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                                 UNITED STATES
                       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, 1998
                                      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: 001-12063
 
                            ------------------------
 
                         ROCKY MOUNTAIN INTERNET, INC.
 
             (Exact name of registrant as specified in its charter)
 
                  DELAWARE                             84-1322326
      (State or other jurisdiction of        (I.R.S. Employer Identification
       incorporation or organization)                     No.)
 
    999 18TH STREET, SUITE 2201, DENVER,                  80202
                  COLORADO                             (Zip Code)
  (Address of principal executive offices)
 
Registrant's telephone number, including area code:  303-672-0700
 
Securities registered pursuant to Section 12(b) of the Act:
 
            TITLE OF EACH CLASS                 NAME OF EXCHANGE ON WHICH
                   None.                               REGISTERED
                                                          None.
 
Securities registered pursuant to section 12(g) of the Act:
 
                    COMMON STOCK, PAR VALUE $.001 PER SHARE
                       WARRANTS TO PURCHASE COMMON STOCK
         UNITS, CONSISTING OF ONE SHARE OF COMMON STOCK AND ONE WARRANT
 
                                (Title of Class)
 
                            ------------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 219.405 of this chapter) 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 of the voting stock held by non-affiliates of the
registrant on March 23, 1998, based upon the closing price of the Common Stock
on the Nasdaq National Market, was approximately $103,057,763.
 
    The number of outstanding shares of the registrant's Common Stock as of
March 29, 1998, was approximately 9,962,154 shares.
 
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<PAGE>
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the registrant's preliminary proxy statement, which will be
issued to stockholders in conjunction with the 1999 Annual Meeting of
Stockholders, are incorporated by reference in Part III.
 
                CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
 
    This Annual Report on Form 10-K and the information incorporated by
reference may include "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. In particular, we
direct your attention to Item 1. Business, Item 2. Properties, Item 3. Legal
Proceedings, Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation, Item 7A. Quantitiative and Qualitative Disclosures
About Market Risk, and Item 8. Financial Statements and Supplementary Data. We
intend the forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in these sections. All statements
regarding our expected financial position and operating results, our business
strategy, our financing plans and the outcome of any contingencies are
forward-looking statements. These statements can sometimes be identified by our
use of forward-looking words such as "may," "believe," "plan," "will,"
"anticipate," "estimate," "expect," "intend" and other phrases of similar
meaning. Known and unknown risks, uncertainties and other factors could cause
the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.
 
    Although we believe that our expectations that are expressed in these
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from our expectations, including the following:
 
    - we may lose subscribers or fail to grow our subscriber base;
 
    - we may not successfully integrate new subscribers or assets obtained
      through acquisitions;
 
    - we may fail to compete with existing and new competitors;
 
    - we may not be able to sustain our current growth;
 
    - we may not adequately respond to technological developments impacting the
      Internet;
 
    - we may fail to identify and correct a significant Year 2000 compliance
      problem and experience a major system failure;
 
    - we may fail to settle outstanding litigation; and
 
    - we may not be able to find needed financing.
 
This list is intended to identify some of the principal factors that could cause
actual results to differ materially from those described in the forward-looking
statements included elsewhere in this report. These factors are not intended to
represent a complete list of all risks and uncertainties inherent in our
business, and should be read in conjunction with the more detailed cautionary
statements included in this Annual Report on Form 10-K under the caption "Item
1. Business--Risk Factors," our other Securities and Exchange Commission filings
and our press releases.
<PAGE>
                                     PART I
 
ITEM 1.  DESCRIPTION OF BUSINESS
 
PROFILE OF ROCKY MOUNTAIN INTERNET AND RECENT ACQUISITIONS
 
    We started our business in 1993 and began offering Internet access services
in 1994. Over the past year, we have grown from a regional Internet service
provider ("ISP") into a premier nationwide E-Business, Web Solutions, and
communication services provider. We serve small- to medium sized business
enterprises, as well as dial-up residential customers. We monitor and control
our network through our Network Operations Center in Denver, Colorado. Through
our nationwide network of owned and leased dial-up access sites, or "POPs"
(points of presence), subscribers are able to access the Internet in 90 of the
largest 100 metropolitan statistical areas in the United States via a local
telephone call. Our current subscriber base has grown to more than 1,300
business customers and over 35,500 dial-up customers. In 1998, we also began to
offer our customers access to value-added Web services, including:
 
    - Web site hosting, production, marketing and training;
 
    - a Web Portal constructed to provide multiple services, including an online
      search engine with a large reference database, an audio feed, a stock
      quote service, and additional content; and
 
    - several E-Commerce products and services.
 
    We have accomplished our growth, in part, through eight acquisitions since
June of 1998. The following table summarizes our acquisitions.
 
<TABLE>
<CAPTION>
     DATE OF
   ACQUISITION                 NAME OF ACQUIRED COMPANY                            NATURE OF BUSINESS
------------------  -----------------------------------------------  -----------------------------------------------
<S>                 <C>                                              <C>
February 1999       Dave's World                                     Internet Access, Web Hosting and Design, and
                                                                     E-commerce
 
February 1999       Communication Network Services                   Long-Distance and Telemarketing
 
December 1998       DataXchange                                      Internet Backbone Network
 
November 1998       InternetNow                                      Internet Service Provider
 
November 1998       Unicom Communications                            Internet Access/Web Hosting
 
November 1998       Stonehenge Internet Communications               Internet Service Provider
 
July 1998           Application Methods                              Developer of Software and E-Commerce Products
 
June 1998           Infohiway                                        Portal with Online Search Engine
</TABLE>
 
    Our executive offices are located at 999 Eighteenth Street, North Tower,
Suite 2201, Denver, Colorado 80202 and our telephone number at that address is
(303) 672-0700. We also maintain an Internet site on the World Wide Web at
WWW.RMI.NET. Information contained on our Web site is not, and should not be
deemed to be, a part of this Annual Report on Form 10-K.
 
INDUSTRY BACKGROUND
 
    THE INTERNET SERVICES MARKET
 
    GROWTH OF THE INTERNET.  The Internet has emerged as a significant global
communications medium, enabling millions of people to communicate, publish and
retrieve information and conduct business electronically. Regardless of the
hardware and software used, Internet Protocol or "IP" enables Internet
communication by providing a common inter-networking standard. Due to increased
public awareness, lower prices for access devices, increased functionality and
improving content, International Data Corporation estimates that the number of
users accessing the World Wide Web will increase from approximately 97 million
at the end of 1998 to approximately 320 million by the end of 2002. Total ISP
revenues in the Untied States are projected to grow from $10.7 billion in 1998
to $37.4 billion in 2003.
<PAGE>
    ROLE OF THE ISP.  Internet access services are the means by which ISPs
interconnect either businesses or individual consumers to the Internet's
resources or to corporate intranets and extranets. Access services include
dial-up access for individuals and small businesses and high-speed dedicated
access designed primarily for mid-sized and larger organizations. In addition to
Internet access services, an increasing number of Internet users are taking
advantage of value-added services, such as Web hosting and Web page design. We
believe that value-added services, such as those included in Rocky Mountain
Internet's business service offerings, are among the fastest growing segments of
the ISP marketplace. According to International Data Corporation, revenues
attributable to value-added services are projected to increase in the United
States at a compound annual growth rate of approximately 34%, from $3 billion in
1998, to $12.9 billion in 2003.
 
    The rapid development and growth of the Internet has resulted in a highly
fragmented industry of over 5,000 national and local ISPs in the U.S. ISPs vary
widely in geographic coverage, customer focus and levels of Internet access
provided to subscribers. For example, access providers may concentrate on
certain types of subscribers (such as businesses or individuals) that differ
substantially in the type of service and support required by the relevant
customer constituency. Often, large national ISPs do not offer individual
customers the level of support desired and many smaller regional ISPs do not
have the resources necessary to offer adequate customer support. Rocky Mountain
Internet intends to fill this void. Because user-friendly software and
responsive customer service and technical support are the foundation of our
business, we believe that Rocky Mountain Internet is poised to capitalize on the
growth in the Internet access and Internet services segments of the
telecommunications market.
 
    INTERNET USERS AND THEIR GROWING NEEDS.  Rocky Mountain Internet focuses on
the residential and small- to medium-sized business segments of the Internet
marketplace. We believe that the demand for Internet service in our target
subscriber markets will grow substantially from current levels. In addition to
demographic and economic trends driving the growth of the Internet market, the
individual and small- to medium-sized business markets are expanding as a
function of falling access costs, lower prices for access devices, more
simplified operational procedures and improved content.
 
    Users currently accessing the Internet do so primarily by means of dial-up
services. Access to the Internet using dial-up services requires the user to
have access to a local telephone line, the use of a modem and an ISP account,
such as a Rocky Mountain Internet account. However, new ways of connecting to
the Internet are becoming more common, particularly those that take advantage of
higher speed and broader bandwidth capacity. In addition, the Web hosting market
represents a rapidly growing area of the Internet marketplace. Web hosting
enables individuals and businesses to increase their presence on the World Wide
Web by creating a Web site, which is "hosted" by companies like Rocky Mountain
Internet, without the responsibility or expense associated with maintaining a
Web server or high-speed Internet connection. We believe that services relating
to e-commerce, which is the means by which businesses offer and sell their
services and products over the Internet, will be an important outgrowth of Web
hosting services.
 
    Rocky Mountain Internet believes that the small- and medium-sized business
markets represent a significant opportunity for continued growth. International
Data Corporation predicts that U.S. corporate Internet access revenues will grow
from approximately $1.9 billion in 1996 to over $6.6 billion in 2000. In
addition, International Data Corporation predicts that enhanced Internet
services, such as Web hosting, security, e-commerce, virtual private networks
and advanced Internet applications are expected to grow from approximately $352
million in 1997 to over $7 billion in 2000.
 
    TELECOMMUNICATIONS INDUSTRY
 
    Since the passage of the Telecommunications Act of 1996, the market for
long-distance and local telephone services has become much more competitive.
Driven by both competitive pressures and the convergence of voice and data
networks, major long distance providers have sought to enhance their
 
                                       2
<PAGE>
competitive positions and gain access to local and cable markets. This trend is
evidenced by AT&T's acquisitions of Teleport Communications Group and TCI and
WorldCom's mergers with MFS, Brooks Fiber Properties, and MCI.
 
    We intend to provide traditional long distance and local telephone service,
as well as other communications services, in order to position ourselves as a
single source supplier for all the communication needs of the customer. On April
22, 1998, the Public Utilities Commission of Colorado granted the request of
Rocky Mountain Broadband, Inc., our wholly owned subsidiary, to become a
competitive local exchange carrier or "CLEC." Rocky Mountain Broadband has since
received approval to become a CLEC from California and West Virginia. Our
intention to provide IP Telephony services and CLEC services will place us
directly in competition with other providers (either resellers or
facilities-based carriers) that provide the same services. This will place us
directly in competition with inter-exchange carriers ("IXCs"), which provide
long distance access, and other long distance resellers and providers, including
large carriers such as AT&T, MCI WorldCom and Sprint. Moreover, there are likely
to be new entrants to the long distance market, such as the regional Bell
operating companies. Most of our competitors are significantly larger and have
substantially greater market presence as well as substantially greater
financial, technical, operational, marketing and other resources and experience
than we do.
 
ROCKY MOUNTAIN INTERNET'S STRATEGY
 
    Our mission is to become a premier nationwide E-Business and communications
services provider, distinguished by a state-of-the-art network and high quality
customer service and support. Key elements to our business strategy include the
following.
 
    PROVIDE A BROAD ARRAY OF WEB SOLUTIONS AND COMMUNICATIONS SERVICES TO OUR
CUSTOMERS. We have built a portfolio of products, services and skill sets to
develop and deliver comprehensive internet communications solutions to both
business and residential customers. These products and services are organized
under two divisions: Communication Services and Web Solutions. Base on our
belief that a growing number of businesses and consumers will demand that one
company provide all of their communications needs, we plan to continue to add
products and services to our portfolio. We refer to our strategy as a "ONE
POINT-OF-CONTACT" service delivery model. We believe that our model ensures:
 
    - high-performance, cost-effective network planning, design and
      implementation;
 
    - maintenance of a single point of responsibility; and
 
    - ongoing customer relationships as a technology partner for communications
      applications.
 
    PROVIDE SUPERIOR CUSTOMER SERVICE AND TECHNICAL SUPPORT.  Our customer
service philosophy is to understand the customer's needs so well that we may
deliver a very high level of value-added services and after-sales support. We
believe that highly differentiated customer service and technical support is a
key competitive asset in the communications industry, and the ISP sector in
particular. Because the Internet is an evolving and complex medium, customers
require significant technical support. Consequently, we have developed a
comprehensive strategy to attain maximum customer satisfaction. This strategy
consists of the following elements:
 
    - maintaining a sufficient number of qualified service and technical support
      personnel through proactive recruitment, retention and training programs;
 
    - utilizing our extranet to provide real-time, interactive customer service;
 
    - developing an on-line billing system enabling customer-controlled account
      customization and analysis; and
 
    - improving our service delivery standards and guarantees.
 
                                       3
<PAGE>
    We continually monitor our customer service strategy through customer
satisfaction surveys, which are monitored by a third-party consulting firm. Over
75 employees, consisting of engineers, technicians, project managers, account
managers and customer service representatives, are responsible for supporting
our customers. We believe that our high quality customer service has led to low
turnover rates and significant growth from customer referrals.
 
    MAXIMIZE NETWORK UTILIZATION.  Through our network and agreements with
third-party providers, we provide Internet access in 90 of the 100 largest
metropolitan statistical areas in the United States. We plan to continue to
selectively add POPs where we can add value for the customers. Historically, the
ISP industry has been divided between ISPs focused on business customers and
ISPs focused on residential dial-up customers. Our business strategy is to
maximize network utilization 24 hours a day by targeting both daytime business
users and evening-intensive residential users. In addition, we operate a
national fully meshed Internet backbone, linking eight U.S. cities--Atlanta,
Chicago, Dallas, Los Angeles, McLean (Virginia), New York, San Francisco, and
Washington, D.C.
 
    SELECTIVELY TARGET KEY CITIES TO EXPAND NATIONWIDE.  We plan to expand our
sales efforts nationally by targeting areas where there are favorable
demographics and a large concentration of businesses. Initially, we plan to
emphasize markets where we have existing facilities and to actively pursue both
business and residential customers. In markets where we are using third-party
provider networks, we will initially target dial-up customers through
advertising, promotions, public relations, telemarketing and customer referrals.
Once we attain critical mass in these locations, we plan to establish our own
POPs and to target business and residential customers with our broad array of
communications products and services.
 
    TAKE ADVANTAGE OF SIGNIFICANT CONSOLIDATION AND ACQUISITION
OPPORTUNITIES.  We believe that the Internet industry is undergoing structural
changes with an increasing use of the Internet for mission-critical
applications. These changes create demand for high quality network operations,
customer service and technical support. We also believe that there is a market
opportunity to consolidate ISPs, Internet-based service companies and Internet
technologies. To exploit this opportunity, we recently acquired the following
companies:
 
    - Infohiway, Inc.--a portal and search engine developer that provides
      on-line advertising opportunities for our customers.
 
    - Application Methods, Incorporated--a developer of software and e-commerce
      products (e-commerce solution and e-SELL) that provide our business
      customers with browser-based software to conduct business over the
      Internet.
 
    - Internet Now--a regional ISP serving customers in Arizona, California and
      Nevada.
 
    - Unicom Communications, Inc--a local ISP serving customers in Kansas.
 
    - Stonehenge Business Systems, Inc.--a local ISP serving customers in
      Colorado.
 
    - DataXchange Network, Inc.--a nationwide Internet backbone, rated by
      Boardwatch Magazine as the 11th largest overall among the 36 national
      backbones.
 
We believe these acquisitions enhance our position as a full service provider of
communications solutions. We will continue to evaluate opportunities to acquire
companies that we believe will enhance our product and service offerings. In
addition, we intend to coordinate our national growth effort by acquiring
additional local ISPs in strategic locations to maximize economies of scale.
 
                                       4
<PAGE>
ROCKY MOUNTAIN INTERNET'S DIVISIONS AND SERVICES.
 
    OVERVIEW.  The following chart summarizes the services we offer through our
two divisions: Communication Services and Web Solutions.
 
<TABLE>
<CAPTION>
         DIVISION                             SERVICES                                  DESCRIPTION
---------------------------  ------------------------------------------  ------------------------------------------
<S>                          <C>                                         <C>
Communication Services       Internet Access                             Fractional T-1, T-2 or greater Internet
                             Dedicated Access                            access provided to a customer's office
                             Dial-Up Service                             Nationwide Internet access for consumer
                                                                         and small business customers using modems
                                                                         to dial into RMI's network
                             Co-Location                                 T-1 or greater Internet access provided to
                                                                         customer's server located at RMI's POP
                             Wireless Access                             Evolving technology allowing up to 750
                                                                         kbps wireless Internet access currently
                                                                         available in the Denver metro area
                             Telephony Services                          Long distance calling using IP Telephony
                             E-Phone                                     technology
                             Long Distance                               Traditional long distance services
                             Local (CLEC)                                Traditional local exchange telephone
                                                                         service on a resale or facilities-owned
                                                                         basis throughout Colorado
                             Dedicated Line Service                      Dedicated and frame relay networks to
                                                                         carry voice and data for business
                                                                         customers
Web Solutions Division       Web Site Production                         Design, development and implementation of
                                                                         customer Web sites
                             Web Site Hosting                            A customer's Web site is "hosted" on RMI's
                                                                         servers and connected to the Internet via
                                                                         a high-speed connection
                             Infohiway                                   Portal constructed to provide multiple
                                                                         services, including a search engine with
                                                                         large database of reference information,
                                                                         an audio feed, a stock quote service, and
                                                                         additional content
                             Electronic Commerce or E-Sell               Turnkey solution for setting up an
                                                                         Internet store
                             Web Site Marketing                          Design and development of advertising and
                                                                         marketing strategies which result in
                                                                         increased traffic and viewing of customer
                                                                         Web sites
                             Traffic Builder Plus                        Unique Web site marketing program whereby
                                                                         customer Web sites are marketed
                                                                         exclusively to Internet users
                             Web Training                                Various levels of Internet training for
                                                                         customers, including basic access training
</TABLE>
 
                                       5
<PAGE>
OUR COMMUNICATION SERVICES DIVISION
 
    INTERNET ACCESS
 
    We provide Internet services through our 11 Internet POPs in the state of
Colorado and, through agreements with third party providers, in 90 of the 100
largest metropolitan statistical areas in the United States.
 
    DEDICATED ACCESS SERVICE.  Dedicated access services are provided primarily
to commercial customers. They include a wide range of connectivity options
tailored to the needs of the customer. These services include a private port or
dedicated modem, ISDN connections, 56 kbps frame relay connections, T-1 (1.54
Mbps) connections, and T-3 (45 Mbps) or fractional T-3 connections. This type of
connectivity ensures a dedicated connection and is generally used to connect
local area networks, wide area networks or server applications to the Internet.
A dedicated connection requires a dedicated telecommunications facility, ranging
from an analog phone line, ISDN, frame relays, leased line T-1 or leased line
T-3 and a router, and a device to convert digital signal to serial interface,
usually referred to as a CSU/DSU. Dedicated services range in price from $199
per month to over $15,000 per month depending on the connection type.
Installation fees generally range from $300 to $5,000.
 
    DIAL-UP SERVICE.  We offer nationwide dial-up service for unlimited usage,
which is available for $19.95 per month plus a one-time $15 set-up fee. This
offering includes high-speed modem access using v.90 technology and a high
quality connection due to the redundancy that has been built into the network.
Through an arrangement with PSINet, we provide dial-up access to customers in
over 230 locations nationwide.
 
    CO-LOCATION.  As more people use the Internet to shop for products and
services, the demands on shared server resources are increasing. We offer
businesses an alternative to shared server resources by co-locating their
servers in our data center. This is much more cost-effective because the
customer can capitalize on our centralized Internet resources. For example, we
believe that a Web developer who co-locates a server with us can save up to 40%
to 60% of the monthly cost of maintaining that server in-house.
 
    WIRELESS SERVICE.  We have recently signed an agreement with American
Telecasting, Inc., to offer high-speed megabit Internet access technology to 80%
of the homes and businesses in the Denver metro area. The service provides
download speeds of about 750 kbps, and includes a microwave receiver, an
external modem, a cable modem and an Ethernet card. Costs include an
installation fee and an approximate $50 per month service charge. We intend to
enter into similar agreements with other providers as we expand our geographic
presence.
 
    INTERNET BACKBONE ACCESS.  With our acquisition of the assets of DataXchange
Network, Inc. in December 1998, we now operate a national Internet backbone,
linking 8 U.S. cities. Each city is linked directly to each of the others. Our
backbone utilizes fully redundant hub and spoke architecture.
 
TELEPHONY SERVICES
 
    IP TELEPHONY OR E-PHONE.  IP Telephony is new technology that enables long
distance calling using Internet technology. We are now able to deliver "toll
quality" long distance calls that originate in Colorado to anywhere in the
contiguous United States using IP Telephony. IP Telephony service is priced at
$.07 per minute to anywhere in the contiguous United States, 24 hours per day.
 
    TRADITIONAL LONG DISTANCE SERVICE.  We recently entered an agreement with
Frontier Communications of the West, Inc. which will permit us to offer a full
line of traditional long distance services. We currently offer the following
services:
 
    - 1+ long distance dialing;
 
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    - dedicated long distance;
 
    - 1-800 service;
 
    - calling cards; and
 
    - conference calling.
 
    LOCAL PHONE SERVICES (CLEC).  We have been certified as a competitive local
exchange carrier or CLEC in the states of Colorado, California and West
Virginia.
 
    DEDICATED LINE SERVICES.  We operate extensive dedicated and frame relay
networks to carry voice and data traffic across the country and across town for
our business customers.
 
OUR WEB SOLUTIONS DIVISION
 
    WEB SITE PRODUCTION
 
    Web site production encompasses the design, development and implementation
of customer Web sites. These sites may be public domain sites or private sites,
which are sometimes referred to as extranets or intranets. The functionality of
these sites will continue to evolve and require a great deal of graphic design
talent as well as high end programming skills.
 
    WEB SITE HOSTING
 
    Web site hosting provides ongoing revenue from customers for whom we host a
Web site on Web servers located in our data center. All access made to these Web
sites by the customer and the Internet community as a whole is processed on our
servers. The advantage to customers is high-speed access to sites by their
targeted audiences. Prices for Web site hosting generally consist of $99 per
month for virtual hosting service and $49 per month for static hosting services.
There is also a one-time set-up fee of approximately $99 for virtual hosting and
$49 for static hosting.
 
    INFOHIWAY/PORTAL.  This is a Web Portal constructed to provide multiple
services, including:
 
    - a search engine that contains a large and rapidly growing database of
      reference information on the World Wide Web;
 
    - an audio feed;
 
    - a stock quote service; and
 
    - additional content.
 
The search engine also contains certain features, including:
 
    - PREVIEW buttons--which permit users to see a site's content without
      waiting for a full download of all the site's graphics;
 
    - FUZZY LINKS--which provide visitors with a handy way to search for related
      but perhaps not specifically targeted information; and
 
    - SITE MAPPING--which provides a simple and visual way to see a site's
      structure.
 
Finally, the Infohiway Portal also contains the ability to host numerous banner
advertisements, which we may sell to our customers as part of a Web marketing
package.
 
    ELECTRONIC COMMERCE OR E-SELL
 
    We provide turnkey software package solutions for e-commerce. Small- to
medium-sized businesses can sell their products and services over the Internet,
thereby reaching customers that are not
 
                                       7
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geographically accessible. Rather than simply offering a Web site, our
e-commerce customers can act as a true Internet store, providing:
 
    - a dynamic, interactive shopping experience for the customer;
 
    - secure credit card transactions;
 
    - "behind the scenes" functionality, such as inventory management and custom
      reporting; and
 
    - fast, efficient and low-cost implementation of a true, database-driven
      Internet store.
 
Competing packages require the involvement of technical experts, consultants or
developers to set up and configure a store. Because of these additional "soft
costs," implementation costs usually reach several times the basic cost of the
package and implementation time can be weeks or months. By contrast, an e-SELL
store can be up and running in hours. Furthermore, e-SELL is scalable and
expandable as a business grows, because it is based on an open
architecture--Microsoft Windows NT and BackOffice. While competing packages
often utilize proprietary programming languages or tools (and many started out
as Macintosh or Unix products), e-SELL is an extension to the industry-standard
BackOffice platform, enabling easy customization. In addition, any
industry-standard database can be connected, furthering the ease of integration
with merchants' existing information systems.
 
    WEB SITE MARKETING
 
    Our sales and marketing department has developed an advertising program that
is designed to increase traffic and viewing of customer Web sites. We believe
that our Web site marketing program will blend well with our other Web solution
products.
 
    TRAFFIC BUILDER PLUS.
 
    This is an Internet marketing program whereby customer Web sites are
marketed exclusively to Internet users. This service includes sophisticated
search engine submission and management techniques, cross-linking related Web
sites, posting to relevant news groups and customizing banner ad campaigns. The
pricing for this service varies dramatically based on a customer's budget and
desired results.
 
    WEB TRAINING
 
    We also provide a training program available for all our customers.
Customers can schedule their employees for various levels of Internet training,
ranging from basic access training to HTML programming. We have a
state-of-the-art training center in our office headquarters with multiple
workstations for interested customers. Customized, one-on-one training is also
available, either at our headquarters or at the customer's site.
 
OUR SALES AND MARKETING DEPARTMENT
 
    DEDICATED COMMUNICATIONS SERVICE CUSTOMERS.  Our primary commercial target
market is small- to medium-sized businesses with 25-5,000 work-stations,
multiple office locations, a dependence on communications technology and with
headquarters located in tier one or tier two cities ranked in the top thirty
high-tech BPI index. Our secondary target markets will be small- and
medium-sized businesses located in smaller cities that are close to our
headquarters or in the top thirty high-tech BPI index.
 
    Our ability to deliver an array of Internet solutions, coupled with
excellent technical knowledge and high quality service, is our key selling point
to commercial customers. We design, implement and maintain a complete enterprise
network solution encompassing integrated voice, data, video and Internet
services that address all facets of internal and external communications for a
business. A
 
                                       8
<PAGE>
number of providers promote themselves as "one-stop shops" or "turnkey
providers" of these services, but few have the ability to deliver, manage and
support all services "in-house." We believe that our ability to package, price,
brand and efficiently deliver our comprehensive set of products and services
will allow us to grow as we focus our sales and marketing efforts on small- to
medium-sized businesses.
 
    Our commercial business sales and marketing efforts emphasize the direct
sales by our field sales representatives. Although each representative has a
specific product or service focus, each is assigned to an account team headed up
by an account manager. We believe that this account team approach allows us to
cross-sell, package, and blend all of our products and services to meet the
needs of our customers. Our sales teams intend to use strategic direct mail
campaigns, public relations efforts and targeted industry advertising. Each
marketing activity is designed to generate company and brand recognition,
provide product/service information and stimulate referral business from
commercial businesses and residential customers.
 
    We provided dedicated access and Web services to over 1,300 business
customers as of December 31, 1998.
 
    DIAL-UP INTERNET ACCESS.  Our dial-up customer base consists mainly of
residential consumers and small businesses. We believe that our competitive
advantage of packaging, pricing, branding and promoting our wide range of
communications services will also serve as a competitive advantage in the
residential consumer market, particularly as we extend our sales and marketing
efforts across the nation. We engage in targeted marketing and distribution
efforts in markets where there is an opportunity for substantial market
penetration. We believe that high geographic concentrations of subscribers
improve network economics and reduce subscriber acquisition costs, thereby
resulting in higher margins.
 
    Through the use of demographic market research data, we are targeting our
marketing and sales efforts towards new and current Internet households and
small businesses nationwide. Because we have experienced a significant amount of
dial-up sales through word-of-mouth advertising, we operate an in-bound calling
center and an out-bound telemarketing sales unit. Our marketing efforts have
been geared toward generating positive referrals and stimulating subscriber
growth and retention by providing exceptionally high-quality service to our
existing subscribers.
 
    We plan to increase our print publication, radio, television and direct mail
advertising in targeted major metropolitan areas throughout the United States in
order to achieve greater density to our subscriber base. In particular, our
sales efforts will focus on our "outbound/inbound" telemarketing unit. We plan
to build an extensive vendor network capable of distributing all of our
communication services to the public through co-branding programs, affinity
marketing agreements and cause-related marketing initiatives. We also plan to
utilize extensive, event marketing opportunities, in-market retail promotions
and a nationwide public relations effort. As of March 1, 1999, we had 16 sales
representatives targeting residential dial-up customers.
 
OUR BILLING AND MANAGEMENT INFORMATION SYSTEMS DEPARTMENT
 
    We are currently installing an online bill presentment and payment package,
which will allow customers to receive their invoices and make payments online.
We are moving form a Microsoft SQL Server to Oracle for database management.
Currently, our administrative office functions are standardized on Microsoft
Office products operating on Microsoft NT Server Networks. Finance and
accounting utilize Great Plains accounting software products for general ledger,
payables processing, and receivables collection and management.
 
    One goal of implementing automated systems is to move customer support
functions to a Web interface which would allow customers to change service
types, review invoicing details, troubleshoot through online information and
communicate with our technical support staff. These systems are
 
                                       9
<PAGE>
expected to provide enhanced customer support and reduce the cost of the
technical support function on a per customer basis. Enhanced billing systems are
expected to permit us to offer promotions and marketing programs to attract new
customers. The new billing systems are expected to provide greater flexibility
in offering discounts for selecting a wide range of the product offerings.
 
COMPETITION
 
    COMPETITIVE FACTORS
 
    The markets in which we operate and intend to operate are extremely
competitive and can be significantly influenced by marketing and pricing
decisions of competitors that have substantially greater resources. We believe
that competition will intensify in the future. Our ability to compete
successfully depends on a number of factors including:
 
    - our market presence and geographic coverage;
 
    - our reputation for reliability, service and effective customer support;
 
    - the capacity, reliability and security of our network infrastructure;
 
    - our packaging and pricing of products and services compared to our
      competitors;
 
    - the timing of new product and service roll-outs; and
 
    - our ability to react to changes in the market and industry and economic
      trends.
 
    INTERNET ACCESS AND WEB HOSTING
 
    The markets for Internet access and Web hosting services are extremely
competitive and highly fragmented. There are no substantial barriers to entry,
and we expect competition to continue to intensify. Our current and prospective
competitors include many large companies that have substantially greater market
presence and financial, technical, operational, marketing and other resources
than we do. In addition, every local market that we have entered or intend to
enter is served by multiple local ISPs. Increased competition could cause us to
increase our selling and marketing expenses could also cause us to lose
customers. We may not be able to offset increased costs with an increase in the
number of our customers or to increase revenues from enhanced services. Any of
these developments could adversely affect our business, financial condition and
results of operations.
 
    We currently compete or expect to compete with the following types of
companies in the Internet services and Web hosting markets:
 
    - established online services, such as America Online, the Microsoft
      Network, CompuServe and Prodigy;
 
    - local, regional and national Internet service providers, such as
      MindSpring, Earthlink, Network, Inc., Internet America, PSINet and Verio,
      Inc.;
 
    - national telecommunications companies, such as AT&T Corp. (with AT&T
      WorldNet), MCI WorldCom, Inc., Sprint (SprintNet) and GTE and Qwest
      Communications International, Inc.;
 
    - local telephone and regional Bell operating companies, such as BellSouth
      and SBC Communications;
 
    - computer hardware and software companies, such as International Business
      Machines and Microsoft Corporation;
 
    - national and regional companies that focus primarily on providing Web
      hosting services;
 
                                       10
<PAGE>
    - cable television operators and online cable services, such as Comcast
      Corporation, TCI, Time Warner, At Home and Roadrunner; and
 
    - nonprofit or educational ISPs.
 
Our competition is likely to increase. We believe this will probably happen as
large diversified telecommunications and media companies acquire Internet
service providers and as Internet service providers consolidate into larger,
more competitive companies. Diversified competitors may bundle other services
and products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. In addition, competitors may charge less
than we do for Internet services, causing us to reduce or preventing us from
raising our fees. As a result, our business may suffer.
 
    BROADBAND TECHNOLOGIES.
 
    We also face competition from companies that provide broadband connections
to consumers' homes, including local and long-distance telephone companies,
cable television companies, electric utility companies, and wireless
communications companies. These companies may include Internet access or Web
hosting using broadband technologies in their basic bundle of services or may
offer Internet access or Web hosting services for a nominal additional charge.
Broadband technologies enable consumers to transmit and receive print, video,
voice and data in a digital form at significantly faster speeds than existing
dial-up modems. For example, modems offered by cable television companies can
transmit information at speeds of up to 10 megabits per second, as opposed to
our v.90 (enhanced speed modem) service, which can transmit information at
speeds of up to only 56 kilobits per second. In addition, TCI has recently
announced it had reached separate agreements with Sun Microsystems, Inc. and
Microsoft to produce the software necessary to permit access to the Internet
through television set-top boxes beginning later this year.
 
    The companies that own these broadband networks could prevent us from
delivering Internet access through the wire and cable connections that they own.
Cable television companies are not currently required to allow ISPs to access
their broadband facilities and the availability and terms of ISP access to
broadband local telephone company networks are under regulatory review. Our
ability to compete with telephone and cable television companies that are able
to support broadband transmissions, and to provide better Internet services and
products, may depend on future regulation to guarantee open access to the
broadband networks. However, in January 1999, the Federal Communications
Commission ("FCC"), declined to take any action to mandate or otherwise regulate
access by ISPs to broadband cable facilities at this time. It is unclear whether
and to what extent local and state regulatory agencies will take any initiatives
to implement this type of regulations, and whether they will be successful in
establishing their authority to do so. Similarly, the FCC is considering
proposals that could limit the right of ISPs to connect with their customers
over broadband local telephone lines. In addition to competing directly in the
ISP market, both cable and television facilities operators are also aligning
themselves with certain ISPs who would receive preferential or exclusive use of
broadband local connections to end users. If high-speed, broadband facilities
increasingly become the preferred mode by which customers access the Internet
and we are unable to gain access to these facilities on reasonable terms, our
business, financial condition and results of operations could be materially
adversely affected.
 
                                       11
<PAGE>
    NO INTERNATIONAL OPERATIONS.
 
    We do not currently compete internationally. If the ability to provide
Internet access internationally becomes a competitive advantage in the Internet
access industry, we may be at a competitive disadvantage relative to our
competitors.
 
EMPLOYEES
 
    As of March 1, 1999, Rocky Mountain Internet had approximately 235
employees, of which approximately 95 were added in acquisitions since June of
1998. None of Rocky Mountain Internet's current employees is represented by a
labor organization, and we consider our relations with our employees to be good.
 
PROPRIETARY RIGHTS
 
    GENERAL.  Although we believe that our success is more a function of our
technical expertise and customer service than our proprietary rights, Rocky
Mountain Internet's success and ability to compete depends in part upon our
technology. We rely on a combination of copyright, trademark and trade secret
laws, and contractual restrictions to establish and protect our technology. It
is our policy to require employees and consultants and, when possible, suppliers
to execute confidentiality agreements upon the commencement of their
relationships with Rocky Mountain Internet. These agreements provide that
confidential information developed or made known during the course of a
relationship with Rocky Mountain Internet must be kept confidential and not
disclosed to third parties except in specific circumstances. We cannot provide
any assurances that the steps we have taken will be adequate to prevent
misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology.
 
    LICENSES.  We have obtained authorization to use the products of each
manufacturer of software that we bundle in Rocky Mountain Internet's front-end
software product for Windows and Macintosh subscribers. The particular
applications included in the Rocky Mountain Internet starter-kit have, in some
cases, been licensed. Rocky Mountain Internet currently intends to maintain or
negotiate renewals of, as the case may be, all existing software licenses and
authorizations as necessary. Rocky Mountain Internet may also want or need to
license other applications in the future. License fees charged to Rocky Mountain
Internet upon enrollment of additional subscribers are included in the cost of
subscriber start-up fees. Other applications included in the Rocky Mountain
Internet starter kit are shareware that Rocky Mountain Internet has obtained
permission to distribute or that are from the public domain and are freely
issuable. Rocky Mountain Internet developed the front-end software programs in
Rocky Mountain Internet's starter kit for Windows 3.1, Windows 95, and
Macintosh. We have acquired some software, trademarks and other proprietary
technology that we may continue to use for acquired subscribers.
 
REGULATION
 
    GENERAL REGULATORY ENVIRONMENT
 
    The telecommunications businesses in which we operate or intend to operate,
namely, providing traditional long distance service, providing long distance
service by means of IP Telephony and activities as a CLEC, are subject to
extensive federal and state regulation. In particular, these services are
subject to the provisions of the Communications Act of 1934, as amended,
including amendments effected by the 1996 Telecommunications Act and the FCC
regulations thereunder, as well as the applicable laws and regulations of the
various states, including regulation by public utility commissions and other
state agencies. Federal laws and FCC regulations apply to the facilities of and
services offered by, telecommunications common carriers including regulating the
prices charged, to the extent that those facilities are used to provide,
originate, or terminate interstate communications. State regulatory
 
                                       12
<PAGE>
authorities retain jurisdiction over telecommunications both originating and
terminating within the state. The regulation of the telecommunications industry
is changing rapidly and the regulatory environment varies substantially from
state to state. Moreover, as deregulation at the federal level occurs, some
states are reassessing the level and scope of regulation that may be applicable
to us. All of our operations are also subject to a variety of environmental,
safety, health and other governmental regulations. We cannot assure that future
regulatory, judicial, or legislative activities will not have a adversely affect
us, or that regulators, competitors, or third parties will not raise material
issues with regard to our compliance or noncompliance with applicable
regulations.
 
    The 1996 Telecommunications Act effected plenary changes in regulation at
both the federal and state levels that affect virtually every segment of the
communications industry. The stated purpose of the 1996 Telecommunications Act
is to promote competition in all areas of communications and to reduce
unnecessary regulation to the greatest extent possible. While it will take years
for the industry to feel the full impact of the 1996 Telecommunications Act, it
is already clear the legislation provides us with both opportunities and
challenges. The 1996 Telecommunications Act, among other things, allows the
regional Bell operating companies to enter the long distance business and
enables other entities, including entities affiliated with power utilities and
ventures between local exchange companies and cable television companies, to
provide an expanded range of telecommunications services. Entry of such
companies into the long distance business would result in substantial
competition to our intended telecommunications services (i.e., traditional long
distance, IP Telephony and local exchange carrier services) and may have a
material adverse effect on our business, financial condition and results of
operations and cash flow.
 
    Under the 1996 Telecommunications Act, the regional Bell operating companies
may immediately provide long distance service outside those states in which they
provide local exchange service ("out-of-region" service) and long distance
service within the regions in which they provide local exchange service
("in-region" service) upon meeting certain conditions. The 1996
Telecommunications Act does, however, impose certain restrictions on, among
others, the regional Bell operating companies in connection with their provision
of long distance services. Out-of-region services by regional Bell operating
companies are subject to receipt of any necessary state and/or federal
regulatory approvals that are otherwise applicable to the provision of
intrastate and/or interstate long distance service. In-region services by
regional Bell operating companies are subject to specific FCC approval and
satisfaction of other conditions, including a checklist of pro-competitive
requirements. The regional Bell operating companies may provide in-region long
distance services only through separate subsidiaries with separate books and
records, financing, management and employees and all affiliate transactions must
be conducted on an arm's length and nondiscriminatory basis. The regional Bell
operating companies are also prohibited from jointly marketing local and long
distance services, equipment and certain information services unless competitors
are permitted to offer similar packages of local and long distance services in
their market. Further, the regional Bell operating companies must obtain
in-region long distance authority before jointly marketing local and long
distance services in a particular state. Additionally, AT&T and other major
carriers serving more than 5% of prescribed long distance access lines in the
United States are also restricted from packaging other long distance services
and local services provided over regional Bell operating company facilities.
 
FEDERAL REGULATION
 
    The FCC has established different levels of regulation for dominant and
non-dominant carriers. Of domestic common carrier service providers, only GTE,
the regional Bell operating companies and other incumbent local exchange
companies ("ILECs") are classified as dominant carriers and all other providers
of domestic common carrier services, including Rocky Mountain Internet, are
classified as non-dominant carriers. The 1996 Telecommunications Act provides
the FCC with the authority to forebear from imposing any regulations it deems
unnecessary, including requiring non-dominant
 
                                       13
<PAGE>
carriers to file tariffs. On November 1, 1996, in its first major exercise of
regulatory forbearance authority granted by the 1996 Telecommunications Act, the
FCC issued an order detariffing domestic inter-exchange services. The order
required mandatory detariffing and gave carriers nine months to withdraw federal
tariffs and move to contractual relationships with their customers. A federal
appeals court subsequently stayed this order.
 
    On April 18, 1997, the FCC ordered that the regional Bell operating
companies and incumbent ILECs offering domestic interstate inter-LATA (local
access and transport areas) services, in-region or out-of-region, be regulated
as non-dominant carriers. However, such services offered in-region must be
offered in compliance with the structural separation requirements mentioned
above. AT&T was classified as a dominant carrier, but AT&T successfully
petitioned the FCC for non-dominant status in the domestic interstate
inter-exchange market in October 1995 and in the international market in May
1996. Therefore, certain pricing restrictions that once applied to AT&T have
been eliminated. A number of parties have, however, sought the FCC's
reconsideration of AT&T's status. We are unable to predict the outcome of these
proceedings on its operations.
 
    On May 8, 1997, the FCC released an order intended to reform its system of
interstate access charges to make that regime compatible with the
pro-competitive deregulatory framework of the 1996 Telecommunications Act.
Access service is the use of local exchange facilities for the origination and
termination of interchange communications. The FCC's historic access charge
rules were formulated largely in anticipation of the 1984 divestiture of AT&T
and the emergence of long distance competition and were designated to replace
piecemeal arrangements for compensating local exchange companies for use of
their networks for access, to ensure that all long distance companies would be
able to originate and terminate long distance traffic at just, reasonable and
non-discriminatory rates and to ensure that access charge revenues would be
sufficient to provide certain levels of subsidy to local exchange service. While
there has been pressure on the FCC historically to revisit its access pricing
rules, the 1996 Telecommunications Act has made access reform timely. The FCC's
recent access reform order adopts various changes to its rules and policies
governing interstate access service pricing designed to move access charges,
over time, to more economically efficient levels and rate structures. Among
other things, the FCC modified rate structures for certain non-traffic sensitive
access rate elements, moving some costs from a per-minute-of-use basis to
flat-rate recovery, including one new flat rate element; changed its structure
for interstate transport services; and affirmed that ISPs may not be assessed
interstate access charges. In response to claims that existing access charge
levels are excessive, the FCC stated that it would rely on market forces first
to drive prices for interstate access to levels that would be achieved through
competition but that a "prescriptive" approach, specifying the nature and timing
of changes to existing access rate levels, might be adopted in the absence of
competition. The FCC intends to address these and other related matters in
subsequent proceedings.
 
    Though we believe that access reform through lowering and/or eliminating
excessive access service charges will have a positive effect on its service
offerings and operations, it cannot predict how or when such benefits may
present themselves, or the outcome of any possible judicial appeal or petition
for FCC reconsideration.
 
    The FCC also released a companion order on universal service reform on May
8, 1997. The universal availability of basic telecommunications service at
affordable prices has been a fundamental element of U.S. telecommunications
policy since enactment of the Communications Act of 1934. The current system of
universal service is based on the indirect subsidization of local exchange
carrier pricing, funded as part of a system of direct charges on some local
exchange carrier customers, including IXCs and above-cost charges for certain
local exchange carrier services such as local business rates and access charges.
In accordance with the 1996 Telecommunications Act, the FCC adopted plans to
implement the recommendations of a Federal-State Joint Board to preserve
universal service, including a definition of services to be supported and
defining carriers eligible for contributing to and receiving from universal
service subsidies. The FCC ruled, among other things, that: contributions to
 
                                       14
<PAGE>
universal service funding be based on all IXCs' gross revenues from both
interstate and international telecommunications services; only common carriers
providing a full complement of defined local services be eligible for support;
and up to $2.25 billion in new annual subsidies for discounted
telecommunications services used by schools, libraries and rural health care
providers be funded by an assessment on total interstate and intrastate revenues
of all IXCs. The FCC stated that it intends to study the mechanism for continued
support of universal service in high cost areas in a subsequent proceeding. We
are unable to predict the outcome of these proceedings or of any judicial appeal
or petition for FCC reconsideration on its operations.
 
    On April 10, 1998, the FCC submitted a report to Congress in which it stated
that telephone-to-telephone IP Telephony bears the characteristics of
"telecommunications services" and that the providers of those services may be
"telecommunications carriers," as those terms are defined in the 1996
Telecommunications Act. The FCC deferred a more definitive resolution of this
issue until a more "fully-developed" record is available. However, the April 10,
1998 report states that, to the extent the FCC concludes that certain forms of
telephone-to-telephone IP Telephony service are "telecommunications services,"
and to the extent the providers of those services obtain the same
circuit-switched access as obtained by other IXCs and therefore impose the same
burdens on the local exchange as do other IXCs, the FCC "may find it reasonable
that they" become subject to the same regulations, including the requirement to
pay access fees to local exchange carriers and to contribute to universal
service subsidies.
 
STATE REGULATION
 
    Companies conducting intrastate long distance telecommunications operations
are subject to various state laws and regulations including, in many
jurisdictions, certification and tariff filing requirements. Generally, these
providers must obtain and maintain certificates of authority from regulatory
bodies in most states in which it offers intrastate services. In April 1998,
Rocky Mountain Broadband, Inc., our wholly subsidiary, obtained a certificate of
authority from the Colorado Public Utility Commission to provide local exchange
services as a CLEC. We also are certified as a CLEC in California and West
Virginia. Certificates of authority can generally be conditioned, modified,
canceled, terminated, or revoked by state regulatory authorities for failure to
comply with state law and/or the rules, regulations and policies of the state
regulatory authorities. Fines and other penalties also may be imposed for such
violations.
 
    Those states that permit the offering of intrastate/intra-LATA service by
IXCs generally require that end users desiring to use such services dial special
access codes. This may put us at a competitive disadvantage compared with local
exchange carriers whose customers can make intrastate/intra-LATA calls simply by
dialing 1 plus the desired number. If a long distance carrier's customer
attempts to make an intra-LATA call by simply dialing 1 plus the desired number,
the call will be routed to and completed by the local exchange carrier.
Regulatory agencies in a number of states have issued decisions that would
permit IXCs to provide intra-LATA calling on a 1 + basis. Further, the 1996
Telecommunications Act requires in most cases that the regional Bell operating
companies provide such dialing parity coincident to their providing in-region
inter-LATA services. We expect to benefit from the ability to offer 1 +
intra-LATA services in states that allow this type of dialing parity.
 
RISK FACTORS
 
    You should carefully consider the risks described below.
 
    WE HAVE A SHORT OPERATING HISTORY, HAVE INCURRED NET LOSSES SINCE OUR
     INCEPTION AND EXPECT FUTURE LOSSES
 
    We started our business in 1993 and began offering Internet access services
in 1994. We have incurred operating losses in every year of our existence. We
incurred net losses of $2.3 million for the
 
                                       15
<PAGE>
year ended December 31, 1996, $4.2 million for the year ended December 31, 1997
and $10.7 million for year ended December 31, 1998. As of December 31, 1998, we
have an accumulated deficit of $17.4 million. We may never be profitable.
 
    In 1998, a proposed merger transaction with Internet Communications
Corporation and related financing transactions was terminated. As a result, we
recorded costs, expenses and related fees of approximately $6.1 million. Of this
amount, approximately $4.2 million relates to warrants that we issued. Although
we are attempting to agree on a schedule for the payment of these expenses that
is satisfactory to all parties, we cannot assure that we will be able to reach
an agreement with all parties. If we are unsuccessful, we do not currently have
the ability to pay all of these expenses.
 
    IF WE ARE UNABLE TO RAISE FUNDS TO FINANCE OUR GROWTH, YOUR INVESTMENT COULD
     BE ADVERSELY AFFECTED
 
    We intend to expand or open new access sites or make other capital
investments as dictated by subscriber demand and strategic considerations. To
open new dial-up access sites, known in our industry as points of presence or
POPs, we must spend significant amounts of money for new equipment as well as
for leased telecommunications facilities and advertising. In addition, to expand
our subscriber base nationwide, we will have to spend significant amounts of
money on additional equipment to maintain the high speed and reliability of our
Internet access services. We may also need to spend significant amounts of cash
to:
 
    - fund growth, operating losses, and increased expenses;
 
    - implement our acquisition strategy;
 
    - take advantage of unanticipated opportunities, such as major strategic
      alliances or other special marketing opportunities, acquisitions of
      complementary businesses or assets, or the development of new products;
      and
 
    - respond to unanticipated developments or competitive pressures.
 
    We will require additional funds through equity, debt, or other external
financing in order to fund our current operations and to achieve our business
plan. We cannot assure that any additional capital resources will be available
to us, or, if available, will be on terms that will be acceptable to us. Any
additional equity financing will dilute the equity interests of existing
security holders. If adequate funds are not available or are not available on
acceptable terms, our ability to execute our business plan and our business
could be materially and adversely affected.
 
    COMPETITION IN OUR INDUSTRY IS INTENSE AND IS LIKELY TO INCREASE
 
    We operate in the Internet services market, which is extremely competitive.
Our current and prospective competitors include many large companies that have
substantially greater market presence, financial, technical, marketing and other
resources than we have. We compete directly or indirectly with the following
categories of companies:
 
    - established online services, such as America Online, the Microsoft
      Network, CompuServe and Prodigy;
 
    - local, regional and national Internet service providers, such as
      MindSpring, Earthlink, Network, Inc., Internet America and PSINet;
 
    - national telecommunications companies, such as AT&T Corp., MCI WorldCom,
      Inc., Sprint and GTE;
 
    - regional Bell operating companies, such as BellSouth and SBC
      Communications;
 
                                       16
<PAGE>
    - computer hardware and software companies, such as International Business
      Machines and Microsoft Corporation; and
 
    - online cable services, such as At Home and Roadrunner.
 
Our competition is likely to increase. We believe this will probably happen as
large diversified telecommunications and media companies acquire Internet
service providers and as Internet service providers consolidate into larger,
more competitive companies. Diversified competitors may bundle other services
and products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. In addition, competitors may charge less
than we do for Internet services, causing us to reduce or preventing us from
raising our fees. As a result, our business may suffer.
 
    WE MAY NOT BE ABLE TO COMPETE IN THE LOCAL EXCHANGE AND LONG-DISTANCE
     TELEPHONE MARKET
 
    In 1998, we entered the long distance telephone market. We will compete
directly with IXCs and long distance carriers and other long distance resellers
and providers, including large carriers such as AT&T, MCI WorldCom and Sprint
and new entrants to the long distance market. Many of our competitors are
significantly larger and have substantially greater market presence and
financial, technical, operational, marketing and other resources. We will face
stiff price competition and may not be able to compete.
 
    Moreover, the local exchange telephone services market in most states was
only recently opened to competition due to the passage of the 1996
Telecommunications Act and related regulatory rulings. There are numerous
operating complexities associated with providing these services. We will be
required to develop new products, services and systems and will need to develop
new marketing initiatives to sell these services. Our inability to overcome any
of these operating complexities could have a material adverse effect on us.
 
    We must keep pace with technological change and evolving industry standards
to remain competitive
 
    The Internet services market is characterized by rapidly changing
technology, evolving industry standards, changes in member needs and frequent
new service and product introductions. Our future success depends, in part, on
our ability to
 
    - use leading technologies to develop our technical expertise;
 
    - enhance our existing services; and
 
    - develop new services that meet changing member needs on a timely and
      cost-effective basis.
 
In particular, we must provide subscribers with the appropriate products,
services and guidance to best take advantage of the rapidly evolving Internet.
Our failure to respond in a timely and effective manner to new and evolving
technologies could have a negative impact on our business.
 
    Our ability to compete will also depend upon the continued compatibility of
our services with products offered by various vendors. Although we intend to
support emerging standards in the market for Internet access, industry standards
may not be established. Moreover, if industry standards are established, we may
not be able to conform to these new standards in a timely fashion. Our
competitors may develop services and technologies that will render our services
or technology noncompetitive or obsolete.
 
    We are also at risk to fundamental changes in the way customers access the
Internet. Currently, most customers access Internet services through computers
connected by telephone lines. However, several companies have developed cable
television modems that transmit data at substantially faster speeds than the
modems that our subscribers and we use. We must develop new technology or modify
our existing technology to accommodate new and faster sources of Internet
access, including cable
 
                                       17
<PAGE>
television modems, screen-based telephones, wireless products, televisions, and
other consumer electronic devices. We may not succeed in adapting our Internet
access business to new and faster access devices.
 
    Our business may also be affected by problems caused by computer viruses,
security breaches and other inappropriate uses of our network, such as e-mail
"spamming." Alleviating these problems and developing technology to prevent
these problems may cause interruptions, delays or cessation in service to our
members, which could cause them to terminate their membership or assert claims
against us.
 
    ANY DECLINE IN OUR MEMBER RETENTION LEVELS OR OUR PRICES WILL ADVERSELY
     AFFECT US
 
    Our new member acquisition costs are substantial relative to the monthly
fees we charge. Accordingly, our long-term success largely depends on our
retention of existing members. While we continue to invest significant resources
in our infrastructure and technical and member support capabilities, it is
relatively easy for Internet users to switch to competing providers.
Consequently, our investments may not help member retention. Any significant
loss of members will substantially decrease our revenue and cause our business
to suffer.
 
    As a result of competitive pricing pressures in the market for Internet
services, we reduced the prices we charge our Internet customers during 1995,
1997 and 1998. We expect that continued price pressures may cause us to reduce
prices further in order to remain competitive, and we expect that such further
price reductions could adversely effect our results of operations, unless we can
lower our costs commensurate with such price decreases.
 
    OUR BUSINESS DEPENDS ON CONTINUED GROWTH OF THE INTERNET
 
    Our future success substantially depends on continued growth in the use of
the Internet. Although we believe that Internet usage and popularity will
continue to grow as it has in the past, we cannot be certain that this growth
will continue or that it will continue in its present form. If Internet usage
declines or evolves away from our business, our growth will slow or stop and our
financial results will suffer.
 
    IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS WILL SUFFER
 
    Our rapid growth has and will place a significant strain on our managerial,
operational, financial and information systems resources. To accommodate our
increasing size and manage our growth, we must continue to implement and improve
these systems and attract, train, manage and retain qualified employees. These
demands will require us to add new management personnel and develop new
expertise. In order to successfully integrate newly acquired assets and continue
to implement a nationwide strategy and network, we must:
 
    - closely monitor service quality, particularly through third-party "POPs";
 
    - acquire and install necessary equipment and telecommunications facilities;
 
    - create and implement marketing strategies in new and existing markets;
 
    - employ qualified personnel to provide technical and marketing support for
      new sites; and
 
    - continue to expand our managerial, operational, and financial resources to
      support expansion.
 
Although we are taking steps to manage our growth effectively, we may not
succeed. If we fail to successfully manage our growth, our ability to maintain
and increase our member base will be impaired and our business will suffer.
 
                                       18
<PAGE>
    WE ARE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS
 
    Since January 1998, we have acquired the stock or assets of eight companies.
As part of our long-term business strategy, we continually evaluate strategic
acquisitions of businesses and subscriber accounts. Acquisitions often involve a
number of special risks, including the following:
 
    - we may experience difficulty integrating acquired operations and
      personnel;
 
    - we may be unable to retain acquired subscribers;
 
    - the acquisition may disrupt our ongoing business;
 
    - we may not be able to successfully incorporate acquired technology and
      rights into our service offerings and maintain uniform standards,
      controls, procedures, and policies;
 
    - the businesses we acquire may fail to achieve the revenues and earnings we
      anticipated;
 
    - we may ultimately be liable for contingent and other liabilities, not
      previously disclosed to us, of the companies that we acquire; and
 
    - our resources may be diverted in asserting and defending our legal rights.
 
We may not successfully overcome problems encountered in connection with
potential future acquisitions. In addition, an acquisition could materially
adversely affect our operating results by:
 
    - diluting your ownership interest;
 
    - causing us to incur additional debt; and
 
    - forcing us to amortize expenses related to goodwill and other intangible
      assets.
 
    Any of these factors could have a material adverse effect on our business.
 
    WE HAVE BEEN SUED FOR AN ALLEGED BREACH OF A MERGER AGREEMENT
 
    In June 1998, we announced that we had entered into a merger agreement to
acquire Internet Communications Corporation. On October 13, 1998, we announced
that we had terminated the merger agreement due to, among other things, Internet
Communications Corporation's failure to satisfy certain obligations under the
merger agreement. On October 14, 1998, Internet Communications Corporation filed
a lawsuit against us in Denver District Court claiming $30 million in damages
and alleging, among other things, that we breached the merger agreement and had
made misrepresentations to them with respect to the proposed merger transaction.
We have filed several counterclaims against Internet Communications Corporation.
Our counterclaims allege that the merger failed because of the actions and
misrepresentations of Internet Communications Corporation and its agents. We are
seeking damages in excess of $175 million. We believe Internet Communications
Corporation's claims are without merit, and intend to conduct a vigorous
defense. We also intend to vigorously pursue our counterclaims against Internet
Communications Corporation. However, we may not prevail in our defense or in any
counterclaims. We hope that we can resolve the dispute without the necessity for
a trial, but we may not succeed. If the dispute cannot be resolved quickly, we
will incur additional litigation costs and the litigation may hamper our ability
to obtain additional financing. An unfavorable outcome could have a material
adverse affect on our business.
 
                                       19
<PAGE>
   IF WE DO NOT SUCCEED IN OBTAINING SUFFICIENT NETWORK CAPACITY FROM OUR
   INTERNAL AND LEASED NETWORK, WE MAY LOSE CUSTOMERS
 
    Our success depends, in part, on the capacity, reliability and security of
our network infrastructure. Network capacity constraints have occurred in the
past and may occur in the future, in connection with:
 
    - particular dial-up POPs affecting only members attempting to use that
      particular point of presence;
 
    - system-wide services, such as e-mail and news services, which can affect
      all members.
 
These capacity constraints result in slowdowns, delays or inaccessibility when
members try to use a particular service. Poor network performance could cause
members to terminate their membership with us. To reduce the probability of such
problems, we will be required to expand and improve our infrastructure. Such
expansion and improvement will be very costly and time consuming. We may not be
able to expand or adapt our network infrastructure to meet additional demand or
changing subscriber requirements on a timely basis or at a commercially
reasonable cost.
 
    In order to provide Internet access and other on-line services to our
customers, we lease long distance fiber optic telecommunications lines from
multiple national telecommunications service providers. We are dependent upon
these providers of data communications facilities. In addition, we have a
wholesale usage agreement with PSINet, which allows us to provide dial-up and
"switched" network access to our customers through PSINet's 235 POPs throughout
the United States. We also have other agreements with service providers on whom
we rely to deliver our product and service offerings. Moreover, PSINet provides
network access to some of our competitors. PSINet could choose to grant these
competitors preferential network access, potentially limiting our members'
ability to access the Internet. Even without such preferential treatment,
increased usage of PSINet's POPs by other Internet service providers and online
service providers may negatively affect access system performance.
 
    DAMAGE OR FAILURE OF OUR SYSTEM COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS
 
    We must protect our infrastructure against fire, earthquakes, power loss,
telecommunications failure, computer viruses, security breaches and similar
events. We do not currently maintain a redundant or backup network hub for all
of our customers. Moreover, because we lease our lines from long distance
telecommunications companies and regional Bell operating companies, we are
dependent upon these companies for physical repair and maintenance of the leased
lines. Although we maintain multiple carrier agreements to reduce the risk of
loss of operations from damage, power failures, telecommunications failures and
similar events, the occurrence of a natural disaster or other unanticipated
problems at our network operations center or any of our POPs may cause
interruptions in the services we provide. In addition, failure of our
telecommunications providers to provide the data communications capacity we
require as a result of a natural disaster, operational disruption or for any
other reason could cause interruptions in the services we provide. Any damage or
failure that causes interruptions in our operations could have a material
adverse effect on us.
 
    OUR NETWORK IS SUBJECT TO SECURITY RISKS
 
    The future success of our business will depend on the security of our
network and the network infrastructures of third-parties over which we have no
control. Despite implementation of security measures, we remain vulnerable to
computer viruses, sabotage, break-ins and similar disruptive problems caused by
subscribers or other Internet users. Computer viruses or other problems, such as
the sending of excessive volumes of unsolicited bulk e-mail, could lead to
interruptions, delays, or cessation of services to our subscribers.
 
    Third parties could also potentially jeopardize the security of confidential
information stored in our computer systems or our subscribers' computer systems
by their inappropriate use of the Internet,
 
                                       20
<PAGE>
which could cause losses to our subscribers or us or deter potential customers
from subscribing to our services. Inappropriate use of the Internet includes
attempting to gain unauthorized access to information or systems, commonly known
as "cracking" or "hacking." Although we intend to continue to implement security
measures, "hackers" have circumvented such measures in the past, and others may
be able to circumvent our security measures or the security measures of our
third-party network providers in the future.
 
    To fix problems caused by computer viruses or other inappropriate uses or
security breaches, we may have to interrupt, delay, or cease service to our
subscribers, which could have a material adverse effect on our business. In
addition, we expect that our subscribers will increasingly use the Internet for
commercial transactions in the future. Any network malfunction or security
breach could cause these transactions to be delayed, not completed at all, or
completed with compromised security. As a result, subscribers or others may
assert claims of liability against us. Further, until more comprehensive
security technologies are developed, the security and privacy concerns of
existing and potential subscribers may inhibit the growth of the Internet
service industry in general and our subscriber base and revenue in particular.
 
    WE ARE DEPENDENT ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS
 
    We rely on traditional telecommunications carriers to transmit our traffic
over local and long distance networks. These networks may experience disruptions
and capacity constraints that are not easily remedied. We may have no means of
replacing these services. In addition, local phone service is sometimes
available only from one telephone company. The benefits of competition and
alternative sources of supply are not present in these markets.
 
    We also depend on certain suppliers of hardware and software components. We
acquire a majority of our networking service components, including terminal
servers and high-performance routers, from Cisco Systems, Inc., Bay Networks,
Inc. and Lucent Technologies, Inc. The expansion of our network infrastructure
places a significant demand on our suppliers, some of which have limited
production capacity. In the past, we have experienced delays in delivery of new
telephone lines, modems, terminal servers and other equipment. If delays are
severe, all incoming modem lines may become full during peak times, resulting in
busy signals for subscribers who are trying to connect to Rocky Mountain
Internet. If our suppliers cannot meet increased demand and we are not able to
develop alternative sources of supply, we could experience delays and increased
costs in expanding our network infrastructure, difficulty in providing our
services and the loss of dissatisfied customers.
 
   WE MAY NOT SUCCESSFULLY PROTECT OUR PROPRIETARY RIGHTS OR AVOIDING CLAIMS
   THAT WE INFRINGE THE PROPRIETARY RIGHTS OF OTHERS
 
    Our success is dependent in part on our technology and other proprietary
rights. To protect our rights, we rely on a combination of copyright, trademark,
patent and trade secret laws and contractual restrictions. We cannot be sure
that these steps will be adequate to prevent misappropriation or infringement of
our intellectual property. Nor can we be sure that competitors will not
independently develop technologies that are substantially equivalent or superior
to our proprietary property and technology.
 
    In our industry, competitors often assert intellectual property claims
against one another. The success of our business depends on our ability to
assert and defend our intellectual property rights. Future litigation may have
an adverse impact on our financial condition. These claims could result in
substantial costs and diversion of resources, even if the claim is ultimately
decided in our favor. If a claim is asserted alleging that we infringed the
proprietary technology or information of a third party, we may be required to
seek licenses for such intellectual property. We cannot be sure that such
licenses would be offered or obtained on commercially reasonable terms, if at
all. The failure to obtain the necessary licenses or other rights could have a
material adverse affect on our business.
 
                                       21
<PAGE>
   MANAGEMENT'S MAJORITY OWNERSHIP OF OUR STOCK ALLOWS THEM TO EXERCISE
   SIGNIFICANT CONTROL OVER ROCKY MOUNTAIN INTERNET AND MAY PREVENT YOU FROM
   REALIZING A PREMIUM RETURN
 
    Our chief executive officer, Douglas Hanson, owns a majority of our common
stock. As a result, Mr. Hanson has voting control of Rocky Mountain Internet and
can influence all matters that require stockholder approval. Mr. Hanson may
designate the members of our Board of Directors and can decide our operations
and business strategy. You may disagree with Mr. Hanson's management decisions.
 
    As a controlling stockholder, Mr. Hanson also has the power to approve or
reject significant corporate matters, such as mergers, acquisitions and other
change-in-control transactions. Mr. Hanson's controlling interest could make it
more difficult for a third party to acquire us, even if the acquisition would be
beneficial to you. You may not realize the premium return that stockholders may
realize in conjunction with corporate takeovers.
 
    MARKET PRICE OF OUR STOCK MAY FALL IF OTHER SECURITY HOLDERS SELL THEIR
     STOCK
 
    As of March 12, 1999, we have 9,962,794 shares of common stock outstanding.
However, we have reserved approximately 10,500,000 additional shares for
issuance upon exercise of warrants and stock options, various anti-dilution
provisions contained in the warrants and stock options, conversion of preferred
stock, and prior acquisitions. If any of the shares presently outstanding or to
be distributed are sold in the public market the market price of our common
stock could fall. If our stockholders sell substantial amounts of our common
stock in the public market, the market price of our common stock could fall.
Such sales also might make it more difficult for us to sell equity or
equity-related securities in the future at a price we deem appropriate. We have
also issued and plan to issue additional convertible equity and debt securities
in the future. If these securities are exercised or converted, you may
experience significant dilution in the market value of your stock.
 
    OUR STOCK PRICE IS HIGHLY VOLATILE
 
    In the past, our common stock and publicly traded warrants have traded at
volatile prices. We believe that the market prices will continue to be subject
to significant fluctuations due to various factors and events that may or may
not be related to our performance. If the market value of our common stock
decreased substantially, we could be delisted from the Nasdaq National Market.
Consequently, you could find it difficult or impossible to sell your stock or to
determine the value of your stock.
 
    In addition, the stock market has from time to time experienced significant
price and volume fluctuations, which have particularly affected the market
prices of the stocks of Internet-sector companies and which may be unrelated to
the operating performance of such companies. Furthermore, our operating results
and prospects from time to time may be below the expectations of public market
analysts and investors. Any such event could result in a material decline in the
price of your stock.
 
    FACTORS OUTSIDE OF OUR CONTROL MAY AFFECT OUR OPERATING RESULTS AND CAUSE
     OUR QUARTERLY RESULTS TO FLUCTUATE
 
    Our financial results may fluctuate significantly because of several
factors, many of which are beyond our control. These factors include:
 
    - costs associated with gaining and retaining members and capital
      expenditures for upgrading our systems and infrastructure;
 
    - timing and market acceptance of new and upgraded Internet service
      introductions, technologies and services by us and our competitors;
 
    - loss of subscribers, seasonal fluctuations in demand for our services;
 
    - downward pressure on prices due to increased competition;
 
                                       22
<PAGE>
    - changes in our operating expenses, including telecommunications costs; and
 
    - effect of potential acquisitions.
 
Fluctuations caused by these and other factors could cause our business to
suffer.
 
    WE HAVE NO INTENTION TO PAY DIVIDENDS
 
    We have never paid any cash dividends on our common stock. We currently
intend to retain all future earnings, if any, for use in our business and do not
expect to pay any dividends in the foreseeable future.
 
    WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION
 
    We provide Internet services through data transmissions over public
telephone lines and cable networks. The FCC governs these transmissions and
establishes charges and terms for communications. As an Internet access
provider, we are not subject to direct regulation by the FCC or any other
governmental agency, other than the regulations applicable to businesses
generally. However, we could become subject to FCC or other regulatory agency
regulation especially as Internet services and telecommunication services
converge. Changes in the regulatory environment could decrease our revenue and
increase our costs. For example, the FCC may decide that Internet-based
telephone services should be subject to pay carrier access charges on the same
basis as traditional telecommunications companies.
 
    The Federal Telecommunications Act of 1996 imposed fines on Internet service
providers, in part, for providing access to indecent and obscene services. The
United States Supreme Court found this part of the unconstitutional in June of
1997. However, on March 12, 1998, the Senate Commerce Committee approved two
bills that attempt to reconstruct these unconstitutional provisions. Although it
is too early to determine the ultimate course of these bills, and to evaluate
the constitutionality of the proposals, these provisions, if enacted and upheld,
could expose ISPs such as Rocky Mountain Internet to liabilities.
 
    Additional laws and regulations may be adopted with respect to the Internet,
covering issues such as Universal Service Fund support payments, content, user
privacy, pricing, libel, obscene material, indecency, gambling, intellectual
property protection and infringement and technology export and other controls.
Other federal Internet-related legislation has been introduced which may limit
commerce and discourse on the Internet. The FCC currently is considering:
 
    - whether Internet service providers are regulated telecommunications
      providers;
 
    - whether Internet service providers are required to contribute to the
      Universal Service Fund; and
 
    - how various companies in the Internet and telecommunications industries
      should be classified.
 
    IF WE ARE UNABLE TO RETAIN KEY EXECUTIVES, OUR BUSINESS WILL BE ADVERSELY
     AFFECTED
 
    Our success greatly depends on our ability to attract and retain key
technical, sales, marketing, information systems, financial and executive
personnel. We are especially dependent on the continued services of our senior
management team, particularly Douglas H. Hanson, our Chief Executive Officer and
Chairman of the Board of Directors, and Mary Beth Vitale, our President and
Chief Operating Officer. The loss of Mr. Hanson, Ms. Vitale or other senior
managers could have a materially detrimental effect on us. Ms. Vitale is the
only executive with an employment agreement. All other members of our senior
management team can terminate their employment at any time. We do not maintain
key person life insurance on any of our personnel. If we fail to attract, hire
or retain the necessary personnel, or if we lose the services of any member of
our senior management team, our business could be adversely affected.
 
                                       23
<PAGE>
   OUR FAILURE TO ENSURE THAT OUR SYSTEMS OR OUR CUSTOMERS AND SUPPLIERS SYSTEMS
   ARE YEAR 2000 COMPLIANT COULD LEAD TO A MAJOR SYSTEM FAILURE THAT COULD
   ADVERSELY AFFECT OUR BUSINESS
 
    The Year 2000 problem is the result of computer programs that use two digits
rather than four to define the applicable year. On January 1, 2000, computer
equipment and programs that have time-sensitive software may not be able to
distinguish whether "00" means 1900 or 2000. Incompatible date coding could
cause a major system failure or could create erroneous results. We may also be
vulnerable to other companies' Year 2000 issues.
 
    Our failure, or the failure of third parties on which we rely, to adequately
address Year 2000 readiness issues could result in an interruption, or a
failure, of some normal business activities or operations. Presently, we believe
that the primary risks that we face with regard to the Year 2000 are those
arising from third party services or products. In particular, we depend heavily
on a significant number of third party vendors to provide both network services
and equipment. A significant Year 2000-related disruption of these network
services or equipment could cause our customers to consider seeking alternate
providers or cause an unmanageable burden on customer service and technical
support. This in turn could materially and adversely affect business.
 
    Furthermore, our business depends on the continued operation of, and
widespread access to, the Internet. To the extent that the normal operation of
the Internet is disrupted by the Year 2000 issue, or if a large portion of our
customers are unable to access the Internet due to Year-2000 related issues in
connection with their own systems, our business could be materially and
adversely affected.
 
    We also face Year 2000 risks related to the acquisitions we make. If we fail
to identify and address Year 2000 issues in connection with our acquisitions,
our business could be materially and adversely affected.
 
    Although we have established a program to coordinate appropriate activity to
be taken to address the Year 2000 issue. As of December 31, 1998, we had
incurred approximately $50,000 in connection with the implementation of the
program. We expect to incur an additional $150,000 to $200,000 of expenses to
implement the remainder of the Year 2000 readiness program. These estimates do
not include additional costs that may be incurred to expand the program for
systems and products that we may acquire later in 1999. These are our best
estimates, and we do not believe that the total costs will have a material
affect on our business. However, if the actual costs resulting from
implementation of the Year 2000 readiness program significantly exceed our
estimates, they may have a material adverse effect on our business.
 
    Furthermore, we have not developed a Year 2000 contingency plan to identify
and address significant Year 2000 risks.
 
ITEM 2.  DESCRIPTION OF PROPERTIES
 
    Our corporate headquarters is located in Denver, Colorado at 999 Eighteenth
Street, Suite 2201, where the executive, sales and marketing and administrative
functions exist. We lease approximately 31,314 square feet in Denver under a
lease that expires August 31, 2005. This lease replaces the lease on the former
headquarters location in Denver, Colorado at 1099 18(th) Street, Suite 300. The
same property management company manages both the former and current leases. We
entered into a termination agreement on the former lease property with the
landlord that provided for six equal termination payments payable over a
six-month period. This corresponds to a simultaneous six-month period in which
we will not be obligated to make rental payments for the new lease property. We
also lease approximately 4,000 square feet in Denver at 1800 Glenarm that
formerly housed the corporate headquarters. This facility has been sub-let for
the remainder of the lease term, which concludes January 7, 2001. We recognized
a loss on the subletting of this space in 1996 of approximately $58,000 which
includes the broker commission plus the difference between the rate we paid and
the amount realized from the sublet tenant. We maintain an office of
approximately 8,000 square feet in Colorado
 
                                       24
<PAGE>
Springs that is leased until January, 2000. RMI also has leased POP locations in
Colorado Springs, Denver, Grand Junction, Loveland, and Pueblo, Colorado.
Through third-party contracts, we lease three additional POP locations in
Burlington, Durango, and Montrose, Colorado. With the acquisitions of
InternetNow, DataXchange, Unicom, Stonehenge and Application Methods we have
assumed operating leases for office locations in Phoenix, Arizona, Walkersville,
Maryland, Overland Park, Kansas, Englewood, Colorado and Seattle, Washington. We
do not own any real estate.
 
ITEM 3.  LEGAL PROCEEDINGS
 
    In June 1998, we announced that we had entered into a merger agreement to
acquire Internet Communications Corporation ("ICC"). The closing of the
acquisition was subject to various closing conditions, and the merger agreement
contained certain rights of termination. On October 13, 1998, we announced that
we had terminated the merger agreement due to, among other things, ICC's failure
to satisfy certain obligations under the merger agreement. On October 14, 1998,
ICC filed a complaint against Rocky Mountain Internet in Denver District Court
claiming $30 million in damages and alleging, among other things, that we had
breached the merger agreement and had made certain misrepresentations to ICC
with respect to the merger transaction. We believe ICC's claims to be without
merit and intend to vigorously defend such action and to assert counterclaims
against ICC; however, there can be no assurance that we will prevail in our
defense or counterclaims.
 
    On November 30, 1998, we filed an answer to the ICC complaint denying their
material allegations, asserting a number of affirmative defenses, and disputing
their right to any recovery on any of the claims asserted. In addition, we filed
a counterclaim against ICC seeking over $175.0 million in damages as a result of
ICC's wrongful acts that led to the failure of the proposed high yield debt
offering in 1998 and the failure of the proposed merger agreement with ICC.
 
    On February 24, 1999, the Denver District Court granted a motion filed by
Rocky Mountain Internet, and disqualified the law firm of Holme Roberts & Owen,
LLP (HRO) from continuing to act as litigation counsel for ICC in the lawsuit.
The Court agreed with Rocky Mountain Internet that because HRO had acted as
transaction counsel for ICC in the high yield debt offering and the proposed
merger, and therefore was a potential material witness and material actor in the
underlying activities, it would be inappropriate for HRO to seek to act as trial
counsel in the same proceeding where it might be required to serve as a witness
or potentially be drawn into the proceedings in some other way.
 
    We are hopeful that we can resolve the dispute with ICC without the
necessity for a trial; however, there can be no assurance as to our ability in
this regard. In the event that the dispute cannot be resolved expeditiously, we
expect that we will incur additional costs and expenses as a result of the
litigation and that the litigation may hamper our ability to obtain additional
financing. As a result of the termination and the related financing transactions
that were not completed, we incurred costs, expenses and related fees of $6.1
million, a portion of which are in dispute. Of this amount, approximately $4.2
million relates to a non-cash item related to warrants issued by Rocky Mountain
Internet.
 
    We are a party to certain smaller court proceedings, but none of those has
the current ability to expose the Company to greater than $25,000 in damages, or
costs and expenses.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    Not applicable.
 
                                       25
<PAGE>
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    Our common stock is traded on the Nasdaq National Market under the symbol
"RMII" and our warrants are traded on the Nasdaq National Market under the
symbol "RMIIW."
 
    The following table sets forth the closing high and low closing prices of
our common stock as reported on the Nasdaq SmallCap Market through March 4, 1999
and on the Nasdaq National Market from March 5, 1999 through March 29, 1999.
 
<TABLE>
<CAPTION>
                                                                                 STOCK PRICE
                                                                             --------------------
1997                                                                           HIGH        LOW
---------------------------------------------------------------------------  ---------  ---------
<S>                                                                          <C>        <C>
First Quarter..............................................................  $   2.750  $   1.125
Second Quarter.............................................................  $   3.250  $   1.875
Third Quarter..............................................................  $   2.625  $   2.000
Fourth Quarter.............................................................  $   3.125  $   2.375
</TABLE>
 
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------------
<S>                                                                        <C>        <C>
First Quarter............................................................  $   5.188  $   1.875
Second Quarter...........................................................  $  11.750  $   5.313
Third Quarter............................................................  $  18.500  $   8.000
Fourth Quarter...........................................................  $  28.500  $   7.000
</TABLE>
 
<TABLE>
<CAPTION>
1999
------------------------------------------------------------------------
<S>                                                                       <C>        <C>
First Quarter
  (January 1-March 29)..................................................  $  14.063  $  10.500
</TABLE>
 
    At March 29, 1999, the last reported sales price of our common stock was
$13.50 per share. Based on information supplied by certain of record holders of
our common stock, we estimate that there are approximately 800 beneficial owners
of our common stock. We have never declared or paid any dividends on our common
stock. Because we currently intend to retain future earnings to finance growth,
we do not anticipate paying any cash dividends in the foreseeable future.
 
    For a description of unregistered securities issued by Rocky Mountain
Internet in 1998, refer to Notes 7, 10 and 11 of the Notes to Consolidated
Financial Statements. In each of these transactions, we relied on the exemption
from registration provided by Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933.
 
    From January 1, 1998 through December 31, 1998, we granted option to
purchase 240,000 shares of common stock under our stock option plans with a
weighted average exercise price of $5.70 per share. Our directors and employees
exercised options to purchase 638,988 shares of common stock with a weighted
average exercise price of $1.37 per share. We issued these securities in
reliance on the exemption from registration provided by Rule 701 for
transactions pursuant to employee benefit plans.
 
                                       26
<PAGE>
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL INFORMATION
 
    The following is a summary of selected consolidated financial data of the
Company as of and for the five years ended December 31, 1998. This data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and the Notes thereto appearing elsewhere in this document.
 
<TABLE>
<CAPTION>
                                              1998           1997           1996           1995          1994
                                         --------------  -------------  -------------  -------------  -----------
<S>                                      <C>             <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues...............................  $   10,087,015  $   6,127,111  $   3,281,579  $   1,179,325  $   253,806
Operating loss.........................     (10,478,162)    (3,800,706)    (2,281,194)      (108,522)     (40,720)
Net loss...............................     (10,668,802)    (4,152,853)    (2,342,571)      (128,794)     (44,086)
Basic and diluted loss per share.......           (1.39)         (0.79)         (1.03)         (0.07)       (0.02)
 
BALANCE SHEET DATA:
Cash and cash equivalents..............  $    5,729,346  $   1,053,189  $     348,978  $     274,661  $    36,470
Investments............................              --             --      1,356,629             --           --
Working capital (deficit)..............       1,986,513       (209,003)       370,884       (186,865)    (174,029)
Total assets...........................      24,681,801      5,082,119      5,540,167        924,603      249,818
Long term debt.........................         493,963        904,627      1,134,380        904,627       51,745
Redeemable, Convertible Preferred
  Stock................................       6,747,843             --             --             --           --
Total stockholders' equity (deficit)...      11,817,614      2,083,370      2,317,437       (169,036)     (43,143)
</TABLE>
 
                                       27
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
GENERAL
 
    The following discussion of the results of operations and financial
condition of Rocky Mountain Internet, Inc. (the "Company") should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere in this Annual Report.
 
RESULTS OF OPERATIONS
 
                 TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997
 
    TOTAL REVENUE
 
    The Company's total revenue grew 65% from $6,127,000 to $10,087,000 for the
twelve months ended December 31, 1998 from the twelve months ended December 31,
1997. Revenue growth performance is attributable to an increase in the number of
the Company's subscribers as a result of more aggressive sales efforts and
subscribers added by acquisition. The Company intensified its sales efforts in
1998 versus 1997 by increasing the size of the sales force and by segmenting the
sales team by product group.
 
    COMMUNICATION SERVICES REVENUE
 
    Communication Services is comprised predominantly of dial-up and dedicated
access service. Communication services revenue increased $2,898,000 from
$5,076,000 in 1997 to $7,974,000 in 1998 for a 57% increase. The increase is due
to increasing demand for a wide range of bandwidth connectivity options to
connect our customers to the Internet and the headcount growth of the Company's
sales department in 1998, which resulted in an addition of over 6,100
subscribers in 1998. The growth in revenue was partially offset by the full-year
impact of the adoption of a flat-rate-structure for dial-up versus a usage based
pricing structure. In addition, we added over 11,000 dial-up and 693 dedicated
access customers due to acquisitions in the Company's fourth quarter.
 
    WEB SOLUTIONS REVENUE
 
    Web Solutions revenue grew from $1,051,000 in 1997 to $2,113,000 in 1998 for
a 101% increase. Web Solutions revenues are comprised of three major products:
web site hosting, web site production and web site marketing. Web site hosting
accounted for $451,000 of revenue in 1997 and $601,000 in 1998 for an increase
of 33% due to an increase in the number of hosted web sites as a result of the
addition of sales personnel. Web site production increased from $543,000 in 1997
to $1,287,000 in 1998, for an increase of 137%. The increase in web site
production revenue is primarily due to the acquisition of Applications Methods,
which accounted for $706,000 or 53% of the web production revenue in 1998.
 
    GROSS PROFIT
 
    Gross profit consists of total revenue less the direct cost of delivering
services and equipment. These costs include costs for circuit and local line
charges to provide service to our customers. The gross profit for Communication
Services was 56% of revenues from that segment for 1998 and 59% for 1997. Gross
profit on Internet access decreased from 69% to 66% from 1997 to 1998 primarily
as a result of changing from usage based pricing to a flat-fee pricing structure
for dial-up access. Gross profit for Web Solutions was 98% in 1998 and 100% in
1997. In 1998, the costs associated with gross profit included outsourcing of
additional web production programmers to complete specific projects whereas no
such outsourcing costs were incurred in 1997. No personnel costs for Company
employees are included in Web Solutions gross profit.
 
                                       28
<PAGE>
    SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
 
    Total selling, general, and administrative expenses ("S G & A") increased
from approximately $6,980,000 in 1997 to $9,184,000 in 1998 or an increase of
32%. This increase was partially the result of higher payroll costs and
benefits. Payroll and benefits costs increased 50% from $3,993,000 in 1997 to
$5,990,000 in 1998, as a result of increasing the Company's headcount from 72 in
December 1997 to 198 in December 1998. Outside services, which includes
"temporary to hire" staff and professional services increased 67% from $682,000
in 1997 to $1,139,000 in 1998. The Company hires many of the technical support
call center staff and the Web production staff on a "temp to hire" program,
wherein the new employee remains on the temporary employment agency's payroll
for approximately ninety days.
 
    COSTS RELATED TO UNSUCCESSFUL MERGER ATTEMPT
 
    In June 1998, the Company announced it had entered into a merger agreement
to acquire Internet Communications Corporation ("ICC"). The closing of the
acquisition was subject to various closing conditions, and the merger agreement
contained certain rights of termination. On October 13, 1998, the Company
announced that it terminated the merger agreement due to, among other things,
ICC's failure to satisfy certain obligations under the merger agreement. On
October 14, 1998, ICC filed a complaint against the Company in Denver District
Court claiming $30.0 million in damages and alleging, among other things, that
the Company had breached the merger agreement and had made certain
misrepresentations to ICC with respect to the merger transaction. The Company
believes ICC's claims to be without merit and intends to vigorously defend such
action and to assert counterclaims against ICC; however, there can be no
assurance that the Company will prevail in its defense or counterclaims. The
Company is hopeful that it can resolve the dispute with ICC without the
necessity for a trial; however, there can be no assurance as to the Company's
ability in this regard. In the event that the dispute cannot be resolved
expeditiously, the Company expects that it would incur additional costs and
expenses as a result of the litigation and that the litigation may hamper the
Company's ability to obtain additional financing. As a result of the termination
and the related financing transactions which were not completed, the Company
incurred costs, expenses and related fees of approximately $6.1 million, a
portion of which are in dispute. Of this amount, approximately $4.2 million
relates to a non-cash item related to warrants issued by the Company. These
costs were charged to expense in the third quarter of 1998, which had an effect
of an additional $0.79 earning per share loss.
 
    DEPRECIATION AND AMORTIZATION
 
    Depreciation and amortization increased from $887,000 in 1997 to $1,789,000
in 1998 for an increase of 102%. The increase was due to higher goodwill
amortization associated with the Company's acquisition of six companies during
1998.
 
    INTEREST EXPENSE
 
    Interest expense decreased from $402,000 for the year ended December 31,
1997 to $320,000 for the year ended December 31,1998. The decrease is due to
lower long-term debt and capital lease obligations in 1998 compared to 1997.
 
    OTHER INCOME
 
    The Company reported other expense of $5,000 for the year ended December 31,
1997 and $78,000 of other income for the year ended December 31, 1998. The
increase is due to the higher collection of late charges.
 
                                       29
<PAGE>
                 TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996
 
    TOTAL REVENUE
 
    For the year ended December 31,1997, the Company's revenue grew 87% to
$6,127,000 compared to $3,282,000 for the year ended December 31, 1996. The
total number of customers grew from 9,800 to 11,000 during the same periods
representing an increase of 12%. Revenues exclusive of equipment sales grew at
108%. Revenues grew at a faster rate than customer count due to a focus on
commercial customers with higher monthly billing rates and from increases in Web
production and hosting and equipment sales. The increase in customer count was
also partially offset by approximately 1,050 deletions resulting from the
termination of a contract with Zero Error Networks. The Company transferred an
additional 390 customers to Zero Error Networks effective January 1, 1998.
 
    COMMUNICATION SERVICES REVENUE
 
    Communication Service revenue grew 77% from $2,862,000 in 1996 to $5,076,000
in 1997. Dial-up service revenue increased from $1,465,000 in 1996 to $2,360,000
in 1997 for a 61% increase due to increased demand for Internet access and the
change from a technical order taking team to a dedicated selling team. Dedicated
access increased 197% from $689,000 in 1996 to $2,048,000 in 1997. This increase
is the result of the creation of a full time sales staff focused on the
dedicated product line and the continuing growth in demand for higher-speed
internet connectivity.
 
    WEB SOLUTIONS REVENUE
 
    Web Solutions revenues are composed of Web site hosting and Web site
production. Web site hosting accounted for $240,000 in 1996 and $479,000 in 1997
of revenue for an increase of 100%. The revenue increase resulted from an
increase in the number of customers. The Company believes the increase in
customers is due to the intensified efforts of the Company's direct sales force,
increased server capacities and speed, and the increasing popularity of the Web
as a business tool. Web site production increased from $174,000 for 1996 to
$564,000 for 1997 for an increase of 224%. The Company increased the size of the
Web production department as well as providing customers more complex
applications. The Company's direct sales force has focused on selling Web
production sites with higher average billings.
 
    GROSS PROFIT
 
    Gross profit consists of total revenue less the direct cost of delivering
services and equipment. These costs include costs for circuit and local line
charges to provide service to our customers. The gross profit for Communication
Services was 62% of revenues from that segment for 1996 and 59% for 1997. Gross
profit percentage decreased due to the transition from a usage based rate
structure to a flat rate structure. Gross profit for Web Solutions was 99% in
1996 and 100% in 1997. The costs reflected in 1996 were due to outside
programming costs incurred for specific projects whereas no such outside
programming costs were incurred in 1997.
 
    GENERAL, SELLING AND ADMINISTRATIVE
 
    Sales and marketing expenses consisting of advertising, promotion,
attendance at trade shows, printing, and finders fees increased from $211,000 in
1996 to $ 286,000 in 1997 or 35%. The Company hired a full time direct sales
staff beginning in December 1995. Compensation for sales and marketing personnel
was approximately $565,000 for 1996 and $969,000 in 1997 for an increase of 71%
with 16 employees at the end of 1996 and 17 employees at the end of 1997. The
increase results from having a fully staffed sales department throughout 1997
while the department was partially staffed in 1996.
 
                                       30
<PAGE>
    General and administrative expenses increased from approximately $3,683,000
in 1996 to approximately $6,611,000 in 1997 or 80%. General and administrative
costs consist of personnel (excluding sales and marketing personnel), physical
facilities, professional services and other related administrative expenses.
Significant items are discussed below.
 
    Payroll costs increased 41% from $2,138,000 for the year ended December 31,
1996 to $3,024,000 for the year ended December 31, 1997 (not including sales and
marketing personnel compensation discussed above). The Company had 55 employees
at the end of 1996 and 67 employees at the end of 1997 in all areas of the
Company including administration, technical support, development, and senior
management (excluding sales and marketing). The 1997 total expense includes
$128,000 of compensation expense in regards to options granted to Mr. Douglas H.
Hanson as discussed elsewhere in this report.
 
    Facilities rent expense was $172,000 for 1996 and increased 156% to $441,000
in 1997. This increase is principally the result of a move in late 1996 to new
corporate headquarters, which consists of leased office space of approximately
19,500 square feet of space including a data center comprised of 1,200 square
feet. The Company continues to occupy offices in Colorado Springs for staff
performing Dial-In technical support, customer service, and sales functions. The
Company's former offices in Denver at 1800 Glenarm have been sub leased
effective March 1, 1997 for the remainder of the lease term. A one-time charge
of approximately $58,000 has been recorded in 1996 for commission expense on the
transaction as well as the difference between the sub lease rate and the
existing lease rate.
 
    The Company experienced an increase in communications expense from $197,000
for the year ended 1996 to $261,000 for the year ended 1997 or 32%. These
expenses included local telephone service, cellular phones and pager costs and
long distance telephone expenses. The Company uses multiple "800" phone numbers
to provide technical support, customer support, and sales order processing to
its growing base of customers.
 
    Legal and accounting expenses increased from $77,000 in 1996 to $218,000 in
1997 or an increase of 183%. This increase resulted from the first full year of
filing quarterly and annual reports with the Securities and Exchange Commission,
due diligence work performed in regards to the investments by Mr. Hanson, and
negotiations in regards to the terminations of employees, and preparation of the
proxy statement.
 
    Outside services, which includes "temp to hire" staff and professional
services, increased 192% from $150,000 to $438,000 from 1996 to 1997. The
Company hires many of the technical support call center staff and the Web
production staff on a "temp to hire" program wherein the new employee remains on
the temporary employment agency's payroll for approximately ninety days. This
allows the staff to be fully evaluated prior to becoming a full time Company
employee.
 
    During 1997, the Company incurred one time expenses for: a write-off of
costs incurred in Grand Junction and Burlington, Colorado for development of
third party marketing agreements in the amount of $45,000, a write down of
inventory for sale in the amount of $23,000, and expense of $318,000 relating to
termination of employees
 
    EFFECTS OF INFLATION
 
    Historically, inflation has not had a material effect on the Company.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    For the year ended December 31, 1998, the Company's cash used in operations
was $2.6 million as compared to $3.3 million for the year ended December 31,
1997. The decrease in cash used in operations primarily resulted from lower
working capital requirements in 1998 offsetting increased
 
                                       31
<PAGE>
operating losses. The Company expects to continue to have operating cash flow
deficiencies for the near future as it develops and expands its business.
 
    For the year ended December 31, 1998, the Company used $0.7 million in
investing activities whereas $0.9 million were provided from investing
activities for the year ended December 31, 1997. This change was primarily due
to increased capital expenditures in 1998 and the company not receiving proceeds
from the maturity of investment securities in 1998 as it did in 1997.
 
    Cash provided by financing activities increased in 1998 compared to 1997 as
a result of increased proceeds from the sale of the Company's preferred stock,
common stock and common stock warrants. In 1998, the Company received $9.6
million in net proceeds from the sale of these stock instruments whereas only
$3.5 million was received in 1997.
 
    Since its inception, the Company has funded its operations and working
capital needs primarily through the public and private placement of the
Company's equity securities. In addition, a significant portion of the Company's
capital expenditures have been financed through capital lease obligations
payable to finance companies. The Company has also borrowed amounts from its
Chief Executive Officer in order to fund working capital requirements.
 
    In 1998, the Company borrowed $1.0 million from its Chief Executive Officer
to fund working capital requirements. All of these amounts were repaid plus
interest at a rate of 11% per annum to the Chief Executive Officer in December
1998. These borrowings were repaid from the proceeds of the Company's Series B
Redeemable, Convertible Preferred Stock issuance.
 
    The Company also issued 8,000 shares of its Series B Redeemable, Convertible
Preferred Stock ("Series B Preferred Stock") through a private placement which
was completed on December 10, 1998. The Company received $8 million in gross
proceeds from the issuance of the Series B Preferred Stock which was sold to two
institutional investors. The Series B Preferred Stock is convertible, subject to
certain restrictions, into shares of the Company's common stock at a variable
rate, based on a formula linked to the market price at the time of conversion.
The terms of the Series B Preferred Stock also includes restrictions on
conversion depending on certain market conditions, restrictions against short
sales and other hedging transactions by the investors and a conversion rate
which may be up to a 20% premium to the market price or a discount to the market
price depending on the time of conversion. The Series B Preferred Stock may be
redeemed by the Company at any time if the Company is in compliance with certain
covenants at a minimum redemption price equal to 115% times the outstanding face
amount plus accrued but unpaid dividends and interest. In addition, the Series B
Preferred Stock may be redeemed at the option of the holders if the Company's
common stock ceases to be traded on either the NASDAQ, NASDAQ Small Cap, NYSE or
the AMEX stock exchanges, if the Company is unable to convert the shares into
common stock upon a requested conversion or if the Company is merged into
another entity where the Company's voting stockholders do not collectively own
greater than 51% of the merged entity.
 
    In addition, the Company issued warrants to purchase 155,000 shares of
common stock with an exercise price of $13.21, subject to adjustment, of the
closing day market price, exercisable at any time over the next five years, to
the purchasers of the Series B Preferred Stock and warrants to purchase 100,000
shares of common stock with an exercise price of $12.20, subject to adjustment,
exercisable over the next five years, to certain brokers in connection with the
transaction. The Company has agreed to register the common stock issuable upon
conversion of the Series B Preferred Stock and the exercise of the warrants
pursuant to registration rights agreements.
 
    The Company has cash and cash equivalents of $5.7 million at December 31,
1998. Management estimates that, based upon its current expectations for growth,
the company will require additional funding of up to $20 million through the end
of 1999 for the execution of its current business plan including the financing
of its anticipated capital expenditures and operating losses. In addition to
 
                                       32
<PAGE>
increasing cash flow from operations, the Company intends to obtain this funding
from one or more of the following sources: (1) a commitment, subject to certain
conditions, from one of the institutional investors who purchased the Series B
Preferred Stock in December 1998 to purchase an additional $5 million of Series
B Preferred Stock, (2) calling 1,089,367 warrants issued in conjunction with its
initial public offering which could yield up to $4.8 million in proceeds, (3)
the exercise of warrants related to the Company's September 1997 private
placement, and (4) establishing a credit facility to finance equipment purchased
and other capital expenditures for $11.0 million. Management believes its
current operating funds, along with these additional financing sources, will be
sufficient to fund its cash requirements for at least the next 12 months.
 
    The Company issued warrants to its Chief Executive Officer to purchase
4,000,000 shares of the Company's common stock at an exercise price of $1.90 per
share, subject to adjustment, in October 1997. These warrants are scheduled to
expire on September 22, 1999, if not exercised earlier. The Chief Executive
Officer exercised a portion of these warrants in March 1998 to purchase 50,000
shares of the Company's common stock.
 
    The sale of additional equity or convertible debt securities could result in
additional dilution to the company's stockholders. In addition, the Company
will, from time to time, consider the acquisition of or investment in
complementary businesses, products, services, and technologies, and the
repurchase and retirement of debt, which might impact the Company's liquidity
requirements or cause the company to issue additional equity or debt securities.
There can be no assurance that financing will be available in amounts or on
terms acceptable to the company, if at all. Should the Company be unsuccessful
in its efforts to raise capital it may be required to modify or curtail its
plans for growth.
 
YEAR 2000 ISSUES
 
    Rocky Mountain Internet is preparing its systems and applications for the
Year 2000. Various problems may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems arise from the fact that most of the
world's computer hardware and software have historically used only two digits to
identify the year in a date. If the computer systems cannot distinguish between
the year 1900 and 2000, system failures or other computer errors could result.
 
    STATE OF READINESS
 
    The Company has established a Y2K Committee to coordinate appropriate
activity and a reporting structure to the Board of Directors on a monthly basis
with regard to the Year 2000 issue. This committee has outlined a comprehensive
plan and is currently implementing the tasks associated for the Company to
become Y2K ready. Preliminary indications are that, since Rocky Mountain
Internet is a relatively new company (founded in 1993), most hardware and
software systems, as well as software programs used by the Company, will not be
impacted by the Year 2000 issues. All of the Company's MIS user equipment is
based on Microsoft Windows 95, 98, or NT. Microsoft has issued or is issuing
patches that will make this software compliant by year-end. Internal MIS systems
that handle accounting and customer care are being replaced due to growth needs.
All future software that will be purchased will be Y2K compliant. All internally
written software is currently being checked to ensure Y2K compliance and will be
completed no later than October 1999. Users have been briefed on the necessity
for them to check any special, non-mission critical software that they have
purchased for their departments to ensure that it is Y2K compliant.
 
    The Company has inventoried the externally purchased network elements
including routers, router software, router redundancy options, processor cards,
and switches. The Company has verified 100% completion of testing, in
cooperation with the external vendors, that the products associated with the
network elements are Y2K compliant. After testing and certification, the Company
learned that 86% of
 
                                       33
<PAGE>
the network elements passed the Y2K compliance test, while 14% failed. Of the
14% of elements that failed, and therefore were not Y2K compliant, the Company
has upgraded all but one piece of equipment to be Year 2000 compliant. The
remaining piece will be replaced no later than October 1999.
 
    Rocky Mountain Internet has acquired eight companies since June 1998. We are
currently working very closely with each company to determine their state of
readiness. Overall, the companies are approximately 85% Y2K compliant from a
hardware and software perspective. The Company believes that the remaining 15%
non-compliance is a result primarily of not yet being able to complete testing
of those components.
 
    With respect to communications from external third parties requesting that
the Company provide verification of Y2K compliance on the Company's goods and
services, the Company expects to have formal response letters sent no later than
May 15, 1999. With respect to communications from the Company to external third
party vendors that provide additional goods and services to the Company, we
expect to issue requests to all those parties to provide verification of Y2K
compliance on their goods and services no later than May 15, 1999.
 
    Subsequent testing will indicate what modifications or replacements will be
necessary for the Company to be internally Year 2000 ready.
 
    The Company is currently evaluating the financial impact for Y2K compliance
and expects that total costs will not exceed $150,000 to $200,000. The estimates
for the costs of the Year 2000 Program are based upon management's best
estimates and may be updated or revised as additional information becomes
available. The Company has incurred approximately $5,000 thus far on
administrative costs in connection with assessing the Year 2000 issues. Due to
the Company's headquarters and data center move during the first quarter of
1999, the Company estimates no more than $50,000 was spent for not only the data
center move but also to ensure non-Y2K compliant equipment was replaced with
equipment that met Y2K standards. The Company is assessing whether or not they
will hire an external consultant to assess the state of readiness of all systems
which could be affected by the Year 2000 issue. The Company believes such costs
will not have a material effect on the Company's financial condition, liquidity
or results of operations.
 
    RISK ASSESSMENT
 
    The failure by the Company to correct a material Year 2000 problem could
result in an interruption in, or a failure of, certain normal business
activities or operations. Presently, however, the Company perceives that its
most reasonably likely worst case scenario related to the Year 2000 is
associated with potential concerns with third party services or products. The
Company is dependent on a significant number of third party vendors to provide
both network services or equipment. A significant Year 2000-related disruption
of the network services or equipment provided to the Company by third party
vendors could cause customers to consider seeking alternate providers or cause
an unmanageable burden on customer service and technical support, which in turn
could materially and adversely affect the Company's results of operations,
liquidity and financial condition. Although the Company believes that internal
Y2K compliance will be achieved by December 31, 1999, there can be no assurance
that the Y2K problem will not have a material adverse affect on the Company's
business, financial condition and results of operations as a result of third
party failures.
 
    CONTINGENCY PLANS
 
    Due to the current phase in which the Company is in of its Year 2000
analysis, the Company is currently unable at this time to fully assess its risk
and determine what contingency plans, if any, need to be implemented by the
Company. The Company's primary concern, at this point, is with its third party
communications providers. These service providers are conducting their own
assessments of their
 
                                       34
<PAGE>
Year 2000 readiness. The Company expects that these third party vendors will be
Year 2000 ready. However, any failure by third party vendors to resolve any Year
2000 issues on a timely basis or in a manner that is compatible with the
Company's systems could have a material adverse effect on the Company.
Preliminary indications are, however, that the Company's third-party providers
are, or will be, Year 2000 compliant.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
    The Company does not have any derivative financial instruments as of
December 31, 1998. The Company's interest income and expense are sensitive to
changes in the general level of interest rates. In this regard, changes in
interest rates can affect the interest earned on the Company's cash equivalents.
The Company's long-term debt has fixed interest rates and the fair value of
these instruments is affected by changes in market interest rates. To mitigate
the impact of fluctuations in interest rates, the Company generally enters into
fixed rate investing and borrowing arrangements. As a result, the Company
believes that the market risk arising from holdings of its financial instruments
is not material.
 
                                       35
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS
 
                         ROCKY MOUNTAIN INTERNET, INC.
                             AUDITORS' REPORTS AND
                       CONSOLIDATED FINANCIAL STATEMENTS
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                            ---------
<S>                                                                                                         <C>
CONSOLIDATED FINANCIAL STATEMENTS
 
  Report of Independent Auditors--Ernst & Young LLP.......................................................         37
 
  Independent Accountants' Report--Baird, Kurtz & Dobson..................................................         38
 
  Consolidated Balance Sheets as of December 31, 1998 and 1997............................................         39
 
  Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996..............         40
 
  Consolidated Statements of Stockholders' Equity and Redeemable, Convertible Preferred Stock for the
    Years Ended December 31, 1998, 1997 and 1996..........................................................         41
 
  Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996..............         42
 
  Summary of Accounting Policies..........................................................................      43-47
 
  Notes to Consolidated Financial Statements..............................................................      43-60
 
Schedule--
 
  II Valuation and Qualifying Accounts....................................................................         61
</TABLE>
 
                                       36
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
Rocky Mountain Internet, Inc.
 
    We have audited the accompanying consolidated balance sheet of Rocky
Mountain Internet, Inc. as of December 31, 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1998. Our audit also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
 
    We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Rocky Mountain Internet, Inc. at December 31, 1998, and the consolidated results
of its operations and its cash flows for the year ended December 31, 1998 in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
 
                                          /s/ ERNST & YOUNG LLP
 
Denver, Colorado
March 26, 1999
 
                                       37
<PAGE>
                        INDEPENDENT ACCOUNTANTS' REPORT
 
Board of Directors
Rocky Mountain Internet, Inc.
Denver, Colorado
 
    We have audited the accompanying consolidated balance sheet of Rocky
Mountain Internet, Inc. as of December 31, 1997 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the two years in the period ended December 31, 1997. Our audit also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rocky
Mountain Internet, Inc. as of December 31, 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth within.
 
                                          /s/ BAIRD, KURTZ & DOBSON
 
Denver, Colorado
February 27, 1998
 
                                       38
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                           DECEMBER 31, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                                            1998          1997
                                                                                        ------------  ------------
<S>                                                                                     <C>           <C>
                                                      ASSETS
 
CURRENT ASSETS
  Cash and cash equivalents...........................................................  $  5,729,346  $  1,053,189
  Trade receivables, less allowance for doubtful accounts; 1998--$265,000; 1997--
    $176,000..........................................................................     1,598,479       672,094
  Inventories.........................................................................        56,440        46,945
  Other...............................................................................       224,629       112,891
                                                                                        ------------  ------------
    Total Current Assets..............................................................     7,608,894     1,885,119
                                                                                        ------------  ------------
PROPERTY AND EQUIPMENT, NET (NOTE 2)..................................................     3,540,400     2,649,649
 
Goodwill, net of accumulated amortization of $839,210 and $112,590, respectively......    13,101,814       470,096
Other.................................................................................       430,693        77,255
                                                                                        ------------  ------------
    Total assets......................................................................  $ 24,681,801  $  5,082,119
                                                                                        ------------  ------------
                                                                                        ------------  ------------
 
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
  Accounts payable....................................................................  $  2,280,101  $    581,366
  Current maturities of long-term debt and capital lease obligations (Note 3).........       915,211       609,390
  Deferred revenue....................................................................       513,167       345,857
  Accrued payroll and related taxes...................................................       302,660       182,569
  Accrued expenses....................................................................     1,611,242       374,940
                                                                                        ------------  ------------
    Total Current Liabilities.........................................................     5,622,381     2,094,122
                                                                                        ------------  ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (NOTE 3).................................       493,963       904,627
                                                                                        ------------  ------------
    Total liabilities.................................................................     6,116,344     2,998,749
                                                                                        ------------  ------------
 
REDEEMABLE, CONVERTIBLE PREFERRED STOCK: (NOTE 7)
  Series B, $.001 par value; 9,600 shares authorized, 8,000 shares issued and
    outstanding (liquidation preference of $8,000,000), net...........................     6,747,843            --
 
COMMITMENTS AND CONTINGENCIES (NOTE 4)
 
STOCKHOLDERS' EQUITY
  Series A Preferred stock, $.001 par value; 750,000 shares authorized, 0 and 40,000
    shares issued and outstanding, respectively.......................................            --            40
  Common stock, $.001 par value; 25,000,000 shares authorized, 9,446,271 and 6,736,889
    issued, respectively, 9,384,677 and 6,677,846 outstanding, respectively...........         9,384         6,677
  Additional paid-in capital..........................................................    29,257,415     9,206,780
  Accumulated deficit.................................................................   (17,449,185)   (6,747,050)
  Unearned compensation...............................................................            --      (383,077)
                                                                                        ------------  ------------
                                                                                          11,817,614     2,083,370
                                                                                        ------------  ------------
                                                                                        $ 24,681,801  $  5,082,119
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       39
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                                           1998           1997           1996
                                                                      --------------  -------------  -------------
<S>                                                                   <C>             <C>            <C>
Revenue
  Communication Services............................................  $    7,974,449  $   5,075,997  $   2,861,530
  Web Solutions.....................................................       2,112,561      1,051,114        420,049
                                                                      --------------  -------------  -------------
                                                                          10,087,010      6,127,111      3,281,579
                                                                      --------------  -------------  -------------
Cost of revenue earned
  Communication Services............................................       3,470,933      2,060,315      1,098,525
  Web Solutions.....................................................          50,589             --          5,142
                                                                      --------------  -------------  -------------
                                                                           3,521,522      2,060,315      1,103,667
                                                                      --------------  -------------  -------------
Gross profit........................................................       6,565,488      4,066,796      2,177,912
 
General, selling, and administrative expenses.......................       9,184,032      6,980,217      4,184,900
Costs related to unsuccessful merger attempt........................       6,071,106             --             --
Depreciation and amortization.......................................       1,788,512        887,285        274,206
                                                                      --------------  -------------  -------------
Operating loss......................................................     (10,478,162)    (3,800,706)    (2,281,194)
                                                                      --------------  -------------  -------------
Other income (expense)
  Interest expense..................................................        (319,665)      (402,086)      (157,042)
  Interest income...................................................          51,432         54,461         44,322
  Other income (expense), net.......................................          77,593         (4,522)        51,343
                                                                      --------------  -------------  -------------
                                                                            (190,640)      (352,147)       (61,377)
                                                                      --------------  -------------  -------------
Net loss............................................................     (10,668,802)    (4,152,853)    (2,342,571)
Preferred stock dividends...........................................          33,333         26,875         25,000
                                                                      --------------  -------------  -------------
Net loss applicable to common Stockholders..........................  $  (10,702,135) $  (4,179,728) $  (2,367,571)
                                                                      --------------  -------------  -------------
                                                                      --------------  -------------  -------------
Basic and diluted loss per common share.............................  $        (1.39) $       (0.79) $       (1.03)
                                                                      --------------  -------------  -------------
                                                                      --------------  -------------  -------------
Weighted average common shares outstanding..........................       7,690,000      5,268,000      2,295,000
                                                                      --------------  -------------  -------------
                                                                      --------------  -------------  -------------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       40
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
       CONSOLIDATED STATEMENTS OF REDEEMABLE, CONVERTIBLE PREFERRED STOCK
                       AND STOCKHOLDERS' EQUITY (DEFICIT)
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
                                                                                                STOCKHOLDERS' EQUITY
                                                                REDEEMABLE,        ----------------------------------------------
                                                                CONVERTIBLE
                                                              PREFERRED STOCK         PREFERRED STOCK           COMMON STOCK
                                                           ----------------------  ----------------------  ----------------------
                                                             SHARES      AMOUNT     SHARES      AMOUNT      SHARES      AMOUNT
                                                           -----------  ---------  ---------  -----------  ---------  -----------
<S>                                                        <C>          <C>        <C>        <C>          <C>        <C>
BALANCE, JANUARY 1, 1996.................................          --   $      --         --   $      --   1,868,000   $   1,868
  Issuance of Series A preferred stock...................          --          --    250,000         250          --          --
  Issuance of common stock...............................          --          --         --          --   1,365,000       1,365
  Stock option compensation..............................          --          --         --          --          --          --
  Issuance of underwriters' warrants.....................          --          --         --          --          --          --
  Conversion of debentures into common stock.............          --          --         --          --   1,225,000       1,225
  Dividends on Series A preferred stock..................          --          --         --          --          --          --
  Issuance of common stock for acquisitions..............          --          --         --          --      82,723          83
    Net loss.............................................          --          --         --          --          --          --
                                                                -----   ---------  ---------         ---   ---------  -----------
BALANCE, DECEMBER 31, 1996...............................          --          --    250,000         250   4,540,723       4,541
  Conversion of Series A preferred to common stock.......          --          --   (210,000)       (210)    210,136         210
  Issuance of common stock in private placement..........          --          --         --          --     621,000         621
  Stock option compensation..............................          --          --         --          --          --          --
  Issuance of common stock in stock purchase agreement...          --          --         --          --   1,225,000       1,225
  Dividends on Series A preferred stock..................          --          --         --          --          --          --
  Issuance of common stock for acquisitions..............          --          --         --          --     116,930         117
  Purchase of treasury stock.............................          --          --         --          --     (59,043)        (60)
  Stock options exercised................................          --          --         --          --      23,100          23
    Net loss.............................................          --          --         --          --          --          --
                                                                -----   ---------  ---------         ---   ---------  -----------
BALANCE, DECEMBER 31, 1997...............................          --          --     40,000          40   6,677,846       6,677
  Conversion of Series A preferred to common stock.......          --          --    (40,000)        (40)     40,150          40
  Issuance of common stock for Acquisitions (Note 10)....          --          --         --          --   1,222,418       1,222
  Issuance of Series B preferred stock and related
    warrants in private placement........................       8,000   6,747,843         --          --          --          --
  Dividends on Series B preferred stock..................          --          --         --          --          --          --
  Stock option compensation..............................          --          --         --          --          --          --
  Stock issued for purchased software....................          --          --         --          --      25,000          25
  Warrants issued in connection with unsuccessful
    merger...............................................          --          --         --          --          --          --
  Purchase of treasury stock.............................          --          --         --          --     (13,629)        (13)
  Stock options and warrants exercised...................          --          --         --          --   1,421,814       1,422
  Common stock contribution to pension plan..............          --          --         --          --      11,078          11
    Net loss.............................................          --          --         --          --          --          --
                                                                -----   ---------  ---------         ---   ---------  -----------
BALANCE, DECEMBER 31, 1998...............................       8,000   $6,747,843        --   $      --   9,384,677   $   9,384
                                                                -----   ---------  ---------         ---   ---------  -----------
                                                                -----   ---------  ---------         ---   ---------  -----------
 
<CAPTION>
 
                                                           ADDITIONAL
                                                            PAID-IN    ACCUMULATED     UNEARNED
                                                            CAPITAL      DEFICIT     COMPENSATION     TOTAL
                                                           ----------  ------------  -------------  ----------
<S>                                                        <C>         <C>           <C>            <C>
BALANCE, JANUARY 1, 1996.................................  $   28,847   $ (199,751)    $      --    $ (169,036)
  Issuance of Series A preferred stock...................     405,750           --            --       406,000
  Issuance of common stock...............................   3,775,887           --            --     3,777,252
  Stock option compensation..............................      52,807           --            --        52,807
  Issuance of underwriters' warrants.....................         100           --            --           100
  Conversion of debentures into common stock.............     488,775           --            --       490,000
  Dividends on Series A preferred stock..................          --      (25,000)           --       (25,000)
  Issuance of common stock for acquisitions..............     127,802           --            --       127,885
    Net loss.............................................          --   (2,342,571)           --    (2,342,571)
                                                           ----------  ------------  -------------  ----------
BALANCE, DECEMBER 31, 1996...............................   4,879,968   (2,567,322)           --     2,317,437
  Conversion of Series A preferred to common stock.......          --           --            --            --
  Issuance of common stock in private placement..........   1,117,299           --            --     1,117,920
  Stock option compensation..............................     551,194           --      (383,077)      168,117
  Issuance of common stock in stock purchase agreement...   2,397,352           --            --     2,398,577
  Dividends on Series A preferred stock..................          --      (26,875)           --       (26,875)
  Issuance of common stock for acquisitions..............     306,830           --            --       306,947
  Purchase of treasury stock.............................     (77,940)          --            --       (78,000)
  Stock options exercised................................      32,077           --            --        32,100
    Net loss.............................................          --   (4,152,853)           --    (4,152,853)
                                                           ----------  ------------  -------------  ----------
BALANCE, DECEMBER 31, 1997...............................   9,206,780   (6,747,050)     (383,077)    2,083,370
  Conversion of Series A preferred to common stock.......          --           --            --            --
  Issuance of common stock for Acquisitions (Note 10)....  12,713,904           --            --    12,715,126
  Issuance of Series B preferred stock and related
    warrants in private placement........................     662,019           --            --       662,019
  Dividends on Series B preferred stock..................          --      (33,333)           --       (33,333)
  Stock option compensation..............................          --           --       383,077       383,077
  Stock issued for purchased software....................     302,725           --            --       302,750
  Warrants issued in connection with unsuccessful
    merger...............................................   4,161,618           --            --     4,161,618
  Purchase of treasury stock.............................     (17,987)          --            --       (18,000)
  Stock options and warrants exercised...................   2,160,949           --            --     2,162,371
  Common stock contribution to pension plan..............      67,407           --            --        67,418
    Net loss.............................................          --  (10,668,802)           --    (10,668,802)
                                                           ----------  ------------  -------------  ----------
BALANCE, DECEMBER 31, 1998...............................  $29,257,415 ($17,449,185)   $      --    $11,817,614
                                                           ----------  ------------  -------------  ----------
                                                           ----------  ------------  -------------  ----------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       41
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                                            1998           1997          1996
                                                                        -------------  ------------  ------------
<S>                                                                     <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss............................................................  $ (10,668,802) $ (4,152,853) $ (2,342,571)
  Items not requiring cash:
    Depreciation......................................................      1,062,892       196,491        88,162
    Amortization......................................................        725,620       690,794       186,044
    Loss on disposal of fixed assets..................................             --        13,128            --
    Issuance of warrants for services related to unsuccessful
      merger..........................................................      4,161,618            --            --
    Stock option compensation.........................................        383,077       168,117        52,807
    Stock contribution to pension plan................................         67,418            --            --
  Changes in operating assets and liabilities net of effects from
    acquired interests (Note 9):
    Trade receivables.................................................       (433,597)     (140,067)     (417,999)
    Inventories.......................................................         37,032        44,102       (78,862)
    Other current assets..............................................        (96,752)       33,119      (154,741)
    Accounts payable..................................................      1,027,052       156,206       224,618
    Deferred revenue..................................................       (181,542)      127,736        41,268
    Accrued payroll and related taxes.................................        120,091      (345,591)      443,208
    Accrued expenses..................................................      1,172,512       (85,896)      429,886
                                                                        -------------  ------------  ------------
      Net cash used in operating activities...........................     (2,623,381)   (3,294,714)   (1,528,180)
                                                                        -------------  ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment.................................       (638,813)     (287,931)     (900,235)
  Purchase of investments.............................................             --            --    (1,756,629)
  Proceeds from investments...........................................             --     1,356,629       400,000
  Cash paid for acquisitions, net of cash acquired (Note 9)...........        (40,878)     (150,000)      (70,478)
                                                                        -------------  ------------  ------------
      Net cash provided by (used in) investing activities.............       (679,691)      918,698    (2,327,342)
                                                                        -------------  ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from sale of common stock and warrants.....................      2,162,371     3,535,397     3,777,352
  Proceeds from sale of preferred stock and related warrants, net.....      7,409,862            --       406,000
  Proceeds from notes payable.........................................             --       500,000         6,689
  Proceeds from long-term debt........................................             --       200,000       135,404
  Payment of preferred stock dividend.................................             --       (26,875)      (25,000)
  Purchase of treasury stock..........................................        (18,000)      (78,000)           --
  Payments on notes payable...........................................             --      (504,250)      (26,108)
  Payments for deferred stock issuance costs..........................       (322,423)           --            --
  Payments on long-term debt and capital lease obligations............     (1,252,581)     (546,045)     (344,498)
                                                                        -------------  ------------  ------------
      Net cash provided by financing activities.......................      7,979,229     3,080,227     3,929,839
                                                                        -------------  ------------  ------------
INCREASE IN CASH AND CASH EQUIVALENTS.................................      4,676,157       704,211        74,317
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..........................      1,053,189       348,978       274,661
                                                                        -------------  ------------  ------------
CASH AND CASH EQUIVALENTS, END OF YEAR................................  $   5,729,346  $  1,053,189  $    348,978
                                                                        -------------  ------------  ------------
                                                                        -------------  ------------  ------------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       42
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
NATURE OF OPERATIONS
 
    Rocky Mountain Internet ("the Company") is a premier nationwide E-Business
and communications services provider for small- and medium-sized business
enterprises, as well as dial-up residential customers. The Company operates 11
Internet points of presence ("POPs") in Colorado, and through agreements with
third-party providers, provides Internet access in 90 of the 100 largest
metropolitan statistical areas in the United States. The Company monitors and
controls its network through its Network Operations Center in Denver, Colorado.
The Company also offers services through its offices located in Alabama,
Arizona, Illinois, Kansas, Maryland and Washington. The Company intends to
provide comprehensive nationwide communications services to its customers,
including:
 
    - dedicated Internet access;
 
    - dial-up Internet access;
 
    - IP Telephony;
 
    - point-to-point private line;
 
    - frame relay; and
 
    - local and long distance telephone service.
 
    The Company also offers its customers a full range of value-added Web
Solutions services, including web site hosting, web site production and
marketing, e-commerce, and web training. In addition, the Company is developing
a mature Portal/Search Engine known as Infohiway, that provides a variety of
services for Internet users.
 
PRINCIPLES OF CONSOLIDATION
 
    The financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
 
USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
CASH EQUIVALENTS
 
    The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents. At December 31, 1998 and 1997, cash
equivalents consisted primarily of money market accounts and commercial paper.
 
                                       43
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
 
    Financial instruments, which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable.
 
    The Company places its cash and temporary cash investments with quality
financial institutions. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of customers and markets
which comprise the Company's customer base. The Company generally does not
require collateral and receivables are generally due within 30 days.
 
    The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximated fair value because of the immediate or short-term maturity of these
instruments. The difference between the carrying amount and fair value of the
Company's long-term debt is not significant.
 
REVENUE RECOGNITION
 
    The Company charges customers (subscribers) monthly access fees to the
Internet and recognizes the revenue in the month the access is provided. For
certain subscribers billed in advance, the Company recognizes the revenue over
the period the billing covers. Revenue for other services provided, including
set-up fees charged to customers when their accounts are activated, or equipment
sales, are recognized as the service is performed or the equipment is delivered
to the customer.
 
COST OF REVENUE EARNED
 
    Communication Services cost of revenue earned consists of the cost of high
speed data circuits and telephone lines that allow customers access to the
Company's service plus Internet access fees paid by the Company to Internet
backbone carriers. Cost of revenue earned for Web Solutions consists solely of
outside services required for specific projects.
 
PROPERTY AND EQUIPMENT
 
    Depreciation and amortization of property and equipment are computed using
the straight-line method over the estimated useful lives of the assets, ranging
from five to seven years. Certain equipment obtained through capital lease
obligations are amortized over the life of the lease. Improvements to leased
property are amortized over the lesser of the life of the lease or life of the
improvements.
 
LONG-LIVED ASSETS
 
    The Company follows the provisions of the Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of." Long-lived assets and certain identifiable intangibles to be
held and used by the Company are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company continuously evaluates the recoverability of its
long-lived assets based on estimated future cash flows and the estimated
liquidation value of such long-lived assets, and provides
 
                                       44
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)
for impairment if such undiscounted cash flows are insufficient to recover the
carrying amount of the long-lived asset.
 
ADVERTISING
 
    The Company expenses advertising costs as incurred. During the years ended
December 31, 1998, 1997 and 1996, the Company incurred $267,789, $274,726 and
$167,565, respectively, in advertising costs.
 
OTHER ASSETS
 
    Other assets consists primarily of goodwill. The excess of the purchase
price over the fair value of net assets acquired in business acquisitions is
recorded as goodwill and is being amortized on a straight line basis over five
years. The carrying value of goodwill is periodically reviewed and impairments,
if any, are recognized when expected future benefit to be derived from
individual intangible assets is less than its carrying value.
 
INVENTORIES
 
    Inventories consist of Internet access equipment and are valued at the lower
of cost of market. Cost is determined using the first-in, first-out (FIFO)
method.
 
NET LOSS PER SHARE
 
    The Company follows the provisions of SFAS No. 128, "Earnings Per Share."
SFAS No. 128 provides for the calculation of "Basic" and "Diluted" earnings per
share. Basic loss per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted loss per share reflects the potential
dilution of securities that could share in the earnings of an entity. All prior
earnings per share data has been restated to reflect the requirements of SFAS
No. 128. The adoption of SFAS No. 128 required the Company to restate reported
earnings per share for the year ended December 31, 1996. As all of the Company's
stock options and warrants are antidilutive, basic and diluted loss per share
are the same for all periods presented herein.
 
INCOME TAXES
 
    Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. For all periods presented, the Company's net deferred tax asset has
been fully reserved with a valuation allowance.
 
COMPREHENSIVE INCOME
 
    As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for the reporting and display
of comprehensive income and its components in the financial statements. The
Company does not have any items which would qualify for disclosure under this
statement.
 
                                       45
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)
STOCK COMPENSATION
 
    The Company applies Accounting Principles Board ("APB") Opinion 25,
"Accounting for Stock Issued to Employees," and related Interpretations in
accounting for all stock option plans. Under APB Opinion 25, no compensation
cost has been recognized for stock options granted to employees when the option
price equals or exceeds the market price of the underlying common stock on the
date of grant. SFAS No. 123, "Accounting for Stock-Based Compensation," requires
the Company to provide pro forma information regarding net income (loss) as if
compensation cost for the Company's stock option plans had been determined in
accordance with the fair value based method prescribed in SFAS No. 123. To
provide the required pro forma information, the Company estimates the fair value
of each stock option at the grant date by using the Black-Scholes option-pricing
model. See Note 9 for required disclosure.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
    In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1 ("SOP 98-1"), Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 requires all costs related to
the development of internal use software other than those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the estimated useful life of the software. SOP 98-1 is effective for the
Company's fiscal year ending December 31, 1999. Adoption is not expected to have
a material effect on the Company's consolidated financial statements as the
Company's policies are substantially in compliance with SOP 98-1.
 
    In April 1998, the American Institute of Certified Public Accountants issued
SOP 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 is effective
for the Company's fiscal year ending December 31, 1999. SOP 98-5 requires costs
of start-up activities and organization costs to be expensed as incurred.
Adoption is not expected to have a material effect on the Company's consolidated
financial statements.
 
    In June 1998, the FASB issued SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designed as part of a
hedge transaction and, if it is, the type of hedge transaction. The Company does
not expect that the adoption of SFAS No. 133 will have a material impact on its
consolidated financial statements because the Company does not currently hold
any derivative instruments.
 
                                       46
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)
 
MANAGEMENT'S PLANS
 
    The Company has incurred a net loss of approximately $10.7 million, $4.6
million excluding the loss recorded for the failed Internet Communications
Company ("ICC") merger (see note 4 for further discussion of the failed merger),
for the year ended December 31, 1998 and anticipates incurring a net loss for
the year ended December 31, 1999. Management of the Company intends to fund this
anticipated net loss by utilizing its existing cash resources, proceeds from a
commitment letter, subject to conditions, from an investor to purchase an
additional $5.0 million of the Company's Redeemable, Convertible Preferred Stock
and proceeds received from potential exercises of the Company's outstanding
initial public offering and private placement warrants. Management believes
these resources will be adequate to fund its operating and capital requirements
through at least January 1, 2000.
 
RECLASSIFICATIONS
 
    Certain prior year balances have been reclassified to conform to the current
year presentation.
 
NOTE 2:  PROPERTY AND EQUIPMENT
 
<TABLE>
<CAPTION>
                                                                                            1998          1997
                                                                                        ------------  ------------
<S>                                                                                     <C>           <C>
Equipment.............................................................................  $  4,151,719  $  2,927,016
Computer software.....................................................................       699,330       218,801
Leasehold improvements................................................................       185,935       190,235
Furniture, fixtures, and office equipment.............................................       436,201       431,814
                                                                                        ------------  ------------
                                                                                           5,473,185     3,767,866
Less accumulated depreciation.........................................................     1,932,785     1,118,217
                                                                                        ------------  ------------
                                                                                        $  3,540,400  $  2,649,649
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>
 
Equipment acquired under capital lease obligations had a cost of $2,540,855 and
$2,291,092 and accumulated depreciation of $1,222,577 and $681,597 at December
31, 1998 and 1997, respectively.
 
                                       47
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 3:  LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
 
    Long-term debt and capital lease obligations at December 31, 1998 and 1997,
consisted of the following:
 
<TABLE>
<CAPTION>
                                                                                            1998          1997
                                                                                        ------------  ------------
<S>                                                                                     <C>           <C>
Capital lease obligations payable to finance companies, due in monthly installments
  aggregating $87,938 including interest ranging from 9.5% to 33% through June 2002,
  collateralized by equipment. A former officer and shareholder of the Company has
  guaranteed certain of the leases and one of the leases restricts the payment of
  preferred stock dividends...........................................................  $  1,336,939  $  1,375,123
Notes payable to bank, due in monthly installments of $5,555 plus interest at 2% over
  the Bank's index rate (9.75% at December 31, 1998) collateralized by furniture and
  fixtures............................................................................        72,235       138,894
                                                                                        ------------  ------------
                                                                                           1,409,174     1,514,017
Less current maturities...............................................................       915,211       609,390
                                                                                        ------------  ------------
                                                                                        $    493,963  $    904,627
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>
 
    Aggregate maturities required on long-term debt and obligations under
capital leases at December 31, 1998, are as follows:
 
<TABLE>
<CAPTION>
                                                                                        CAPITAL
                                                                     LONG-TERM DEBT     LEASES         TOTAL
                                                                     --------------  -------------  ------------
<S>                                                                  <C>             <C>            <C>
Years ending December 31:
  1999.............................................................    $   66,660     $ 1,048,704   $  1,115,364
  2000.............................................................         5,575         417,977        423,552
  2001.............................................................            --         132,395        132,395
  2002.............................................................            --           6,315          6,315
  2003.............................................................            --              --             --
  Thereafter.......................................................            --              --             --
                                                                     --------------  -------------  ------------
  Total payments...................................................        72,235       1,605,391      1,677,626
  Less amounts representing interest...............................            --        (268,452)      (268,452)
                                                                     --------------  -------------  ------------
  Principal payments...............................................        72,235       1,336,939      1,409,174
  Less current maturities..........................................       (66,660)       (848,551)      (915,211)
                                                                     --------------  -------------  ------------
    Total long-term debt...........................................    $    5,575     $   488,388   $    493,963
                                                                     --------------  -------------  ------------
                                                                     --------------  -------------  ------------
</TABLE>
 
NOTE 4:  COMMITMENTS AND CONTINGENCIES
 
LEASE COMMITMENTS
 
    The Company leases operating facilities and equipment under operating lease
agreements expiring through 2005. Certain of these lease agreements require the
Company to pay operating expenses and provide for escalation of annual rentals
if the lessor's operating costs increase.
 
                                       48
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 4:  COMMITMENTS AND CONTINGENCIES (CONTINUED)
    At December 31, 1998, the future minimum payments under these leases,
exclusive of sublease payments, are as follows:
 
<TABLE>
<CAPTION>
                                                                                     AMOUNT
                                                                                  ------------
<S>                                                                               <C>
Years ending December 31:
  1999..........................................................................  $  1,059,271
  2000..........................................................................     1,044,811
  2001..........................................................................       706,611
  2002..........................................................................       658,919
  2003..........................................................................       668,628
  Thereafter....................................................................     1,114,380
                                                                                  ------------
                                                                                  $  5,252,620
                                                                                  ------------
                                                                                  ------------
</TABLE>
 
    In February 1997, the Company subleased one of its operating facilities. The
Company accrued a loss of $58,073 as of December 31, 1996, as a result of this
sublease. Minimum future rentals receivable under this noncancellable operating
sublease are $99,507, covering the period through January 2001, which have not
been deducted from the above future minimum payments.
 
    Rent expense was $496,010, $538,625 and $240,720 for the years ended
December 31, 1998, 1997 and 1996, respectively.
 
LETTER OF CREDIT
 
    At December 31, 1998, the Company had an outstanding letter of credit in the
amount of $100,000 to be used in case of default on its main operating
facilities lease. The letter of credit was secured by $117,000 currently
invested in a money market account.
 
LITIGATION
 
    In June 1998, the Company announced it had entered into a merger agreement
to acquire Internet Communications Corporation ("ICC"). The closing of the
acquisition was subject to various closing conditions, and the merger agreement
contained certain rights of termination. On October 13, 1998, the Company
announced that it terminated the merger agreement due to, among other things,
ICC's failure to satisfy certain obligations under the merger agreement. On
October 14, 1998, ICC filed a complaint against the Company in Denver District
Court claiming $30 million in damages and alleging, among other things, that the
Company had breached the merger agreement and had made certain
misrepresentations to ICC with respect to the merger transaction. The Company
believes ICC's claims to be without merit and intends to vigorously defend such
action and to assert counterclaims against ICC; however, there can be no
assurance that the Company will prevail in its defense or counterclaims.
 
    On November 30, 1998, the Company filed an answer to the ICC Complaint
denying their material allegations, asserting a number of affirmative defenses,
and disputing their right to any recovery from the Company on any of the claims
asserted. In addition, the Company filed a counterclaim against ICC seeking over
$175 million in damages for injuries suffered by the Company as a result of
ICC's wrongful acts that led to the failure of the proposed high yield debt
offering in 1998 and the failure of the proposed merger agreement with ICC.
 
                                       49
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 4:  COMMITMENTS AND CONTINGENCIES (CONTINUED)
    On February 24, 1999, the Denver District Court granted a motion filed by
the Company, and disqualified the law firm of Holme Roberts & Owen, LLP (HRO)
from continuing to act as litigation counsel for ICC in the lawsuit. The Court
agreed with the Company that because HRO had acted as transaction counsel for
ICC in the high yield debt offering and the proposed merger, and therefore was a
potential material witness and material actor in the underlying activities, it
would be inappropriate for HRO to seek to act as trial counsel in the same
proceeding where it might be required to serve as a witness or potentially be
drawn into the proceedings in some other way.
 
    The Company is hopeful that it can resolve the dispute with ICC without the
necessity for a trial; however, there can be no assurance as to the Company's
ability in this regard. In the event that the dispute cannot be resolved
expeditiously, the Company expects that it would incur additional costs and
expenses as a result of the litigation and that the litigation may hamper the
Company's ability to obtain additional financing. As a result of the termination
and the related financing transactions which were not completed, the Company
incurred costs, expenses and related fees of $6.1 million, a portion of which
are in dispute. Of this amount, approximately $4.2 million relates to a non-cash
item related to warrants issued by the Company. Of the $6.1 million expensed,
$0.8 million remained accrued at December 31, 1998 related to this matter. At
this time, the Company is unable to determine the possible outcome of this
dispute.
 
    The warrants underlying the $4.2 million charge described above were issued
to the proposed lenders of the failed high yield debt offering. These warrants
allow the lenders to acquire 220,833 shares of the Company's common stock at an
exercise price of $9.01 per share and 339,167 shares of the Company's common
stock at an exercise price of $0.01. Both sets of warrants expire in September
2003. The Company has valued the $4.2 million charge utilizing the Black-Scholes
method.
 
NOTE 5:  BUSINESS ALLIANCES
 
    The Company has entered into various contracts with unrelated entities to
enable the Company to provide customers Internet service within certain areas of
Colorado. The unrelated entities own equipment in "points of presence" (POP)
sites which the Company utilizes to provide service to customers. The Company
pays a portion of the revenues (generally 50%) generated through the use of
unrelated parties' equipment. The contracts can be cancelled with notice and if
cancelled by the other party the Company has the right, but not the obligation,
to acquire the equipment owned by the unrelated parties. The revenues to the
Company related to these arrangements amounted to $302,303, $480,951 and
$354,565 for the years ended December 31, 1998, 1997 and 1996, respectively, and
are included in "Communication Services" revenues in the accompanying
consolidated statements of operations. The payables to the unrelated entities
for their portion of the aforementioned revenues of $45,164 and $48,089 at
December 31, 1998 and 1997, respectively, are included in accrued expenses in
the accompanying balance sheets.
 
NOTE 6:  INCOME TAXES
 
    Under the provisions of the Internal Revenue Code, the Company has available
for federal income tax purposes a net operating loss carryforward of
approximately $14,236,000, which expires in the years 2010 through 2019. As a
result of a change of control in 1997, a portion of these loss carryforwards
 
                                       50
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 6:  INCOME TAXES (CONTINUED)
may be limited pursuant to Internal Revenue Code Section 382. The tax effects of
this and other temporary differences related to deferred taxes were:
 
<TABLE>
<CAPTION>
                                                                      1998           1997
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Deferred tax assets:
  Net operating loss............................................  $   5,892,000  $   2,317,000
  Deferred stock issuance costs.................................        285,000             --
  Allowance for doubtful accounts...............................         85,000         66,000
  Goodwill......................................................         71,000         42,000
  Accrued expenses..............................................         89,000        108,000
                                                                  -------------  -------------
                                                                      6,422,000      2,533,000
                                                                  -------------  -------------
                                                                  -------------  -------------
Deferred tax liabilities:
  Capitalized software..........................................        (16,000)            --
  Accumulated depreciation......................................       (322,000)      (101,000)
                                                                  -------------  -------------
Net deferred tax asset before valuation allowance...............      6,084,000      2,432,000
Valuation allowance.............................................     (6,084,000)    (2,432,000)
                                                                  -------------  -------------
      Net deferred tax asset....................................  $          --  $          --
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>
 
The actual provisions (credits) for income taxes varied from the expected
provision (computed by applying the statutory U.S. federal income tax rates to
loss before taxes) because the tax benefits of the net operating losses for the
periods ended December 31, 1998, 1997 and 1996, are offset by the valuation
allowance.
 
NOTE 7:  PREFERRED STOCK
 
SERIES A CONVERTIBLE
 
    On April 26, 1996, the Board of Directors designated 250,000 shares of
preferred stock as Series A Convertible Preferred Stock (Series A Stock) and set
the terms of the stock. The Series A Stock accrues cumulative dividends at the
rate of 10% per annum. The dividends are payable quarterly to the extent
permitted by applicable law.
 
    During 1998 and 1997, 40,000 and 210,000, respectively, shares of preferred
stock were converted into common stock. No shares of Series A Stock were
outstanding at December 31, 1998.
 
SERIES B REDEEMABLE, CONVERTIBLE
 
    The Company issued 8,000 shares of its Series B Redeemable, Convertible
Preferred Stock ("Series B Preferred Stock") through a private placement which
was completed on December 10, 1998. The Company received $8 million in gross
proceeds from the issuance of the Series B Preferred Stock which was sold to two
institutional investors. The Series B Preferred Stock provides for dividends at
a rate of $50 per annum per share. These dividends are cumulative. The dividends
are payable semiannually commencing May 15, 1999 and may be paid either with
cash or by the Company issuing additional shares of Series B Preferred Stock.
The Series B Preferred Stock is convertible, subject to certain restrictions,
into shares of the Company's common stock at a variable rate, based on a formula
linked to the market price at the time of conversion and does not have vesting
rights. The terms of the
 
                                       51
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7:  PREFERRED STOCK (CONTINUED)
Series B Preferred Stock also includes restrictions on conversion depending on
certain market conditions, restrictions against short sales and other hedging
transactions by the investors and a conversion rate which may be up to a 20%
premium to the market price or a discount to the market price depending on the
time of conversion. The Series B Preferred Stock may be redeemed by the Company
at any time if the Company is in compliance with certain covenants at a minimum
redemption price equal to 115% times the outstanding face amount plus accrued
but unpaid dividends and interest. In addition, the Series B Preferred Stock may
be redeemed at the option of the holders if the Company's common stock ceases to
be traded on either the NASDAQ, NASDAQ Small Cap, NYSE or the AMEX stock
exchanges, if the Company is unable to convert the shares into common stock upon
a requested conversion or if the Company is merged into another entity where the
Company's voting stockholders do not collectively own greater than 51% of the
merged entity.
 
    In addition, the Company issued warrants to purchase 155,000 shares of
common stock with an exercise price of $13.21, subject to adjustment,
exercisable at any time over the next five years, to the purchasers of the
Series B Preferred Stock and warrants to purchase 100,000 shares of common stock
with an exercise price of $12.20, subject to adjustment, exercisable over the
next five years, to certain brokers in connection with the transaction. The
Company has agreed to register the common stock issuable upon conversion of the
Series B Preferred Stock and the exercise of the warrants pursuant to
registration rights agreements. The Company has attributed $662,019 of the
proceeds from this issuance to the value of these warrants.
 
    The Company has the authority to issue up to an additional 740,400 shares of
Preferred Stock. The Board of Directors is authorized to determine terms and
preferences of the Preferred Stock prior to issuance.
 
NOTE 8:  COMMON STOCK TRANSACTIONS
 
PUBLIC OFFERING
 
    On September 5, 1996, the Company completed a public offering of 1,365,000
units at an offering price of $3.50 per unit. Each unit consisted of one share
of common stock and one warrant to purchase one share of common stock at $4.375
per share for a 23-month period commencing October 5, 1997, and prior to
September 5, 1999. Under certain circumstances, the Company may redeem the
warrants at $.25 per warrant. Of these warrants, 1,089,368 were unexercised at
December 31, 1998. Additionally, the Company sold to the underwriter for $100,
warrants to purchase 125,000 units. These underwriter warrants to purchase units
are exercisable through September 5, 2000, at an exercise price of $4.20 per
unit (for which the accompanying warrant to purchase a share of common stock is
exercisable at $6.5625). Costs of the offering, including a 10% commission paid
to the underwriters, the underwriter's nonaccountable expense allowance, and
professional fees, amounted to $1,000,248, resulting in net proceeds from the
offering of $3,777,252.
 
PRIVATE PLACEMENT
 
    On September 14, 1997, the Company completed a private placement of units
consisting of two shares of common stock and a warrant to purchase one share of
common stock. The per unit price was $4.00 and was allocated $1.90 to each share
of common stock and $0.20 to the warrant to purchase a share of common stock.
The warrants entitle the holder to purchase a share of common stock for $3.00
and expire on June 13, 2000. The net proceeds to the Company from the sale of
310,500 units
 
                                       52
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 8:  COMMON STOCK TRANSACTIONS (CONTINUED)
amounted to $1,117,920 after deducting offering expenses of $124,080. The terms
of the offering requires the issuance of additional shares of common stock in
the event the Company sells common stock in the future at a cash price, net of
discounts and commissions of less than $1.80 per share, exclusive of shares
issued upon the exercise of employee stock options. The number of shares
issuable under this provision would equate to the number of shares by which
purchasers would have been diluted if shares are sold at net price of less than
$1.80.
 
    In connection with that offering, the Company agreed to issue to the
placement agent warrants ("Agent's Private Offering Warrants") to purchase units
of securities, each unit consisting of two shares of Common Stock and one common
stock purchase warrant. The Company has issued to the placement agent, for
nominal consideration, 31,050 Agent's Private Offering Warrants. The Warrants
will be exercisable for $4.00 per unit (consisting of two shares of common stock
and one warrant to purchase one share of common stock for $3.00) and will be
exercisable for 5 years.
 
RESERVED SHARES
 
    The Company has reserved 834,288 shares of its common stock for the public
offering warrants described earlier. The Company has also reserved 206,041 for
its common stock option plans.
 
STOCK PURCHASE AGREEMENT
 
    On October 1, 1997, the Chief Executive Officer of the Company acquired
directly from the Company 1,225,000 shares of the Company's Common Stock and a
warrant to purchase 4,000,000 (3,950,000 unexercised at December 31, 1998)
shares of the Company's Common Stock for $2,450,000. The warrant is exercisable,
in whole or in part, through September 22, 1999, at $1.90 per share.
 
NOTE 9:  BENEFIT PLANS
 
MANAGEMENT BONUS PLAN
 
    The Company had a bonus plan during 1996 which entitled certain employees to
receive a cash bonus based upon achievement of specified levels of revenues by
the Company for the year ended December 31, 1996. The Company accrued $158,000
in bonuses under the plan in 1996. The Company gave employees the option of
receiving their bonuses in cash or stock options. As a result, 40,425 stock
options were issued in 1997 to employees at an exercise price of $1.00 per
share. The Company adopted a similar plan for 1997, however, no bonuses were
earned under the 1997 Plan. There was no bonus plan for 1998.
 
                                       53
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9:  BENEFIT PLANS (CONTINUED)
 
STOCK OPTION PLANS
 
    In July 1996, the Company adopted the 1996 Employee Stock Option Plan (the
Employee Plan) and the Non-Employee Directors' Stock Option Plan (the Directors'
Plan). The Employee Plan provides for an authorization of 471,300 shares of
Common Stock for issuance upon exercise of stock options granted under the Plan.
The Employee Plan is administered by the Board of Directors, which determines
the persons to whom options are granted, the type, number, vesting schedule,
exercise price, and term of options granted. Under this plan both incentive and
nonqualified options can be granted.
 
    An aggregate of 18,000 shares of Common Stock are reserved for issuance
under the Directors' Plan. All nonemployee directors are automatically granted
nonqualified stock options to purchase 1,500 shares initially and additional
1,500 shares for each subsequent year that they serve up to a maximum of 6,000
shares per director.
 
    In September 1997, the Company adopted the 1997 Stock Option Plan (1997
Plan). The 1997 Plan provides for an authorization of 50,000 shares of Common
Stock for issuance upon exercise of stock options granted under the Plan. The
1997 Plan was established to issue the stock options discussed under Management
Bonus Plan.
 
    In October 1997, the Company granted the Company's Chief Executive Officer
(see Note 8) incentive stock options to purchase 191,385 shares of Common Stock
at $2.6125 per share and nonqualified stock options to purchase 408,615 shares
of Common Stock at $1.00 per share, subject to approval by the stockholders. The
options vest one year from the date of grant. Compensation of $383,077 and
$168,117 relating to the nonqualified stock options was recorded during the
years ended December 31, 1998 and 1997, respectively.
 
    The Board of Directors has approved the 1998 Employees' Stock Option Plan.
This plan reserves 266,544 shares of Common Stock for issuance over the ten-year
term of the plan.
 
    In 1998, the stockholders of the Company approved the adoption of the Rocky
Mountain Internet, Inc. 1998 Non-Employee Directors' Stock Option Plan (the
"1998 Directors' Plan"), effective as of January 22, 1998. A total of 68,000
shares of common stock have been reserved for issuance over the three-year term
of the 1998 Directors' Plan.
 
    The option exercise price of any option granted under the 1998 Directors'
Plan may not be less than the fair market value of the common stock on the date
of grant of the option. Upon the effective date of the 1998 Directors' Plan,
each non-employee director of the Company was granted options to purchase 8,500
shares of common stock, subject to certain adjustments. On December 31,1998,
options to purchase 1,500 shares of common stock vested for each director; if he
or she continues to serve as a director for the entire calendar year ending
December 31, 1999, options to purchase 3,500 shares of common stock will vest;
and if he or she continues to serve as a director for the entire calendar year
ending December 31, 2000 and 2001, respectively. Notwithstanding the foregoing,
in the event of a change in control of the Company (as defined in the 1998
Directors' Plan), each outstanding option under the 1998 Directors' Plan vests
immediately. In addition, in the event of a change in control of the Company,
the Administrative Committee (or the board of directors in the absence of such a
committee) may: (i) grant a cash bonus award to any optionee in an amount equal
to the exercise price of all or any portion of the options then held by the
optionee; (ii) pay cash to any or all optionees in exchange for the cancellation
of their outstanding options in an amount equal to the difference between the
exercise price and the greater of the tender offer price for the common stock
underlying
 
                                       54
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9:  BENEFIT PLANS (CONTINUED)
such options (in the event of a tender offer for the securities of the Company)
or the fair market value of the stock on the date of cancellation; and (iii)
make any other adjustments or amendments to the outstanding options.
 
    Each option granted under the 1998 Directors' Plan shall expire not more
than five years from the date of grant. The 1998 Directors' Plan terminates on
December 31, 2000, unless earlier terminated in the discretion of the
Administrative Committee (or the board of directors in the absence of such a
committee).
 
    The following is a summary of the status of the Company's stock option plans
at December 31, 1998, 1997 and 1996, and the changes during the years then
ended:
 
<TABLE>
<CAPTION>
                                                      1998                     1997                     1996
                                             -----------------------  -----------------------  -----------------------
                                                          WEIGHTED                 WEIGHTED                 WEIGHTED
                                                           AVERAGE                  AVERAGE                  AVERAGE
                                                          EXERCISE                 EXERCISE                 EXERCISE
                                               SHARES       PRICE       SHARES       PRICE       SHARES       PRICE
                                             ----------  -----------  ----------  -----------  ----------  -----------
<S>                                          <C>         <C>          <C>         <C>          <C>         <C>
Outstanding, Beginning of year.............   1,089,670   $    1.67      285,730        1.68           --   $      --
Options granted............................     240,000        5.70      900,900        1.68      285,730        1.68
Options forfeited..........................     (59,989)       2.56      (73,860)       1.81           --          --
Options exercised..........................    (638,988)       1.37      (23,100)       1.65           --          --
                                             ----------       -----   ----------       -----   ----------       -----
Outstanding, end of year...................     630,693   $    3.43    1,089,670   $    1.67      285,730   $    1.68
                                             ----------       -----   ----------       -----   ----------       -----
                                             ----------       -----   ----------       -----   ----------       -----
Options exercisable, end of year...........     396,193                  489,670                   26,500
</TABLE>
 
    For purposes of applying SFAS No. 123, the fair value of each option granted
is estimated on the date of the grant using the Black-Scholes method with the
following weighted-average assumptions:
 
<TABLE>
<CAPTION>
                                                                   1998       1997       1996
                                                                 ---------  ---------  ---------
<S>                                                              <C>        <C>        <C>
Dividend per share.............................................  $    0.00  $    0.00  $    0.00
Risk-free interest rate........................................      5.50%       6.0%      6.16%
Expected life of options.......................................    5 years    5 years    5 years
 
Weighted-average fair value of options granted.................  $    5.19  $    1.29  $    1.90
</TABLE>
 
    Had compensation cost been determined based upon the fair value at the grant
dates for all awards pursuant to the method set forth in SFAS No. 123, the
Company would have increased its net loss to the pro forma amounts indicated
below:
 
<TABLE>
<CAPTION>
                                                    1998            1997            1996
                                               --------------  --------------  --------------
<S>                                            <C>             <C>             <C>
Net loss:
  As reported................................  $  (10,668,802) $   (4,152,853) $   (2,342,571)
                                               --------------  --------------  --------------
                                               --------------  --------------  --------------
  Pro forma..................................  $  (11,825,776) $   (4,921,500) $   (2,416,829)
                                               --------------  --------------  --------------
                                               --------------  --------------  --------------
Net loss per common share:
  As reported................................  $        (1.39) $        (0.79) $        (1.03)
                                               --------------  --------------  --------------
                                               --------------  --------------  --------------
  Pro forma..................................  $        (1.54) $        (0.93) $        (1.05)
                                               --------------  --------------  --------------
                                               --------------  --------------  --------------
</TABLE>
 
                                       55
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9:  BENEFIT PLANS (CONTINUED)
    The Black-Scholes method option valuation model was developed for use in
estimating the fair value of options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions such as expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
 
    The following table summarizes information about stock options under the
plans outstanding at December 31, 1998:
 
<TABLE>
<CAPTION>
                          OPTIONS OUTSTANDING
                 -------------------------------------    OPTIONS EXERCISABLE
                               WEIGHTED-                ------------------------
                                AVERAGE     WEIGHTED-                 WEIGHTED-
                               REMAINING     AVERAGE                   AVERAGE
   RANGE OF        NUMBER     CONTRACTUAL   EXERCISE      NUMBER      EXERCISE
EXERCISE PRICES  OUTSTANDING     LIFE         PRICE     EXERCISABLE     PRICE
---------------  -----------  -----------  -----------  -----------  -----------
<S>              <C>          <C>          <C>          <C>          <C>
$0.40--2.75         490,193    4.08 years   $    2.33      396,193    $    2.12
$7.25--7.63         130,500    5.00 years   $    7.44           --    $      --
$10.19               10,000    5.00 years   $   10.19           --    $      --
</TABLE>
 
    One nonqualified stock option to purchase 25,000 shares at $0.40 per share
was granted under the Employee Plan in 1997. This option vested immediately.
Compensation of $40,000 relating to this option was recorded to compensation
expense in 1997. The remaining Employee Plan options above have a five year term
and vested fully during 1997 due to a change in control of the Company.
 
401(K) PLAN
 
    The Board of Directors has approved a 401(k) Savings and Retirement Plan
that covers substantially all employees effective January 16, 1998. The
Company's contributions to the Plan will be determined annually by the Board of
Directors. For the year ended December 31, 1998 the Company recorded the fair
value of the common stock contributed to the 401(k) plan of $67,418 as expense.
 
NOTE 10:  ACQUISITIONS
 
    On June 5, 1998, the Company acquired all of the outstanding common stock of
Infohiway Inc. Infohiway Inc. has developed a search engine which the Company
believes has unique data searching features. The Company issued 150,000 shares
of common stock valued at $1,335,000.
 
    On June 30, 1998 the company acquired all of the outstanding common stock of
Application Methods, Inc. Application Methods develops software and has recently
developed an e-commerce product. The Company issued 286,396 shares of common
stock valued at $3,239,000. Additionally, the shareholders are entitled to
receive an additional number of shares of the Company's common stock to be
earned (30% of the net income of the Application Methods subsidiary for a three
year period following closing up to a maximum of $2,500,000) based upon the
surviving corporation obtaining certain financial performance criteria in six
month intervals over the three year period following closing. For the six month
interval between July 1, 1998 and December 31, 1998, the surviving corporation
has experienced a loss, thus, no contingent shares have been earned as of
December 31, 1998.
 
                                       56
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 10:  ACQUISITIONS (CONTINUED)
    On November 24, 1998 the Company purchased certain assets and assumed
certain liabilities from Unicom Communications, a Kansas City based Internet
access and web hosting provider. The Company issued 172,152 shares of common
stock, 17,215 of which was issued into escrow subsequent to December 31, 1998,
valued at a total of $1,700,000.
 
    On November 30, 1998 the Company purchased certain assets and assumed
certain liabilities from Stonehenge Internet Communications, a Denver based ISP.
The Company issued 49,862 shares of the Company's common stock valued at
$450,000.
 
    On November 20, 1998 the Company, acquired all of the outstanding capital
stock of Internet Now, a Phoenix based ISP. The Company paid cash of $150,000
and issued 171,250 shares of the Company's common shares valued at $1,691,000.
 
    On December 4, 1998 the Company acquired certain assets and liabilities of
DataXchange Network, an Internet backbone network provider. As consideration the
Company issued 410,000 shares of the Company's common stock valued at
$4,300,000. In addition, up to 250,000 shares of the Company's common stock and
410,000 warrants to purchase the Company's common stock may be issued upon the
achievement of certain financial thresholds.
 
    Results of acquired entities are included in the Company's operations upon
the acquisition date. All acquisitions have been accounted for utilizing the
purchase method of accounting. Most of the purchase price was allocated to
goodwill for acquisitions consumated during 1998. Certain of these purchase
price allocations are preliminary.
 
    Unaudited pro forma consolidated operations for the years ended December 31,
1998 and 1997, assuming the acquisitions were completed on January 1 of each
year:
 
<TABLE>
<CAPTION>
                                                                      1998           1997
                                                                 --------------  -------------
<S>                                                              <C>             <C>
Net sales......................................................  $   15,475,000  $  11,093,000
Net loss.......................................................  $  (10,997,000) $  (4,998,000)
Net loss per share.............................................  $        (1.23) $       (0.77)
</TABLE>
 
NOTE 11:  RELATED PARTY TRANSACTIONS
 
    Effective October 1, 1997, the Company issued and sold to the Chief
Executive Officer, Mr. Douglas H. Hanson, 1,225,000 shares of Common Stock for a
purchase price of $2,450,000, or $2.00 per share. As the result of the
transaction, Mr. Hanson also became the Company's President, Chief Executive
Officer, and Chairman of the Board of Directors.
 
    The Company agreed to issue to Mr. Hanson warrants (the "Warrants") to
purchase 4,000,000 (3,950,000 unexercised at December 31, 1998) shares of common
stock for an exercise price of $1.90 per share, subject to adjustment, and the
Company granted him incentive stock options to purchase 191,385 shares of common
stock for an exercise price of $2.6125 per share and non-qualified stock options
to purchase 408,615 shares of common stock for an exercise price of $1.00 per
share (collectively, the "Options") pursuant to the Company's 1997 Stock Option
Plan (the "1997 Plan"). The Options vested in 1998. The remaining Warrants
expire on September 2, 1999.
 
    Pursuant to a Stock Purchase Agreement between Mr. Hanson and Roy J. Dimoff,
the Company's former Chief Executive Officer, dated as of October 1, 1997, Mr.
Dimoff sold to Mr. Hanson 150,000
 
                                       57
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 11:  RELATED PARTY TRANSACTIONS (CONTINUED)
shares of Common Stock for a purchase price of $300,000, or $2.00 per share.
Contemporaneously with this purchase and sale, Mr. Dimoff resigned as a director
and as President and Chief Executive Officer of the Company. In addition, as
discussed below, Mr. Hanson entered into a Shareholders' Voting Agreement and
Irrevocable Proxy with Mr. Dimoff and six other stockholders pursuant to which
Mr. Hanson obtained the right to vote certain shares of Common Stock
beneficially owned by Mr. Dimoff and such other stockholders.
 
    Pursuant to a Stock Purchase Agreement among Mr. Hanson, Christopher K.
Phillips, Jim D. Welch, and Kevin R. Loud, dated as of October 1, 1997, Mr.
Hanson purchased 50,000 shares, 50,000 shares, and 25,000 shares of Common Stock
from Messrs. Phillips, Welch, and Loud, respectively, for an aggregate purchase
price of $250,000, in each case for $2.00 per share. In addition, as discussed
below, Mr. Hanson entered into a Shareholders' Voting Agreement and Irrevocable
Proxy with Messrs. Phillips, Welch, and Loud pursuant to which Mr. Hanson
obtained the right to vote certain shares of Common Stock beneficially owned by
them.
 
    In December, 1996, the Company acquired the assets of The Information
Exchange, LLC., and a Denver based voice messaging service company, a related
party through common ownership. Roy J. Dimoff, at the time President and CEO of
Rocky Mountain Internet, Inc. (RMI), held a 51% ownership share of The
Information Exchange and Nancy Phillips, Vice President of Operations of RMI at
the time held a 31% share of The Information Exchange. RMI issued 52,723 shares
of common stock in exchange for 100% ownership of The Information Exchange.
 
    In connection with the resignation by Mr. Dimoff effective October 1, 1997,
the Company and Mr. Dimoff entered into a Waiver and Release pursuant to which,
among other matters, (i) the Company agreed to pay Mr. Dimoff $102,000 (less all
federal and state withholdings on wages) in respect of the severance of his
prior employment relationship with the Company and to reimburse Mr. Dimoff for
his attorney's fees (up to a maximum of $2,000) for the negotiation of the
Waiver and Release. One quarter of the severance amount ($25,500) was payable,
and was paid, upon execution of the Waiver and Release and the remainder was
payable in nine equal monthly installments on the first day of each month
commencing on January 1, 1998; (ii) Mr. Dimoff agreed not to make use of or to
divulge to any other person any confidential information (as defined in the
Waiver and Release) relating to the Company; and (iii) Mr. Dimoff agreed to not
compete with the Company, directly or indirectly, in certain geographic areas
specified in the Waiver and Release until October 1, 1998, except that, at any
time after December 2, 1997, Mr. Dimoff may elect to terminate the `agreement
not to compete by giving 30 days' prior written notice to the Company of this
election. In the event that Mr. Dimoff terminates his covenant not to compete,
the Company will have no further obligation to make any remaining severance
payments to Mr. Dimoff. Mr. Dimoff has provided such notice and effective March
6, 1998 no further severance payments were due him and his agreement not to
compete is terminated.
 
    In February 1997, the Company entered into a negotiated agreement with Jim
D. Welch, an officer and a shareholder of the Company, wherein the Company
agreed to purchase 90,000 shares of the Company's common stock from him for
$120,000. As of March 13, 1998, the Company has purchased 72,660 shares in the
amount of $96,000. The stock will be purchased over an eighteen month period. As
part of the agreement, Mr. Welch separated from employment with the Company.
 
    In August 1998, Mr. Hanson loaned $400,000 to the Company for various
working capital needs, on October 20, 1998 he loaned another $400,000 for
working capital needs and in November 1998
 
                                       58
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 11:  RELATED PARTY TRANSACTIONS (CONTINUED)
Mr. Hanson loaned an additional $200,000 for working capital needs. Such loans
were consolidated and were evidenced by one promissory note. The principal
amount of the promissory note, together with interest at the rate of 11% per
annum, was scheduled to be payable in full 90 days after November 19, 1998. Mr.
Hanson was repaid in full plus interest in December 1998.
 
    In September 1998, the Company entered into a Software License and
Consulting Services Agreement (the "Novazen Agreement") with Novazen Inc.
("Novazen") to provide the Company proprietary billing software tailored to its
business. As consideration for the consulting services to be provided by
Novazen, the Company paid $100,000 in cash and issued to Novazen 25,000 share of
its Common Stock. Subsequent to the date of the Novazen Agreement, Kevin R.
Loud, an officer of the Company, purchased 38,000 shares of Novazen common stock
for $1.60 per share.
 
NOTE 12:  ADDITIONAL CASH FLOW INFORMATION
 
<TABLE>
<CAPTION>
NONCASH INVESTING AND FINANCING ACTIVITIES                     1998       1997       1996
                                                            ----------  ---------  ---------
<S>                                                         <C>         <C>        <C>
Capital lease obligations incurred for equipment..........  $  310,287  $ 273,859  $1,672,244
Common stock issued to purchase software..................     302,750         --         --
Accrual of preferred stock dividend.......................      33,333         --         --
Long-term debt converted to common stock..................          --         --    490,000
Common stock issued in connection with acquisitions.......  12,715,126    306,947    127,885
Other.....................................................          --     32,310         --
ADDITIONAL CASH PAYMENTS INFORMATION
  Interest paid                                             $  296,293  $ 396,731  $ 159,007
</TABLE>
 
NOTE 13:  SUBSEQUENT EVENTS
 
    On February 2, 1999, the Company acquired all of the outstanding common
stock of the August 5th Corporation, d/b/a Dave's World, an Illinois corporation
headquartered in Bloomington, Illinois ("Dave's World"), pursuant to which
Dave's World merged with and into the Company. Pursuant to the terms of the
Merger Agreement, the Company provided the shareholders of Dave's World, in the
aggregate, approximately $3,000,000, payable in shares of Common Stock of the
Company.
 
                                       59
<PAGE>
                         ROCKY MOUNTAIN INTERNET, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 13:  SUBSEQUENT EVENTS (CONTINUED)
 
    On February 5, 1999, the Company acquired substantially all of the assets of
ImageWare Technologies, L.L.C., an Alabama limited liability company
("ImageWare"), and Communication Network Services, L.L.C., an Alabama limited
liability company ("CNS"), pursuant to the terms of an Asset Purchase Agreement.
ImageWare and CNS were affiliated telecommunications services companies, which
provided long-distance and local telecommunications services as well as
telemarketing services. The Agreement, entered into by and among the Company,
ImageWare, and CNS, provided that the Company would purchase the assets of the
two related companies for approximately $565,000, payable in the form of
restricted common stock of the Company, and would assume certain liabilities of
the related companies.
 
NOTE 14:  SEGMENT INFORMATION
 
    The Company's management regularly evaluates the performance of the Company
by reviewing operating results comprising two segments of the business. As such,
the Company considers each division to be an operating segment. In 1998, the
Company had two operations segments: Web Solutions which is web development and
related commerce and Communication Services which is Internet Services, Long
Distance and related services. Both are 100% owned by Rocky Mountain Internet,
Inc. In July 1998, the Company acquired Application Methods which added to the
revenues of the Web Solutions segment.
 
    In making operating decisions and allocating resources, the Company's
management specifically focuses on the revenues and operating costs generated by
each operating segment, as summarized in the following tables. Certain shared
costs of the segments have been allocated to each segment based upon its share
of the consolidated revenues for the period reported. Excluded from operating
loss of the segment is expense $6,071,106 related to an unsuccessful merger
attempt.
 
<TABLE>
<CAPTION>
                                                                           1998           1997           1996
                                                                       -------------  -------------  -------------
<S>                                                                    <C>            <C>            <C>
NET SALES:
Web Solutions........................................................  $   2,112,561  $   1,051,114  $     420,049
Communication Services...............................................      7,974,449      5,075,997      2,861,530
                                                                       -------------  -------------  -------------
Total Net Sales......................................................  $  10,087,010  $   6,127,111  $   3,281,579
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
COST OF GOODS SOLD:
Web Solutions........................................................  $      50,589  $          --  $       5,142
Communication Services...............................................      3,470,933      2,060,315      1,098,525
                                                                       -------------  -------------  -------------
Total COGS...........................................................  $   3,521,522  $   2,060,315  $   1,103,667
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
SG&A:
Web Solutions........................................................  $   3,163,245  $   1,196,220  $     251,392
Communication Services...............................................      6,020,787      5,783,997      3,933,508
                                                                       -------------  -------------  -------------
Total SG&A...........................................................  $   9,184,032  $   6,980,217  $   4,184,900
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
OPERATING INCOME (LOSS) BEFORE
  DEPRECIATION AND AMORTIZATION:
Web Solutions........................................................  $  (1,101,273) $    (145,106) $     165,515
Communication Services...............................................     (1,517,271)    (2,768,315)    (2,170,503)
                                                                       -------------  -------------  -------------
Total Operating Income (Loss)........................................  $  (2,618,544) $  (2,913,421) $  (2,006,988)
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
</TABLE>
 
                                       60
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
<TABLE>
<CAPTION>
                                                                    BALANCE     CHARGED                  BALANCE
                                                                       AT          TO                       AT
                                                                   BEGINNING    COST AND                  END OF
DESCRIPTION                                                        OF PERIOD    EXPENSES   DEDUCTIONS     PERIOD
-----------------------------------------------------------------  ----------  ----------  -----------  ----------
<S>                                                                <C>         <C>         <C>          <C>
Year Ended December 31, 1998.....................................  $  176,000  $  248,000   $ 159,000   $  265,000
Year Ended December 31, 1997.....................................  $  115,000  $  188,000   $ 127,000   $  176,000
Year Ended December 31, 1996.....................................  $    6,000  $  112,000   $   3,000   $  115,000
</TABLE>
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.
 
    On December 14, 1998, the Company filed a report on Form 8-K under Item 4
that announced that the Company had replaced Baird, Kurtz & Dobson ("BKD") as
its independent auditor with Ernst & Young, LLP ("E&Y"). BKD's reports on the
Company's financial statements for each of the past two fiscal years did not
contain an adverse opinion or a disclaimer of opinion, nor was either report
modified as to uncertainty, audit scope or accounting principles. During the
Company's two most recent fiscal years and the subsequent interim period
preceding the date of the change in independent auditor, there were no
disagreements with BKD on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. BKD has furnished
the Company with a letter addressed to the Securities and Exchange Commission
stating that BKD agrees with the statements above.
 
    During the past two fiscal years and the subsequent interim period preceding
the date of the change in independent auditor, the Company has not consulted E&Y
regarding the application of accounting principles to a specific completed or
contemplated transaction or the type of audit opinion that might be rendered on
the Company's financial statements.
 
    The change is subject to ratification by the Company's shareholders at the
1999 annual meeting of stockholders.
 
                                    PART III
 
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
 
    Information required by Part III, Item 10, is included in the Company's
Proxy Statement relating to the Company's 1999 annual meeting of stockholders,
and is incorporated herein by reference.
 
ITEM 11.  EXECUTIVE COMPENSATION.
 
    Information required by Part III, Item 11, is included in the Company's
Proxy Statement relating to the Company's 1999 annual meeting of stockholders,
and is incorporated herein by reference.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
    Information required by Part III, Item 12, is included in the Company's
Proxy Statement relating to the Company's 1999 annual meeting of stockholders,
and is incorporated herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
    Information required by Part III, Item 13, is included in the Company's
Proxy Statement relating to the Company's 1999 annual meeting of stockholders,
and is incorporated herein by reference.
 
                                       61
<PAGE>
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
(a) Documents filed as a part of this report:
 
    (1) Financial Statements
       Report of Independent Auditors--Ernst & Young LLP
       Report of Independent Auditors--Baird, Kurtz and Dobson
       Consolidated Balance Sheets as of December 31, 1998 and 1997
       Consolidated Statements of Operations for the Years Ended
         December 31, 1998, 1997 and 1996
       Consolidated Statements of Stockholders' Equity for the Years Ended
         December 31, 1998, 1997 and 1996
       Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1998, 1997 and 1996
       Summary of Accounting Policies
       Notes to Consolidated Financial Statements
 
    (2) Financial Statement Schedules:
 
       Schedule II--Valuation and Qualifying Accounts
 
       All other schedules have been omitted because the required information is
       included in the consolidated financial statements or the notes, thereto,
       or is not applicable or required.
 
(b) Reports on Form 8-K. Reports on 8-K. State whether any reports on Form 8-K
    were filed during the last quarter of the period covered by this report,
    listing the items reported, any financial statements filed and the dates of
    any such reports.
 
       (1) ITEM 5--OTHER EVENTS, dated December 10, 1998, and filed with the
           Securities Exchange Commission January 8, 1999. The Registrant
           completed a private placement of 8,000 shares of Series B Convertible
           Preferred Stock for gross proceeds of $8,000,000 or $1,000 per share.
           The private placement was exempt from registration under Rule 506 of
           Regulation D, as promulgated by the Securities and Exchange
           Commission under the Securities Act of 1933, as amended. Shares of
           the Registrant's Series B Convertible Preferred Stock were issued to
           two institutional investors. Exhibits were filed pursuant to Item 7
           of Form 8-K and Items 601(b)(4) and (10) of Regulation S-K.
 
       (2) ITEM 4--CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT, dated December
           9, 1998, and filed with the Securities Exchange Commission December
           10, 1998. On December 9, 1998, the Registrant replaced Baird, Kurtz &
           Dobson as its independent auditor with Ernst & Young, LLP. Baird,
           Kurtz & Dobson's reports on the Registrant's consolidated financial
           statements for fiscal years 1996 and 1997 did not contain an adverse
           opinion or a disclaimer of opinion, nor was either report modified as
           to uncertainty, audit scope or accounting principles. There were no
           disagreements with Baird, Kurtz & Dobson on any matter of accounting
           principles or practices, financial statement disclosure or auditing
           scope or procedure. Baird, Kurtz & Dobson provided a letter addressed
           to the Securities and Exchange Commission stating that Baird, Kurtz &
           Dobson agreed with the statements above, which was filed an exhibit
           to the Form 8-K pursuant to Item 7 of Form 8-K and Item 16 of
           Regulation S-K.
 
       (3) ITEM 2--ACQUISITION OR DISPOSITION OF ASSETS, dated December 8, 1998
           and filed with the Securities Exchange Commission on December 22,
           1998 and amended and filed with the Securities Exchange Commission on
           January 8, 1999. On December 8, 1998, the Registrant completed the
           acquisition of substantially all of the assets of DataXchange
 
                                       62
<PAGE>
           Network, Inc. a Florida corporation. Consideration for the assets
           acquired was comprised of up to 535,000 shares of the Registrant's
           common stock, 410,000 of which were issued at closing, and warrants
           to purchase up to 535,000 shares of the Registrant's common stock,
           410,000 of which were issued at closing. The remaining 125,000 shares
           of common stock and warrants to purchase 125,000 shares of common
           stock are payable by the Registrant upon achievement of certain
           financial performance objectives set forth in the DataXchange
           Purchase Agreement and related agreements. Exhibits were filed
           pursuant to Item 7 of Form 8-K and Items 601(b)(2) and (10) of
           Regulation S-K. Financial statements of DataXchange Network, Inc. and
           pro forma financial statements of the Registrant were filed with
           Amendment No. 1 to the Form 8-K on January 8, 1999.
 
       (4) ITEM 2--ACQUISITION OR DISPOSITION OF ASSETS, dated November 20,
           1998, and filed with the Securities Exchange Commission on December
           7, 1998. On November 20, 1998, the Registrant acquired all of the
           issued outstanding common stock of Internet Now, a Nevada corporation
           headquartered in Phoenix, Arizona. Consideration for the stock
           acquired was comprised of $150,000 in cash and 171,250 shares of the
           Registrant's common stock. On November 24, 1998, the Registrant
           certain assets that comprised the access and hosting business of
           Unicom Communications, Inc. a Kansas corporation. Consideration for
           the assets acquired was comprised of 172,152 shares of the
           Registrant's common stock. Exhibits were filed pursuant to Item 7 of
           Form 8-K and Item 601(b)(10) of Regulation S-K.
 
       (5) ITEM 5--OTHER EVENTS, dated November 20, 1998, and filed with the
           Securities Exchange Commission on December 7, 1998. On November 1,
           1998, the Registrant acquired substantially all of assets Stonehenge
           Business Systems Corporation, A Colorado Corporation. Consideration
           for the stock acquired was comprised of 49,862 shares of the
           Registrant's common stock. Exhibits were filed pursuant to Item 7 of
           Form 8-K and Item 601(b)(10) of Regulation S-K.
 
                                       63
<PAGE>
    (c) Exhibits:
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                             DESCRIPTION OF DOCUMENT
---------  --------------------------------------------------------------------------------------------------------
<C>        <S>
   2.01    Agreement and Plan of Reorganization and Liquidation by and Among Rocky Mountain Internet, Inc.,
             DataXchange Network, Inc., and Certain of the Shareholders of DataXchange Network, Inc., dated as of
             December 8, 1998(13)
   3.01    Certificate of Incorporation(1)
   3.02    Bylaws of Rocky Mountain Internet, Inc.(1)
   3.03    Certificate of Amendment of Certificate of Incorporation of Rocky Mountain Internet, Inc.(16)
   3.04    Certificate of Designations of Series B Convertible Preferred Stock(16)
   4.01    Form of Warrant Agreement dated September 5, 1996 between Rocky Mountain Internet, Inc. and American
             Securities Transfer, Inc.(1)
   4.02    Form of Subordinated Convertible Promissory Note(1)
   4.03    Form of Lock-Up Agreement for Common Stockholders(1)
   4.04    Form of Lock-Up Agreement for Preferred Stockholders(1)
   4.05    Form of Lock-Up Agreement for Debenture Holders(1)
   4.06    Form of Stock Certificate(1)
   4.07    Form of Warrant Certificate(1)
   4.08    Warrant Agreement between Rocky Mountain Internet, Inc. and Douglas H. Hanson dated October 1, 1997(8)
   4.09    1996 Employees' Stock Option Plan(6)
   4.10    1996 Non-Employee Directors' Stock Option Plan(6)
   4.11    Rocky Mountain Internet Inc. 1997 Non-Qualified Stock Option Plan(7)
   4.12    1997 Stock Option Plan(9)
   4.12.1  First Amendment to Non-Qualified Stock Option Agreement pursuant to the Rocky Mountain Internet, Inc.
             1997 Stock Option Plan(16)
   4.12.2  First Amendment to Incentive Stock Option Agreement pursuant to the Rocky Mountain Internet, Inc. 1997
             Stock Option Plan)(16)
   4.13    Rocky Mountain Internet, Inc. 1998 Employees' Stock Option Plan(10)
   4.14    Rocky Mountain Internet, Inc. 1998 Non-Employee Directors' Stock Option Plan(11)
   4.15    Subscription Agreement, dated as of December 10, 1998, by and between Rocky Mountain Internet, Inc. and
             Koch Industries, Inc.(15)
   4.16    Subscription Agreement, dated as of December 10, 1998, by and between Rocky Mountain Internet, Inc. and
             Advantage Fund II Ltd.(15)
   4.17    Form of Common Stock Purchase Warrant issued to Koch Industries, Inc., Advantage Fund II Ltd., Wharton
             Capital Partners Ltd., Leslie Bines, and Neidiger Tucker Bruner Inc.(15)
   4.18    Form of Registration Rights Agreement between Rocky Mountain Internet, Inc. and (i) Koch Industries,
             Inc.; and (ii) Advantage Fund II Ltd.(15)
   4.19    Form of Registration Rights Agreement between Rocky Mountain Internet and (i) Wharton Capital Partners
             Ltd.; (ii) Leslie Bines; and (iii) Neidiger Tucker Bruner Inc.(15)
  10.01    Agreement of Lease between Denver-Stellar Associates Limited Partnership, Landlord and Rocky Mountain
             Internet, Inc., Tenant(2)
  10.02    Asset Purchase Agreement--Acquisition of CompuNerd, Inc.(2)
  10.03    Confirmation of $2.0 million lease line of credit(2)
  10.04    Agreement between MCI and Rocky Mountain Internet, Inc. governing the provision of professional
             information system development services for the design and development of the MCI internal Intranet
             project referred to as Electronic Advice.(2)
  10.05    Sublease Agreement--February 26, 1997--1800 Glenarm, Denver, CO(4)
  10.06    Acquisition Agreement for The Information Exchange(4)
</TABLE>
 
                                       64
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                             DESCRIPTION OF DOCUMENT
---------  --------------------------------------------------------------------------------------------------------
<C>        <S>
  10.07    Asset Purchase Agreement for On-Line Network Enterprises(4)
  10.08    1996 Incentive Compensation Plan--Annual Bonus Incentive(4)
  10.09    1997 Incentive Compensation Plan--Annual Bonus Incentive(4)
  10.10    Termination Agreement of joint venture between Rocky Mountain Internet, Inc. and Zero Error Networks,
             Inc.(5)
  10.11    Private Placement Memorandum(5)
  10.12    Carrier Services Switchless Agreement Between Frontier Communications of the West, Inc. and Rocky
             Mountain Broadband, Inc.**(15)
  10.13    Wholesale Usage Agreement Between PSINet Inc. and Rocky Mountain Internet, Inc.**(15)
  10.14    PacNet Reseller Agreement between PacNet Inc. and Rocky Mountain Internet, Inc.**(15)
  10.15    Operating Agreement of The Mountain Area EXchange LLC(15)
  10.16    Software License and Consulting Services Agreement Between Rocky Mountain Internet, Inc. and Novazen
             Inc.**(15)
  10.19    Merger Agreement among Rocky Mountain Internet, Inc., RMI-INI, Internet Now, Hutchinson Persons, Leslie
             Kelly, Taufik, Islam, Susan Coupal, and Gary Kim, dated November 20, 1998(12)
  10.20    Asset Purchase Agreement between Rocky Mountain Internet, Inc. and Unicom Communications Corporation
             dated as of November 24, 1998(12)
  10.21    Asset Purchase Agreement among Rocky Mountain Internet, Inc., Stonehenge Business Systems Corporation,
             Todd Keener, and Danette Keener, dated as of November 30, 1998(12)
  10.22    Commitment letter dated December 10, 1998 from Advantage Fund Ltd. to Rocky Mountain Internet, Inc.(15)
  10.23    Agreement and Plan of Merger dated February 2, 1999 by and between Rocky Mountain Internet, Inc. and
             August 5th Corporation, d/b/a Dave's World(17)
  10.24    Asset Purchase Agreement by and among Rocky Mountain Internet, Inc., ImageWare Technologies, L.L.C., and
             Communication Network Services, L.L.C.(17)
  16.01    Letter re change in certifying accountant(3)
  16.02    Letter re change in certifying accountant(14)
  21.01    Subsidiaries of the Registrant *
  23.01    Consent of Ernst & Young LLP *
  23.02    Consent of Baird, Kurtz & Dobson*
  27.01    Financial Data Schedule *
</TABLE>
 
------------------------
 
*   Filed with this Annual Report on Form 10-K for the fiscal year ended
    December 31, 1998.
 
**  Portions of these documents have been omitted pursuant to a request for
    confidential treatment.
 
(1) Incorporated by reference from the Registrant's Registration Statement on
    Form SB-2 (Reg. No. 333-05040C) and amendments thereto, as previously filed
    with the Securities and Exchange Commission.
 
(2) Incorporated by reference from the Registrant's Quarterly Report on Form
    10-QSB for the quarter ended September 30, 1996.
 
(3) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated January 28, 1997.
 
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
    for the fiscal year ended December 31, 1996.
 
(5) Incorporated by reference to the Registrant's Quarterly Report on Form
    10-QSB for the quarter ended June 30, 1997.
 
                                       65
<PAGE>
(6) Incorporated by reference to the Registrant's documents filed with the
    Registrant's Initial Public Offering.
 
(7) Incorporated by reference to the Registrant's Registration Statement on Form
    S-8, as filed with the Securities and Exchange Commission on September 26,
    1997.
 
(8) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated October 6, 1997.
 
(9) Incorporated by reference to the Definitive Proxy Statement (Appendix A)
    filed on Schedule 14A on February 13, 1998.
 
(10) Incorporated by reference to the Definitive Proxy Statement (Appendix B)
    filed on Schedule 14A on February 13, 1998.
 
(11) Incorporated by reference to the Definitive Proxy Statement (Appendix C)
    filed on Schedule 14A on February 13, 1998.
 
(12) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated November 20, 1998.
 
(13) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated December 8, 1998.
 
(14) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated December 9, 1998.
 
(15) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated December 10, 1998.
 
(16) Incorporated by reference from the Registrant's Registration Statement on
    Form S-1 (Reg. No. 333-52731) and amendments thereto, as previously filed
    with the Securities and Exchange Commission.
 
(17) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated February 2, 1999.
 
                                       66
<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, in the city of Denver,
state of Colorado, on March 30, 1999.
 
<TABLE>
<S>                             <C>  <C>
                                ROCKY MOUNTAIN INTERNET, INC.
                                a Delaware corporation
 
                                By:  /s/ DOUGLAS H. HANSON
                                     -----------------------------------------
                                     Name: Douglas H. Hanson
                                     Title: Chief Executive Officer and
                                     Chairman of the Board of Directors
                                            (PRINCIPAL EXECUTIVE OFFICER)
</TABLE>
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, report
has been signed below by the following persons in the capacities and on the
dates indicated:
 
<TABLE>
<CAPTION>
             NAME                         TITLE                    DATE
------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
                                Chief Executive Officer
    /s/ DOUGLAS H. HANSON         and Chairman of the
------------------------------    Board of Directors          March 30, 1999
      Douglas H. Hanson           (PRINCIPAL EXECUTIVE
                                  OFFICER)
 
                                Chief Financial Officer
     /s/ PETER J. KUSHAR          and Treasurer (PRINCIPAL
------------------------------    FINANCIAL OFFICER AND       March 30, 1999
       Peter J. Kushar            PRINCIPAL ACCOUNTING
                                  OFFICER)
 
     /s/ MARY BETH VITALE
------------------------------  President, Chief Operating    March 30, 1999
       Mary Beth Vitale           Officer and Director
 
        /s/ D.D. HOCK
------------------------------  Director                      March 30, 1999
          D.D. Hock
 
   /s/ ROBERT S. GRABOWSKI
------------------------------  Director                      March 30, 1999
     Robert S. Grabowski
 
   /s/ LEWIS J. SILVERBERG
------------------------------  Director                      March 30, 1999
     Lewis J. Silverberg
</TABLE>
 
                                       67
<PAGE>
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                            DESCRIPTION OF DOCUMENT
---------  --------------------------------------------------------------------------------------------------------
<C>        <S>
   2.01    Agreement and Plan of Reorganization and Liquidation by and Among Rocky Mountain Internet, Inc.,
             DataXchange Network, Inc., and Certain of the Shareholders of DataXchange Network, Inc., dated as of
             December 8, 1998(13)
   3.01    Certificate of Incorporation(1)
   3.02    Bylaws of Rocky Mountain Internet, Inc.(1)
   3.03    Certificate of Amendment of Certificate of Incorporation of Rocky Mountain Internet, Inc.(16)
   3.04    Certificate of Designations of Series B Convertible Preferred Stock(16)
   4.01    Form of Warrant Agreement dated September 5,1996 between Rocky Mountain Internet, Inc. and American
             Securities Transfer, Inc.(1)
   4.02    Form of Subordinated Convertible Promissory Note(1)
   4.03    Form of Lock-Up Agreement for Common Stockholders(1)
   4.04    Form of Lock-Up Agreement for Preferred Stockholders(1)
   4.05    Form of Lock-Up Agreement for Debenture Holders(1)
   4.06    Form of Stock Certificate(1)
   4.07    Form of Warrant Certificate(1)
   4.08    Warrant Agreement between Rocky Mountain Internet, Inc. and Douglas H. Hanson dated October 1, 1997(8)
   4.09    1996 Employees' Stock Option Plan(6)
   4.10    1996 Non-Employee Directors' Stock Option Plan(6)
   4.11    Rocky Mountain Internet Inc. 1997 Non-Qualified Stock Option Plan(7)
   4.12    1997 Stock Option Plan(9)
   4.12.1  First Amendment to Non-Qualified Stock Option Agreement pursuant to the Rocky Mountain Internet, Inc.
             1997 Stock Option Plan(16)
   4.12.2  First Amendment to Incentive Stock Option Agreement pursuant to the Rocky Mountain Internet, Inc. 1997
             Stock Option Plan)(16)
   4.13    Rocky Mountain Internet, Inc. 1998 Employees' Stock Option Plan(10)
   4.14    Rocky Mountain Internet, Inc. 1998 Non-Employee Directors' Stock Option Plan(11)
   4.15    Subscription Agreement, dated as of December 10, 1998, by and between Rocky Mountain Internet, Inc. and
             Koch Industries, Inc.(15)
   4.16    Subscription Agreement, dated as of December 10, 1998, by and between Rocky Mountain Internet, Inc. and
             Advantage Fund II Ltd.(15)
   4.17    Form of Common Stock Purchase Warrant issued to Koch Industries, Inc., Advantage Fund II Ltd., Wharton
             Capital Partners Ltd., Leslie Bines, and Neidiger Tucker Bruner Inc.(15)
   4.18    Form of Registration Rights Agreement between Rocky Mountain Internet, Inc. and (i) Koch Industries,
             Inc.; and (ii) Advantage Fund II Ltd.(15)
   4.19    Form of Registration Rights Agreement between Rocky Mountain Internet and (i) Wharton Capital Partners
             Ltd.; (ii) Leslie Bines; and (iii) Neidiger Tucker Bruner Inc.(15)
  10.01    Agreement of Lease between Denver-Stellar Associates Limited Partnership, Landlord and Rocky Mountain
             Internet, Inc., Tenant(2)
  10.02    Asset Purchase Agreement--Acquisition of CompuNerd, Inc.(2)
  10.03    Confirmation of $2.0 million lease line of credit(2)
  10.04    Agreement between MCI and Rocky Mountain Internet, Inc. governing the provision of professional
             information system development services for the design and development of the MCI internal Intranet
             project referred to as Electronic Advice.(2)
  10.05    Sublease Agreement-February 26, 1997-1800 Glenarm, Denver, CO(4)
  10.06    Acquisition Agreement for The Information Exchange(4)
</TABLE>
 
                                       68
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                            DESCRIPTION OF DOCUMENT
---------  --------------------------------------------------------------------------------------------------------
<C>        <S>
  10.07    Asset Purchase Agreement for On-Line Network Enterprises(4)
  10.08    1996 Incentive Compensation Plan--Annual Bonus Incentive(4)
  10.09    1997 Incentive Compensation Plan--Annual Bonus Incentive(4)
  10.10    Termination Agreement of joint venture between Rocky Mountain Internet, Inc. and Zero Error Networks,
             Inc.(5)
  10.11    Private Placement Memorandum(5)
  10.12    Carrier Services Switchless Agreement Between Frontier Communications of the West, Inc. and Rocky
             Mountain Broadband, Inc.**(15)
  10.13    Wholesale Usage Agreement Between PSINet Inc. and Rocky Mountain Internet, Inc.**(15)
  10.14    PacNet Reseller Agreement between PacNet Inc. and Rocky Mountain Internet, Inc.**(15)
  10.15    Operating Agreement of The Mountain Area EXchange LLC(15)
  10.16    Software License and Consulting Services Agreement Between Rocky Mountain Internet, Inc. and Novazen
             Inc.**(15)
  10.19    Merger Agreement among Rocky Mountain Internet, Inc., RMI-INI, Internet Now, Hutchinson Persons, Leslie
             Kelly, Taufik, Islam, Susan Coupal, and Gary Kim, dated November 20, 1998(12)
  10.20    Asset Purchase Agreement between Rocky Mountain Internet, Inc. and Unicom Communications Corporation
             dated as of November 24, 1998(12)
  10.21    Asset Purchase Agreement among Rocky Mountain Internet, Inc., Stonehenge Business Systems Corporation,
             Todd Keener, and Danette Keener, dated as of November 30, 1998(12)
  10.22    Commitment letter dated December 10, 1998 from Advantage Fund Ltd. to Rocky Mountain Internet, Inc.(15)
  10.23    Agreement and Plan of Merger dated February 2, 1999 by and between Rocky Mountain Internet, Inc. and
             August 5th Corporation, d/b/a Dave's World(17)
  10.24    Asset Purchase Agreement by and among Rocky Mountain Internet, Inc., ImageWare Technologies, L.L.C., and
             Communication Network Services, L.L.C.(17)
  16.01    Letter re change in certifying accountant(3)
  16.02    Letter re change in certifying accountant(14)
  21.01    Subsidiaries of the Registrant*
  23.01    Consent of Ernst & Young LLP*
  23.02    Consent of Baird, Kurtz & Dobson*
  27.01    Financial Data Schedule*
</TABLE>
 
------------------------
 
   * Filed with this Annual Report on Form 10-K for the fiscal year ended
     December 31, 1998.
 
  ** Portions of these documents have been omitted pursuant to a request for
     confidential treatment.
 
 (1) Incorporated by reference from the Registrant's Registration Statement on
     Form SB-2 (Reg. No. 333-05040C) and amendments thereto, as previously filed
     with the Securities and Exchange Commission.
 
 (2) Incorporated by reference from the Registrant's Quarterly Report on Form
     10-QSB for the quarter ended September 30, 1996.
 
 (3) Incorporated by reference to the Registrant's Current Report on Form 8-K
     dated January 28, 1997.
 
 (4) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
     for the fiscal year ended December 31, 1996.
 
                                       69
<PAGE>
 (5) Incorporated by reference to the Registrant's Quarterly Report on Form
     10-QSB for the quarter ended June 30, 1997.
 
 (6) Incorporated by reference to the Registrant's documents filed with the
     Registrant's Initial Public Offering.
 
 (7) Incorporated by reference to the Registrant's Registration Statement on
     Form S-8, as filed with the Securities and Exchange Commission on September
     26, 1997.
 
 (8) Incorporated by reference to the Registrant's Current Report on Form 8-K
     dated October 6, 1997.
 
 (9) Incorporated by reference to the Definitive Proxy Statement (Appendix A)
     filed on Schedule 14A on February 13, 1998.
 
 (10) Incorporated by reference to the Definitive Proxy Statement (Appendix B)
      filed on Schedule 14A on February 13, 1998.
 
 (11) Incorporated by reference to the Definitive Proxy Statement (Appendix C)
      filed on Schedule 14A on February 13, 1998.
 
 (12) Incorporated by reference to the Registrant's Current Report on Form 8-K
      dated November 20, 1998.
 
 (13) Incorporated by reference to the Registrant's Current Report on Form 8-K
      dated December 8, 1998.
 
 (14) Incorporated by reference to the Registrant's Current Report on Form 8-K
      dated December 9, 1998.
 
 (15) Incorporated by reference to the Registrant's Current Report on Form 8-K
      dated December 10, 1998.
 
 (16) Incorporated by reference from the Registrant's Registration Statement on
      Form S-1 (Reg. No. 333-52731) and amendments thereto, as previously filed
      with the Securities and Exchange Commission.
 
 (17) Incorporated by reference to the Registrant's Current Report on Form 8-K
      dated February 2, 1999.
 
                                       70