<PAGE>

--------------------------------------------------------------------------------
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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, 1999

                                       OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934

  For the transition period from ______ to ________

                       Commission File Number: 000-28893

                                   L90, Inc.
             (Exact name of registrant as specified in its charter)

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

               Delaware                                95-4761069
   (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)                Identification No.)

                          2020 Santa Monica Boulevard
                                   Suite 400
                         Santa Monica, California 90404
              (Address of principal executive offices) (Zip Code)

                                 (310) 315-1199
              (Registrant's telephone number, including area code)

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

                                      None

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

                    Common Stock, par value $.001 per share
                                (Title of class)

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the 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 registrant's voting Common Stock held by
non-affiliates of the registrant was approximately $204,847,556 (computed using
the closing price of $21.06 per share of Common Stock on March 1, 2000, as
reported by NASDAQ, based on the assumption that directors and officers and
more than 10% stockholders are affiliates). There were 21,892,085 shares of the
registrant's Common Stock, par value $.001 per share, outstanding on March 1,
2000.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                     None.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                   L90, INC.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----

                                     Part I

 <C>      <S>                                                             <C>
 Item 1.  Business......................................................    3
 Item 2.  Properties....................................................   21
 Item 3.  Legal Proceedings.............................................   21
 Item 4.  Submission of Matters to a Vote of Security Holders...........   22

                                    Part II

 Item 5.  Market for Registrant's Common Equity and Related Stockholder
          Matters.......................................................   23
 Item 6.  Selected Financial Data.......................................   25
 Item 7.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations.....................................   26
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk....   31
 Item 8.  Financial Statements and Supplementary Data...................   33
 Item 9.  Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure......................................   51

                                    Part III

 Item 10. Directors and Executive Officers of the Registrant............   51
 Item 11. Executive Compensation........................................   54
 Item 12. Security Ownership of Certain Beneficial Owners and
          Management....................................................   56
 Item 13. Certain Relationships and Related Transactions................   58

                                    Part IV

 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
          8-K...........................................................   60
 Signatures..............................................................  63
</TABLE>

                                       2
<PAGE>

   THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT L90 AND OUR
INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
L90'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY
DESCRIBED IN THIS SECTION AND ELSEWHERE IN THIS REPORT. L90 UNDERTAKES NO
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON,
EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.

                                     PART I

ITEM 1. BUSINESS.

Overview

   We are a leading provider of Internet-based advertising and direct marketing
solutions for advertisers and Web publishers. We design and implement
advertising campaigns for our advertising clients and strategically place their
ads on our network of Web sites. We provide our Web publishing clients with a
fully-outsourced solution which includes the sale of advertising space on their
Web sites as well as the technology required to deliver advertisements.

   We have developed adMonitor, our ad serving and tracking technology that is
used to deliver advertisements to our network of Web site publishers. adMonitor
enables our advertising and Web publishing clients to implement sophisticated
advertising campaigns quickly and to selectively target ads to Web users based
on specific interests or characteristics. adMonitor also enables our clients to
measure and manage the effectiveness of their ad campaigns.

   We represent a network of select Web publishers featuring sites with strong
online brand awareness and innovative content such as Alloy Online, BigYellow,
Hollywood.com and Liquid Audio. Over 600 advertisers including Chevrolet,
iVillage, Microsoft, Netscape, Procter & Gamble and Visa have utilized our
solutions.

Industry Background

 Emergence of the Internet as an Advertising and Direct Marketing Medium

   The Internet has rapidly emerged as an important medium for facilitating
communication, disseminating information and conducting commerce. International
Data Corporation estimates that the number of worldwide Internet users exceeded
142 million in 1998 and will grow to approximately 502 million by 2003.
International Data Corporation also estimates that worldwide commerce over the
Internet will grow from approximately $50.4 billion in 1998 to approximately
$1.3 trillion by 2003.

   As the Internet has grown, advertisers have devoted increasing portions of
their advertising and marketing budgets to online advertising and direct
marketing. Forrester Research estimates that worldwide Internet advertising
spending will grow from approximately $3.3 billion in 1999 to approximately
$33.1 billion in 2004. Moreover, worldwide expenditures for online direct
marketing, as estimated by the Direct Marketing Association, will grow from
approximately $603 million in 1998 to approximately $5.3 billion in 2003.

 Advantages of Online Advertising and Direct Marketing Over Traditional Media

   Unlike traditional broadcast media, the Internet allows advertisers to
selectively target advertisements to individual consumers based upon their
specific interests and characteristics. The interactivity of the Internet also
enables advertisers and marketers to reach the consumer at the point of sale
and to receive immediate

                                       3
<PAGE>

feedback on their ad campaigns. Moreover, the Internet provides advertisers
with the ability to monitor and measure the effectiveness of their campaigns
and track the resulting transactions. This timely feedback enables advertisers
to continually optimize ad campaigns and increase their returns on advertising
spending. We believe that online advertising and direct marketing campaigns
generally are more cost effective and easier to develop and implement than
advertising and direct marketing campaigns in traditional media.

 Challenges for Online Advertisers

   Online advertisers seek to continually enhance the effectiveness of their
advertising campaigns. They face several significant challenges, including:

  .  Complicated Media Buy. Low barriers to entry and easy-to-use Web site
     authoring software have resulted in a proliferation of Web sites and Web
     pages. eStats estimates that the number of Web sites in the United
     States has grown to 3.6 million in 1999. As a result, advertisers are
     faced with an increasingly complex and fragmented environment in which
     to construct, purchase and implement their advertising campaigns.

  .  Lack of Technical and Creative Expertise. Advertisers are increasingly
     seeking solutions that enable them to achieve their goals by integrating
     sponsorships such as rich media and other marketing techniques into
     their online advertising campaigns. Implementing online solutions
     requires higher levels of technical and creative expertise.

  .  Engaging the Online User. Because Web users exercise control over their
     online experience, online advertisers face greater difficulties in
     engaging a user's attention than do advertisers utilizing broadcast
     media who rely on the passive reception of their messages. The impact of
     traditional banner ad campaigns is limited. As a result, online
     advertisers have focused increasingly on developing campaigns that
     engage online users and encourage their interaction with the
     advertisements.

  .  Compiling Data and Extracting Value. In order to create effective
     advertising campaigns, advertisers seek to gather relevant information
     about Web users through various means, such as tracking technology,
     which is able to track a user's movements through the Internet, and
     modeling techniques, which are used to predict a Web user's online
     behavior, and quickly analyze this information to continually refine
     campaign strategies. Most advertisers do not have the technical
     expertise to compile and analyze campaign performance data and, as a
     result, require a third party solution.

  .  Execution. Once advertisers have compiled and analyzed the information
     gathered about Web users, they must be able to capitalize on the value
     of this information to create tailored advertising campaigns and direct
     these campaigns to specific groups of Web users. To maximize the
     effectiveness of their campaigns, advertisers must be able to implement
     changes in their strategies on a timely basis.

 Challenges for Web Publishers

   Web publishers seek to maximize the value realized from their available Web
site space, or ad inventory. They face several significant challenges,
including:

  .  Lack of Sales Expertise. Many Web publishers lack sufficient experienced
     personnel to effectively sell ad space on their Web sites.

  .  Difficulty in Differentiation. The number of Web sites has increased
     dramatically due in part to growth in the number of Web users, the
     advent of easy-to-use Web site authoring software and the continuing
     growth of electronic commerce. As a result, Web publishers increasingly
     face difficulty in differentiating themselves to prospective advertisers
     and in gaining access to advertising decision makers.


                                       4
<PAGE>

  .  Lack of Ad Delivery and Tracking Technology. Given the pace and scale in
     which new ad delivery and tracking technology is evolving, many Web
     publishers cannot afford to develop and maintain the technology
     necessary to target, deliver and track Web advertising.

  .  Inventory Management. Maximizing the value of a Web publisher's
     available Web site space, or ad inventory, requires efficient inventory
     management. It is difficult for Web publishers to maintain price
     consistency with their high-CPM ad packages while monetizing their
     unsold ad inventory.

The L90 Solution

   Our solution is designed to enable advertisers and Web publishers to take
advantage of the Internet as a marketing medium. We offer advertisers creative
campaign development and design services, strategic sales solutions and a
network of Web sites on which to place their ads. Our adMonitor technology
provides them with ad serving, contemporaneous campaign management,
measurement, reporting and transaction tracking capabilities. We offer Web
publishers the opportunity to focus on their core businesses while we provide
online advertising sales, ad inventory management and back office operational
support. Our comprehensive advertising solution combines our high value-added,
strategic ad campaign development services, an extensive knowledge of our Web
publishers and our adMonitor technology. We believe this combination enables us
to obtain improved pricing by maximizing the value of the ad inventory of our
Web publishers.

 Benefits to Advertisers

  .  Strategic Advertising Sales Approach. Our highly skilled sales force
     consults closely with advertisers and advertising agencies to determine
     their needs and to construct effective advertising solutions that enable
     them to realize their online advertising objectives. Utilizing this
     consultative approach, we develop comprehensive campaigns that are
     intended to achieve higher response rates in a fragmented and crowded
     Web publishing marketplace.

  .  Design and Marketing Expertise. Our extensive design, creative
     development and marketing expertise provides our clients with cost
     savings in the development and deployment of their advertising
     campaigns. In addition, our design and marketing expertise allows us to
     quickly develop and deploy these advertising campaigns, resulting in an
     advantage for our clients in the time it takes to implement an
     advertising campaign. Our skilled staff has significant expertise in
     creating advertising campaigns that employ leading-edge technologies and
     techniques, such as sponsorships or the incorporation of rich media into
     the campaign and sponsorships. Further, by maintaining a library of our
     successful advertising campaigns, we are able to offer advertisers the
     ability to select pre-tested solutions that can be quickly tailored to
     meet the advertisers needs and goals. This "plug and play" functionality
     significantly reduces the time it takes to implement an advertising
     campaign.

  .  Sponsorship Advertising. We have created sponsorship advertising
     solutions that enable our advertising clients to develop campaigns that
     go beyond traditional banner advertising. Our highly targeted solutions
     utilize value-added features such as content integration, co-branding,
     rich media and campaign structures such as promotions and sweepstakes.
     We believe that our sponsorship solutions enable advertisers to place
     their ads in a more relevant and targeted context. For example, by co-
     branding an advertiser with a Web publisher or integrating the
     advertiser's advertisement into the Web publisher's content, the
     advertiser benefits from the Web publisher's existing relationship with
     its users. We believe these placements generate higher returns by
     leveraging the existing relationship between the Web user and the Web
     site.

  .  Ad Serving and Tracking Technology. Our adMonitor technology delivers
     advertising campaigns incorporating rich media, interactivity and ad
     targeting. We aggregate information about Web users in our proprietary
     databases that can be used on a standalone basis or in conjunction with
     other data sources to deliver highly targeted advertising messages to
     users across our entire network of Web sites. Additionally, advertisers
     can access adMonitor through a Web browser, enabling them to view

                                       5
<PAGE>

     their campaigns and obtain real-time reports. adMonitor also enables
     advertisers to execute valuable testing programs, such as simultaneously
     running a number of different campaigns, and to obtain real-time
     performance feedback that assesses their relative effectiveness.

  .  Highly Targeted Advertising. The combination of our network of Web
     sites, category sales specialists and adMonitor technology empowers us
     to structure highly targeted campaigns for advertisers. Advertisers can
     target delivery based on the Web user's demographic or behavioral data,
     or on more complex parameters, such as future buying prospects.

  .  Direct Marketing Capabilities. We have considerable expertise in
     creating direct marketing campaigns that incorporate creative
     promotional offers and easy-to-use interactivity in order to realize
     increased click-through rates and greater participation by Web users.
     Our direct marketing campaigns include components such as interstitials,
     sweepstakes, targeted e-mails, Web user registrations and other
     techniques designed to encourage specific actions by users or to collect
     valuable customer data.

Benefits to Web Publishers

  .  Outsourced Advertising Sales. Participants in our network benefit from
     the services of our skilled sales force. By outsourcing online
     advertising sales, Web publishers are able to focus on their core
     competencies and avoid the significant investment and distraction of
     developing an in-house sales force.

  .  Improved Pricing. Based on our ability to deliver highly effective
     campaigns, advertisers are willing to pay higher prices for the ad
     inventory on our network. We believe the average CPM realized by our Web
     publishers is substantially higher than the industry average.

  .  Efficient Inventory Management. adMonitor provides Web publishers with
     an inventory management tool that generates useful real-time reports on
     current and expected ad inventory. By monitoring each active ad
     campaign, adMonitor continuously updates available inventory to properly
     deliver ads on schedule and to ensure that Web publishers achieve a
     superior revenue yield from their ad inventory. We seek to optimize
     yield by selling packages that emphasize high CPM advertising campaigns,
     including sponsorships, sweepstakes, promotions and content integration.

  .  Creating Visibility. Due to the proliferation in the number of Web
     sites, it is often difficult for individual Web sites to gain the
     attention of major advertisers. Through the aggregation of online ad
     inventory from the Web sites we represent, our Web site network attracts
     the attention of major advertisers. Inclusion in our network provides
     Web publishers with access to a larger number of major advertisers.

  .  Web-Hosted Ad Serving and Tracking. adMonitor provides Web publishers
     with centralized ad serving, targeting and tracking capabilities to
     execute, manage and optimize advertising campaigns incorporating rich
     media and sponsorships. Outsourcing this technology enables Web
     publishers to avoid the significant investments associated with
     developing this capability in-house.

  .  Flexible, Adaptable Technology Platform. Our adMonitor technology is
     designed to be easily modified to incorporate new technologies in order
     to meet the needs and demands of Web publishers and advertisers.
     adMonitor's flexible technology also provides a platform for additional
     direct marketing applications such as e-mail campaign management and
     loyalty programs.

  .  Rapid Implementation. We can implement adMonitor quickly and simply to
     begin serving ads for new Web publishing clients, typically within 24
     hours. As a result, these clients can begin to generate revenue from the
     sale of their ad inventory in a highly efficient manner.

                                       6
<PAGE>

Products and Services

   Our products and services are designed to provide our advertisers and Web
publishers with comprehensive, customized online advertising solutions.

 Advertising Solutions

   In designing an advertising solution, we offer the following primary
advertising programs:


<TABLE>
<CAPTION>
     Advertising Programs                         Description
-------------------------------------------------------------------------------
 <C>                           <S>
 L90Premium                    . L90Premium leverages the brand names, quality
  (Beyond the Banner             content and desirable demographics of our
  Programs)                      premium Web sites through advertising programs
                                 featuring advertising components such as co-
                                 branded micro-sites and jump pages, content
                                 integration, contextual sponsorships, rich
                                 media and promotions. We specialize in
                                 providing three types of sponsorship
                                 opportunities:

                               . turnkey sponsorships, which are pre-packaged
                                 programs that can be easily and quickly
                                 implemented to meet the objectives of the
                                 advertiser;

                               . customized sponsorships, which are original
                                 programs specifically created for, and based
                                 upon the marketing objectives of, a specific
                                 advertiser; and

                               . syndicated sponsorships, which are genre-
                                 specific programs that run across a selection
                                 of our premium Web sites.

-------------------------------------------------------------------------------
 L90Targeted                   . L90Targeted enables advertisers to target
  (Special Interest              specific audiences by content categories,
  Categories)                    including Entertainment, Automotive, Sports,
                                 Kids/Teens and e-Commerce. Our category sales
                                 specialists possess in-depth knowledge and
                                 understanding of their respective categories
                                 and can assist advertising clients in
                                 developing ad campaigns that address audiences
                                 in these categories.

-------------------------------------------------------------------------------
 L90R&E                        . L90R&E offers broad distribution across our
  (Reach and Efficiency          entire network of Web sites for advertisers
  Network)                       interested in attaining the greatest reach for
                                 the lowest and most efficient cost.

-------------------------------------------------------------------------------
 L90D.m.                       . L90D.m. programs range from pop-up boxes and
  (Direct Marketing)             e-mail newsletter sponsorships to "opt-in"
                                 registrations and viral marketing programs,
                                 all designed to reach targeted audiences and
                                 build qualified marketing databases. These
                                 programs include:

-------------------------------------------------------------------------------
                               . L90Mail which delivers advertising messages
                                 directly to a specific targeted audience
                                 through e-mail newsletters and site updates.
                                 Advertisements are integrated within e-mail
                                 newsletters or sent as stand-alone e-mail
                                 messages.

                               . L90Opt-in which enables advertisers to build a
                                 qualified marketing database of consumers that
                                 specifically opt-in to receive targeted
                                 information or special offers.

-------------------------------------------------------------------------------
 L90Link                       . L90Link, which is a marketing tool that uses
  (Viral Marketing)              the entire L90 network, our adMonitor
                                 technology and the power of word-of-mouth
                                 marketing to generate customer acquisitions.
                                 L90Link rewards users for taking advantage of
                                 promotional offers and forwarding these offers
                                 to friends and colleagues.

-------------------------------------------------------------------------------
 L90Rewards                    . L90Rewards is an opt-in data gathering tool
  (Opt-In Rewards Program)       and consumer retention program that
                                 incorporates sweepstakes and other promotions
                                 to build its membership base.
</TABLE>


                                       7
<PAGE>

 Ad Serving and Tracking Technology

   Through our Web-hosted adMonitor technology, we offer advertisers and Web
publishers the ability to selectively target and deliver ad campaigns that
incorporate rich media and other marketing features. In addition, adMonitor
enables advertisers to track, measure and manage the effectiveness of their ad
campaigns and receive real-time reports from any Web browser.

  .  Ad Serving. adMonitor delivers targeted advertising campaigns quickly,
     consistently and on schedule. In addition, because adMonitor is a
     centrally served technology platform administered from our facilities,
     our Web publishing clients are not required to purchase additional
     hardware, software or back-up systems to implement or utilize our
     adMonitor services. Our adMonitor system is easily modified, can handle
     significantly increased volume when needed, and is able to deliver
     targeted and specialized advertising campaigns virtually
     instantaneously. In addition, because adMonitor is capable of delivering
     rich media content, advertisers have the freedom to develop complex
     advertising solutions.

  .  Targeting. adMonitor enables our advertising clients to target their
     campaigns using a wide range of parameters, including domain, content
     area, keyword, geography and user-profile data. By utilizing adMonitor's
     advanced targeting capabilities, advertisers are able to direct their
     campaigns at Web users who are most likely to respond.

  .  Tracking. adMonitor provides advertisers with comprehensive performance
     reports and the ability to adjust media plans, all in real-time.
     Advertisers are able to track the progress of their campaigns from their
     Web browsers. These reports contain detailed information such as the Web
     sites included in an advertising campaign, the number of impressions
     served, the click-through rates and the incremental sales from the
     campaign, as well as other performance measures. In addition, they
     provide the information that advertisers need to actively manage their
     campaigns to maximize effectiveness. adMonitor is fully Web-hosted and
     gives advertisers the ability to optimize in real time the performance
     of their advertising campaigns.

  .  ClickTrack. ClickTrack is the purchase and transaction tracking
     component of our adMonitor technology. Through ClickTrack we are able to
     match the exact point of a consumer's purchase or transaction with the
     precise advertisement that resulted in the sale or transaction. Even if
     a consumer views an advertisement, clicks through to the advertiser's
     Web site, leaves the Web site and returns two months later to make a
     purchase or take a specific action, ClickTrack is able to match and
     report the resulting sale or attributable to the advertisement.

  .  Inventory Management. We provide our Web publishers and advertisers with
     detailed, real-time information about current and future ad inventory.
     adMonitor automatically monitors each advertising campaign in progress,
     adjusts the delivery of ads for variations in site traffic and updates
     available ad inventory based upon current advertising campaigns. Our
     system ensures that advertising campaigns are optimally scheduled and
     delivered and that our Web publishers maximize the value of their ad
     inventory.

Our Network of Web Publishers

   We currently represent approximately 134 Web sites, 45 of which are in our
premium category. A Web publisher must satisfy a number of objective and
subjective criteria before we will designate it as "premium." The objective
requirements include measurable data such as minimum traffic volume. The
subjective requirements include matters such as high brand recognition,
desirable demographics and highly innovative content. Our other Web publishers
are generally newer Web sites that we believe have high growth potential. The
decision to accept a Web publisher for representation is based on a number of
criteria, including the demographics of the Web site's users, the Web site's
content quality and brand name recognition, the level of existing and projected
traffic on the Web site, and sponsorship opportunities.


                                       8
<PAGE>

   The following table identifies our premium Web publishers as of March 1,
2000:

                               Premium Web Sites
<TABLE>
<CAPTION>
      Company              Web Address
---------------------------------------------
 <S>                <C>
 Allbusiness.com    www.allbusiness.com
---------------------------------------------
 Alloy Online,      www.alloy.com
  Inc.
---------------------------------------------
 AutoFusion, Inc.   www.carprices.com
---------------------------------------------
 Bell Atlantic      www.BigYellow.com
  Electronic
  Commerce
  Services, Inc.
---------------------------------------------
 Broadband          www.athletedirect.com
  Sports, Inc.
---------------------------------------------
 Campus Pipeline,   www.campuspipeline.com
  Inc.
---------------------------------------------
 click2send.com,    www.click2send.com
  Inc.
---------------------------------------------
 Computer.com       www.scoopswrestling.com
---------------------------------------------
 Freei Network,     www.go.freei.net
  Inc.
---------------------------------------------
 Global Media       www.globalmedia.com
  Corp.
---------------------------------------------
 H&R Block          www.h&rblock.com
---------------------------------------------
 Harry Knowles      www.aint-it-cool-news.com
---------------------------------------------
 The                www.holidaychannel.com
  HolidayChannel,
  Inc.
---------------------------------------------
 Hollywood.com,     www.hollywood.com
  Inc.
---------------------------------------------
 Homestead          www.homestead.com
  Technologies
---------------------------------------------
 iFilm              www.ifilm.com
  Corporation
---------------------------------------------
 IMS, Inc.          www.kanoodle.com
---------------------------------------------
 Infonautics        www.companysleuth.com
  Corp.             www.elibrary.com
                    www.encyclopedia.com
                    www.jobsleuth.com
                    www.sportssleuth.com
</TABLE>


<TABLE>
<CAPTION>
      Company               Web Address
-----------------------------------------------
 <S>                <C>
 Internet           www.shoplet.com
  Shopping
  Outlet New York
  Corp.
-----------------------------------------------
 JobsOnline, LLC    www.jobsonline.com
-----------------------------------------------
 Liquid Audio,      www.liquidaudio.com
  Inc.
-----------------------------------------------
 Lucasfilm Ltd.     www.StarWars.com
                    www.IndianaJones.com
-----------------------------------------------
 Net2phone          www.net2phone
-----------------------------------------------
 PBS                www.pbs.org
-----------------------------------------------
 Regards.com,       www.regards.com
  Inc.
-----------------------------------------------
 Scour              www.scour.net
-----------------------------------------------
 Sega of America    www.sega.com
-----------------------------------------------
 Small World,       www.baseball.smallworld.com
  Inc.
-----------------------------------------------
 Sportspage.com,    www.sportspage.com
  Inc.
-----------------------------------------------
 Starchefs          www.starchef.com
-----------------------------------------------
 TargetMatch &      www.datingclub.com
 NetMatch           www.matchonline.com
                    www.jobmatch.com
                    www.open4assistance.com
                    www.singlesmonthly.com
                    www.travelmatch.com
-----------------------------------------------
 Tickets.com        www.tickets.com
-----------------------------------------------
 Weider             www.fitnessonline.com
  Publications
-----------------------------------------------
 Whatis.com, Inc.   www.whatis.com
-----------------------------------------------
 The WinSite        www.winsite.com
  Group, Inc.
</TABLE>


   Our entire network of Web publishers is organized into ten categories. We
determine the category of a Web site based primarily on its content.
Advertisers may choose to target their ads on sites within one or more of these
categories. Some of our Web sites may fall into multiple categories if they
provide a broad range of content.

                              Web Site Categories

<TABLE>
   <S>                         <C>                                            <C>
   . 18-34                     . Business/Finance                             . Sports
   . Automotive                . e-Commerce                                   . Technology
   . Broadband                 . Entertainment                                . Women/Health
                               . Kids/Teens
</TABLE>

                                       9
<PAGE>

Our Advertising Clients

   In connection with the representation of our Web publishers, we have
developed relationships with, and continue to focus our sales and marketing
efforts on, online advertisers and advertising agencies. Since inception, over
600 advertisers from a variety of industries have utilized our services. Our
experienced sales and marketing organization works closely with advertisers and
advertising agencies to enhance the effectiveness of their online advertising
campaigns.

   Set forth below is a list of the top 20 advertisers during the year ended
December 31, 1999:

                             Top 20 L90 Advertisers

<TABLE>
       <S>                                            <C>
       Ask Jeeves                                     Launch Media, inc.
       Audiohighway                                   MediaRing
       AutoConnect                                    Microsoft
       Deluxe Entertainment                           OnHealth
       Dynamic Telecommunications                     Shopnow
       Entertaindom, Inc.                             Talk City
       FindLaw                                        TargetMatch
       Gateway                                        Telebank
       Improvenet                                     Tickets.com
       iVillage                                       Visa
</TABLE>


Privacy Concerns

   We believe that issues relating to the privacy of Internet users and the use
of personal information about these users are extremely important. In the
course of delivering ads to a Web user, we only collect non-personally
identifiable information about the Web user. We do not collect any personally
identifiable information about the Web user unless the Web user voluntarily and
knowingly provides personally identifiable information.

   In implementing any service or program designed to gather consumer data, we
are always mindful of our continuing commitment to uphold the privacy
principles of the Direct Marketing Association. In addition, we are a licensee
under the TRUSTe Privacy Program. TRUSTe is an independent, non-profit
organization whose mission is to build users' trust and confidence in the
Internet by promoting the use of fair information practices.

Sales and Marketing

   Our sales and marketing staff is trained to work strategically with our Web
publishers and advertisers to develop comprehensive advertising solutions. We
believe that advertisers desire sponsorship opportunities that go beyond the
banner to include content integration, contextual sponsorships, promotions,
sweepstakes, e-mail sponsorships, interstitials, custom content and other
highly effective advertising tools. We have assembled a sales and marketing
staff that possesses the marketing, media, creative and advertising skills
required to develop large, sophisticated advertising campaigns. We have close
relationships with, and detailed knowledge of, our Web publishers.
Consequently, we are able to work with advertisers in developing comprehensive,
sponsorship-oriented advertising solutions.

   We sell our advertising solutions in the United States through a sales and
marketing team consisting of a total of 82 employees as of March 1, 2000. Our
sales and marketing team is organized in a matrix fashion and includes account
executives, who sell all of our Web site ad inventory, and category sales
specialists, who focus on a specific field of content. Currently, our sales and
marketing team is organized according to five geographic regions.


                                       10
<PAGE>

   Our experienced Web publisher and advertiser sales and marketing personnel
use a variety of marketing programs to generate demand for our products and
services, build market awareness, develop customer leads and establish business
relationships. Our marketing activities include public relations, print
advertisements, online advertisements and direct marketing, Web advertising
seminars, trade shows, special events and ongoing customer communications
programs.

Seasonality and Cyclicality

   We believe that our business is subject to seasonal fluctuations.
Advertisers generally place fewer advertisements during the first and third
calendar quarters of each year, and direct marketers generally mail
substantially more marketing materials in the third calendar quarter of each
year. In addition, expenditures by advertisers and direct marketers vary in
cycles and tend to reflect the overall economic conditions, as well as
budgeting and buying patterns. Furthermore, user traffic on the Internet tends
to decrease during the summer months which results in fewer advertisements to
sell and deliver. A decline in the general economy or in the economic prospects
of advertisers and direct marketers could adversely affect our revenue.

Technology Platform

   We have developed a centralized ad serving and tracking system that is
resident in our facilities. adMonitor is a flexible and versatile system with
the ability to adapt to specific advertiser and Web publisher needs. Complex ad
campaigns can be quickly developed and implemented using our technology.
adMonitor supports most leading Web tools and technologies, including JAVA,
Java Script, RealAudio, Enliven and VRML and is capable of delivering these
advertising campaigns containing rich media and interstitials. Moreover,
adMonitor is compatible with most leading host servers.

   adMonitor has the ability to selectively serve advertisements to, and track
the movements of, Web users. Upon viewing and downloading a Web page of one of
our Web publishers, the user's browser is directed to the adMonitor system to
retrieve an advertisement. Our adMonitor system selects an appropriate ad to
display based upon the user's profile. Through the use of cookies, small files
of information placed on a user's computer, adMonitor is also able to track the
user's movements through the Web publisher's site. adMonitor also provides
advertisers real-time reporting on the performance of their campaigns.
Advertisers can log into the adMonitor system from any Web browser to access
reports on their campaigns. All reports are real-time and can be customized to
satisfy the needs of the advertiser.

   adMonitor functions on a fully redundant, high performance system built with
an emphasis on capacity and speed. We use a combination of products from Sun
Microsystems, Cisco Systems, Microsoft, Oracle, 3Com and F5 Labs to support
adMonitor's scalability and reliability. adMonitor is deployed on hardware
resident in multiple, secure data centers located across the United States,
where technical support is provided 24 hours a day, seven days a week.

Competition

   The online advertising market is extremely competitive. We believe that our
ability to compete depends upon many factors both within and beyond our
control, including the following:

  .  the timing and market acceptance of new solutions and enhancements to
     existing solutions developed either by us or our competitors;

  .  the continued and increasing acceptance by advertisers of the Internet
     as an effective and cost-efficient means of advertising;

  .  the ability to adapt to the rapidly changing trends of the Internet;

  .  our customer service and support efforts;


                                       11
<PAGE>

  .  our sales and marketing efforts;

  .  our ability to adapt and scale our technology as customer needs change
     and grow; and

  .  the ease of use, performance, price and reliability of solutions
     developed either by us or our competitors.

   As we expand the scope of our Web services, we may face greater competition
from a number of Web sites and other media companies across a wide range of
different Web services, including in vertical markets where competitors may
have advantages in expertise, brand recognition and other factors. Several
companies offer competitive products or services through Web advertising
networks, including DoubleClick, 24/7 Media and Engage Technologies. Our
business may also encounter competition from providers of advertising inventory
and database management products and related services, including AdForce,
DoubleClick and Engage Technologies. In addition, we may face potential
competition from a number of large Web publishers and Web search engine
companies, such as America Online, Excite@Home, Infoseek and Yahoo! We also
compete with television, radio, cable and print for a share of the overall
advertising budgets of advertisers.

Intellectual Property Rights

   Our success and ability to compete are substantially dependent on our
internally developed technologies, including adMonitor, and trademarks that we
protect through a combination of patent, copyright, trade secret, unfair
competition and trademark law, as well as contractual agreements. We have filed
a patent application in the United States for our adMonitor technology. We have
also applied to register trademarks in the United States and internationally.

   We cannot guarantee that any of our current or future patent applications or
trademark applications will be approved. Even if they are approved, these
patents or trademarks might be successfully challenged by others or
invalidated. Furthermore, if our patent applications or trademark applications
are not approved because third parties own these patents or trademarks, our use
of these patents or trademarks will be restricted unless we enter into
arrangements with these third parties. We cannot assure you that we can enter
into arrangements with these third parties on commercially reasonable terms.

   We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite these efforts, unauthorized parties may attempt to
disclose, obtain or use our advertising solutions or technologies. Our
precautions may not prevent misappropriation of our advertising solutions or
technologies, particularly in foreign countries where laws or law enforcement
practices may not protect our rights as fully as in the United States.

   Our technology collects and utilizes data derived from user activity on the
Internet. This information is used for targeting advertising and predicting
advertising performance. Although we believe that we generally have the right
to use this information and to compile it in our database, we cannot assure you
that any trade secret, copyright or other protection will be available for this
information. In addition, others may claim rights to this information.
Furthermore, we cannot guarantee that any of our other intellectual property
rights will be viable or valuable in the future since the validity,
enforceability and scope of protection of intellectual property rights in
Internet related industries is uncertain and still evolving. In addition, third
parties may assert infringement claims against us. Any claims could subject us
to significant liability for damages and could result in the invalidation of
our intellectual property rights. In addition, any claims could result in
litigation, which would be time-consuming and expensive to defend, and divert
our time and attention. Even if we prevail, this litigation could cause our
business, results of operations and financial condition to suffer. Any claims
or litigation from third parties may also result in limitations on our ability
to use the intellectual property subject to these claims or litigation unless
we enter into arrangements with the third parties responsible for these claims
or litigation, which could be unavailable on commercially reasonable terms. We
believe that factors such as the technological and creative skills of our
personnel, new service offerings, brand recognition and reliable

                                       12
<PAGE>

customer service are more essential to establishing and maintaining our
position in the marketplace, rather than the legal protection of our
technology. We cannot assure you that others will not develop technologies that
are similar or superior to our technology.

   On November 12, 1999, DoubleClick filed a lawsuit against us in the United
States District Court for the Eastern District of Virginia. The suit alleges
that we are infringing, and inducing and contributing to the infringement by
third parties of, a patent held by DoubleClick related to methods and networks
for delivering, targeting and measuring advertising over the Internet.
DoubleClick is seeking treble damages in an unspecified amount, a preliminary
and permanent injunction from further alleged infringement and attorneys' fees
and costs. The case is currently in the early stages of discovery. We believe
we have meritorious defenses to this lawsuit and intend to defend ourselves
vigorously. We currently believe that this lawsuit and its outcome will not
cause any material harm to our business. However, the litigation could result
in significant expenses and diversion of management time and other resources.
If DoubleClick is successful in its claims against us, then we may be hindered
from competing in the Internet advertising market and our operations could be
severely harmed. See "Risk Factors--Intellectual property infringement claims,
including claims by DoubleClick against us, could prevent or hinder our ability
to delivery advertisements over the Internet" and "Legal Proceedings" for more
information relating to the DoubleClick suit.

Employees

   As of March 1, 2000, we had 125 full-time employees, including 82 in sales
and marketing, 24 in engineering and product development and 19 in accounting,
human resources, business operations and administration. In addition, we had
three part-time employees. We are not subject to any collective bargaining
agreements and believe that our employee relations are excellent. Our future
success depends in part on our ability to attract, retain, integrate and
motivate highly-skilled employees. Competition for employees in the industry is
intense.

Risk Factors

   You should consider carefully the following risks before you decide to buy
our common stock. The risks and uncertainties described below are not the only
ones we may face. Additional risks and uncertainties may also impair our
business operations. If any of the following risks actually occurs, our
business, results of operations and financial condition would likely suffer. In
such case, the trading price of our common stock could decline, and you may
lose all or part of the money you paid to buy our common stock.

 Our revenues and prospects are difficult to forecast because we have only been
 operating our business since January 1997

   We began our business in January 1997 and have a brief operating history.
Therefore, we lack sufficient historical financial and operating data on which
to adequately forecast future operating results. You should consider our
prospects in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in an early stage of development,
particularly companies in new and rapidly evolving markets such as online
advertising.

   These risks include our ability to:

  .  manage our growth effectively;

  .  anticipate and adapt to the rapid changes in the Internet;

  .  continue to develop and upgrade our technology;

  .  respond to competitive developments in our market; and

  .  continue to identify, attract, retain and motivate qualified personnel.

                                       13
<PAGE>

   If we are unsuccessful in addressing these risks, our revenues may not grow
in accordance with our business model and may fall short of expectations of
market analysts and investors, which could negatively affect the price of our
stock. Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for more information on our operating history and
results of operations.

 We have a history of losses and expect to incur substantial losses in the
 future

   We incurred net losses of approximately $7.5 million for the year ended
December 31, 1999 and $290,000 for the year ended December 31, 1998. Our
accumulated deficit from inception, as of December 31, 1999, was approximately
$8.8 million. We expect to continue to incur substantial net losses for the
foreseeable future due to a high level of planned operating expenditures. We
are making these expenditures in anticipation of higher revenue, but we cannot
assure you that we will realize higher revenue. If we do not succeed in
substantially increasing our revenue, our losses may continue indefinitely and
would likely increase. In addition, we cannot assure you that we will return
to profitability. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for more information on our
operating history and results of operations.

 Intellectual property infringement claims, including a November 1999 lawsuit
 against us by DoubleClick, could prevent or hinder our ability to deliver
 advertisements over the Internet

   We face the risk that other parties' intellectual property positions will
impair our ability to deliver advertisements over the Internet. On November
12, 1999, DoubleClick filed a patent infringement lawsuit against us in the
United States District Court for the Eastern District of Virginia. The suit
alleges that we are infringing, and inducing and contributing to the
infringement by third parties of, a patent held by DoubleClick related to
methods and networks for delivering, targeting and measuring advertising over
the Internet. DoubleClick is seeking treble damages in an unspecified amount,
a preliminary and permanent injunction from further alleged infringement and
attorneys' fees and costs. The case is currently in the early stages of
discovery. This litigation can be expected to result in significant expenses
to us and the diversion of management time and other resources, the extent of
which cannot be quantified with any reasonable accuracy given the early stage
of this litigation. In addition, some of our contracts with Web publishers
require us to indemnify the Web publishers for losses they incur arising from
any infringement by our ad serving technology of a third party's intellectual
property rights. If DoubleClick is successful in its claims against us, we may
be hindered from competing in the Internet advertising market and our
operations could be severely harmed. The DoubleClick suit could result in
limitations on how we implement our products and services, delays and costs
associated with redesigning our products and services and payments of license
fees and other monies. An injunction obtained by DoubleClick could eliminate
our ability to deliver advertisements over the Internet. If DoubleClick is
successful in its claims against us, we cannot assure you that we would be
able to enter into a licensing agreement with DoubleClick on commercially
reasonable terms, if at all. In that case, we would be required to alter our
technology in a way that would not infringe the DoubleClick patent, and we
cannot assure you that these alterations would be successful. Furthermore,
other third parties, such as 24/7 Media, may have, or may in the future be
granted, patents that cover our technology or other aspects of our business.
We may be limited in our ability to use our technology or conduct our business
without licenses from these third parties, which may not be available on
commercially reasonable terms, if at all.

 Our quarterly operating results may fluctuate, which may make it difficult to
 forecast our future performance and may result in volatility in our stock
 price

   Although we intend to increase our spending and investment to support our
planned growth, our revenue, and some of our costs, will be much less
predictable. This unpredictability will likely result in significant
fluctuations in our quarterly results. Therefore, you should not rely on
quarter-to-quarter comparisons of results of operations as an indication of
our future performance. Because of our limited operating history and the
emerging nature of our industry, we anticipate that securities analysts may
have difficulty in accurately forecasting our results. If our operating
results are below market expectations, the price of our common stock will
likely decline.

                                      14
<PAGE>

   The following are among the factors that could cause significant
fluctuations in our operating results:

  .  market acceptance of the Internet as an advertising medium;

  .  delay or cancellation of advertising contracts;

  .  expiration or termination of contracts with Web publishers;

  .  introduction of new or enhanced services by us or our competitors;

  .  system outages, delays in obtaining new equipment or problems with
     upgrades;

  .  disruption or impairment of the Internet;

  .  changes in our pricing policies or those of our competitors;

  .  seasonality in the demand for advertising;

  .  changes in government regulation of the Internet; and

  .  general economic and market conditions, as well as economic and market
     conditions specific to the Internet.

 If we do not effectively manage our growth and expansion, our ability to
 provide services could suffer

   Our success depends in part on our ability to manage our growth and
expansion. We have grown to 125 full-time and three part-time employees as of
March 1, 2000 from 33 full-time and three part-time employees as of December
31, 1998. We plan to continue to expand our sales, marketing, technology and
administrative organizations. This anticipated future expansion may place a
significant strain on our managerial, operational and financial resources. In
addition, we will need to continue to improve our financial and managerial
controls, enhance our reporting systems and procedures and expand, train and
manage our work force.

 If we are unable to attract and retain sales and client service personnel, or
 if we are unable to adequately train our sales personnel in a timely manner,
 our business and future revenue growth could suffer

   Our future success depends on our ability to identify, recruit, train,
integrate and retain qualified sales and marketing, managerial and technical
personnel. We anticipate the need to hire a significant number of personnel to
achieve our growth objectives. Competition for these personnel is intense. The
inability to attract, integrate and retain the necessary sales, marketing,
technical and administrative personnel could harm our ability to generate
revenue.

 If our ad delivery and tracking technology is not effective, our
 relationships with our advertising clients may be harmed

   Because our adMonitor technology is relatively new, we cannot assure you
that the use of our adMonitor services will remain effective in serving,
targeting and tracking advertisements or other marketing and promotional
activities. Our revenue would be adversely affected if advertisers do not
perceive that the use of our adMonitor services will improve the effectiveness
of their marketing campaigns.

 A small number of Web publishers accounts for a substantial percentage of our
 advertising revenue and our failure to develop and sustain long-term
 relationships with Web publishers, or the reduction in traffic of a current
 Web publisher in our network, could limit our ability to generate revenue

   For the year ended December 31, 1999, our top five Web publishers accounted
for approximately 26.9% of our revenue, and our top three Web publishers
accounted for approximately 19.0% of our revenue. For the year ended December
31, 1998 our top five Web publishers accounted for approximately 66.7% of our
revenue, and our top three Web publishers accounted for approximately 57.3% of
our revenue. Our contracts with Web publishers, including these top Web
publishers, are generally one year in duration and can be terminated by either
party with as little as 30 days notice. We cannot assure you that any of our
Web publishers will continue

                                      15
<PAGE>

their relationships with us. Additionally, we may lose Web publishers as a
result of acquisitions or as a result of the discontinuation of operations of
any of our Web publishers. For example, Four11, Inc. terminated its contract
with us following its acquisition by Yahoo! Furthermore, we cannot assure you
that we would be able to replace a departed or acquired Web publisher with
another Web publisher with comparable traffic patterns and demographics, if at
all. Therefore, our failure to develop and sustain long-term relationships
with Web publishers or the reduction in traffic of a current Web publisher in
our network could limit our ability to generate advertising revenue.

 A limited number of advertisers accounts for a significant percentage of our
 revenue and a loss of one or more of these advertisers could cause our
 results of operations to suffer

   For the year ended December 31, 1999, revenue from our five largest
advertisers accounted for 20.4% of our revenue. Advertisers typically purchase
advertising under short-term purchase order agreements. We cannot assure you
that our top advertisers or our other advertisers will continue their
relationships with us. The loss of one or more of the advertisers that
represent a significant portion of our revenue could cause our results of
operations to suffer. In addition, many of our contracts with Web publishers
require us to bear the risk of non-payment of advertising fees from
advertisers. Accordingly, the non-payment or late payment of amounts due to us
from a significant advertiser could cause our financial condition to suffer.
For the year ended December 31, 1999, our bad debt expense related to
uncollected advertising fees was $645,000.

 Since we expect to derive substantially all of our revenue in the foreseeable
 future from online advertising, our ability to generate revenue may suffer if
 the Internet is not increasingly accepted as an effective advertising medium

   If the online advertising market does not develop further, or develops more
slowly than expected, we may not generate enough advertising revenue to return
to profitability. Since we expect to derive substantially all of our revenue
in the foreseeable future from online advertising, our future success is
highly dependent on the increased use of the Internet as an advertising
medium. Online advertising is relatively new and rapidly evolving, and its
effectiveness, compared to traditional media, is uncertain. Widespread use of
online advertising depends upon businesses accepting a new way of marketing
their products and services. Businesses may view online advertising as
undesirable or less effective for promoting their products and services
relative to traditional advertising media. In addition, the widespread
adoption of technologies that permit Internet users to block advertisements on
Web sites could inhibit the growth of the Internet as an advertising medium.

 Since our business depends in part on market acceptance of electronic
 commerce, if electronic commerce does not grow, or grows slower than we
 expect, our ability to generate revenue may suffer

   Our success depends in part on market acceptance of electronic commerce. A
number of factors outside of our control could prevent this acceptance,
including the following:

  .  the necessary network infrastructure for substantial growth in usage of
     the Internet may not develop adequately;

  .  insufficient availability of telecommunication services or changes in
     telecommunication services could result in slower response times; and

  .  negative publicity and consumer concern surrounding the security of
     transactions could impede the growth of electronic commerce.

   If electronic commerce does not grow, or grows slower than we expect, due
to any of the above factors, or any other factor, our ability to generate
revenue could suffer.


                                      16
<PAGE>

 Failure of our technology and computing systems could harm our relationships
 with our clients and cause our results of operations to suffer

   The continuing and uninterrupted performance of our servers and networking
hardware and software infrastructure is critical to our business.
Periodically, we have experienced minor systems interruptions, including
Internet disruptions, which we believe may occur periodically in the future.
Any system failure that causes interruptions in our ability to service our
customers, including failures that affect our ability to deliver
advertisements without significant delay to the viewer, could reduce customer
satisfaction and, if sustained or repeated, could cause our results of
operations to suffer. Further, an increase in the volume of advertising
delivered through our servers could strain the capacity of our hardware and
software, which could lead to slower response times or system failures. If we
do not effectively address any capacity constraints, customer satisfaction
could be harmed and our business would likely suffer.

 Failure of the Web infrastructure to support the growth of the electronic
 marketplace could limit the growth of our business

   The Internet may not in the future be a viable commercial marketplace
because of inadequate development of the necessary infrastructure, slow
development of complementary products, including high speed modems, delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet activity or increased government regulation. To
the extent that the Internet continues to experience significant growth in the
number of users and the level of use, we cannot assure you that the Internet
infrastructure will continue to be able to support the demands placed on it by
its users. If the necessary infrastructure or complementary products are not
developed, our business may not grow and would likely suffer.

 Our failure to adequately respond to rapid changes in technology and the
 Internet could harm our ability to generate revenue

   The market for online products and services is subject to rapid change and
characterized by evolving industry standards and frequent introductions of new
technological developments. These new standards and technological developments
could make our existing or future products or services obsolete. Keeping pace
with the introduction of new standards and technological developments could
result in significant additional costs or prove to be difficult or impossible
for us. Any failure to keep pace with the introduction of new standards and
technological developments on a cost-effective basis could result in increased
costs and harm our ability to generate revenue.

 Many competitors have substantial competitive advantages that may make it
 more difficult for us to retain our existing advertisers and Web publishers
 and to attract new advertisers and Web publishers

   The markets for online advertising, direct marketing and ad delivery, or ad
serving, and tracking technology are intensely competitive. We compete with
television, radio, cable and print for a share of advertisers' total
advertising budgets. We also compete with large Web publishers and Web search
engine companies, such as America Online, Excite@Home, Infoseek and Yahoo!,
for the online advertising budgets of advertisers. In addition, we compete
with various Internet advertising networks, such as DoubleClick, 24/7 Media
and Engage Technologies. In marketing our adMonitor products and services to
Web publishers and advertisers, we also compete with providers of ad delivery,
or ad serving, technology, database management and related services, including
AdForce, DoubleClick and Engage Technologies. Many of our current and
potential competitors enjoy competitive advantages over us, including
significantly greater financial, technical and marketing resources. They may
also enjoy significantly greater brand recognition and substantially larger
bases of Web site clients and advertisers. As a result, our competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in client requirements. Our competitors may also have a significantly
greater ability to undertake more extensive marketing campaigns, adopt more
aggressive

                                      17
<PAGE>

pricing policies and make more attractive offers to potential employees,
strategic partners, advertisers and Web publishers. Further, we cannot assure
you that our competitors will not develop online products and services that
are equal to or superior to our products and services or that achieve greater
market acceptance than our products and services. If we are unable to compete
successfully against existing or potential competitors, our revenue and
margins may decline. Please see "Business--Competition" for more information
on our competitors.

 Our failure to successfully acquire and integrate new technologies and
 businesses could cause our results of operations to suffer

   We focus on creating sponsorship-oriented advertising campaigns that take
full advantage of the unique capabilities of the Internet. The Internet is a
quickly changing environment, requiring companies to constantly improve their
technology and develop or acquire new technology. We intend to acquire and
make investments in complementary businesses, products, services or
technologies. We cannot assure you that we will be able to identify suitable
acquisition or investment candidates. Even if we do identify suitable
candidates, we cannot assure you that we will be able to make any potential
acquisition or investment on commercially acceptable terms. Moreover, we may
have difficulty integrating any acquired businesses, products, services or
technologies into our operations. These difficulties could disrupt our
business, distract our management and employees and increase our expenses. In
addition, we may incur debt or issue equity securities to fund any future
acquisitions. The issuance of equity securities could be dilutive to existing
stockholders.

 If we are unable to safeguard the security and privacy of our information,
 our results of operations may suffer

   Our technical infrastructure is potentially vulnerable to physical or
electronic computer break-ins, viruses and similar disruptive problems.
Weaknesses or vulnerabilities in the Internet, a user's personal computer or
in our services could compromise the confidential nature of information
transmitted over the Internet. These factors could require us to devote
significant financial and human resources to protect against future breaches
and alleviate or mitigate problems caused by security breaches. Security
breaches could result in financial loss, litigation and other liabilities, any
of which could cause our results of operations to suffer.

 Government regulation may affect our ability to gather, generate or use
 information for profiles and may hinder our ability to conduct business

   The legal and regulatory environment governing the Internet and the use of
information about Web users is uncertain and may change. A number of lawsuits
have recently been filed against certain Internet companies related to online
privacy. Web sites typically place small files of information, commonly known
as cookies, on a Web user's hard drive, generally without the user's knowledge
or consent. Although it is possible to modify a Web user's Internet browser
software to prevent the placement of cookies, few users currently choose to do
so. Our adMonitor tracking technology is able to use cookies to collect data
about a Web user's movement through the Internet. Some Internet commentators
and privacy advocates have suggested limiting or eliminating the use of
cookies and restricting the collection of data through the use of cookies.
United States legislators in the past have introduced a number of bills aimed
at regulating the collection and use of data from Internet users and
additional similar bills are being considered during the current congressional
session. The European Union has recently adopted a directive addressing data
privacy that may result in limitations on the collection and the use of
specific personal information regarding Internet users. In addition, Germany
and other European Union member countries have imposed their own laws
protecting data that can become personally identifiable through subsequent
processing. Other countries have enacted, or are considering, limitations on
the use of personal data as well. The effectiveness of our technology could be
impaired by any limitation in the use of cookies or the collection of data
from Internet users, and consequently, our business and results of operations
could be harmed.


                                      18
<PAGE>

   A number of laws and regulations have been, and in the future may be,
adopted covering issues such as pricing, acceptable content, taxation and
quality of products and services on the Internet. This legislation could
inhibit the growth in the use of the Internet and decrease the acceptance of
the Internet as a communications and commercial medium. In addition, due to
the global accessibility of the Internet, it is possible that multiple
federal, state or foreign jurisdictions might inconsistently regulate our
activities and our customers. Any of these developments could limit our
ability to do business and to generate revenue.

 Any failure by us to protect our intellectual property could harm our
 business and competitive position

   We generally protect our intellectual property through a combination of
patent, trademark, trade secret and copyright laws, confidentiality agreements
with our employees and third parties, and license agreements with consultants,
vendors and clients. We have filed a patent application for our adMonitor
technology in the United States. We have also filed applications for several
trademarks in the United States. We cannot assure you that any of our patent
or trademark applications will be approved. Even if these applications are
approved, the patents or trademarks may be successfully challenged by others
or invalidated. In addition, despite our efforts to protect our intellectual
property, unauthorized parties may attempt to copy aspects of our services or
to obtain and use information that we regard as proprietary. We may not have
adequate remedies for any breach of confidentiality agreements, and our trade
secrets may otherwise become known or independently developed by competitors.
Please see "Business--Intellectual Property Rights" for more information on
our intellectual property.

 We may be liable for content available or posted on the Web sites of our
 publishers

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

 The loss of key employees would likely impair the growth of our business

   Our performance and future success is substantially dependent on the
continued service of our executive officers and other key employees, all of
whom are employed on an at-will basis. In particular, our success depends on
the client relationships, management skills and industry and technical
knowledge of our CEO and president, John C. Bohan, and our chief technology
officer, Frank A. Addante. Given our early stage of development, we are
dependent on our ability to retain and motivate highly qualified personnel,
especially our management, technical and business development executives and
other key employees. The loss of the services of one or more of our executive
officers or other key employees would likely impair the growth of our
business. Please see "Directors and Executive Officers of the Registrant" for
more information about our executive officers and key employees.

 The substantial number of shares that will be eligible for sale in the near
 future may cause the market price of our common stock to decline

   A substantial number of shares of our common stock are subject to 180 day
lock-up agreements that expire on July 26, 2000. Sales of substantial amounts
of our common stock, or the perception that such sales could occur, could
adversely affect the market price of our common stock.

 Our executive officers and directors exercise significant control over our
 company, including the ability to control the election of our board of
 directors and the outcome of corporate actions requiring stockholder approval

   Our executive officers and directors, in the aggregate, beneficially owned
or controlled approximately 55.6% of the outstanding shares of our common
stock as of March 1, 2000. Our officers, directors and their affiliates will
have the ability to control the election of our board of directors and the
outcome of corporate

                                      19
<PAGE>

actions requiring stockholder approval, including merger and other changes of
corporate control, going private transactions and other extraordinary
transactions and terms thereof.

 Our planned international expansion may be affected by factors beyond our
 control

   We are currently evaluating the initiation of operations in selected
international markets. This potential expansion could occur through internal
growth, acquisition, or both. To date, we have not deployed international
versions of our products and services. Expansion into international markets
will require substantial resources and attention from management. We have no
experience in international operations and may not be able to compete
effectively in international markets. We may face numerous risks inherent in
conducting business internationally, such as:

  .  the impact of recessions in economies outside the United States;

  .  changes in domestic regulatory requirements, as well as differences
     between domestic and foreign regulatory requirements;

  .  export restrictions, including export controls relating to encryption
     technology;

  .  reduced protection for intellectual property rights in some countries;

  .  potentially adverse tax consequences;

  .  difficulties and costs of staffing and managing foreign operations;

  .  problems associated with any acquisitions we might pursue;

  .  foreign political and economic instability;

  .  tariffs and other trade barriers;

  .  fluctuations in currency exchange rates; and

  .  seasonal reductions in business activity.

   Our failure to address these risks adequately may cause our business,
results of operations and financial condition to suffer.

 We may need additional capital in the future to operate our business and we
 may experience difficulty in obtaining this additional capital

   We believe that our existing cash and cash equivalents will be sufficient
to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. We may need to raise additional
funds in the future to fund our operations, to enhance or expand the range of
products and services we offer or to respond to competitive pressures or
perceived opportunities. We cannot assure you that additional financing will
be available on terms favorable to us, or at all. If adequate funds are not
available or not available when required or on acceptable terms, the growth of
our business and results of operations may suffer.

 We are subject to anti-takeover provisions, which may make it difficult for a
 third party to acquire us

   A number of recent acquisitions and consolidations have occurred in our
industry. For example, DoubleClick acquired NetGravity in October 1999, and
CMGI, Inc., which recently acquired Flycast Communications and Adforce, has
agreed to sell Flycast Communications and Adsmart to its majority-owned
operating company, Engage Technologies, Inc. We are subject to anti-takeover
provisions that may make it difficult for a third party to acquire us. We are
subject to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is

                                      20
<PAGE>

approved in a prescribed manner. For purposes of Section 203, a "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years prior, did own, 15% or more of the corporation's voting
stock.

 Our common stock and our stock price may experience extreme price and volume
 fluctuations

   The stock market has experienced extreme price and volume fluctuations. The
market prices of the securities of Internet-related companies have been
especially volatile. The market price of our common stock has fluctuated in the
past and is likely to be highly volatile. The market price of our common stock
could be subject to wide fluctuations in response to factors such as:

  .  actual or anticipated variations in our revenue;

  .  earnings and cash flow;

  .  announcements of new service offerings;

  .  technological innovations;

  .  competitive developments with respect to patents, copyrights or
     proprietary rights;

  .  changes in financial estimates by securities analysts;

  .  conditions and trends in the Internet and electronic commerce
     industries;

  .  adoption of new accounting standards affecting our industry; and

  .  general market conditions.

ITEM 2. PROPERTIES

   Our principal executive offices are located in Santa Monica, California,
where we lease approximately 11,000 square feet under a lease that expires on
December 31, 2000. We also lease approximately 6,000 square feet of space in
another facility in Santa Monica, California. In addition, we lease space for
our sales and marketing efforts in Chicago, Franklin (Michigan), New York and
San Francisco. Our adMonitor ad serving and tracking software and hardware is
currently housed in El Segundo, California and Santa Clara, California. These
two facilities provide us with a secure area to store and operate our computer
systems and capacity for communications links and Internet connectivity
systems. We are continually evaluating our facility requirements. We believe
that our existing leased space is more than adequate for our current
operations, and that suitable replacement and additional space will be
available in the future on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

   On November 12, 1999, DoubleClick filed a lawsuit against us in the United
States District Court for the Eastern District of Virginia. The suit alleges
that we are infringing, and inducing and contributing to the infringement by
third parties of, a patent held by DoubleClick related to methods and networks
for delivering, targeting and measuring advertising over the Internet.
DoubleClick is seeking treble damages in an unspecified amount, a preliminary
and permanent injunction from further alleged infringement and attorneys' fees
and costs. The case is currently in the early stages of discovery. We believe
we have meritorious defenses to this lawsuit and intend to defend ourselves
vigorously. We currently believe that this lawsuit and its outcome will not
cause any material harm to our business. See "Risk Factors--Intellectual
property infringement claims, including claims by DoubleClick against us, could
prevent or hinder our ability to delivery advertisements over the Internet."

   In addition to the DoubleClick lawsuit, we periodically may become subject
to other legal proceedings in the ordinary course of our business. We are not
currently involved in any such other proceedings which we believe will
materially and adversely affect us.

                                       21
<PAGE>

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

   By written consent effective December 13, 1999, the stockholders approved
the following matters: 1. Approval of a two-for-three reverse stock split; 2.
Approval of the Amended and Restated Certificate of Incorporation in the form
effective following the completion of our initial public offering in February
2000; and 3. Approval of an amendment to our Stock Incentive Plan to increase
the number of shares of common stock reserved for issuance upon exercise of
options granted under the Plan by 666,666 shares. The above resolutions were
approved by holders of 6,533,333 shares of common stock (as adjusted to reflect
the two-for-three reverse stock split), the holder of 2,000 shares of Series A
preferred stock, the holders of 3,681,514 shares of Series B preferred stock
and the holders of 1,307,190 shares of Series C preferred stock. No stockholder
voted against the above resolutions, and there were no abstentions.

                                       22
<PAGE>

                                    PART II

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

Market for Common Stock

   Our common stock has been quoted on the Nasdaq National Market under the
symbol LNTY since our initial public offering of January 28, 2000. Prior to
January 28, 2000, there was no public market for our common stock. The
following table sets forth, for the periods indicated, the high and low sales
prices per share of our common stock as reported by The Nasdaq National Market,
Inc.

<TABLE>
<CAPTION>
       2000                                                         High   Low
       ----                                                        ------ ------
       <S>                                                         <C>    <C>
       First Quarter (January 28, 2000--March 20, 2000)........... $31.38 $13.88
</TABLE>

   On March 20, 2000, the last sale price of a share of our common stock
reported by the Nasdaq National Market was $15.38.

Holders

   As of March 1, 2000, there were approximately 76 stockholders of record.

Dividend Policy

   We have never declared or paid cash dividends on our common stock. We
currently intend to retain available funds from earnings for future growth and,
therefore, we do not anticipate paying any dividends in the foreseeable future.

Sales of Unregistered Securities

   We sold and issued the following securities during the year ended December
31, 1999 (which numbers reflect the 2-for-3 reverse stock split effected on
January 25, 2000):

   On June 7, 1999, we issued to The Roman Arch Fund L.P. and The Roman Arch
Fund II, L.P. four warrants to purchase an aggregate of 333,333 shares of our
common stock, later adjusted to an aggregate of 150,000 shares of our common
stock, at an initial purchase price of $2.40 per share, subject to adjustment.
We issued these warrants in connection with a loan made by The Roman Arch Fund
L.P. and The Roman Arch Fund II, L.P. to us in the aggregate principal amount
of $1,000,000. These warrants were issued and sold in reliance upon the
exemption provided for by Section 4(2) of the Securities Act and Regulation D
promulgated thereunder, based on the fact that we issued these securities in a
sale not involving a public offering.

   In August and September 1999, we sold 4,107,044 shares of our Series B
Convertible Preferred Stock, par value $.001 per share to (i) DigaComm (L90),
L.L.C. in exchange for $2,000,000 in cash, (ii) Keystone Venture V, L.P. in
exchange for $4,000,000 in cash, (iii) The Roman Arch Fund L.P. and The Roman
Arch Fund II L.P. in exchange for $500,000 in cash, (iv) Remtula and Shinin
Suleman, co-trustees for Trust dated 9/10/93 for the benefit of Trevor F.
Suleman and Miles L. Suleman in exchange for $500,000 in cash, (v) Lawrence
Haut in exchange for $117,500 in cash, (vi) Donald and Cathy Allman in exchange
for $100,000 in cash, (vii) Seymour Zises in exchange for $25,000 in cash,
(viii) Matthew Ludmer in exchange for $30,000 in cash, (ix) Jodi Yegelwel in
exchange for $50,000 in cash, (x) Lewis Katz in exchange for $200,000 in cash,
(xi) Herb Corbin in exchange for $50,000 in cash, (xii) Paul Konigsberg in
exchange for $40,000 in cash, (xiii) Dime Capital Partners, Inc. in exchange
for $1,000,000 in cash, (xiv) James Stern in exchange for $500,000 in cash,
(xv) Cambridge Lat 90 Associates, LLC in exchange for $500,000 in cash and
(xvi) Harley Greenfield in exchange for $50,000 in cash. These shares of Series
B Convertible Preferred Stock automatically converted into 2,738,029 shares of
our common stock on a three-for-two basis on the closing of our initial

                                       23
<PAGE>

public offering on February 2, 2000. In addition, we sold to (i) DigaComm
(L90), L.L.C. a warrant for the purchase of up to 353,964 shares of our common
stock at an exercise price of $5.30 per share and (ii) William Apfelbaum a
warrant for the purchase of up to 353,964 shares of our common stock at an
exercise price of $5.30 per share. These securities were sold in reliance upon
the exemption provided for by Section 4(2) of the Securities Act and Regulation
D promulgated thereunder, based on the fact that we issued these securities in
a sale not involving a public offering.

   In September 1999, we sold 1,307,190 shares of our Series C Convertible
Preferred Stock, par value $0.001 per share, to (i) Development Ventures (Two)
Inc. in exchange for $2,000,000 in cash and (ii) Rare Medium Group, Inc. in
exchange for $2,000,000 in cash. These shares of Series C Convertible Preferred
Stock automatically converted into 871,460 shares of our common stock on a
three-for-two basis on the closing of our initial public offering on February
2, 2000. In addition, we sold to (i) Development Ventures (Two) Inc. a warrant
for the purchase of up to 674,029 shares of our common stock at an exercise
price of $4.59 per share and (ii) Rare Medium Group, Inc. a warrant for the
purchase of up to 600,000 shares of our common stock at an exercise price of
$4.59 per share. These securities were sold in reliance upon the exemption
provided for by Section 4(2) of the Securities Act and Regulation D promulgated
thereunder, based on the fact that we issued these securities in a sale not
involving a public offering.

   As of December 31, 1999, we had issued and sold 26,666 shares of our common
stock to employees, consultants, officers and directors upon the exercise of
options for an aggregate consideration of $94,000. All shares of our common
stock issued upon exercise of these options were issued and sold in reliance
upon the exemption provided for under Rule 701 promulgated under the Securities
Act.

Use of Proceeds

   The effective date of our initial public offering of shares of common stock
was January 28, 2000 (SEC Registration No. 333-87607). Through our initial
public offering in February 2000, we sold 7,475,000 shares of our common stock,
inclusive of the underwriters' over allotment, at an initial public offering
price of $15.00 per share. Our initial public offering was managed by SG Cowen
Securities Corporation, Banc of America Securities LLC, CIBC Oppenheimer Corp.
and Wit Capital Corporation. The initial public offering resulted in gross
proceeds of approximately $112.1 million, approximately $7.8 million of which
was applied toward the underwriting discount and commission. Expenses related
to the offering totaled approximately $1.5 million. Our net proceeds from the
offering were approximately $102.8 million. From the time of receipt through
March 1, 2000, these net proceeds have been applied toward general corporate
purposes. Pending these uses, the net proceeds have been invested in short-
term, investment grade, interest-bearing securities.

                                       24
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

   The following table sets forth selected financial data for the period ended
December 31, 1997 and the fiscal years ended December 31, 1998 and 1999, which
has been derived from our audited financial statements. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and notes to those statements included elsewhere in this Report.
<TABLE>
<CAPTION>
                                       Period from
                                        Inception
                                     (January 5, 1997)  Year ended December 31,
                                         through       -------------------------
                                    December 31, 1997      1998         1999
                                    ------------------ ------------ ------------
                                       (in thousands, except per share data)
<S>                                 <C>                <C>          <C>
Statement of Operations Data:
Revenue...........................        $1,160         $ 2,189      $ 9,201
Operating expenses:
  Cost of revenue.................           --              --         4,751
  Sales and marketing.............           550           1,362        4,865
  Research and development........           --              138        2,581
  General and administrative......           303             995        4,521
                                          ------         -------      -------
Total operating expenses..........           853           2,495       16,718
                                          ------         -------      -------
Operating income (loss)...........           307            (306)      (7,517)
Interest income, net..............             3              17           30
                                          ------         -------      -------
Net income (loss) before provision
 for income taxes.................           310            (289)      (7,487)
Provision for income taxes........           --                1            1
                                          ------         -------      -------
Net income (loss).................        $  310         $  (290)     $(7,488)
                                          ======         =======      =======
Cumulative dividends on
 participating preferred stock ...           --              (23)      (1,470)
                                          ------         -------      -------
Net income (loss) attributable to
 common stockholders..............        $  310         $  (313)     $(8,958)
                                          ======         =======      =======
Net loss per share:
  Basic/Diluted...................        $  --          $ (0.05)     $ (1.34)
                                          ======         =======      =======
Weighted average shares
 outstanding used in basic and
 diluted per share calculation....           --            6,667        6,675
                                          ======         =======      =======
<CAPTION>
                                       December 31,    December 31, December 31,
                                           1997            1998         1999
                                    ------------------ ------------ ------------
                                                   (in thousands)
<S>                                 <C>                <C>          <C>
Balance Sheet Data:
Cash and cash equivalents.........         $ 235          $2,112      $ 6,896
Working capital...................           470           1,996        4,914
Total assets......................           970           3,936       16,136
Convertible preferred stock.......           --            2,000       16,006
Total stockholders' equity........           495           2,133        7,312
<CAPTION>
                                       Period from
                                        Inception
                                    (January 5, 1997)   Year Ended December 31,
                                         through       -------------------------
                                    December 31, 1997      1998         1999
                                    ------------------ ------------ ------------
                                                   (in thousands)
<S>                                 <C>                <C>          <C>
Supplemental Data:
System revenue(1).................        $4,210         $ 8,024      $15,366
                                          ======         =======      =======
</TABLE>
--------
(1) System revenue represents the full value of gross billings for ads sold
    under either commission-based contracts or service fee-based contracts.
    Although system revenue is not recognized under generally accepted
    accounting principles, we believe that system revenue is a standard measure
    of advertising volume for the Internet advertising industry that enables a
    meaningful comparison of activity from period to period and from one
    company to another.

                                       25
<PAGE>

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

   You should read the following discussion of our financial condition and
results of operations together with the financial statements and the notes to
financial statements included elsewhere in this report. This discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those anticipated in
these forward-looking statements.

Overview

   We are a leading provider of comprehensive online advertising and direct
marketing solutions for advertisers and Web publishers. Since inception,
substantially all of our revenue has been derived from online advertising
sales, and we expect this to continue for the foreseeable future. We offer
advertisements primarily priced on a cost per every thousand ads viewed, or
CPM, basis. We also offer direct marketing programs which may be priced on a
cost per action basis, such as cost for each new user registration. In January
1999, we began to charge our customers for the use of our adMonitor technology.
For the year ended December 31, 1999, online advertising sales accounted for
95.6% of our revenue, and fees generated by our adMonitor technology accounted
for 4.4% of our revenue.

   Revenue from ad sales is earned under commission-based and service fee-based
contracts. For commission-based contracts, we receive commissions from Web
publishers for the sale of their ad inventory. Revenue earned from commission-
based contracts reflects only the amount of the commission earned without any
associated cost of revenue. We recognize commissions ratably over the term of
an advertising campaign, which typically ranges from one to twelve months. For
service fee-based contracts, we purchase advertising space, or ad inventory,
from Web publishers and are obligated to pay a service fee to Web publishers
for ads placed on their Web sites. Additionally, under service fee-based
contracts, we bear the risk of loss from the non-collection of fees payable by
advertisers for ads sold. Consequently, revenue earned from service fee-based
contracts reflects the full value of the ads sold. System revenue represents
the full value of gross billings for ads sold under either commission-based
contracts or service fee-based contracts.

   In the second quarter of 1999, we began the process of amending many of our
commission-based contracts with Web publishers to provide that we will sell
their ad inventory on a best efforts basis to our advertising clients and remit
to Web publishers, as a service fee, a percentage of the resulting advertising
revenue. We are attempting to amend almost all of our existing commission-based
contracts with Web publishers to convert these contracts into service fee-based
contracts. So long as we have both commission-based and service fee-based
contracts, revenue will include a mix of commissions received under our
commission-based contracts and total billings to our advertising clients under
our service fee-based contracts. For the foreseeable future, we do not expect
to completely convert all of our contracts into service fee-based contracts. As
our amended contracts are phased in, we expect that revenue will increase
disproportionately from prior periods as a result of the recognition of total
billings to our advertising clients as revenue.

   The financial statements included elsewhere in this report include
references to system revenue. We believe system revenue provides a consistent
basis for reporting revenue from period to period, regardless of the change in
contract type, as discussed above. System revenue represents the full value of
gross billings for ads sold under either commission-based contracts or service
fee-based contracts. We believe that period to period comparisons of operating
results are not always meaningful and that the results for any period should
not be relied upon as an indication of future performance. For the year ended
December 31, 1999, service fee-based contracts accounted for 79.2% of our
revenue, and commission based contracts accounted for 20.8% of our revenue. For
the year ended December 31, 1998, commission-based contracts accounted for 100%
of our revenue.

   We expect that revenue generated from the delivery of advertisements on our
network of Web sites will continue to account for a substantial majority of our
revenue for the foreseeable future. Our five largest

                                       26
<PAGE>

advertising customers accounted for 20.4% of revenue for the year ended
December 31, 1999, 25.5% of revenue for the year ended December 31, 1998 and
30.0% for the period ended December 31, 1997. Our largest advertising customer
accounted for less than 10% of revenue for each of the years ended December 31,
1999 and 1998, and 17% for the period ended December 31, 1997.

   We typically enter into one-year contracts with the Web publishers in our
network. Web publishers do not pay a fee to join our network. These agreements
usually may be terminated by either party by giving 30 to 120 days prior
written notice. Additionally, these agreements are usually automatically
renewable for successive one-year terms. For the year ended December 31, 1999,
our largest Web publisher accounted for less than 10% of our revenue. Ads
delivered on the top five Web sites in our network accounted for 26.9% of our
revenue for the year ended December 31, 1999, 66.7% of our revenue for the year
ended December 31, 1998 and 74.5% for the period ended December 31, 1997.

   Cost of revenue includes service fees paid to our Web publishers under our
service fee-based contracts and Internet connectivity and bandwidth costs
associated with ad serving. We expect cost of revenue to increase on an
absolute dollar basis in future periods as our revenue increases and as more of
the contracts with Web publishers are structured as service fee-based
contracts.

Results of Operations

 Years Ended December 31, 1999 and 1998

   Revenue. Revenue increased 320.2% to $9.2 million for the year ended
December 31, 1999 from $2.2 million for the year ended December 31, 1998. This
increase was due to increases in the number of advertising customers that we
serviced, the number of Web publishers on our network and the number of ads
delivered. In addition, this increase was partly attributable to our adoption
of service fee-based contracts and the initiation of our charging service fees
to customers for the use of our adMonitor technology.

   System Revenue. System revenue represents the full value of gross billings
for ads sold under either commission-based contracts or service fee-based
contracts. Although system revenue is not recognized under generally accepted
accounting principles, we believe that system revenue is a standard measure of
advertising volume for the Internet advertising industry that enables a
meaningful comparison of activity from period to period and from one company to
another. System revenue increased 91.5% to $15.4 million for the year ended
December 31, 1999 from $8.0 million for the year ended December 31, 1998. This
increase was due to increases in the number of advertising customers that we
serviced, the number of Web publishers on our network and the number of ads
delivered, as well as the initiation of our charging service fees to customers
for the use of our adMonitor technology.

   Cost of Revenue. Cost of revenue was $4.8 million for the year ended
December 31, 1999. During the year ended December 31, 1998, all revenue was
derived solely from advertising sales commissions with no related service fees
charged to customers for the use of adMonitor, or associated cost of revenue.

   Sales and Marketing. Sales and marketing expenses include salaries,
commissions, travel, advertising, trade show costs and marketing materials
expense. Sales and marketing expenses were $4.9 million, or 52.9% of revenue,
for the year ended Decemer 31, 1999, and $1.4 million, or 62.2% of revenue, for
the year ended December 31, 1998. This increase was primarily due to an
increase in the number of sales and marketing personnel. Our sales and
marketing organization has grown to 75 employees as of December 31, 1999 from
six employees as of January 1, 1998. We expect sales and marketing expenses to
increase on an absolute dollar basis in future periods as we hire additional
personnel, expand into new markets and continue to promote our advertising
solutions.

   Research and Development. Research and development expenses consist
primarily of compensation, consulting expenses and expenses for hardware,
software and materials associated with the development and

                                       27
<PAGE>

improvement of our adMonitor technology. To date, all research and development
costs have been expensed as incurred. Research and development expenses were
$2.6 million, or 28.1% of revenue, for the year ended December 31, 1999, and
$138,000, or 6.3% of revenue, for the year ended December 31, 1998. This
increase was due primarily to the deployment and enhancement of our adMonitor
technology. We expect research and development expenses to increase
significantly on an absolute dollar basis in future periods.

   General and Administrative. General and administrative expenses consist
primarily of compensation and professional service fees. General and
administrative expenses were $4.5 million, or 49.1% of revenue, for the year
ended December 31, 1999, and $995,000, or 45.5% of revenue, for the year ended
December 31, 1998. This increase was primarily a result of a $1.0 million
increase in personnel expenses, a $677,000 increase in professional service
fees and a $1.3 million increase in facility expenses necessary to support our
growth. We expect general and administrative expenses to increase on an
absolute dollar basis as we hire additional personnel and incur additional
costs related to the growth of our business and our operation as a public
company.

   Interest Income, Net. Net interest income primarily consists of interest
earned on cash balances, offset by interest expense incurred with respect to
our capital leases and equipment financing obligations. Net interest income was
$30,000 for the year ended December 31, 1999. Net interest income was $17,000
for the year ended December 31, 1998.

 Year Ended December 31, 1998 and the Period Ended December 31, 1997

   Revenue. Revenue increased 88.8%, to $2.2 million for the year ended
December 31, 1998 from $1.2 million for the period ended December 31, 1997.
This increase was due to increases in the number of advertising customers that
we serviced, the number of Web publishers on our network and the number of ads
delivered.

   System Revenue. System revenue represents the full value of gross billings
for ads sold under either commission-based contracts or service fee-based
contracts. Although system revenue is not recognized under generally accepted
accounting principles, we believe that system revenue is a standard measure of
advertising volume for the Internet advertising industry that enables a
meaningful comparison of activity from period to period and from one company to
another. System revenue increased 90.6% to $8.0 million for the year ended
December 31, 1998 from $4.2 million for the period ended December 31, 1997.
This increase was due to increases in the number of advertising customers that
we serviced, the number of Web publishers on our network and the number of ads
delivered.

   Cost of Revenue. During both periods, all revenue was derived solely from
advertising sales commissions and there was no associated cost of revenue.

   Sales and Marketing. Sales and marketing expenses were $1.4 million, or
62.2% of revenue, for the year ended December 31, 1998, and $550,000, or 47.4%
of revenue, for the period ended December 31, 1997. This increase was primarily
due to an increase in the number of sales and marketing personnel.

   Research and Development. Research and development expenses were $138,000,
or 6.3% of revenue, for the year ended December 31, 1998. Research and
development expenses consisted primarily of expenses associated with the
development and deployment of our adMonitor technology. There were no research
and development expenses for the period ended December 31, 1997.

   General and Administrative. General and administrative expenses were
$995,000, or 45.5% of revenue, for the year ended December 31, 1998, and
$303,000, or 26.1% of revenue, for the period ended December 31, 1997. The
increase was primarily a result of a $144,000 increase in personnel expenses, a
$176,000 increase in professional service fees and a $234,000 increase in
facility expenses necessary to support our growth.

                                       28
<PAGE>

   Interest Income, Net. Net interest income was $17,000 for the year ended
December 31, 1998, and $3,000 for the period ended December 31, 1997.

Quarterly Results of Operations

   The following tables set forth unaudited quarterly statement of operations
data for the eight quarters ended December 31, 1999 in dollars and as a
percentage of revenue. In the opinion of management, this information has been
prepared on the same basis as the audited financial statements appearing
elsewhere in this report, and all necessary adjustments, consisting only of
normal recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited quarterly results of operations. The quarterly
data should be read in conjunction with our audited financial statements and
the notes to the financial statements appearing elsewhere in this report.

<TABLE>
<CAPTION>
                                                    Three Months Ended
                          -------------------------------------------------------------------------
                          Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30,  Sep. 30,  Dec. 31,
                            1998     1998     1998     1998     1999     1999      1999      1999
                          -------- -------- -------- -------- -------- --------  --------  --------
                                           (in thousands, except per share data)
<S>                       <C>      <C>      <C>      <C>      <C>      <C>       <C>       <C>
Statement of Operations
 Data:
 Revenue................   $  404   $  516   $  545   $  724   $  753  $ 1,168   $ 2,052   $ 5,227
 Operating expenses:
 Cost of revenue........      --       --       --       --         2      307     1,027     3,415
 Sales and marketing....      313      239      322      487      803    1,003     1,182     1,878
 Research and
  Development...........        7       20       34       77      139      252     1,013     1,176
 General and
  administrative........      116      187      275      417      528      812     1,368     1,813
                           ------   ------   ------   ------   ------  -------   -------   -------
 Total operating
  expenses..............      436      446      631      981    1,472    2,374     4,590     8,282
                           ------   ------   ------   ------   ------  -------   -------   -------
 Operating income
  (loss)................      (32)      70      (86)    (257)    (719)  (1,206)   (2,538)   (3,055)
 Interest income
  (expense) net.........        3      --         3       10       11      (16)      (47)       82
                           ------   ------   ------   ------   ------  -------   -------   -------
 Income (loss) before
  provision for taxes...      (29)      70      (83)    (247)    (708)  (1,222)   (2,585)   (2,973)
 Provision for income
  taxes.................      --       --       --         1      --       --        --          1
                           ------   ------   ------   ------   ------  -------   -------   -------
 Net income (loss)......      (29)      70      (83)    (248)    (708)  (1,222)   (2,585)   (2,974)
 Cumulative dividends on
  participating
  preferred stock.......      --       --        (3)     (20)     (20)     (20)   (1,204)     (225)
                           ------   ------   ------   ------   ------  -------   -------   -------
 Net income (loss)
  attributed to common
  stockholders..........   $  (29)  $   70   $  (86)  $ (268)  $ (728) $(1,242)  $(3,789)  $(3,199)
                           ======   ======   ======   ======   ======  =======   =======   =======
 Net income (loss) per
  share:
 Basic/Diluted..........   $(0.00)  $ 0.01   $(0.01)  $(0.04)  $(0.11) $ (0.19)  $ (0.57)  $ (0.48)
                           ======   ======   ======   ======   ======  =======   =======   =======
 Weighted average number
  of common shares
  outstanding:
 Basic/Diluted..........    6,667    6,667    6,667    6,667    6,667    6,667     6,667     6,693
                           ======   ======   ======   ======   ======  =======   =======   =======
Supplemental Data:
 Systems Revenue(1).....   $1,466   $1,910   $2,064   $2,583   $2,529  $ 3,101   $ 3,602   $ 6,134
                           ======   ======   ======   ======   ======  =======   =======   =======
</TABLE>
--------
(1) System revenue represents the full value of gross billings for ads sold
    under either commission-based contracts or service fee-based contracts.
    Although system revenue is not recognized under generally accepted
    accounting principles, we believe that system revenue is a standard measure
    of advertising volume for the Internet advertising industry that enables a
    meaningful comparison of activity from period to period and from one
    company to another.

   Our system revenue increased during each quarter of 1998. Quarterly system
revenue increased 30.3% from the first to second quarter, 8.1% from the second
to third quarter and 25.2% from the third to fourth quarter of 1998. Quarterly
system revenue decreased 2.1% from the fourth quarter of 1998 to the first
quarter of 1999 due to seasonal factors. Quarterly system revenue increased
22.6% from the first quarter to the second quarter of 1999, 16.1% from the
second to the third quarter of 1999, and 70.3% from the third to the fourth

                                       29
<PAGE>

quarter 1999. Quarterly growth was due to increases in the number of
advertising customers, the number of Web publishers on our network, the number
of ads delivered and adMonitor service fees.

<TABLE>
<CAPTION>
                                                   Three Months Ended
                         ----------------------------------------------------------------------------
                         Mar. 31,  June 30, Sep. 30,  Dec. 31,  Mar. 31,  June 30,  Sep. 30,  Dec 31,
                           1998      1998     1998      1998      1999      1999      1999     1999
                         --------  -------- --------  --------  --------  --------  --------  -------
<S>                      <C>       <C>      <C>       <C>       <C>       <C>       <C>       <C>
As a Percentage of
 Revenue:
Revenue.................  100.0%    100.0%   100.0%    100.0%    100.0%     100.0%    100.0%   100.0%
Operating expenses:
  Cost of revenue.......    --        --       --        --        0.3       26.3      50.0     65.3
  Sales and marketing...   77.5      46.5     59.1      67.2     106.6       85.9      57.6     35.9
  Research and
   Development..........    1.7       3.9      6.3      10.7      18.5       21.6      49.4     22.5
  General and
   administrative.......   28.7      36.2     50.5      57.7      70.1       69.5      66.7     34.7
                          -----     -----    -----     -----     -----     ------    ------    -----
Total operating
 expenses...............  107.9      86.6    115.9     135.6     195.5      203.3     223.7    158.4
                          -----     -----    -----     -----     -----     ------    ------    -----
Operating income
 (loss).................   (7.9)     13.4    (15.9)    (35.6)    (95.5)    (103.3)   (123.7)   (58.4)
Interest income
 (expense), net.........    0.7       0.1      0.6       1.5       1.4       (1.3)     (2.2)     1.6
                          -----     -----    -----     -----     -----     ------    ------    -----
Income (loss) before
 provision for income
 taxes..................   (7.2)     13.5    (15.3)    (34.1)    (94.1)    (104.6)   (125.9)   (56.9)
Provision for income
 taxes..................    --        --       --        --        --         --        --       --
                          -----     -----    -----     -----     -----     ------    ------    -----
Net income (loss).......   (7.2)%    13.5%   (15.3)%   (34.1)%   (94.1)%   (104.6)%  (125.9)%  (56.9)%
                          =====     =====    =====     =====     =====     ======    ======    =====
</TABLE>

   Our revenue increased during each of the last eight quarters. In 1998,
quarterly revenue increased 27.7% from the first to second quarter, 5.6% from
the second to the third quarter and 32.8% from the third to the fourth quarter.
In 1999, quarterly revenue increased 55.1% from the first to the second
quarter, 75.7% from the second to the third quarter, and 155% from the third to
the fourth quarter. Quarterly revenue growth was primarily due to increases in
the number of advertising clients, the number of Web sites on our network, the
number of ads delivered and adMonitor service fees. The increases in revenue
from quarter to quarter in 1999 were also due to increases in the number of
service fee-based contracts.

   Increases in total operating expenses were due primarily to the addition of
sales, technical and administrative personnel needed to sustain our growth and
further develop our infrastructure.

   Our revenue has historically been, and we expect it to continue to be,
subject to seasonal fluctuations because advertisers generally place fewer
advertisements during the first calendar quarter of each year. Additionally,
expenditures by advertisers tend to be cyclical, reflecting overall economic
conditions, as well as budgeting and buying patterns.

Liquidity and Capital Resources

   From our inception through September 1998, we financed our operations
primarily through internally generated cash flow. In September 1998, we
completed a private placement of equity securities to an individual investor
and received $1.9 million in net proceeds. In September 1999, we completed two
private placements of equity securities and received $12.9 million in net
proceeds. In February 2000, we completed our initial public offering of
7,475,000 shares of our common stock (including 975,000 shares subject to the
underwriter's over-allotment option) at $15.00 per share. The initial public
offering resulted in aggregate net proceeds of approximately $102.8 million,
net of underwriting discounts and expenses of the offering. The net proceeds
from these private placements and our initial public offering are being used to
expand our business operations, to hire additional personnel, to provide
additional services and for general corporate purposes related to the expansion
of our business.

                                       30
<PAGE>

   Net cash used by operating activities was $6.3 million for the year ended
December 31, 1999. Net cash provided by operating activities was $1,000 for the
year ended December 31, 1998 and $259,000 for the period ended December 31,
1997. Cash used in operating activities for the year ended December 31, 1999
resulted from a net loss of $7.5 million, as well as a $2.8 million increase in
accounts receivable and a $1.1 million increase in prepaids and other current
assets partially offset by a $3.5 million increase in accounts payable and a
$1.4 million increase in accrued expenses. Cash provided by operating
activities for the year ended December 31, 1998 resulted from a $834,000
increase in accounts payable and a $200,000 increase in accrued liabilities,
partially offset by a $290,000 net loss and a $626,000 increase in accounts
receivable. Cash provided by operating activities for the period ended December
31, 1997 resulted from $310,000 in net income and a $327,000 increase in
accounts payable and a $100,000 increase in accrued liabilities, partially
offset by a $490,000 increase in accounts receivable. The increases in both
accounts receivable and accounts payable include amounts invoiced on behalf of
Web publishers for which we have no credit exposure. As of December 31, 1999,
the amount billed on behalf of our Web publishing clients, and therefore
included in our accounts receivable and accounts payable balances with no
credit risk to us, was approximately $229,000.

   Net cash used in investing activities was $1.1 million for the year ended
December 31, 1999, $323,000 for the year ended December 31, 1998 and $19,000
for the period ended December 31, 1997. Cash used in investing activities was
primarily related to purchases of property and equipment.

   Net cash provided by financing activities was $12.2 million for the year
ended December 31, 1999 and $2.2 million for the year ended December 31, 1998.
Net cash used by financing activities was $5,000 for the period ended December
31, 1997, resulting from a withdrawal of capital. Cash provided by financing
activities for the year ended December 31, 1999 resulted primarily from the
proceeds from our private placement of equity securities. Cash provided by
financing activities for the year ended December 31, 1998 resulted primarily
from the sale of Series A preferred stock, partially offset by distributions to
stockholders.

   Although we do not have any material commitments for capital expenditures,
we anticipate that we will experience a substantial increase in our capital
expenditures consistent with our anticipated growth in operations,
infrastructure and personnel. We currently anticipate that we will continue to
experience significant growth in operating expenses for the foreseeable future.
We believe that our existing cash and cash equivalents will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures
for at least the next 12 months.

Year 2000 Compliance

   We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to
our on-going business as a result of the "Year 2000 issue." However, it is
possible that the full impact of the date change, which was of concern due to
computer programs that use two digits instead of four digits to define years,
has not been fully recognized. We cannot quantify the amount of our potential
exposure but we believe that any such problems are likely to be minor and
correctable. In addition, we could still be negatively impacted if our
customers or suppliers are adversely affected by the Year 2000 or similar
issues. We currently are not aware of any significant Year 2000 or similar
problems that have arisen for our customers and suppliers. In preparation for
the year 2000, we incurred internal staff costs as well as consulting and other
expenses. Year 2000 expenses incurred during 1999 totaled less than $100,000.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   We are exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates affecting the yield on our
investments.

                                       31
<PAGE>

Interest Rate Risk

   The primary objective of our investment activities is to preserve the
principal while at the same time achieving an attractive return. To achieve
this objective, we maintain a portfolio of investment grade cash equivalents
and short-term investments. Although we are subject to interest rate risks, we
believe an effective increase or decrease of 10% in interest rate percentages
would not have a material adverse effect on our results from operations. The
potential change noted above is based on sensitivity analysis we performed as
of December 31, 1999.

   We did not hold derivative financial instruments as of December 31, 1999,
and have never held these instruments in the past.

Foreign Currency

   Currently all of our sales and expenses are denominated in U.S. dollars and
as a result we have experienced no foreign exchange gains and losses to date.
While we do expect to effect some transactions in foreign currencies during
2000, we do not anticipate that foreign exchange gains or losses will be
significant. We have not engaged in foreign currency hedging activities to
date.

                                       32
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.


                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----

<S>                                                                        <C>
L90, Inc.

  Report of Independent Public Accountants................................  34

  Balance Sheets as of December 31, 1998 and 1999.........................  35

  Statements of Operations for the period ended December 31, 1997, for the
   years ended December 31, 1998 and 1999.................................  36

  Statements of Stockholders' Equity for the period ended December 31,
   1997, for the years ended December 31, 1998 and 1999...................  37

  Statements of Cash Flows for the period ended December 31, 1997, for the
   years ended December 31, 1998 and 1999.................................  38

  Notes to Financial Statements...........................................  39
</TABLE>

                                       33
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
L90, Inc.:

   We have audited the accompanying balance sheets of L90, Inc. (a Delaware
Corporation) as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for the period from January 5,
1997 (inception) to December 31, 1997, and the years ended December 31, 1998
and 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the financial position of L90, Inc. as of December
31, 1998 and 1999 and the results of its operations and its cash flows for the
period from January 5, 1997 (inception) to December 31, 1997, and the years
ended December 31, 1998 and 1999 in conformity with accounting principles
generally accepted in the United States.

                                          /s/ Arthur Andersen LLP

Los Angeles, California
January 28, 2000

                                       34
<PAGE>

                                   L90, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    Pro Forma
                                                                   Stockholders
                                               December 31,           Equity
                                          -----------------------  December 31,
                                             1998        1999          1999
                                          ----------  -----------  ------------
                                                                   (unaudited)
                                                                     (Note 3)
<S>                                       <C>         <C>          <C>
                 ASSETS
Current Assets:
 Cash and cash equivalents............... $2,111,852  $ 6,895,938
 Accounts receivable (net of allowances
  of $142,952 and $668,010 at December
  31, 1998 and 1999, respectively........  1,310,457    4,128,069
 Prepaid expenses and other assets.......    196,562    1,341,950
                                          ----------  -----------
 Total current assets....................  3,618,871   12,365,957
                                          ----------  -----------
 Restricted cash.........................        --     1,268,632
 Property and equipment:
   Equipment.............................    320,567    2,695,847
   Furniture and fixtures................     15,720       70,006
   Leasehold improvements................     18,347       32,421
                                          ----------  -----------
                                             354,634    2,798,274
   Less--Accumulated depreciation and
    amortization.........................    (37,340)    (296,808)
                                          ----------  -----------
 Property and equipment, net.............    317,294    2,501,466
                                          ----------  -----------
 Total assets............................ $3,936,165  $16,136,055
                                          ==========  ===========
  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Accounts payable........................ $1,177,950  $ 4,693,881
 Accrued expenses........................    300,670    1,686,274
 Current portion of note payable.........        --       414,222
 Current portion of long-term capital
  lease obligations......................     68,025      256,928
 Deferred revenues.......................     53,417          --
 Accrued dividends.......................     23,233      401,139
                                          ----------  -----------
 Total current liabilities...............  1,623,295    7,452,444
Note payable, net of current portion.....        --       928,702
Long-term capital lease obligations, net
 of current portion......................    180,362      442,710
                                          ----------  -----------
 Total liabilities.......................  1,803,657    8,823,856
                                          ----------  -----------
Stockholders' Equity:
 Preferred stock, $0.001 par value;
  15,000,000 shares authorized:
   Series A preferred stock, $0.001 par
    value, 2,000 shares authorized, 2,000
    shares issued and outstanding,
    including paid-in capital of
    2,077,501............................  2,000,000    2,077,503  $       --
   Series B preferred stock, $0.001 par
    value, 5,000,000 shares authorized,
    4,107,044 shares issued and
    outstanding, including
    paid-in-capital of 9,348,823.........        --     9,352,930          --
   Series C preferred stock, $0.001 par
    value, 3,000,000 shares authorized,
    1,307,190 shares issued and
    outstanding, including
    paid-in-capital of 4,574,279.........        --     4,575,586          --
 Common stock, $0.001 par value,
  53,333,333 shares authorized,
  6,693,333 and 11,969,489 shares issued
  and outstanding, actual and proforma,
  respectively...........................      6,667        6,693       11,969
 Additional paid-in capital..............     50,151      181,901   16,182,644
 Notes receivable for common stock.......    (43,750)     (43,750)     (43,750)
 Capital contributions, net of
  shareholder draws......................        --           --           --
 Retained earnings.......................    119,440   (8,838,664)  (8,838,664)
                                          ----------  -----------  -----------
 Total stockholders' equity..............  2,132,508    7,312,199  $ 7,312,199
                                          ----------  -----------  ===========
 Total liabilities and stockholders'
  equity................................. $3,936,165  $16,136,055
                                          ==========  ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       35
<PAGE>

                                   L90, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                          Period Ended       Years Ended
                                          December 31,       December 31,
                                          ------------ -----------------------
                                              1997        1998        1999
                                          ------------ ----------  -----------
<S>                                       <C>          <C>         <C>
Revenue
  Service fee-based revenue.............   $      --   $      --   $ 7,282,892
  Commission-based revenue..............    1,159,764   2,189,433    1,917,907
                                           ----------  ----------  -----------
Total revenue...........................    1,159,764   2,189,433    9,200,799
                                           ----------  ----------  -----------
Operating expenses:
  Cost of service fee and other
   revenue..............................          --          --     4,751,034
  Sales and marketing...................      549,805   1,361,856    4,865,678
  Research and development..............          --      138,402    2,581,070
  General and administrative............      302,776     995,435    4,520,895
                                           ----------  ----------  -----------
Total operating expenses................      852,581   2,495,693   16,718,677
                                           ----------  ----------  -----------
Operating income (loss).................      307,183    (306,260)  (7,517,878)
Interest income, net....................        2,601      17,491       30,397
                                           ----------  ----------  -----------
Income (loss) before provision for
 income taxes...........................      309,784    (288,769)  (7,487,481)
Provision for income taxes..............          --          800          800
                                           ----------  ----------  -----------
Net income (loss).......................   $  309,784  $ (289,569) $(7,488,281)
                                           ==========  ==========  ===========
Cumulative dividends on participating
 preferred stock........................          --      (23,233)  (1,469,823)
                                           ----------  ----------  -----------
Net income (loss) attributable to common
 stockholders...........................   $  309,784  $ (312,802) $(8,958,104)
                                           ==========  ==========  ===========
Net income (loss) per share:
  Basic/Diluted.........................   $      --   $    (0.05) $     (1.34)
                                           ==========  ==========  ===========
Weighted average number of common shares
 outstanding:
  Basic/Diluted.........................          --    6,666,667    6,675,361
                                           ==========  ==========  ===========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       36
<PAGE>

                                   L90, INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                   Notes
                                                      Additional Receivable
                           Preferred  Capital  Common  Paid-in   for Common  Retained
                             Stock    Account  Stock   Capital     Stock     Earnings       Total
                          ----------- -------  ------ ---------- ---------- -----------  -----------
<S>                       <C>         <C>      <C>    <C>        <C>        <C>          <C>
BALANCE at January 5,
 1997...................  $       --  $13,068  $  --   $    --    $    --   $   177,458  $   190,526
Withdrawal of capital...          --   (5,000)    --        --         --           --        (5,000)
Net income..............          --      --      --        --         --       309,784      309,784
                          ----------- -------  ------  --------   --------  -----------  -----------
BALANCE at December 31,
 1997...................          --    8,068     --        --         --       487,242      495,310
Net loss................          --      --      --        --         --      (289,569)    (289,569)
Issuance of Series A
 preferred stock........    2,000,000     --      --        --         --           --     2,000,000
Issuance of common
 stock..................          --      --      --     43,750    (43,750)         --           --
Distributions to
 shareholders...........          --      --      --        --         --       (50,000)     (50,000)
Conversion to C-
 corporation............          --   (8,068)  6,667     6,401        --        (5,000)         --
Accrual of cumulative
 dividends on
 participating preferred
 stock..................          --      --      --        --         --       (23,233)     (23,233)
                          ----------- -------  ------  --------   --------  -----------  -----------
BALANCE at December 31,
 1998...................    2,000,000     --    6,667    50,151    (43,750)     119,440    2,132,508
Net loss................          --      --      --        --         --    (7,488,281)  (7,488,281)
Issuance of Series B
 preferred stock, net of
 costs of $706,471......    8,957,694     --      --        --         --           --     8,957,694
Issuance of Series C
 preferred stock, net of
 costs of $45,505.......    3,956,408     --      --        --         --           --     3,956,408
Issuance of common stock
 for options............          --      --       26    93,974        --           --        94,000
Issuance of debt related
 warrants...............          --      --      --     37,776        --           --        37,776
Issuance of preferred
 stock warrants.........    1,091,917     --      --        --         --    (1,091,917)         --
Accrual of cumulative
 dividends on
 participating preferred
 stock..................          --      --      --        --         --      (377,906)    (377,906)
                          ----------- -------  ------  --------   --------  -----------  -----------
BALANCE at December 31,
 1999...................  $16,006,019 $   --   $6,693  $181,901   $(43,750) $(8,838,664) $ 7,312,199
                          =========== =======  ======  ========   ========  ===========  ===========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       37
<PAGE>

                                   L90, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                           Period Ended      Years Ended
                                           December 31,      December 31,
                                           ------------ -----------------------
                                               1997        1998        1999
                                           ------------ ----------  -----------
<S>                                        <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................   $ 309,784   $ (289,569) $(7,488,281)
Adjustments to reconcile net loss to cash
 used in operating
 activities--
  Depreciation and amortization..........       5,800       30,885      297,245
  Changes in assets and liabilities:
   Increase in accounts receivable.......    (489,637)    (626,420)  (2,817,612)
   Increase in prepaid expenses and other
    assets...............................     (25,325)    (171,237)  (1,145,388)
   Increase in accounts payable..........     327,237      833,950    3,515,931
   Increase in accrued expenses..........     100,240      200,430    1,385,604
   Increase (decrease) in deferred
    revenues.............................      30,418       22,999      (53,417)
                                            ---------   ----------  -----------
    Net cash provided by (used in)
     operating activities................     258,517        1,038   (6,305,918)
                                            ---------   ----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment.....     (18,876)    (322,762)  (1,100,717)
                                            ---------   ----------  -----------
    Net cash used in investing
     activities..........................     (18,876)    (322,762)  (1,100,717)
                                            ---------   ----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (repayments) under
   capital lease obligations.............         --       248,387      451,251
  Restricted cash........................         --           --    (1,268,632)
  Withdrawal of capital..................      (5,000)         --           --
  Distribution to Shareholder............         --       (50,000)         --
  Series A preferred stock...............         --     2,000,000          --
  Series B preferred stock, net..........         --           --     8,957,694
  Series C preferred stock, net..........         --           --     3,956,408
  Exercise of common stock options.......         --           --        94,000
                                            ---------   ----------  -----------
    Net cash provided by (used in)
     financing activities................      (5,000)   2,198,387   12,190,721
                                            ---------   ----------  -----------
Net increase in cash.....................     234,641    1,876,663    4,784,086
Cash and cash equivalents, beginning of
 period..................................         548      235,189    2,111,852
                                            ---------   ----------  -----------
Cash and cash equivalents, end of
 period..................................   $ 235,189   $2,111,852  $ 6,895,938
                                            =========   ==========  ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
  Cash paid during the period for:
  Interest...............................   $     --    $   15,555  $   124,577
                                            =========   ==========  ===========
  Income taxes...........................   $     --    $      --   $       800
                                            =========   ==========  ===========
SUMMARY OF NON-CASH FINANCING ACTIVITIES:
  Notes receivable for common stock......   $     --    $  (43,750) $       --
                                            =========   ==========  ===========
  Accrued dividends......................   $     --    $   23,233  $   377,906
                                            =========   ==========  ===========
  Acquisition of software license in
   exchange for note.....................   $     --    $      --   $ 1,342,924
                                            =========   ==========  ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       38
<PAGE>

                                   L90, INC.

                         NOTES TO FINANCIAL STATEMENTS

1. Description of the Business

   L90, Inc., (the "Company") is an Internet-based provider of online
advertising and direct marketing solutions for advertisers and Web publishers.
The Company provides fully-outsourced ad sales, as well as ad serving and
tracking technology. The Company develops targeted advertising campaigns that
leverage the capabilities of the Internet. The Company's adMonitor technology
platform provides Web publishers, advertisers and ad agencies with the ability
to target, deliver, measure and analyze their marketing campaigns.

   The Company commenced operations in January 1997 as a sole proprietorship.
In May 1997, the Company became a California limited liability company and
changed its name to John Bohan and Associates, LLC. At that time, the Company
did business as AdNet Strategies. In January 1998, the Company incorporated in
California, elected S-corporation status and changed its name to AdNet
Strategies, Inc. In December 1998, the Company became a California C-
corporation under the name Latitude 90, Inc. In September 1999, the Company
reincorporated in Delaware as L90, Inc.

2. Summary of Significant Accounting Policies

 a. Revenue Recognition

   Revenue from ad sales is earned under commission-based and service fee-based
contracts. For commission-based contracts, the Company generally invoices the
full amount of revenue due to Web publishers for the sale of their ad inventory
and is entitled to receive a commission. Revenue earned from commission-based
contracts reflects only the amount of the commission earned without any
associated cost of revenue. The Company recognizes commissions ratably over the
term of the advertising campaigns, which usually range from one to twelve
months. For service fee-based contracts, the Company is obligated to pay a
service fee to the Web publishers for ads placed on their Web sites that is
included in cost of revenue. Additionally, under service fee-based contracts,
the Company must collect and bear the risk of loss from the advertiser for ads
sold. Consequently, revenue earned from service fee-based contracts reflects
the full value of the ads sold, or the Company's credit risk exposure on
service fee-based sales.

   System revenue represents the full value of gross billings for ads sold
under either commission-based or service fee-based contracts and is not
affected by the mix of such contracts. Revenue of the Company was derived from
system revenue of $4,210,080 for the period ended December 31, 1997, $8,023,501
and $15,365,966 for the years ended December 31, 1998 and 1999, respectively.

 b. Current Vulnerability Due to Certain Concentrations

   The Company sells advertising space to its customers. For the period ended
December 31, 1997, approximately 17 percent of revenue was to one advertising
customer. No other advertising customer accounted for 10 percent or more of
revenue in that period. For the years ended December 31, 1998 and 1999 there
were no advertising customers that comprised greater than 10 percent of
revenue.

   The Company purchases advertising space from its Web site partners. For the
period ended December 31, 1997, the three largest Web site partners accounted
for 27.1 percent, 22.0 percent and 17.3 percent of revenue, respectively. For
the year ended December 31, 1998, the two largest Web site partners accounted
for 36.3 percent and 12.0 percent of revenue, respectively. For the year ended
December 31, 1999, no Web site partner accounted for 10 percent or more of the
advertising space sold to generate revenue. The loss of the largest advertising
customer or any of the largest Web site partners could have an adverse effect
on the Company's operations.


                                       39
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 c. Cash and Cash Equivalents

   For purposes of the balance sheets and statements of cash flows, cash and
cash equivalents includes all cash instruments due on demand or with an
original maturity of 90 days or less.

   The Company maintained its cash balances in two financial institutions
during 1999 and one financial institution during 1998. The balances are insured
by the Federal Deposit Insurance Corporation up to $100,000. At December 31,
1998 and 1999, the Company's uninsured cash balances totaled $2,011,852 and
$6,695,938, respectively.

 d. Restricted Cash

   Restricted cash consists of cash pledged under outstanding letters of
credit.

 e. Accounts Receivable

   The Company has receivables due from advertisers and from Web publishers
resulting from the sales of ads. These receivables relate to both commission-
based and service fee-based contracts. The Company's credit exposure on
commission-based contracts is limited to the net amount of cash to be received
by the Company from ad sales. The Company's credit exposure on service fee-
based contracts is the full amount of the ad sales as the Company is obligated
to pay the Web publishers for ads sold on their Web sites irrespective of
receiving payment from advertisers.

   The Company extends credit to its customers, who are primarily located in
the United States. The ability of these customers to meet their obligations to
the Company is dependent on their economic health, as well as their industry
and other factors. The Company maintains an allowance for doubtful accounts
which represents management's estimate of expected losses on specific accounts
and inherent losses on other as yet unidentified accounts included in accounts
receivable. In estimating the potential losses on specific accounts, management
performs ongoing credit evaluations of its customers based on management
analysis and reviews of available public documents. The amounts the Company
will ultimately realize could differ materially in the near term from the
amounts assumed in arriving at the allowance for doubtful accounts reported in
the financial statement.

 f. Property and Equipment

   Property and equipment are recorded at cost and depreciated over the
estimated useful life of the asset, using the straight-line method of
depreciation. Leasehold improvements are amortized over the shorter of the
estimated useful life of the asset or the term of the lease. Property,
equipment and leasehold improvements have estimated useful lives ranging from
three to five years.

 g. Equipment Under Capital Leases

   Equipment under capital leases is recorded at the lower of the present value
of the minimum lease payments or the fair value of the leased property at the
inception of the lease. Amortization of leased property is computed using the
straight-line method over the term of the lease.

 h. Deferred Revenue

   Deferred revenue primarily represents advertising campaign revenue to be
recognized over the period of the campaign subsequent to the respective year-
end. This revenue will be recognized ratably over the term of the advertising
campaign, which usually ranges from one to twelve months.

                                       40
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 i. Income Taxes

   The Company provides for income taxes in accordance with the asset and
liability method. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using the enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

 j. Net Loss Per Share

   Basic earnings per share ("EPS") is computed by dividing income or loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or result in the issuance of common
stock that would then share in the earnings of the Company. Potentially
dilutive securities are excluded from the Company's calculation of diluted EPS
when their inclusion would be antidilutive.

 k. Stock-Based Compensation

   Accounting principles generally accepted in the United States ("GAAP")
permit companies to use either of two alternative accounting methods to
recognize employee stock-based compensation. Under the first accounting method,
if options are granted at an exercise price equal to the market value of the
stock at the time of the grant, no compensation expense is recognized. The
Company follows this accounting method, which it believes better reflects the
motivation for its issuance of stock options, namely, that they are incentives
for future performance rather than compensation for past performance. Under the
second accounting method, issuers record compensation expense over the period
they are expected to be outstanding prior to exercise, expiration, or
cancellation. The amount of compensation expense recognized over this term is
the "fair value" of the options at the time of the grant as determined by an
option pricing model. The option pricing model attributes fair value to the
options based upon the length of their term, the volatility of the stock price
in past periods, and other factors. Under this method, the issuer recognizes
compensation expense regardless of whether the officer or director exercised
the options. Pro forma disclosures of net income under this method are
presented in Note 6.

 l. Use of Estimates

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

 m. New Accounting Pronouncements

   In March 1998, the Accounting Standards Executive Committee issued Statement
of Position ("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 was adopted by the
Company on January 1, 1999 and did not have a material effect on the Company's
financial position or results of operations.


                                       41
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

3. Equity

   On April 29, 1999, the Board of Directors of the Company authorized a stock
split converting each share of common stock into ten shares of common stock.
This stock split increased the total number of common stock shares authorized
from 1,800,000 to 18,000,000. In October 1999, the Company announced that it
will effect a reverse stock split converting three shares of common stock into
two shares of common stock. On January 25, 2000, the Company effected the 2-
for-3 reverse stock split. The effect of this stock split is retroactively
reflected in the financial statements and the accompanying notes to the
financial statements.

   On September 22, 1999, the Company restated and amended its certificate of
incorporation authorizing 80,000,000 shares of common stock, later adjusted to
53,333,333 as a result of the reverse stock split, and 15,000,000 authorized
shares of preferred stock.

 a. Series A Preferred Stock Financing

   On September 16, 1998, in a private placement transaction, the Company
issued 2,000 shares of Series A preferred stock to William Apfelbaum at $1,000
per share, convertible into common stock at the conversion price per share of
$1.20. The number of shares of common stock into which the Series A preferred
stock will convert is an aggregate of 1,666,666 shares. Mr. Apfelbaum, the
Company's chairman, was issued a warrant to purchase up to 438,593 shares of
the Company's common stock at a price per share of $1.71. The holder of the
Series A preferred stock is entitled to registration rights regarding the
shares of common stock issued or issuable upon conversion and upon exercise of
the warrant. The holder of the outstanding shares of Series A preferred stock
is entitled to receive, upon conversion of shares of Series A preferred stock
into common stock, a dividend in cash accruing from September 16, 1998, at an
annual rate of $40 per share of Series A preferred stock so converted. The
holder of Series A preferred stock has the right to elect one member of the
board of directors. To date, the holder of the Series A preferred stock has
designated William Apfelbaum to the board of directors. All shares of Series A
preferred stock were automatically converted into shares of common stock upon
the closing of the initial public offering of the Company's common stock on
February 2, 2000.

 b. Series B Preferred Stock Financing

   Commencing on August 6, 1999, in a private placement transaction, the
Company issued a total of 4,107,044 shares of Series B preferred stock at $2.35
per share convertible into common stock at a three-to-two ratio. The principal
purchasers of the Series B preferred stock included DigaComm (L90), L.L.C. and
Keystone Venture V, L.P. DigaComm (L90), L.L.C. also purchased a warrant to
acquire up to 353,964 shares of common stock of the Company at a price per
share of $5.30. Unless previously exercised this warrant will be automatically
exercised on a cashless basis into shares of common stock, with a fair value
equivalent to the intrinsic value of the warrant, upon the closing of an
initial public offering of the Company's common stock. The holders of the
Series B preferred stock are entitled to registration rights regarding the
shares of common stock issued or issuable upon conversion and upon exercise of
the warrant. The holders of the outstanding shares of Series B preferred stock
are entitled to receive, upon conversion of shares of Series B convertible
preferred stock into common stock, a dividend in cash accruing from August 6,
1999, at an annual rate of $0.141 per share of Series B preferred stock so
converted. The holders of Series B preferred stock collectively have the right
to elect three members of the board of directors. All shares of Series B
preferred stock were automatically converted into shares of common stock upon
the closing the initial public offering of the Company's common stock on
February 2, 2000. In connection with the closing of the private placement
transaction for Series B preferred stock, the Company incurred fees and
expenses totaling $629,864.


                                       42
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

 c. Series C Preferred Stock Financing

   On September 22, 1999, in a private placement transaction, the Company
issued 1,307,190 shares of Series C preferred stock to Development Ventures
(Two) Inc. and Rare Medium Group, Inc. at $3.06 per share, convertible into
common stock at a three-to-two ratio. The holders of the outstanding shares of
Series C preferred stock are entitled to receive, upon conversion of the Series
C preferred stock into common stock, a dividend in cash accruing from September
22, 1999, at an annual rate of $0.18 per share of Series C preferred stock so
converted. Development Ventures (Two) Inc. also purchased a warrant to acquire
up to 674,029 shares of common stock of the Company at a price per share of
$4.59. Rare Medium Group, Inc. also purchased a warrant to acquire up to
600,000 shares of common stock of the Company at a price per share of $4.59.
Unless previously exercised, both warrants will automatically be exercised on a
cashless basis into shares of common stock upon the closing of an initial
public offering. The holders of Series C preferred stock are entitled to have
their shares of common stock issuable upon conversion of the Series C preferred
stock, as well as the common stock issuable upon exercise of their warrants,
registered on the same registration statement. All shares of Series C preferred
stock were automatically converted into shares of common stock upon the closing
of the initial public offering of the Company's common stock on February 2,
2000.

 d. Warrants

   On June 7, 1999, the Company issued to The Roman Arch Fund L.P. and The
Roman Arch Fund II, L.P. four warrants to purchase up to an aggregate of
333,333 shares of common stock, later adjusted to an aggregate of 150,000
shares of common stock, at an initial purchase price of $2.40 per share,
subject to adjustment. These warrants may be exercised on a cashless basis.
These warrants expire on the earlier of (i) June 7, 2005 or (ii) the fifth
anniversary of an initial public offering with gross proceeds of at least
$20,000,000. Eighty-three thousand three hundred thirty-three of these
warrants, to the extent not previously exercised, may be exchanged at the
election of the holder within 180 days of the closing of an initial public
offering of the Company's common stock with gross proceeds of at least
$20,000,000 for warrants to purchase up to 166,667 shares of common stock.

   On August 13, 1999, the Company issued to William Apfelbaum a warrant to
purchase up to 353,964 shares of common stock, at an exercise price of $5.30
per share. Unless previously exercised, this warrant will automatically convert
into the right to receive 353,964 shares of common stock immediately prior to
the closing of an initial public offering of the Company's common stock. Mr.
Apfelbaum exercised this warrant on a cashless basis on January 28, 2000 and
purchased 274,422 shares of common stock.

 e. Unaudited Pro Forma Stockholders' Equity

   Concurrent with the consummation of an initial public offering of the
Company's common stock, the Company will cause the conversion of all existing
Series A, B and C preferred stock into 5,276,156 shares of the Company's common
stock. The unaudited pro forma stockholders' equity at December 31, 1999, gives
effect to this conversion.

4. Debt

   On June 7, 1999, the Company entered into two senior promissory note
agreements in the aggregate principal amount of $1,000,000 and warrants to
purchase an aggregate of up to 333,333 shares of common stock. These notes bear
interest at 9% through June 7, 2000, and 12% thereafter until paid in full.
During August 1999, the Company paid in full its obligations under these two
senior promissory note agreements and issued the warrants in aggregate of
150,000 shares of common stock.

                                       43
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   On November 29, 1999, the Company acquired a software license in exchange
for a promissory note for $1,342,924. The note bears interest at 7.86% per
annum. This note is collateralized by a standby letter of $1,208,632. Remaining
principal payments due under the note are $414,222, $446,788 and $481,914 for
the years ending December 31, 2000, 2001 and 2002, respectively.

   On November 29, 1999, the Company obtained a standby letter of credit for a
total of $1,208,632. At December 31, 1999, the Company had pledged $1,208,632
of cash as collateral for this outstanding letter of credit.

   On November 29, 1999, the Company obtained a standby letter of credit for a
total of $60,000. At December 31, 1999, the Company had pledged $60,000 of cash
as collateral for this outstanding letter of credit.

5. Income Taxes

   During 1997, the Company was a sole proprietorship and limited liability
corporation. In 1998, the Company was an S-corporation and the federal and
state taxes were the responsibility of stockholders rather than the Company.
Effective November 30, 1998, the Company became a C-corporation for income tax
purposes. Pursuant to this election, such taxes will be the responsibility of
the Company rather than stockholders.

   Deferred income taxes arise as a result of temporary differences in the
methods used to determine income for financial reporting purposes versus income
for tax reporting purposes. These differences result primarily from accruals,
reserves and net operating losses carrying forward.

   The provision (benefit) for income taxes for December 31, 1998 and 1999
consists of the following:

<TABLE>
<CAPTION>
                                                               December 31,
                                                            -------------------
                                                              1998      1999
                                                            -------- ----------
       <S>                                                  <C>      <C>
       Current:
        Federal............................................ $    --  $      --
        State..............................................      800        800
                                                            -------- ----------
                                                                 800        800
       Deferred............................................  136,600  2,981,483
                                                            -------- ----------
                                                             137,400  2,982,283
       Less: Valuation allowance...........................  136,600  2,981,483
                                                            -------- ----------
                                                            $    800 $      800
                                                            ======== ==========
</TABLE>

   The net deferred income tax assets at December 31, 1998 and 1999 are
comprised primarily of net operating loss carry forwards and are summarized as
follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                                         ----------------------
                                                           1998        1999
                                                         ---------  -----------
       <S>                                               <C>        <C>
       Deferred tax asset............................... $ 136,600  $ 2,981,483
       Less: Valuation allowance........................  (136,600)  (2,981,483)
                                                         ---------  -----------
                                                         $     --   $       --
                                                         =========  ===========
</TABLE>

   At December 31, 1998 and 1999, the Company provided a valuation allowance
for net deferred tax assets which management determined were "more likely than
not" to be unrealizable. As a result, no deferred tax assets have been recorded
by the Company.


                                       44
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

   The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforward in certain situations where changes occur in the stock
ownership of a company. If the Company should have an ownership change, as
defined for tax purposes, utilization of the carryforwards could be restricted.

6. Stock Options and Warrants

 a. Stock Options

   During 1998, the Company issued 648,667 nonqualified stock options at an
exercise price equal to the then current fair market value of the stock, as
determined by the Company's Board of Directors. These options vest between two
to three years after the grant date and expire no later than ten years after
the grant date.

   During February 1999, the Company granted 46,666 stock options to employees
with a strike price of $1.50 vesting ratably through March 1, 2003. These
options are dependent upon continued employment with the Company.

   During April 1999, the Company adopted an employee stock option plan
authorized by the Board of Directors to grant up to an aggregate of 1,666,666
options to purchase common stock shares. These shares may be comprised of
authorized but unissued shares or shares previously issued but reacquired by
the Company. The price of these options will be not less than the fair market
value of the shares, or greater than 110 percent of the fair market value of
the shares, at the date of grant. This plan will terminate ten years from the
adoption date and may be amended by the Board of Directors with stockholder
approval.

   No options were issued by the Company prior to 1998. Employee transactions
during the years ended December 31, 1998 and 1999 are summarized as follows:

<TABLE>
<CAPTION>
                                      1998                      1999
                             ------------------------ --------------------------
                                          Weighted                   Weighted
                                          average                    average
   Employee stock options     Shares   exercise price   Shares    exercise price
   ----------------------    --------  -------------- ----------  --------------
   <S>                       <C>       <C>            <C>         <C>
   Outstanding at beginning
    of year................       --       $ --          582,000      $0.86
   Granted.................   648,667       0.89       1,644,400       3.51
   Exercised...............       --         --          (26,666)      3.53
   Forfeited...............   (66,667)      1.20         (48,000)      2.23
                             --------                 ----------
   Outstanding at end of
    period.................   582,000      $0.86       2,151,734      $2.82
                             ========                 ==========
   Options exercisable at
    end of period..........       --                     816,666
   Weighted-average fair
    value of options
    granted during the
    period.................  $   0.60                 $     2.31
</TABLE>

   The following table summarizes information about employee stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                                                      Weighted average
                                            Number                       remaining
       Range of exercise prices           outstanding                 contractual life
       ------------------------           -----------                 ----------------
       <S>                                <C>                         <C>
                $0.38                        266,667                     8.01 years
                $1.20                        263,333                     8.46 years
                $1.50                         66,667                     8.96 years
                $3.53                      1,488,400                     9.63 years
                $4.59                         66,667                     9.73 years
                                           ---------
                                           2,151,734
                                           =========
</TABLE>

                                       45
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plan. No compensation cost has been recognized for its employee stock
option grants, which are fixed in nature, as the options have been granted with
an exercise price equal to the then current fair market value of the Company's
stock as determined by the Company's Board of Directors. Had compensation cost
for the Company's stock-based compensation plan been determined based on the
fair value at the grant dates for awards under this plan consistent with the
method of Financial Accounting Standards Board ("FASB") Statement No. 123,
"Accounting for Stock-Based Compensation," the Company's net loss for the years
ended December 31, 1998 and 1999 would have been increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                                 Year ended
                                                                December 31,
                                                             -------------------
                                                               1998      1999
                                                             -------- ----------
       <S>                                                   <C>      <C>
       Net loss as reported................................. $289,569 $7,488,281
       Pro forma adjustment.................................  137,769  1,092,595
                                                             -------- ----------
       Pro forma loss....................................... $427,338 $8,580,876
                                                             ======== ==========
</TABLE>

   The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants during the years ended December 31, 1998 and 1999:
dividend yield of 0 percent; expected volatility of 20 percent; risk-free
interest rates of 5.9 percent; and an expected life of five years.

 b. Common Stock Warrants

   On September 16, 1998, the Company entered into a Series A preferred stock
agreement which included a warrant to purchase 438,593 shares of common stock
at a strike price of $1.71 per share. The holder of this warrant exercised the
warrant on January 27, 2000 and purchased 438,593 shares of common stock. In
August 1999, the Company issued another warrant to this holder of Series A
preferred stock to purchase 353,964 shares of common stock at a strike price of
$5.30 per share. This warrant was exercised on a cashless basis on January 28,
2000 to purchase 274,422 shares of common stock.

   On June 7, 1999, the Company issued warrants, in association with the senior
promissory notes, to purchase an aggregate of up to 333,333 shares of common
stock, later adjusted to an aggregate of 150,000 shares of common stock. These
warrants may be exercised on a cashless basis. These warrants are exercisable
at a price equal to $2.40 per share at any time or from time to time commencing
on the earliest of (i) December7, 1999, (ii) the closing of a qualified initial
public offering as defined, (iii) the closing of a qualified private placement
as defined and prior to 5:00 p.m., Los Angeles, California time, on the earlier
of (i) June 7, 2005 or (ii) the fifth anniversary of the commencement of
trading of the Company's common stock in connection with an initial public
offering with gross proceeds of at least $20,000,000.

   In August 1999, in association with the Series B preferred stock issuance,
the Company issued a warrant to purchase 353,964 shares of the Company's common
stock at a price of $5.30 per share expiring August 2004. To the extent not
previously exercised, this warrant will be automatically exercised on a
cashless basis into shares of common stock immediately upon the closing of an
initial public offering of the Company's common stock. The holder of the
warrant is entitled to registration rights regarding the shares of common stock
issued or issuable upon conversion and upon exercise of the warrant. This
warrant was exercised on a cashless basis on February 2, 2000 to purchase
276,825 shares of common stock.

   In September 1999, in association with the Series C preferred stock
issuance, the Company issued warrants to purchase 1,274,029 shares of the
Company's common stock at a price of $4.59 per share expiring September 2004.
To the extent not previously exercised, these warrants will be automatically
exercised on a

                                       46
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

cashless basis into shares of common stock immediately upon the closing of an
initial public offering of the Company's common stock. Two of these warrants
were exercised on January 31, 2000 to purchase 674,029 shares of common stock.
The remaining warrants were exercised on a cashless basis on February 2, 2000
to purchase 486,653 shares of common stock. The holders of the warrants are
entitled to registration rights regarding the shares of common stock issued
upon conversion and upon exercise of the warrants.

7. Commitments and Contingencies

 a. Litigation

   The Company may become subject to legal proceeding from time to time in the
normal course of business. The Company is not currently involved in any
litigation that management believes will have a material adverse effect on the
Company's financial position or results of operations.

   On November 12, 1999, DoubleClick, Inc. ("DoubleClick") filed a lawsuit
against the Company in the United States District Court for the Eastern
District of Virginia. The suit alleges that the Company is infringing, and
inducing and contributing to the infringement by third parties of, a patent
held by DoubleClick related to methods and networks for delivering, targeting
and measuring advertising over the Internet. DoubleClick is seeking treble
damages in an unspecified amount, a preliminary and permanent injunction from
further alleged infringement and attorneys' fees and costs. The Company
believes that it has meritorious defenses to this lawsuit and intends to defend
itself vigorously. The Company currently believes that this lawsuit and its
outcome will not have a material adverse effect on the Company's results of
operations or financial position. However, the litigation could result in
significant expenses and diversion of management time and other resources.
Further, if DoubleClick successfully asserts an infringement claim against the
Company, its operations would be impacted severely. The DoubleClick suit could
result in limitations on the Company's ability to market its products and
services, delays and costs associated with redesigning its products and
services or payments of license fees or other payments.

 b. Lease Commitments and Service Agreement

   The Company is committed under noncancellable operating and capital lease
obligations for certain facilities and equipment. The equipment related to
capital leases has an original cost of approximately $0, $274,000 and $873,000
at December 31, 1997, 1998 and 1999, respectively, with accumulated
depreciation of approximately $0, $11,000, and $127,000, respectively. Rent
expense under operating leases was approximately $24,000, $163,000 and $636,000
at December 31, 1997, 1998 and 1999, respectively.

   Future minimum annual payments under noncancellable operating and capital
leases are as follows as of December 31, 1999:
<TABLE>
<CAPTION>
                                                            Capital  Operating
     Year                                                    Leases    Leases
     ----                                                   -------- ----------
     <S>                                                    <C>      <C>
     2000.................................................. $340,545 $  444,603
     2001..................................................  316,271    409,091
     2002..................................................  147,235    404,966
     2003..................................................   18,364    404,966
     Thereafter............................................    9,927    812,786
                                                            -------- ----------
                                                             832,342 $2,476,412
                                                            ======== ==========
     Less--Amounts representing interest...................  132,704
                                                            --------
                                                             699,638
     Less--Current portion.................................  256,928
                                                            --------
                                                            $442,710
                                                            ========
</TABLE>


                                       47
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

   During 1999, the Company entered into a three-year servicing agreement with
a third party to provide Internet data service centers. If this agreement is
terminated without cause, the Company will be assessed a fee equal to fifteen
percent of the total contract value due to the service provider.

8. Related Party Transactions

   During 1998, the Company received $43,750 in notes receivable for common
stock from employees for the issuance of 116,667 shares of common stock with a
par value of $0.001 per share. These notes bear interest at a rate equal to
5.28 percent per annum and mature at the earliest of cessation of maker's
employment by the Company for any reason or May 18, 2004. In addition, during
1998, the Company issued an aggregate of 6,550,000 shares of common stock with
a par value of $0.001 per share to certain other employees and a former
employee in exchange for their contribution of the operating business of John
Bohan & Associates, LLC, which was valued at $2,456,250.

   During 1998, the Company entered into an agreement with a stockholder to
purchase 2,000 shares of preferred stock for $2,000,000 and a warrant to
purchase 438,593 shares of common stock at a strike price of $1.71 per share.

   During September of 1999, a member of the Board of Directors exercised
options to purchase 26,667 shares of common stock at $3.53 per share. This
transaction has been reflected in the financial statements and accompanying
notes to the financial statements.

9. Subsequent Events (Unaudited)

 a. Initial Public Offering

   On February 2, 2000, the Company completed an initial public offering (the
"IPO") of 7,475,000 shares of common stock, including 975,000 shares subject to
the underwriter's over-allotment option, at $15.00 per share of common stock.
The IPO resulted in aggregate net proceeds to the Company of approximately
$102,800,000, net of underwriting discounts and expenses of the offering.

 b. Conversion of Preferred Stock and Warrants

   Upon the IPO of the Company's common stock, the Company converted all
outstanding shares of Series A, B and C preferred stock into shares of common
stock. Additionally, the Series A, B and C preferred stockholders exercised
their warrants to purchase shares of the Company's common stock (Notes 3 and
6).

 c. Grant of Employee Stock Options

   Upon the initial public offering of the Company's common stock, the Company
granted an aggregate of 451,526 options to employees to purchase shares of the
Company's common stock under the terms set forth in the Employee Stock Option
Plan (Note 6).

                                       48
<PAGE>

                                   L90, INC.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 d. Equipment Lease

   On January 5, 2000, the Company entered into a lease agreement for network
equipment. The Company is required to make equal monthly payments which are due
as follows:

<TABLE>
<CAPTION>
       Year ending December 31,
       ------------------------
       <S>                                                          <C>
       2000........................................................ $  853,688
       2001........................................................    853,688
                                                                    ----------
                                                                    $1,707,376
                                                                    ==========
</TABLE>

 e. Office Lease

   On February 28, 2000, the Company entered into an agreement to lease
additional office space through July 30, 2003. The company is required to make
equal monthly payments which are due as follows:

<TABLE>
<CAPTION>
       Year ending December 31,
       ------------------------
       <S>                                                          <C>
       2000........................................................ $  292,500
       2001........................................................    351,000
       2002........................................................    351,000
       2003........................................................    204,750
                                                                    ----------
                                                                    $1,199,250
                                                                    ==========
</TABLE>

   In connection with this agreement, the Company was required to obtain a
standby letter of credit in the amount of $600,000. This letter of credit
expires on July 31, 2001 and is automatically extended for an additional period
of one year through July 31, 2002. The Company has pledged $600,000 under this
letter of credit.

 f. Warrant

   In connection with an advertising agreement, the Company issued a warrant to
purchase 50,000 shares of common stock at an exercise price of $15.00 per
share. This warrant is only exercisable from January 30, 2001 through February
5, 2001. The warrant expires on February 5, 2001. The fair value of the warrant
was estimated at $209,000 on the date of issuance using the Black-Scholes
option pricing model with the following assumptions: dividend yield of 0
percent; expected volatility of 65 percent; risk-free interest rate of
6.12 percent; and an expected life of one year.

                                       49
<PAGE>

                                  SCHEDULE II

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                         Balance  Charged              Balance
                                           at     to Costs              at End
                                        Beginning   and                   of
Description                             of Period Expenses Deductions   Period
-----------                             --------- -------- ----------  --------
<S>                                     <C>       <C>      <C>         <C>
For the year ended December 31, 1999
Allowance for doubtful accounts
 receivable...........................  $142,952  $644,602 $(119,544)  $668,010
For the year ended December 31, 1998
Allowance for doubtful accounts
 receivable...........................  $ 69,860  $142,952 $ (69,860)  $142,952
For the period ended December 31, 1997
Allowance for doubtful accounts
 receivable...........................  $  7,029  $ 69,860 $  (7,029)  $ 69,860
</TABLE>

                                       50
<PAGE>

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

   Not Applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors, Executive Officers and Key Employees

   Our directors, executive officers and key employees and their positions and
ages, as of March 1, 2000, are as follows:

<TABLE>
<CAPTION>
           Name           Age   Position
           ----           ---   --------
 <C>                      <C> <S>
 William M. Apfelbaum....  53 Chairman of the Board of Directors
 John C. Bohan...........  35 President, Chief Executive Officer and Director
 Thomas A. Sebastian.....  35 Senior Vice President, Chief Financial Officer and Assistant Secretary
 Mark D. Roah............  31 Senior Vice President of Business Development and Director
 Christopher J.
  Cardinali..............  35 Vice President of Northwestern Sales, Secretary and Director
 Frank A. Addante........  23 Chief Technology Officer
 Keith J. Kaplan.........  31 Senior Vice President of National York Sales
 Sean P. Cowan...........  32 Senior Vice President of New York Sales
 Peter G. Diamandis......  68 Director
 Peter E. Ligeti.........  44 Director
 Glenn S. Meyers.........  38 Director
 G. Bruce Redditt........  49 Director
 Peter Sealey............  59 Director
</TABLE>

   William M. Apfelbaum has served as our Chairman of the Board and a director
since September 1998. Mr. Apfelbaum has been the President and Chief Executive
Officer of TDI Worldwide, a wholly-owned subsidiary of CBS, since 1989. Mr.
Apfelbaum is also the founder of CBS Plus which oversees advertising sales
across all seven of CBS's media divisions, including their Internet-based
properties. Mr. Apfelbaum graduated with a B.A. from New York University. He
has guest lectured at the Harvard Business School, the London Business School
and New York University's Stern School of Business.

   John C. Bohan has served as our President and Chief Executive Officer and a
director since our inception. Mr. Bohan is a co-founder of L90. From April 1995
to December 1996, he was Executive Vice President for Screaming Media, formerly
known as Interactive Connection. From August 1994 until March 1995, Mr. Bohan
served as an advertising sales Account Executive for USA Networks. Mr. Bohan
worked as a cable advertising sales Account Executive for Landmark
Communications in both New York City and Los Angeles from February 1990 to
August 1994. Mr. Bohan graduated with a B.A. in Economics from Middlebury
College.

   Thomas A. Sebastian has served as Chief Financial Officer, Senior Vice
President and Assistant Secretary of L90 since July 1999. Between June 1997 and
June 1999, Mr. Sebastian served as Vice President of Finance of Fair, Isaac &
Company. Between May 1996 and May 1997, he was an Investment Banker at Volpe,
Brown, Whelan & Company. Between June 1994 and May 1996, Mr. Sebastian worked
as Corporate Finance Manager at Hewlett-Packard Company. Mr. Sebastian
graduated with a B.S. in Computer Science from the University of Virginia and
an M.B.A. from the Anderson School at UCLA.

   Mark D. Roah has served as our Senior Vice President of Business Development
since April 1999 and has served as a director of L90 since our inception. Mr.
Roah is a co-founder of L90. From January 1997 to April 1999, he served as our
Vice President of Southwestern Sales. Between January 1996 and December 1996,
Mr. Roah worked as an Account Executive at Screaming Media, formerly known as
Interactive Connection.

                                       51
<PAGE>

From August 1992 until November 1994, Mr. Roah worked as a Financial Analyst at
Shaman Pharmaceuticals and between November 1994 and December 1995 he was a
Marketing Manager for ICS Communications. Mr. Roah graduated with a B.S. in
Finance from San Francisco State University.

   Christopher J. Cardinali has served as our Vice President of Northwestern
Sales and Secretary and has served as a director since our inception. Mr.
Cardinali is a co-founder of L90. Between January 1996 and December 1996, Mr.
Cardinali worked as an Account Executive at Screaming Media, formerly known as
Interactive Connection. Between June 1995 and December 1995, he was a
consultant for Halo Interactive. Mr. Cardinali graduated with a B.A. in
Economics and Philosophy from Boston College and also received an M.B.A. from
the Anderson School at UCLA.

   Frank A. Addante has served as our Chief Technology Officer since February
1998. Between January 1995 and February 1998, Mr. Addante served as Vice
President of ReaXions, Inc., an Internet advertising and e-commerce technology
development company. Between January 1997 and February 1998, ReaXions provided
technology consulting services to L90, during which time Mr. Addante served as
our primary contact within ReaXions. Prior to January 1995, Mr. Addante
attended the Illinois Institute of Technology.

   Keith J. Kaplan has served as our Senior Vice President of National Sales
since October 1999. Between August 1998 and September 1999, Mr. Kaplan served
as National Account Manager for Transportation Displays Incorporated. Between
April 1995 and August 1998, Mr. Kaplan served as Northeast Division Manager for
Paramount Pictures. From February 1990 to April 1995, he served as National
Sales Manager for Cablevision Systems (SportsChannel). Mr. Kaplan graduated
with B.A. in Communications from Syracuse University.

   Sean P. Cowan has served as our Senior Vice President of New York Sales
since October 1999. Between September 1997 and September 1999, Mr. Cowan served
as Vice President, National Sales, for Paramount Advertiser Services, Paramount
Pictures. Between September 1992 and September 1997, he served as an Account
Executive for Paramount Advertiser Services, Paramount Pictures. Mr. Cowan
graduated with a B.S. in Marketing from State University of New York, College
at Oswego.

   Peter G. Diamandis has served as one of our directors since August 1999. Mr.
Diamandis is currently a managing member of DigaComm, L.L.C., a private
investment firm. Between February 1991 and September 1996, he served as Vice
Chairman of DM Holdings, Inc., the parent company of Donnelley Marketing, Inc.
Mr. Diamandis was also the founder or publisher of several popular magazines,
including Self Magazine, New York and Mademoiselle. Mr. Diamandis serves on the
board of directors of Big Flower Press Holdings, Inc. Mr. Diamandis graduated
with a B.S. in Finance from Bucknell University.

   Peter E. Ligeti has served as a director of L90 since August 1999. Since
1988, Mr. Ligeti has been a principal of Keystone Venture Capital, a
Philadelphia-based venture capital firm, where he has managed many of
Keystone's technology-related investments and provided financing to emerging
growth companies. Mr. Ligeti has represented Keystone on the boards of such
companies as Solbright, Nettech, BATNET, Hollywood Stock Exchange, Integrated
Circuit Systems, Paradigm Software Technologies, Ansoft, Infonautics and
National Medical Technologies. Mr. Ligeti graduated with a B.A. from Harvard
University and an M.B.A. from the Wharton School at the University of
Pennsylvania.

   Glenn S. Meyers has served as one of our directors since September 1999.
Since April 1998, Mr. Meyers has served as a director and the President and
Chief Executive Officer of Rare Medium Group, Inc. Mr. Meyers has also served
as a director and Chief Executive Officer of Rare Medium, Inc. since September
1995. Prior to September 1995, Mr. Meyers served as President of Brookridge
Capital Management, an Internet venture capital firm. Mr. Meyers graduated with
a B.S. from the University of Florida School of Business Administration.

   G. Bruce Redditt has served as one of our directors since September 1999.
Since May 1998, Mr. Redditt has served as Executive Vice President of Omnicom
Group Inc. His duties include overseeing Communicade, a

                                       52
<PAGE>

division of Omnicom Group that holds investment positions in companies
specializing in Web-based, interactive media services. Between July 1995 and
April 1998, Mr. Redditt served as Executive Vice President of Sony Pictures
Entertainment. Between July 1986 and June 1995, Mr. Redditt held a number of
communication positions within GTE Corporation, last as Corporate Vice
President. Mr. Redditt graduated with a B.S. from Florida State University.

   Peter Sealey has served as one of our directors since August 1999. Dr.
Sealey has been a Lecturer and an Adjunct Professor of Marketing at the Haas
School of Business at the University of California, Berkeley since 1994. In
addition, during the same period Dr. Sealey has been self-employed as a
management consultant. Dr. Sealey was employed by the Coca-Cola Company for 24
years, where he held a series of senior management positions, including Senior
Vice President, Global Marketing. Dr. Sealey serves on the board of directors
of Autoweb.com, Cybergold, Inc. and USWeb Corporation. Dr. Sealey graduated
with a B.S. from the University of Florida, an M.I.A. from Yale University, and
an M.A. and a Ph.D. from Claremont Graduate University.

Composition of the Board

   Our board of directors has nine authorized members. All directors are
elected by the holders of common stock. Members of the board of directors will
be elected each year at our annual meeting of stockholders, and serve until the
following annual meeting of stockholders or until their respective successors
have been elected and qualified.

Board Committees

   We have established an audit committee, comprised of Mr. Ligeti and Mr.
Diamandis, and a compensation committee, comprised of Mr. Apfelbaum and Mr.
Sealey. The audit committee reviews our internal accounting procedures and
consults with and reviews the results and scope of the audit and other services
provided by our independent accountants. The compensation committee administers
our stock option plans and reviews and approves the compensation and benefits
for our key executive officers. This committee also establishes and reviews
general policies relating to compensation and benefits of our employees.

Director Compensation

   Other than reimbursing directors for customary and reasonable expenses of
attending board and committee meetings, we do not currently compensate our non-
employee directors.

Employment Agreements

   In September 1999, we entered into at-will employment agreements with each
of Messrs. Bohan, Sebastian, Roah, Cardinali and Addante. These agreements
provide for annual base salaries of $58,000, $130,000, $100,000, $60,000 and
$81,600, respectively. In addition, these agreements provide for sales
commissions for Messrs. Bohan, Roah, Cardinali and Addante in accordance with
our then current policy. Each agreement provides for an initial two-year term,
and is automatically renewed for successive one-year terms, unless otherwise
terminated in writing by us or the employee prior to 30 days before the
expiration of the initial term or any successive term. These agreements provide
for customary benefits and for the ongoing payment to each of these employees
of their base salaries for the balance of the initial term or any successive
term if he is terminated without cause. In November 1999, we entered into an
arrangement with Mr. Sebastian governing the vesting of stock options and
restricted stock grants upon a termination of his employment following a change
in control. The agreement provides that all of Mr. Sebastian's options and
restricted stock grants shall become exercisable upon a termination of his
employment following a change in control. In addition, the agreement provides
that in the event of a termination of his employment following a change in
control, Mr. Sebastian will receive a cash payment to offset the effects of any
"excess parachute" excise tax imposed upon him.


                                       53
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

   Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of our common stock and other equity securities of L90. Officers,
directors and greater than ten percent stockholders are required by Securities
and Exchange Commission regulation to furnish us with copies of all Section
16(a) forms they file. To our knowledge, based solely on a review of the copies
of such reports furnished to us and written representations that no other
reports were required, our officers, directors and greater than ten percent
beneficial owners complied with the Section 16(a) filing requirements during
the year ended December 31, 1999.

ITEM 11. EXECUTIVE COMPENSATION.

   The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and the other executive officers whose cash
compensation exceeded $100,000 in 1999 for services rendered to L90 in all
capacities during 1999.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                        Long-Term
                                                       Compensation
                                                          Awards
                            Annual                        Shares
Name and Principal       Compensation   Other Annual    Underlying    All Other
Position                    Salary    Compensation (1)   Options     Compensation
------------------       ------------ ---------------- ------------  ------------
<S>                      <C>          <C>              <C>           <C>
John C. Bohan...........   $58,000        $204,649           --            --
  President and Chief
   Executive Officer
Thomas A. Sebastian.....   $85,000             --        166,666           --
  Senior Vice President,
   Chief Financial
   Officer and Assistant
   Secretary
Christopher J.
 Cardinali..............   $60,000        $ 69,480       133,333(2)     $4,800(3)
  Vice President of
   Northwestern Sales
Mark D. Roah............   $39,792        $111,985       133,333(2)     $4,800(3)
  Senior Vice President
   of Business
   Development
Frank A. Addante........   $63,600        $ 39,344       640,000           --
  Chief Technology
   Officer
</TABLE>
--------
(1) The amounts listed in "Other Annual Compensation" is comprised solely of
    sales commissions.
(2) These shares underlie an option granted by John C. Bohan to the option
    holder. The option and the shares underlying the option may be deemed
    compensation received by the option holder for services rendered to L90.
(3) This amount represents a vehicle allowance.

                                       54
<PAGE>

Option Grants in 1999

   The following table sets forth information regarding options granted to the
named executives during the year ended December 31, 1999. We have not granted
any stock appreciation rights. Options were granted at an exercise price equal
to the fair market value of the common stock at the date of the grant. In
determining the fair market value of the common stock, the board of directors
considered various factors, including recent arms' length transactions, our
financial condition and business prospects, operating results, the absence of a
market for the common stock and the risks normally associated with investments
in companies engaged in similar businesses. The term of each option granted is
generally 10 years from the date of grant. Options may terminate before their
expiration dates, if the optionee's status as an employee is terminated or upon
the optionee's death or disability.
<TABLE>
<CAPTION>




                                                                              Potential Realizable
                                         Individual Grants                      Value at Assumed
                         ----------------------------------------------------     Annual Rates
                         Number of    % of Total                                 of Stock Price
                         Securities    Options                                  Appreciation for
                         Underlying   Granted to                                 Option Term (3)
                          Options     Employees  Exercise Price  Expiration   ---------------------
Name                      Granted      in 1999     Per Share        Date          5%        10%
----                     ----------   ---------- -------------- ------------- ---------- ----------
<S>                      <C>          <C>        <C>            <C>           <C>        <C>
John C. Bohan...........      --          --           --                 --         --         --
Thomas A. Sebastian.....  166,666        10.1        $3.53      Aug. 17, 2009 $  369,998 $  937,648
Christopher J.
 Cardinali..............  133,333(1)      7.5(2)     $3.53      Aug. 10, 2009 $  295,999 $  750,119
Mark D. Roah............  133,333(1)      7.5(2)     $3.53      Aug. 10, 2009 $  295,999 $  750,119
Frank A. Addante........  640,000        38.9        $3.53      Aug. 10, 2009 $1,420,798 $3,600,583
</TABLE>

--------
(1) These shares underlie an option granted by John C. Bohan to the option
    holder. The option and the shares underlying the option may be deemed
    compensation received by the option holder for services rendered to L90.
(2) This percentage only includes 133,333 shares underlying an option that may
    be deemed compensation received by the option holder for services rendered
    to L90.
(3) Amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term. These gains
    are based on assumed rates of stock appreciation of 5% and 10% compounded
    annually from the date the respective options were granted based upon the
    fair market value on the date of grant. These assumptions are not intended
    to forecast future appreciation of our stock price. The amounts reflected
    in the table may not be achieved.

1999 Year-Ended Option Values

   The following table sets forth for each of the named executives information
concerning the number of shares subject to both exercisable and unexercisable
stock options as of December 31, 1999. Also reported are values for "in-the-
money" options that represent the positive spread between the respective
exercise prices of outstanding options and the fair market value of our common
stock as of December 31, 1999. None of the named executives exercised any
options in 1999.

<TABLE>
<CAPTION>
                              Number of Securities      Value of Unexercised
                             Underlying Unexercised         In-the-Money
                                Options at FY-End       Options at FY-End (1)
                            ------------------------- -------------------------
Name                        Exercisable Unexercisable Exercisable Unexercisable
----                        ----------- ------------- ----------- -------------
<S>                         <C>         <C>           <C>         <C>
John C. Bohan..............       --           --            --           --
Thomas A. Sebastian........       --       166,666           --    $1,244,995
Christopher J. Cardinali...   266,666          --     $2,411,994          --
Mark D. Roah...............   266,666          --     $2,411,994          --
Frank A. Addante...........   333,333      306,667    $2,489,998   $2,290,802
</TABLE>

                                       55
<PAGE>

--------
(1) Calculated by determining the difference between the fair market value of
    the securities underlying the option as of December 31, 1999, which the
    Board of Directors has determined to be $11.00 per share, and the exercise
    price of the named executive's options. In determining the fair market
    value of L90's common stock, the board of directors considered various
    factors, including L90's financial condition and business prospects, its
    operating results, the absence of a market for its common stock and the
    risks normally associated with technology companies.

1999 Stock Incentive Plan

   Our 1999 Stock Incentive Plan was adopted by the board of directors on April
30, 1999, and provides for awards or sales of shares and options, including
incentive stock options and nonstatutory stock options. A total of 2,333,333
shares of common stock has been reserved for issuance under our 1999 Stock
Incentive Plan.

   Our 1999 Stock Incentive Plan is administered by our compensation committee
of the board of directors. The board of directors may amend our 1999 Stock
Incentive Plan as it desires without further action by our stockholders except
as required by applicable law. Our 1999 Stock Incentive Plan will remain in
effect until terminated by the board or for a term of 10 years from its
original adoption date, whichever is earlier.

   The consideration for each award under our 1999 Stock Incentive Plan will be
established by the administrator, but in no event will the option price for any
award be less than 100% of the fair market value of the stock on the date of
the grant. In the event that an employee recipient of incentive stock options
under our 1999 Stock Incentive Plan holds 10% or more of our outstanding common
stock on the date of the grant, the option price for these options may not be
less than 110% of the fair market value of the stock on the date of the grant.
Awards will have such terms and be exercisable in such manner and at such times
as the administrator may determine. However, each option must expire within a
period of not more than 10 years from the date of grant.

   Our 1999 Stock Incentive Plan provides that, in the event of a change in our
capitalization, outstanding options, restricted shares and options available
for grant under the 1999 Stock Incentive Plan will be subject to adjustment in
the discretion of the administrator.

   As of December 31, 1999, options to purchase up to 1,555,066 shares of
common stock had been granted and are outstanding under our 1999 Stock
Incentive Plan. These options have an average exercise price of $3.57 per share
and were held by 85 persons.

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

   The following table sets forth information with respect to the beneficial
ownership of our common stock as of March 1, 2000 for each of the following
persons:

  .  each person or entity who we know to beneficially own 5% or more of the
     outstanding common stock,

  .  each of the named executives,

  .  each of our directors, and

  .  all of our directors and executive officers as a group.

   Unless otherwise indicated, the address of each beneficial owner listed
below is c/o L90, Inc., 2020 Santa Monica Boulevard, Suite 400, Santa Monica,
California 90404.

   The percentage of beneficial ownership is based on 21,892,085 shares of our
common stock outstanding as of March 1, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person
and the percentage

                                       56
<PAGE>

ownership of that person, shares of common stock subject to options or warrants
held by that person that are currently exercisable or exercisable within 60
days of March 1, 2000, are deemed outstanding. These shares, however, are not
deemed outstanding for the purposes of computing the percentage ownership of
each other person. Except as indicated in the footnotes to this table and under
applicable community property laws, each stockholder named in the table has
sole voting and investment power with respect to the shares set forth opposite
such stockholder's name.

<TABLE>
<CAPTION>
                                                  Shares Beneficially Owned
                                                     as of March 1, 2000
                                                  -------------------------
                                                      Number        Percent
                                                  --------------- -------------
<S>                                               <C>             <C>
Named executive officers and directors:
  John C. Bohan (1)..............................       5,728,638       26.2%
  William M. Apfelbaum...........................       2,379,681       10.9
  Glenn S. Meyers (2)............................       1,155,715        5.3
  Peter E. Ligeti (3)............................       1,132,685        5.2
  Peter G. Diamandis (4).........................         843,167        3.9
  Christopher J. Cardinali.......................         446,666        2.0
  Mark D. Roah...................................         453,166        2.1
  Frank A. Addante (5)...........................         400,000        1.8
  Peter Sealey...................................          26,666          *
  Thomas A. Sebastian (6)........................          25,000          *
  Gerald B. Redditt..............................             --         --
Other 5% Stockholders:
  Keystone Venture V, L.P........................       1,132,685        5.2
   1601 Market Street, Suite 2500
   Philadelphia, PA 19103
  Rare Medium Group, Inc.........................       1,089,049        5.0
   44 West 18th Street, New York, NY 10011
  DigaComm (L90), L.L.C..........................         843,167        3.9
   400 North Michigan Avenue, Suite 520
   Chicago, IL 60611
All directors and executive officers as a group
 (11 persons)....................................      12,591,384       56.4
</TABLE>
--------
*  Represents less than 1%.
(1) Includes 303,334 shares on which Mr. Bohan has granted options to key
    employees of L90.
(2) Includes:

  .  1,089,049 shares beneficially owned by Rare Medium Group, Inc., of which
     Mr. Meyers serves as President and Chief Executive Officer, and

  .  66,666 shares issuable upon exercise of stock options at a price of
     $4.59 per share, which are presently exercisable or will become
     exercisable within 60 days from March 1, 2000.
(3) Reflects 1,132,685 shares beneficially owned by Keystone Venture V, L.P.
    Mr. Ligeti is the managing director of Keystone V Management Co., Inc.,
    which is the general partner of Keystone V Partners, L.P., and Keystone V
    Partners, L.P. is the general partner of Keystone Venture V, L.P.
(4) Reflects 843,167 shares beneficially owned by DigaComm (L90), L.L.C., the
    parent of which Mr. Diamandis is a managing member.
(5) Includes 333,333 shares issuable upon exercise of stock options at a price
    of $3.53 per share, which are presently exercisable or will become
    exercisable within 60 days from March 1, 2000.
(6) Reflects 25,000 shares issuable upon exercise of stock options at a price
    of $3.53 per share, which are presently exercisable or will become
    exercisable within 60 days from March 1, 2000.


                                       57
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Preferred Stock Financings

   We used the funds raised in each of the preferred stock financings described
below:

     .  to expand our business operations;

     .  to hire additional personnel;

     .  to provide additional services; and

     .  for other general corporate purposes related to the expansion of our
  business.

 Series A Preferred Stock Financing

   Upon the closing our initial public offering on February 2, 2000, all
outstanding shares of Series A preferred stock automatically converted into an
aggregate of 1,666,666 shares of our common stock. Upon conversion of the
Series A preferred stock, L90 paid the Series A preferred stock holder accrued
dividends equal to approximately $105,863.

 Series B Preferred Stock Financing

   In a private placement transaction, which closed in September 1999, we
issued a total of 4,107,044 shares of Series B preferred stock at $2.35 per
share convertible into common stock at a three-to-two ratio. The Series B
preferred stock converted into an aggregate of 2,738,029 shares of common stock
upon the closing of our initial public offering on February 2, 2000. The
principal purchasers of the Series B preferred stock included DigaComm (L90),
L.L.C. and Keystone Venture V, L.P. DigaComm (L90), L.L.C. also purchased a
warrant to acquire up to 353,964 shares of our common stock at a price per
share of $5.30. DigaComm (L90), L.L.C. exercised this warrant on a cashless
basis on February 2, 2000, and purchased 276,825 shares of our common stock.
The holders of common stock issued upon conversion of the Series B preferred
stock are entitled to registration rights with respect to the shares of common
stock issued upon conversion of the Series B preferred stock. Upon conversion
of the Series B preferred stock on February 2, 2000, L90 paid the holders of
Series B preferred stock aggregate, accrued dividends equal to approximately
$233,224.

 Series C Preferred Stock Financing

   In a private placement transaction, which closed in September 1999, we
issued a total of 1,307,190 shares of Series C preferred stock at $3.06 per
share convertible into common stock at a three-to-two ratio. The Series C
preferred stock converted into an aggregate of 871,460 shares of common stock
upon the closing of our initial public offering on February 2, 2000. The
purchasers of the Series C preferred stock were Development Ventures (Two) Inc.
and Rare Medium Group, Inc. Development Ventures (Two) Inc. purchased a warrant
to acquire up to an additional 674,029 shares of our common stock at a price of
$4.59. The holders of this warrant exercised this warrant on January 31, 2000,
and purchased an aggregate of 674,029 shares of our common stock. Rare Medium
Group, Inc. purchased a warrant to acquire up to an additional 600,000 shares
of our common stock at a price of $4.59. Rare Medium Group, Inc. exercised this
warrant on a cashless basis on February 2, 2000, and purchased 486,652 shares
of our common stock. The holders of common stock issued upon conversion of the
Series C preferred stock and upon exercise of the warrants have registered
these shares of common stock on a registration statement declared effective on
January 28, 2000. These stockholders have agreed not to sell any of these
shares for at least 180 days after January 28, 3000, the effective date of our
registration statement covering our initial public offering. and one-half of
their shares until 270 days after January 28, 2000. See "Description of Capital
Stock--Registration Rights" for a description of these registration rights.
Upon conversion of the Series C preferred stock on February 2, 2000, L90 paid
the holders of Series C preferred stock aggregate, accrued dividends equal to
approximately $64,464.


                                       58
<PAGE>

Warrants

   On June 7, 1999, we issued to The Roman Arch Fund L.P. and The Roman Arch
Fund II, L.P. four warrants to purchase up to an aggregate of 333,333 shares of
common stock, later adjusted to an aggregate of 150,000 shares of common stock,
at an initial purchase price of $2.40 per share, subject to adjustment. These
warrants may be exercised on a cashless basis. These warrants expire on the
earlier of June 7, 2005, or the fifth anniversary of this offering. Warrants to
purchase up to 83,333 shares of common stock, to the extent not previously
exercised, may be exchanged at the election of the holder within 180 days of
the closing of our initial public offering for warrants to purchase up to
166,667 shares of common stock.

   On August 13, 1999, we issued to William Apfelbaum a warrant to purchase up
to 353,964 shares of common stock, at an exercise price of $5.30 per share. Mr.
Apfelbaum exercised this warrant on a cashless basis on January 28, 2000, and
purchased 274,422 shares of our common stock. In addition, Mr. Apfelbaum
exercised a warrant on January 27, 2000, and purchased 438,593 shares of our
common stock at an exercise price per share of $1.71.

Shareholders Agreement

   In connection with the financings described above, substantially all of our
stockholders entered into an agreement with us which provides for specified
voting for our board of directors and requires that corporate activities, such
as a merger or sale of assets, be approved by our stockholders. This agreement
also contains various other rights. However, the provisions of this agreement
terminated upon the closing of our initial public offering and with the
conversion at that closing of all of our preferred stock into common stock.

                                       59
<PAGE>

                                    PART IV

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

(a) Documents Filed As Part of This Report:

   (1) Index to Financial Statements

   The financial statements included in Part II, Item 8 of this document are
filed as part of this Report.

   (2) Financial Statement Schedules

   The financial statement schedule included in Part II, Item 8 of this
document is filed as part of this Report.

   All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.

   (3) Exhibits

   The exhibits listed below are filed as part of this Report.


<TABLE>
<CAPTION>
 Exhibit No.                             Description
 -----------                             -----------
 <C>         <S>
     2.1     Agreement of Merger dated September 15, 1999, previously filed
             with the Commission as Exhibit 2.1 to L90's Registration Statement
             on Form S-1 (as amended) filed with the Commission on September
             23, 1999 (the "Form S-1"), which is incorporated herein by
             reference.
     3.1     Amended and Restated Certificate of Incorporation.
     3.2     Amended and Restated Bylaws, previously filed with the Commission
             as Exhibit 3.3 to L90's Form S-1, which is incorporated herein by
             reference.
     4.1     See Exhibits 3.1 and 3.2 for provisions of the Amended and
             Restated Certificate of Incorporation and Bylaws of L90 defining
             the rights of holders of Common Stock of L90.
     4.2     Stock Purchase and Stockholders Agreement dated September 14,
             1998, previously filed with the Commission as Exhibit 4.2 to L90's
             Form S-1, which is incorporated herein by reference.
     4.3     Registration Agreement dated August 6, 1999, previously filed with
             the Commission as Exhibit 4.3 to L90's Form S-1, which is
             incorporated herein by reference.
     4.4     Series C Registration Agreement dated September 22, 1999,
             previously filed with the Commission as Exhibit 4.4 to L90's Form
             S-1, which is incorporated herein by reference.
    10.1     1999 Stock Incentive Plan, previously filed with the Commission as
             Exhibit 10.1 to L90's Form S-1, which is incorporated herein by
             reference.
    10.2     Form of Incentive Stock Option Agreement.
    10.3     Form of Non-Statutory Stock Option Agreement.
             Stock Purchase and Stockholders Agreement dated September 14,
    10.4     1998. See Exhibit 4.2
    10.5     Sublease dated May 21, 1999 between Widom, Wein, Cohen, O'Leary,
             Terasawa and Latitude 90, previously filed with the Commission as
             Exhibit 10.3 to L90's Form S-1, which is incorporated herein by
             reference.
    10.6     Representation Agreement dated December 31, 1998 between Latitude
             90, Inc. and Go2Net, Inc., previously filed with the Commission as
             Exhibit 10.7 to L90's Form S-1, which is incorporated herein by
             reference.
    10.7     Advertising Sales Agency Agreement dated January 1, 1999 between
             Latitude 90, Inc. and Bell Atlantic Electronic Commerce Services,
             Inc., previously filed with the Commission as Exhibit 10.8 to
             L90's Form S-1, which is incorporated herein by reference.
    10.8     Equipment Lease dated December 2, 1998 between AdNet Strategies,
             Inc. and Premier Capital Corporation, previously filed with the
             Commission as Exhibit 10.9 to L90's Form S-1, which isincorporated
             herein by reference.
</TABLE>

                                      60
<PAGE>

<TABLE>
<CAPTION>
 Exhibit No.                             Description
 -----------                             -----------
 <C>         <S>
    10.9     Shareholders Agreement dated August 6, 1999 (as amended),
             previously filed with the Commission as Exhibit 10.10 to L90's
             Form S-1, which is incorporated herein by reference.
    10.10    Amended and Restated Shareholders Agreement dated September 22,
             1999, previously filed with the Commission as Exhibit 10.11 to
             L90's Form S-1, which is incorporated herein by reference.
    10.11    Series B Preferred Stock Purchase Agreement dated August 6, 1999
             between L90 and the holders of Series B preferred stock (as
             amended), previously filed with the Commission as Exhibit 10.12 to
             L90'sForm S-1, which is incorporated herein by reference.
    10.12    Series C Preferred Stock Purchase Agreement dated September 22,
             1999 between L90 and the holders of Series C preferred stock,
             previously filed with the Commission as Exhibit 10.13 to L90's
             Form S-1,which is incorporated herein by reference.
    10.13    Warrant dated September 16, 1998 issued to William Apfelbaum,
             previously filed with the Commission as Exhibit 10.14 to L90's
             Form S-1, which is incorporated herein by reference..
    10.14    Stock Purchase Warrant dated August 16, 1999 issued to DigaComm,
             L.L.C., previously filed with the Commission as Exhibit 10.15 to
             L90's Form S-1, which is incorporated herein by reference.
    10.15    Stock Purchase Warrant dated August 16, 1999 issued to William
             Apfelbaum, previously filed with the Commission as Exhibit 10.16
             to L90's Form S-1, which is incorporated herein by reference.
    10.16    Stock Purchase Warrant dated September 22, 1999 issued to
             Development Ventures (Two) Inc., previously filed with the
             Commission as Exhibit 10.17 to L90's Form S-1, which is
             incorporated herein by reference.
    10.17    Stock Purchase Warrant dated September 22, 1999 issued to Rare
             Medium Group, Inc., previously filed with the Commission as
             Exhibit 10.18 to L90's Form S-1, which is incorporated herein by
             reference.
    10.18    Promissory Note in the original principal amount of $600,000, made
             June 7, 1999 by L90 in favor of The Roman Arch Fund L.P.,
             previously filed with the Commission as Exhibit 10.19 to L90's
             Form S-1, which is incorporated herein by reference.
    10.19    Promissory Note in the original principal amount of $400,000, made
             June 7, 1999 by L90 in favor of The Roman Arch Fund II L.P.,
             previously filed with the Commission as Exhibit 10.20 to L90's
             Form S-1, which is incorporated herein by reference.
    10.20    Warrant No. PP-99-1 dated June 7, 1999 issued to The Roman Arch
             Fund L.P., previously filed with the Commission as Exhibit 10.21
             to L90's Form S-1, which is incorporated herein by reference.
    10.21    Warrant No. PP-99-2 dated June 7, 1999 issued to The Roman Arch
             Fund II L.P., previously filed with the Commission as Exhibit
             10.22 to L90's Form S-1, which is incorporated herein by
             reference.
    10.22    Warrant No. IPO-99-1 dated June 7, 1999 issued to The Roman Arch
             Fund L.P., previously filed with the Commission as Exhibit 10.23
             to L90's Form S-1, which is incorporated herein by reference.
    10.23    Warrant No. IPO-99-2 dated June 7, 1999 issued to The Roman Arch
             Fund II L.P., previously filed with the Commission as Exhibit
             10.24 to L90's Form S-1, which is incorporated herein by
             reference.
    10.24    Assignment and Assumption Agreement dated September 17, 1999,
             previously filed with the Commission as Exhibit 10.25 to L90's
             Form S-1, which is incorporated herein by reference.
    10.25    Assignment and Assumption Agreement dated September 17, 1999,
             previously filed with the Commission as Exhibit 10.26 to L90's
             Form S-1, which is incorporated herein by reference.
    10.26    Form of Indemnification Agreement entered into between L90 and
             each of its directors and executive officers, previously filed
             with the Commission as Exhibit 10.27 to L90's Form S-1, which is
             incorporated herein by reference.
    10.27    Employment Agreement entered into between L90 and John C. Bohan,
             previously filed with the Commission as Exhibit 10.28 to L90's
             Form S-1, which is incorporated herein by reference.
</TABLE>

                                       61
<PAGE>

<TABLE>
<CAPTION>
 Exhibit No.                             Description
 -----------                             -----------
 <C>         <S>
    10.28    Employment Agreement entered into between L90 and Christopher J.
             Cardinali, previously filed with the Commission as Exhibit 10.29
             to L90's Form S-1, which is incorporated herein by reference.
    10.29    Employment Agreement entered into between L90 and Mark D. Roah (as
             amended), previously filed with the Commission as Exhibit 10.30 to
             L90's Form S-1, which is incorporated herein by reference.
    10.30    Employment Agreement entered into between L90 and Frank A. Addante
             (as amended), previously filed with the Commission as Exhibit
             10.31 to L90's Form S-1, which is incorporated herein by
             reference.
    10.31    Employment Agreement entered into between L90 and Thomas A.
             Sebastian, previously filed with the Commission as Exhibit 10.32
             to L90's Form S-1, which is incorporated herein by reference.
    10.32    Severance Agreement entered into between L90 and Thomas A.
             Sebastian, previously filed with the Commission as Exhibit 10.33
             to L90's Form S-1, which is incorporated herein by reference.
    10.33    Warrant No. W-WB1 dated January 27, 2000, issued to Entertaindom,
             Inc.
    10.34    Payment Schedule Contract dated November 30, 1999 between L90 and
             Oracle Credit Corporation.
    10.35    Master Lease Agreement dated January 1999 between L90 and Sun
             Microsystems Finance.
    27.1     Financial Data Schedule, previously filed with the Commission as
             Exhibit 27.1 to L90's Form S-1, which is incorporated herein by
             reference.
</TABLE>

(b) Reports on Form 8-K.

   No reports on Form 8-K were filed during the fourth quarter of the fiscal
year covered by this Form 10-K.

                                       62
<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.

                                          L90, INC.,
                                          a Delaware corporation

Date: March 24, 2000                                 /s/ JOHN C. BOHAN
                                          By: _________________________________
                                                       John C. Bohan
                                               President and Chief Executive
                                                          Officer

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

<TABLE>
<CAPTION>
              Signature                         Capacity                 Date
              ---------                         --------                 ----

<S>                                    <C>                        <C>
         /s/ John C. Bohan             Director, President and      March 24, 2000
______________________________________  Chief Executive Officer
            John C. Bohan               (Principal Executive
                                        Officer)

     /s/ Thomas A. Sebastian           Senior Vice President,       March 24, 2000
______________________________________  Chief Financial Officer
         Thomas A. Sebastian            and Assistant Secretary
                                        (Principal Financial
                                        Officer and Principal
                                        Accounting Officer)

     /s/ William M. Apfelbaum          Chairman of the Board of     March 24, 2000
______________________________________  Directors
         William M. Apfelbaum

        /s/ Mark D. Roah               Director                     March 24, 2000
______________________________________
             Mark D. Roah

  /s/ Christopher J. Cardinali         Director                     March 24, 2000
______________________________________
       Christopher J. Cardinali

      /s/ Peter G. Diamandis           Director                     March 24, 2000
______________________________________
          Peter G. Diamandis

       /s/ Peter E. Ligeti             Director                     March 24, 2000
______________________________________
           Peter E. Ligeti

                                       Director                     March   , 2000
______________________________________
           Glenn S. Meyers

       /s/ G. Bruce Redditt            Director                     March 24, 2000
______________________________________
           G. Bruce Redditt

         /s/ Peter Sealey              Director                     March 24, 2000
______________________________________
             Peter Sealey
</TABLE>

                                       63
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit No.                             Description
 -----------                             -----------
 <C>         <S>
     2.1     Agreement of Merger dated September 15, 1999, previously filed
             with the Commission as Exhibit 2.1 to L90's Registration Statement
             on Form S-1 (as amended) filed with the Commission on September
             23, 1999 (the "Form S-1"), which is incorporated herein by
             reference.
     3.1     Amended and Restated Certificate of Incorporation.
     3.2     Amended and Restated Bylaws, previously filed with the Commission
             as Exhibit 3.3 to L90's Form S-1, which is incorporated herein by
             reference.
     4.1     See Exhibits 3.1 and 3.2 for provisions of the Amended and
             Restated Certificate of Incorporation and Bylaws of L90 defining
             the rights of holders of Common Stock of L90.
     4.2     Stock Purchase and Stockholders Agreement dated September 14,
             1998, previously filed with the Commission as Exhibit 4.2 to L90's
             Form S-1, which is incorporated herein by reference.
     4.3     Registration Agreement dated August 6, 1999, previously filed with
             the Commission as Exhibit 4.3 to L90's Form S-1, which is
             incorporated herein by reference.
     4.4     Series C Registration Agreement dated September 22, 1999,
             previously filed with the Commission as Exhibit 4.4 to L90's Form
             S-1, which is incorporated herein by reference.
    10.1     1999 Stock Incentive Plan, previously filed with the Commission as
             Exhibit 10.1 to L90's Form S-1, which is incorporated herein by
             reference.
    10.2     Form of Incentive Stock Option Agreement.
    10.3     Form of Non-Statutory Stock Option Agreement.
    10.4     Stock Purchase and Stockholders Agreement dated September 14,
             1998. See Exhibit 4.2
    10.5     Sublease dated May 21, 1999 between Widom, Wein, Cohen, O'Leary,
             Terasawa and Latitude 90, previously filed with the Commission as
             Exhibit 10.3 to L90's Form S-1, which is incorporated herein by
             reference.
    10.6     Representation Agreement dated December 31, 1998 between Latitude
             90, Inc. and Go2Net, Inc., previously filed with the Commission as
             Exhibit 10.7 to L90's Form S-1, which is incorporated herein by
             reference.
    10.7     Advertising Sales Agency Agreement dated January 1, 1999 between
             Latitude 90, Inc. and Bell Atlantic Electronic Commerce Services,
             Inc., previously filed with the Commission as Exhibit 10.8 to
             L90's Form S-1, which is incorporated herein by reference.
    10.8     Equipment Lease dated December 2, 1998 between AdNet Strategies,
             Inc. and Premier Capital Corporation, previously filed with the
             Commission as Exhibit 10.9 to L90's Form S-1, which is
             incorporated herein by reference.
    10.9     Shareholders Agreement dated August 6, 1999 (as amended),
             previously filed with the Commission as Exhibit 10.10 to L90's
             Form S-1, which is incorporated herein by reference.
    10.10    Amended and Restated Shareholders Agreement dated September 22,
             1999, previously filed with the Commission as Exhibit 10.11 to
             L90's Form S-1, which is incorporated herein by reference.
    10.11    Series B Preferred Stock Purchase Agreement dated August 6, 1999
             between L90 and the holders of Series B preferred stock (as
             amended), previously filed with the Commission as Exhibit 10.12 to
             L90's Form S-1, which is incorporated herein by reference.
    10.12    Series C Preferred Stock Purchase Agreement dated September 22,
             1999 between L90 and the holders of Series C preferred stock,
             previously filed with the Commission as Exhibit 10.13 to L90's
             Form S-1, which is incorporated herein by reference.
    10.13    Warrant dated September 16, 1998 issued to William Apfelbaum,
             previously filed with the Commission as Exhibit 10.14 to L90's
             Form S-1, which is incorporated herein by reference.
    10.14    Stock Purchase Warrant dated August 16, 1999 issued to DigaComm,
             L.L.C., previously filed with the Commission as Exhibit 10.15 to
             L90's Form S-1, which is incorporated herein by reference.
    10.15    Stock Purchase Warrant dated August 16, 1999 issued to William
             Apfelbaum, previously filed with the Commission as Exhibit 10.16
             to L90's Form S-1, which is incorporated herein by reference.
    10.16    Stock Purchase Warrant dated September 22, 1999 issued to
             Development Ventures (Two) Inc., previously filed with the
             Commission as Exhibit 10.17 to L90's Form S-1, which is
             incorporated herein by reference.
</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
 Exhibit No.                             Description
 -----------                             -----------
 <C>         <S>
    10.17    Stock Purchase Warrant dated September 22, 1999 issued to Rare
             Medium Group, Inc., previously filed with the Commission as
             Exhibit 10.18 to L90's Form S-1, which is incorporated herein by
             reference.
    10.18    Promissory Note in the original principal amount of $600,000, made
             June 7, 1999 by L90 in favor of The Roman Arch Fund L.P.,
             previously filed with the Commission as Exhibit 10.19 to L90's
             Form S-1, which is incorporated herein by reference.
    10.19    Promissory Note in the original principal amount of $400,000, made
             June 7, 1999 by L90 in favor of The Roman Arch Fund II L.P.,
             previously filed with the Commission as Exhibit 10.20 to L90's
             Form S-1, which is incorporated herein by reference.
    10.20    Warrant No. PP-99-1 dated June 7, 1999 issued to The Roman Arch
             Fund L.P., previously filed with the Commission as Exhibit 10.21
             to L90's Form S-1, which is incorporated herein by reference.
    10.21    Warrant No. PP-99-2 dated June 7, 1999 issued to The Roman Arch
             Fund II L.P., previously filed with the Commission as Exhibit
             10.22 to L90's Form S-1, which is incorporated herein by
             reference.
    10.22    Warrant No. IPO-99-1 dated June 7, 1999 issued to The Roman Arch
             Fund L.P., previously filed with the Commission as Exhibit 10.23
             to L90's Form S-1, which is incorporated herein by reference.
    10.23    Warrant No. IPO-99-2 dated June 7, 1999 issued to The Roman Arch
             Fund II L.P., previously filed with the Commission as Exhibit
             10.24 to L90's Form S-1, which is incorporated herein by
             reference.
    10.24    Assignment and Assumption Agreement dated September 17, 1999,
             previously filed with the Commission as Exhibit 10.25 to L90's
             Form S-1, which is incorporated herein by reference.
    10.25    Assignment and Assumption Agreement dated September 17, 1999,
             previously filed with the Commission as Exhibit 10.26 to L90's
             Form S-1, which is incorporated herein by reference.
    10.26    Form of Indemnification Agreement entered into between L90 and
             each of its directors and executive officers, previously filed
             with the Commission as Exhibit 10.27 to L90's Form S-1, which is
             incorporated herein by reference.
    10.27    Employment Agreement entered into between L90 and John C. Bohan,
             previously filed with the Commission as Exhibit 10.28 to L90's
             Form S-1, which is incorporated herein by reference.
    10.28    Employment Agreement entered into between L90 and Christopher J.
             Cardinali, previously filed with the Commission as Exhibit 10.29
             to L90's Form S-1, which is incorporated herein by reference.
    10.29    Employment Agreement entered into between L90 and Mark D. Roah (as
             amended), previously filed with the Commission as Exhibit 10.30 to
             L90's Form S-1, which is incorporated herein by reference.
    10.30    Employment Agreement entered into between L90 and Frank A. Addante
             (as amended), previously filed with the Commission as Exhibit
             10.31 to L90's Form S-1, which is incorporated herein by
             reference.
    10.31    Employment Agreement entered into between L90 and Thomas A.
             Sebastian, previously filed with the Commission as Exhibit 10.32
             to L90's Form S-1, which is incorporated herein by reference.
    10.32    Severance Agreement entered into between L90 and Thomas A.
             Sebastian, previously filed with the Commission as Exhibit 10.33
             to L90's Form S-1, which is incorporated herein by reference.
    10.33    Warrant No. W-WB1 dated January 27, 2000, issued to Entertaindom,
             Inc.
    10.34    Payment Schedule Contract dated November 30, 1999 between L90 and
             Oracle Credit Corporation.
    10.35    Master Lease Agreement dated January 1999 between L90 and Sun
             Microsystems Finance.
    27.1     Financial Data Schedule, previously filed with the Commission as
             Exhibit 27.1 to L90's Form S-1, which is incorporated herein by
             reference.
</TABLE>

                                       65