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

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

                                   FORM 10-K
                            ------------------------

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

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

                       COMMISSION FILE NUMBER: 333-84191

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

                           ACME COMMUNICATIONS, INC.
            (EXACT NAME OF REGISTRANTS AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      33-0866283
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)
</TABLE>

                       2101 E. FOURTH STREET, SUITE 202 A
                          SANTA ANA, CALIFORNIA, 92705
                                 (714) 245-9499
         (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

<TABLE>
<CAPTION>
                                                           NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                            ON WHICH REGISTERED
             -------------------                           ---------------------
<S>                                            <C>
    Common Stock, par value $.01 per share                 Nasdaq National Market
</TABLE>

     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, and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]  No [ ]

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed on the basis of $9.56 per share, which was the last
sale price on the Nasdaq on March 26, 2001, was $160,130,000.

     As of March 26, 2001, there were 16,750,000 shares of registrant's common
stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Proxy Statement to be filed pursuant to
Regulation 14A relating to the 2001 Annual Meeting of Stockholders are
incorporated by reference in Part III.

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                           ACME COMMUNICATIONS, INC.

                           ANNUAL REPORT ON FORM 10-K

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE
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<S>        <C>                                                           <C>
                                   PART I
Item 1.    Business....................................................    3
Item 2.    Properties..................................................   19
Item 3.    Legal Proceedings...........................................   19
Item 4.    Submission of Matters to a Vote of Security Holders.........   20

                                   PART II

Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters.........................................   20
Item 6.    Selected Financial Data.....................................   21
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................   23
Item 7A.   Quantitative and Qualitative Disclosures About Market
           Risk........................................................   26
Item 8.    Financial Statements and Supplementary Data:
           Independent Auditors' Report................................   27
           Consolidated Balance Sheets.................................   28
           Consolidated Statements of Operations.......................   29
           Consolidated Statements of Stockholders' Equity.............   30
           Consolidated Statements of Cash Flows.......................   31
           Notes to Consolidated Financial Statements..................   32
Item 9.    Changes in and disagreements with Accountants on Accounting
           and Financial Disclosure....................................   49

                                  PART III

Item 10.*  Directors and Executive Officers of the Registrant..........   49
Item 11.*  Executive Compensation......................................   49
Item 12.*  Security Ownership of Certain Beneficial Owners and
           Management..................................................   49
Item 13.*  Certain Relationships and Related Transactions..............   49

                                   PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form
           8-K.........................................................   50
           Schedule II -- Valuation and Qualifying Accounts
</TABLE>

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* Items incorporated by reference to our Proxy Statement to be filed pursuant to
  Regulation 14A relating to the 2001 Annual Meeting of Stockholders.

                                        2
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                                     PART I

ITEM 1. BUSINESS

     ACME Communications, Inc. (the "Company" or "we") currently owns and
operates ten broadcast television stations in medium-sized markets across the
United States. Nine of our stations are network affiliates of The WB Network,
making us the third largest WB Network affiliated station group in the country.
Our television stations broadcast in markets that cover in aggregate
approximately 5.4% of the total U.S. television households. We also own the
rights to acquire construction permits to build four other stations -- three to
be new WB Network affiliates in Lexington, KY, Richmond, VA and
Flint - Saginaw - Bay Cities, MI and the fourth to be a second station, operated
as an independent, in Portland, OR. The acquisition of these construction
permits is dependent on the Federal Communications Commission approving the
underlying applications, and then our agreements to acquire them from these
applicants. Mr. Kellner, our Chairman and Chief Executive Officer, is also a
founder, Chief Executive Officer and partner of The WB Network, and was
President of Fox Broadcasting Company from its inception in 1986 through 1993.
In March 2001, Mr. Kellner also became Chairman and Chief Executive Officer of
AOL Time Warner's Television Networks division.

     Since our formation in 1997, we have focused primarily on acquiring
independently-owned stations, under-performing stations and construction permits
for new stations in markets that we believe have the growth potential and
demographic profile to support a successful WB Network affiliate. We believe
that medium-sized markets provide advantages such as fewer competitors and lower
operating costs compared to large markets. Our strategy is to capitalize on
these advantages and to grow our revenues and cash flow with an emphasized focus
on local sales. Since we centralize many of our stations' administrative
functions and primarily provide entertainment programming, our station general
managers are able to focus on increasing sales and improving operating margins.
Additionally, since many of the stations we own are in markets where the Federal
Communications Commission allows dual ownership of broadcast television stations
("duopoly"), our long-term strategy also includes acquiring such second
stations.

     Like The WB Network, we target our programming at younger audiences, in
particular, young adults, teens and kids. We believe that these younger
audiences are a growing and increasingly important demographic target for
advertisers, and that our affiliation with The WB Network affords us a
significant competitive advantage over other network affiliated television
broadcasters in attracting these younger audiences. Since its launch in 1995 and
through the 1999/2000 season, The WB Network was the only English-language
broadcast network in the United States to increase its audience share in these
key target demographic groups. To build and retain our audience share during
non-network hours, we also acquire the broadcast rights to popular syndicated
programming that we believe complements The WB Network programming. In addition,
we broadcast local programming such as news in St. Louis, local weather updates
and local and regional sports programming in selected markets. We believe this
programming enhances our ability to sell advertising time to local and regional
advertisers and increase audience awareness of our newly launched stations.

PROGRAMMING

     Our programming includes:

     - The WB Network prime time programming (at nine of our ten stations);

     - Kids' WB! (at nine of our ten stations);

     - syndicated programming; and

     - local programming.

     Prime Time Programming. In prime time, The WB Network is currently ranked
number one among female teens and, based on the average age of their viewers, is
the youngest broadcast network today. Prime time programming includes: 7th
Heaven, Buffy the Vampire Slayer, Dawson's Creek, Charmed, Felicity,

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Sabrina: The Teenage Witch, Popstars and Popular. When The WB Network began
broadcasting in 1995, it provided two hours of prime time programming per week.
In the 2000/2001 season, The WB Network is providing 13 hours of prime time
programming Sunday through Friday.

     Kids' WB! Programming. The WB Network launched Kids' WB! in September 1995
with three hours of programming on Saturdays, and currently provides 19 hours of
kids' programming Monday through Saturday. Kids' WB! programming includes
Pokemon, Batman Beyond, Men in Black, Max Steel and Jackie Chan Adventures.

     Syndicated Programming. In addition to The WB Network programming, our
stations air syndicated programs. Generally, our most profitable programming
time periods are those immediately before and after The WB Network programming.
Consequently, during these time periods, we air programs that are targeted to
the audiences similar in demographics as those that watch The WB Network prime
time programs. These syndicated programs include Friends, Sabrina: The Teenage
Witch, Star Trek: Next Generation, Drew Carey, Spin City, Judge Judy, Seinfeld
and Star Trek: Voyager. We have secured future broadcast rights for certain of
our stations to King of the Hill, That 70s Show, Dharma & Greg, Everybody Loves
Raymond and other shows. We have multi-year contracts to air most of our
syndicated programming.

     Local Programming. Each of our stations also airs programming of local
interest, which we believe creates immediate viewership at our start-up
stations, increases local awareness of our stations and expands our advertiser
base. At KWBP, our station in Portland, we air weather updates throughout each
evening, a format we intend to replicate at our other stations. At many of our
stations, we acquire the broadcast rights and air certain regional and local
sporting events including games of the St. Louis Cardinals and the St. Louis
Blues at KPLR, the Seattle Mariners and the University of Oregon Ducks at KWBP,
and the Colorado Rockies at KUWB. In addition, KPLR airs a nightly 30-minute
local newscast.

OUR STATIONS

     The following table provides general information concerning our stations:

<TABLE>
<CAPTION>
                                                              NOVEMBER 2000 AUDIENCE SHARE(2)
                                       TELEVISION        ------------------------------------------
                                      HOUSEHOLDS(1)        PRIME TIME(3)     SIGN-ON TO SIGN-OFF(4)
                                   -------------------   -----------------   ----------------------
        STATION - CHANNEL          MARKET                 TEENS    ADULTS     ADULTS                   BEGINNING OF
           MARKETPLACE             RANKING    NUMBER     12 - 17   18 - 34   18 - 34    HOUSEHOLDS    ACME OPERATION
        -----------------          -------   ---------   -------   -------   --------   -----------   --------------
<S>                                <C>       <C>         <C>       <C>       <C>        <C>           <C>
KPLR - 11
St. Louis, MO....................    22      1,121,000     21        11         11           9        October 1997
KWBP - 32
Portland, OR.....................    23      1,017,800     11        10          7           5        February 1997
KUWB - 30
Salt Lake City, UT...............    36        732,400      8         7          5           4        April 1998
KWBQ - 19
Albuquerque - Santa Fe, NM.......    50        570,500      3         3          2           2        March 1999
KASY - 50
Albuquerque - Santa Fe, NM.......    50        570,500      4         6          3           3        November 1999
WBDT - 26
Dayton, OH.......................    56        515,200     11         7          4           2        June 1999
WBXX - 20
Knoxville, TN....................    63        462,000     13        10          7           3        October 1997
WIWB - 14
Green Bay - Appleton, WI.........    69        398,500      7         4          3           2        June 1999
WTVK - 46
Ft. Myers - Naples, FL...........    81        352,200      7         5          4           1        March 1998
WBUI - 23
Champaign - Springfield - Decatur,
IL...............................    83        345,400      6         5          3           2        June 1999
</TABLE>

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(1) All television stations throughout the United States are grouped into 210
    markets that are ranked in size according to the number of households with
    televisions in the market for the 2000/2001 season.

(2) All share information is from Nielsen Media Research.

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(3) Prime Time represents the hours of programming provided by The WB Network,
    except for KASY in Albuquerque - Santa Fe, NM for which programming is
    provided by UPN.

(4) Sign-on to Sign-off represents the hours from 7:00 a.m. through 1:00 a.m.,
    Monday through Sunday.

KPLR: ST. LOUIS, MISSOURI

Designated Market Area: 22           TV Households: 1,121,000
Total Age 2+ Population: 2,829,000

     Market Description. Thirty-three percent of the total population of St.
Louis is under 25 years of age. The estimated average household income in the
St. Louis market is approximately $46,200 per year. Major employers in the
market include Anheuser-Busch, Emerson Electric, May Department Stores,
Monsanto, Ralston Purina and TWA. The television advertising revenue in the St.
Louis marketplace was estimated at $231.4 million in 2000 and has grown at a
compound annual rate of approximately 3.9% over the past five years.

     Station Overview. We began operating KPLR under a local marketing agreement
in October 1997 and acquired the station in March 1998. KPLR signed on the air
in 1959 and has been affiliated with The WB Network since the network's launch.
In addition to carrying The WB Network prime time programming and Kids' WB!, the
station broadcasts a daily 9pm, half-hour local newscast and also has the
exclusive broadcast rights to air games of the St. Louis Cardinals and the St.
Louis Blues. In addition, the station's syndicated programming currently
includes Friends, The Drew Carey Show, Spin City, Sabrina: The Teenage Witch and
Cheers. The station has contracted for the future exclusive market broadcast
rights to popular shows such as Everybody Loves Raymond (9/01), Will & Grace
(9/02) and The 70's Show (9/02). In the November 2000 sweeps period, KPLR again
delivered the highest household rating in WB prime time to rank number one
versus all other WB affiliates in the country. KPLR also took top honors among
adults aged 18 - 49. In the St. Louis market, KPLR continued to rank number one
in the Monday through Sunday, 5:00 p.m. to 1:00 a.m. time period among St. Louis
teens and persons aged 12 - 24. In the same time period, KPLR ranks third in the
market for adults aged 18 - 49.

KWBP: PORTLAND, OREGON

Designated Market Area: 23           TV Households: 1,017,800
Total Age 2+ Population: 2,539,000

     Market Description. Thirty-two percent of the total population of Portland
is under 25 years of age. The estimated average household income in the Portland
market is approximately $44,200 per year. Major employers in the market include
Intel, Fred Meyer, Providence Health System, U.S. Bank of Oregon, Tektronix and
Safeway. The television advertising revenue in the Portland marketplace was
estimated at $212.4 million in 2000 and has grown at a compound annual rate of
approximately 7.8% over the past five years.

     Station Overview. We began operating KWBP under a local marketing agreement
in February 1997 and acquired the station in June 1997. KWBP signed on the air
in 1989 and has been affiliated with The WB Network since the network's launch.
In addition to carrying The WB Network prime time programming and Kids' WB!, the
station's syndicated programming currently includes Star Trek: The Next
Generation, Judge Judy, The Drew Carey Show and Xena: Warrior Princess. In
addition, the station has contracted for the future exclusive-market broadcast
rights to popular shows such as King of the Hill (9/01) and That 70's Show
(9/02). In the November 2000 sweeps period, KWBP delivered an average weekly
cumulative number of 572,000 households from sign-on to sign-off, representing a
22% increase over November 1999. KWPB was the fastest growing WB affiliate in
the country in prime time for the November 2000 sweeps, as measured by the gain
in its adult 18 - 49 year old ratings. The station also grew 50% in household
ratings for the 7:00 a.m. to 1:00 a.m. time period compared to November 1999.

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KUWB: SALT LAKE CITY, UTAH

Designated Market Area: 36           TV Households: 732,400
Total Age 2+ Population: 2,173,000

     Market Description. Forty-five percent of the total population of Salt Lake
City is under 25 years of age. The estimated average household income in the
Salt Lake City market is approximately $43,500 per year. Major employers in the
market include Intermountain Health Care, Brigham Young University, IOMEGA, ICON
Health and Fitness and Smith Food & Drug Centers. Salt Lake City is the site of
the 2002 winter Olympic Games. The television advertising revenue in the Salt
Lake City marketplace was estimated at $154.9 million in 2000 and has grown at a
compound annual rate of approximately 4.6% over the past five years.

     Station Overview. We began operating KUWB in April 1998 under a local
marketing agreement and acquired the station in September 1998. KUWB has been
affiliated with The WB Network since the network's launch. When we began
operating the station, we replaced the primarily religious paid programming and
infomercials that were being run on the station in all non-WB Network time
periods with syndicated programming. The station's syndicated programming
currently includes The Drew Carey Show, Spin City and Sabrina: The Teenage
Witch. It also carries the NBC-affiliated Saturday Night Live. The station has
contracted for the future exclusive-market broadcast rights to popular shows
such as, Everybody Loves Raymond (9/01) and That 70's Show (9/02). In the
November 2000 sweeps period, KUWB delivered an average weekly cumulative number
of 373,000 households from sign-on to sign-off, an increase of 14% compared to
November 1999. The WB Network prime time programming continued to perform well
in the market as highlighted by the 23% increase in its average household rating
as compared to November of 1999.

KWBQ: ALBUQUERQUE - SANTA FE, NEW MEXICO
KASY: ALBUQUERQUE - SANTA FE, NEW MEXICO

Designated Market Area: 50          TV Households: 570,500
Total Age 21 Population: 1,508,000

     Market Description. Thirty-six percent of the total population of
Albuquerque - Santa Fe is under 25 years of age. The estimated average household
income in the Albuquerque - Santa Fe market is approximately $38,400 per year.
Major employers in the market include Intel, Motorola, General Electric, General
Mills, Philips and Levi Strauss. The television advertising revenue in the
Albuquerque - Santa Fe marketplace was estimated at $100.7 million in 2000 and
has grown at a compound annual rate of approximately 5.1% over the past five
years. In October 2000, Albuquerque - Santa Fe became a metered market.

     KWBQ Station Overview. We launched KWBQ in March 1999 with The WB Network
prime time programming and Kids' WB!. In addition, the station's syndicated
programming currently includes Spin City, Sabrina, Seinfeld and Third Rock from
the Sun. The station has contracted for the future exclusive-market broadcast
rights to popular shows such as Judge Judy (4/01), Judge Joe Brown (9/01), King
of the Hill (9/01), Everybody Loves Raymond (9/01) and That 70s Show. In the
November 2000 sweeps period, the station increased its weekly circulation 126%
from 80,000 homes in November 1999 to 181,000 homes. Also, the household ratings
increased 100% for WB Prime time and 150% for the 7:00 a.m. to 1:00 a.m. time
periods compared to November 1999.

     KASY Station Overview. We began operating KASY, the UPN affiliate in the
market, under an interim LMA on November 1, 1999 and closed our purchase of the
station on December 3, 1999. The station has been a UPN affiliate since that
network's launch in January 1995. Prior to November 1999, the station had been
operating as an LMA by another station owner in the market. The station's
syndicated programming includes Star Trek: Next Generation, People's Court,
Jerry Springer and Roseanne. All of the future program rights negotiated for
KWBQ are also available to air on KASY. During the November 2000 ratings period,
KASY reached an average of 220,000 households, sign-on to sign-off, Monday
through Sunday, 7:00 a.m. to 1:00 a.m., an 88% increase over the homes reached
just a year before. Also in November 2000, KASY ranked

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as the sixth fastest growing UPN affiliate in the country as measured by the
percentage growth in the household rating during UPN prime time programming.

WBDT: DAYTON, OHIO

Designated Market Area: 56           TV Households: 515,200
Total Age 2+ Population: 1,285,000

     Market Description. Thirty-three percent of the total population of Dayton,
Ohio is under 25 years of age. The estimated average household income in the
Dayton market is approximately $44,500 per year. Major employers in the market
include Chrysler Corp/Acustar Inc., General Motors, Bank One Dayton, American
Matsushita and BF Goodrich. The television advertising revenue in the Dayton
marketplace was estimated at $86.2 million in 2000 and has grown at a compound
annual rate of approximately 1.8% over the past five years. Dayton will become a
metered market in October 2001.

     Station Overview. We acquired WBDT in June 1999 after the May 1999 sweeps
period. WBDT signed on the air in October 1980 and has been affiliated with The
WB Network since our acquisition of the station. WBDT, former Pax Net station,
currently carries a combination of Pax Net and WB Network programming. Pax Net
programming including Diagnosis Murder and Touched by an Angel is shown during
the morning and prime access time periods. The WB Network prime time programming
and Kids' WB! is shown at The WB Network scheduled times. In addition, the
station's syndicated programming currently includes Sabrina: The Teenage Witch,
Seventh Heaven, Fresh Prince and Change of Heart, and the station has contracted
for the future exclusive-market broadcast rights to popular shows such as
Everybody Loves Raymond (9/01), That 70's Show (9/02) and Will & Grace (9/02).
During the November 2000 sweeps period, WBDT reached an average of 140,000
households weekly, representing an 23% increase over the November 1999 sweeps
period. The station also increased its 7:00 a.m. to 1:00 a.m. household ratings
by 75% compared to the November 1999 sweeps period.

WBXX: KNOXVILLE, TENNESSEE

Designated Market Area: 63           TV Households: 462,000
Total Age 2+ Population: 1,124,000

     Market Description. Thirty-one percent of the total population of Knoxville
is under 25 years of age. The estimated average household income in the
Knoxville market is approximately $37,900 per year. Major employers in the
market include the University of Tennessee, TVA, Oakridge National Laboratories,
Alcoa and Nippondenso. The television advertising revenue in the Knoxville
marketplace was estimated at $77.7 million in 2000 and has grown at a compound
annual rate of approximately 7.5% over the past five years.

     Station Overview. We launched WBXX in October 1997. In addition to carrying
The WB Network prime time programming and Kids' WB!, the station has broadcast
rights to air games of the Atlanta Braves. In addition, the station's syndicated
programming currently includes Friends, The Drew Carey Show, Spin City and
Cheers. The station has contracted for the future exclusive-market broadcast
rights to popular shows such as King of the Hill (9/01), That 70s Show (9/02)
and Dharma & Gregg (9/02). In the November 2000 sweeps period, WBXX increased
its household ratings for 7:00 a.m. to 1:00 a.m. and for the WB prime time
periods by 22% and 15%, respectively, compared to November 1999. The station was
also the number one WB affiliate in a non-metered market during the November
2000 sweeps period.

WIWB: GREEN BAY - APPLETON, WISCONSIN

Designated Market Area: 69           TV Households: 398,500
Total Age 2+ Population: 1,003,000

     Market Description. Thirty-four percent of the total population of Green
Bay - Appleton is under 25 years of age. The estimated average household income
in the Green Bay - Appleton market is approximately $41,900 per year. Major
employers in the market include Fort James Corporation, the Oneida Tribe of
Indians of Wisconsin, Schneider National, Humana, Shopko Stores, American
Medical Security, Bellin
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Memorial Hospital and Procter & Gamble Paper Products. The television
advertising revenue in the Green Bay - Appleton marketplace was estimated at
$59.1 million in 2000 and has grown at a compound annual rate of approximately
5.0% over the past five years.

     Station Overview. We acquired WIWB in June 1999. WIWB signed on the air in
August 1998 and has been affiliated with The WB Network since our acquisition of
the station. WIWB, a former Pax Net station, currently carries a combination of
Pax Net and WB Network programming. Pax Net programming including Diagnosis
Murder and Touched by an Angel is shown during the morning and prime access time
periods. The WB Network prime time and Kids' WB! is shown at The WB Network
scheduled times. In addition, the station's syndicated programming currently
includes Sabrina: The Teenage Witch and Seventh Heaven and the station has
contracted for the future exclusive-market broadcast rights to popular shows
such Everybody Loves Raymond (9/01), That 70's Show (9/02) and Will & Grace
(9/02). In the November 2000 sweeps period, WIWB's reach in the Green
Bay/Appleton market climbed 8% over the November 1999 sweeps period to a weekly
average of 100,000 homes. Also, the station's household ratings for the 7:00
a.m. to 1:00 a.m. time period and for WB prime time increased 20% and 50%,
respectively, over the November 1999 sweeps period.

WTVK: FT. MYERS - NAPLES, FLORIDA

Designated Market Area: 81          TV Households: 352,200
Total Age 2+ Population: 832,000

     Market Description. Twenty-four percent of the total population of Ft.
Myers - Naples is under 25 years of age. The estimated average household income
in the Ft. Myers - Naples market is approximately $46,500 per year. Major
employers in the market include The Lee County School District, Lee Memorial
Health System, Columbia Healthcare and Publix SuperMarkets. The television
advertising revenue in the Ft. Myers - Naples marketplace was estimated at $69.2
million in 2000 and has grown at a compound annual rate of approximately 7.8%
over the past five years. Ft. Myers - Naples will become a metered market in
April 2001.

     Station Overview. We began operating WTVK in March 1998 under a local
marketing agreement and acquired the station in June 1998. WTVK signed on the
air in October 1990 and has been affiliated with The WB Network since our
acquisition of the station. In addition to carrying The WB Network prime time
programming and Kids' WB!, the station's syndicated programming currently
includes Sabrina: The Teenage Witch, Spin City, Star Trek: Voyager and The Drew
Carey Show. The station has contracted for the future exclusive-market broadcast
rights to popular shows such as Just Shoot Me (9/01), That 70's Show (9/02) and
Dharma & Greg (9/02). WTVK delivered an average weekly household cumulative
number of 73,000 in November 2000, a decrease of 19,000 households since
November 1999. We believe that the decline in circulation for the station is
primarily a result of undersampling by Nielsen in this market, a situation which
should be resolved when Nielsen meters the market.

WBUI: CHAMPAIGN - SPRINGFIELD - DECATUR, ILLINOIS

Designated Market Area: 83           TV Households: 345,400
Total Age 2+ Population: 837,000

     Market Description. Thirty-three percent of the total population of
Champaign - Springfield - Decatur is under 25 years of age. The estimated
average household income in the Champaign - Springfield - Decatur market is
approximately $43,100 per year. Major employers in the market include ADM,
Staley's, Caterpillar, Mueller, Illinois Power, Kraft and the University of
Illinois. The television advertising revenue in the
Champaign - Springfield - Decatur marketplace was estimated at $46.0 million in
2000 and has grown at a compound annual rate of approximately 5.2% over the past
five years.

     Station Overview. We acquired WBUI in June 1999. WBUI signed on the air in
May 1984 and has been affiliated with The WB Network since our acquisition of
the station. WBUI, a former Pax Net station, currently carries a combination of
Pax Net and WB Network programming. Pax Net programming including Diagnosis
Murder and Touched by an Angel is shown during the morning and prime access time
periods. The

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WB Network prime time and Kids' WB! is shown at The WB Network scheduled times.
In addition, the station's syndicated programming currently includes Sabrina:
The Teenage Witch, Spin City, and Star Trek: Voyager. The station has contracted
for the future exclusive market broadcast rights to popular shows such as
Everybody Loves Raymond (9/01) and That 70's Show (9/02). In the November 2000
sweeps period, WBUI's reach in its market increased 11% over the November 1999
period to a weekly average of 92,000 homes. Also, the station's 7:00 a.m. to
1:00 a.m. household ratings increased 20% over the November 1999 sweeps period.

     In 2000, by mutual agreement, the Company terminated its joint sales
agreement with DP Media for WZPX, serving the Grand Rapids, Michigan market.
Neither party performed any services under that agreement.

OUR AFFILIATION AGREEMENTS

     Each of our nine WB Network affiliated stations has entered into a station
affiliation agreement with The WB Network that provides each station with the
exclusive right to broadcast The WB Network programming in its respective
market. These affiliate agreements have three to 10 year terms that expire
between March 2002 and April 2009. KASY, our UPN affiliated station in
Albuquerque - Santa Fe, New Mexico, has entered into an affiliation agreement
with UPN that expires in January 2005.

     Under the affiliation agreements, The WB Network and UPN retain the right
to program and sell approximately 75% of the advertising time available during
their prime time schedule with the remaining 25% available for sale by our
stations. Both networks retain approximately 50% of the advertising time
available during kids' programming aired in other dayparts.

     For our nine WB Network affiliated stations, in addition to the advertising
time retained for sale by The WB Network, each station is also subject to annual
compensation payments to The WB Network. The amount of compensation is
determined by taking into account the station's average ratings among adults
ages 18 - 49 during The WB Network prime time programming, as well as the number
of prime time programming hours provided per week by The WB Network. For our UPN
affiliate, KASY, no compensation is paid by either party. We participate in
cooperative marketing efforts with The WB Network and UPN whereby the networks
reimburse up to 50% of certain approved advertising expenditures by a station to
promote network programming. Our affiliation agreements for KPLR, KWBP and WBXX,
also entitle those stations to certain most favorable terms agreed to by The WB
Network and any affiliate, during the term of the affiliation agreements, and
any subsequent modifications.

     In addition, as part of our acquisition of WBDT, WIWB and WBUI, we entered
into a five-year secondary affiliation agreement with Pax Net at these stations.
We are generally obligated to run the Pax Net prime time programming in certain
morning dayparts. We retain a portion of the advertising time during this
programming for local sales, and Pax Net retains the balance.

ADVERTISING/SALES

     Virtually all of our revenues for 1998, 1999 and 2000 consisted of
advertising revenues, and no single advertiser accounted for more than 10% of
our gross advertising revenues in these periods. Our advertising revenues are
generated both by local advertising and national spot advertising.

     Local Advertising. Local advertising revenues are generated by both local
merchants and service providers and by regional and national businesses and
advertising agencies located in a particular designated market area. Local
advertising revenues represented 54% of our net advertising revenues in 1998,
55% in 1999 and 54% in 2000.

     National Spot Advertising. National spot advertising represents time sold
to national and regional advertisers based outside a station's designated market
area. National spot advertising revenues represented

                                        9
<PAGE>   10

46% of our net advertising revenues in 1998, 45% in 1999 and 46% in 2000.
National spot advertising primarily comes from:

     - new advertisers wishing to test a market;

     - advertisers who are regional retailers and manufacturers without national
       distribution;

     - advertisers who need to enhance network advertising in given markets; and

     - advertisers wishing to place more advertisements in specified geographic
       areas.

OUR COMPETITION

     Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations in their respective markets and, to a
lesser but increasing extent, with radio stations, cable television system
operators, newspapers, billboard companies, direct mail and internet sites.
Traditional network and Fox programming generally achieves higher household
audience levels than that of The WB Network, UPN and syndicated programming
aired by independent stations which is attributable to a number of factors,
including:

     - the traditional networks' efforts to reach a broader audience;

     - historically, less competition;

     - generally better channel positions;

     - more network programming being broadcast weekly;

     - the traditional networks' cross-promotions; and

     - the traditional networks' more established market presence than The WB
       Network.

     However, because The WB Network and UPN provide fewer hours of programming
per week than the traditional networks, we have a significantly higher inventory
of advertising time for our own use and, therefore, our programs achieve a share
of television market advertising revenues greater than their share of the
market's audience. We believe that this available advertising time, combined
with our efforts to attract (via our programming) the audiences that are key
targets of advertisers, and our focus on advertising sales allows us to compete
effectively for advertising revenues within our stations' markets.

     The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of federal
regulatory bodies, including the FCC, any of which could possibly have an
adverse effect on a television station's operations and profits. Sources of
video service other than conventional television stations, the most common being
cable television, can increase competition for a broadcast television station by
bringing distant broadcasting signals not otherwise available to the station's
audience, serving as a distribution system for national satellite-delivered
programming and other non-broadcast programming originated on a cable system and
selling advertising time to local advertisers. Other principal sources of
competition include home video exhibition, direct-to-home broadcast satellite
television, entertainment services and multi-channel multi-point distribution
services. Currently, two FCC permittees, DirecTV and Echostar, provide
subscription DBS services via high-power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers.

     Other technology advances and regulatory changes affecting programming
delivery through fiber optic telephone lines and video compression could lower
entry barriers for new video channels and encourage the development of
increasingly specialized niche programming. The Telecommunications Act of 1996
permits telephone companies to provide video distribution services via radio
communication, on a common carrier basis, as cable systems or as open video
systems, each pursuant to different regulatory schemes. We cannot predict the
effect that these and other technological and regulatory changes will have on
the broadcast television industry or on the future profitability and value of a
particular broadcast television station.

                                        10
<PAGE>   11

     Broadcast television stations compete with other television stations in
their designated market areas for the acquisition of programming. Generally,
cable systems do not compete with local stations for programming, but various
national cable networks do from time to time and on an increasing basis acquire
programming that could have been offered to local television stations. Public
broadcasting stations generally compete with commercially-rated broadcasters for
viewers, but do not compete for advertising revenues. Historically, the cost of
programming has increased because of an increase in the number of independent
stations and a shortage of quality programming.

FEDERAL REGULATION OF TELEVISION BROADCASTING

     Television broadcasting is a regulated industry and is subject to the
jurisdiction of the FCC under the Communications Act of 1934, as amended from
time to time. The Communications Act prohibits the operation of television
broadcasting stations except under a license issued by the FCC. The
Communications Act empowers the FCC, among other things:

     - to issue, revoke and modify broadcast licenses;

     - to decide whether to approve a change of ownership or control of station
       licenses;

     - to regulate the equipment used by stations; and

     - to adopt and implement regulations to carry out the provisions of the
       Communications Act.

     Failure to observe FCC or other governmental rules and policies can result
in the imposition of various sanctions, including monetary forfeitures, the
grant of short, or less than maximum, license renewal terms or, for a
particularly egregious violations, the denial of a license renewal application,
the revocation of a license or denial of FCC consent to acquire additional
broadcast properties.

     License Grant, Renewal, Transfer and Assignment. A party must obtain a
construction permit from the FCC to build a new television station. Once a
station is constructed and commences broadcast operations, the permittee will
receive a license which must be renewed by the FCC at the end of each license
term (which may be as long as eight years under current law). The FCC grants
renewal of a broadcast license if it finds that the station has served the
public interest, convenience, and necessity, there have been no serious
violations by the licensee of the Communications Act or FCC rules and policies,
and there have been no other violations of the Communications Act and FCC rules
and policies which, taken together, would constitute a pattern of abuse. If the
FCC finds that a licensee has failed to meet these standards, the FCC may deny
renewal, condition renewal, or impose some other sanction (such as a
forfeiture). Any other party with standing may petition the FCC to deny a
broadcaster's application for renewal. However, only if the FCC issues an order
denying renewal will the FCC accept and consider applications from other parties
for a construction permit for a new station to operate on that channel. The FCC
may not consider any applicant in making determinations concerning the grant or
denial of the licensee's renewal application. Although renewal of licenses is
granted in the majority of cases even when petitions to deny have been filed, we
cannot be sure our station licenses will be renewed for a full term or without
modification.

                                        11
<PAGE>   12

     Our current licenses expire as follows:

<TABLE>
<CAPTION>
           STATION (BY MARKET RANKING)              EXPIRATION DATE
           ---------------------------              ---------------
<S>                                                 <C>
KPLR..............................................  February 1, 2006
KWBP..............................................  February 1, 2007
KUWB..............................................  October 1, 2006
KWBQ..............................................  October 1, 2006
KASY..............................................  October 1, 2006
WBDT..............................................  October 1, 2005
WBXX..............................................  August 1, 2005
WIWB..............................................  December 1, 2005
WTVK..............................................  February 1, 2005
WBUI..............................................  December 1, 2005
</TABLE>

     The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a broadcast licensee without the prior approval of
the FCC. In determining whether to permit the assignment or transfer of control
of, or the grant or renewal of, a broadcast license, the FCC considers a number
of factors pertaining to the licensee, including:

     - compliance with various rules limiting common ownership of media
       properties;

     - the character of the licensee and those persons holding attributable
       interests therein; and

     - compliance with the Communications Act's limitations on alien ownership.

     Character generally refers to the likelihood that the licensee or applicant
will comply with applicable law and regulation. Attributable interests generally
refers to the level of ownership or other involvement in station operations
which would result in the FCC attributing ownership of that station or other
media outlet to the person or entity in determining compliance with FCC
ownership limitations.

     To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, an application must be filed with the FCC. If
the application involves a substantial change in ownership or control, the
application must be placed on public notice for a period of no less than 30 days
during which petitions to deny the application may be filed by interested
parties, including certain members of the public. If the FCC grants the
application, interested parties have no less than 30 days from the date of
public notice of the grant to seek reconsideration or review of that grant by
the full commission or, as the case may be, a court of competent jurisdiction.
The full FCC commission has an additional 10 days to set aside on its own motion
any action taken by the FCC's staff. When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer to any party other than the
assignee or transferee specified in the application.

     Ownership Restrictions. The officers, directors and equity owners of 5% or
more of our outstanding voting stock or the voting stock of a company holding
one or more broadcast licenses are deemed to have attributable interests in the
broadcast company. Also, specified institutional investors, including mutual
funds, insurance companies and banks acting in a fiduciary capacity, may own up
to (but not as much as) 20% of the outstanding voting stock without being
subject to attribution if they exercise no control over the management or
policies of the broadcast company. Finally, even if it owns non-voting stock, a
third party could be deemed to have an attributable interest if it owns more
than 33 percent of a station's (or the Company's) asset value (which is defined
by the FCC to mean the aggregate of equity plus debt) and either has another
attributable interest in the same market as the station(s) or provides more than
15 percent of the weekly programming for the station(s).

     The FCC rules generally prohibit the issuance of a license to to any party,
or parties under common control, for a television station if that station's
Grade B contour overlaps with the Grade B contour of another

                                        12
<PAGE>   13

television station in the same DMA in which that party or those parties already
have an attributable interest. FCC rules provide an exception to that general
prohibition under any one of the following circumstances:

     - there will be eight independent full-power television stations in the DMA
       after the acquisition or merger and one of the two television stations
       owned by the same party is not among the top four-ranked stations in the
       DMA based on audience share;

     - the station to be acquired is a "failing" station under FCC rules and
       policies;

     - the station to be acquired is a "failed" station under FCC rules and
       policies; or

     - the acquisition will result in the construction of a previously un-built
       station.

     FCC regulations also prohibit one owner from having attributable interests
in television broadcast stations that reach in the aggregate more than 35% of
the nation's television households. For purposes of this calculation, stations
in the UHF band, which covers channels 14 - 69 are attributed with only 50% of
the households attributed to stations in the VHF band, which covers channels
2 - 13. Subject to certain exceptions, FCC rules generally allow the holder of
an attributable interest in a television station to have an attributable
interest in:

     - up to six radio stations in a market with 20 independent media voices;

     - up to four radio stations in a market with 10 independent media voices;
       and

     - at least one radio station in any market.

     At the same time, FCC rules and policies generally prohibit a party with an
attributable interest in a television station from owning a daily newspaper or
cable television system serving a community located within the relevant coverage
area of that television station.

     Restrictions on Foreign Ownership. The Communications Act prohibits the
issuance of broadcast licenses to, or the holding of a broadcast license by,
foreign citizens or any corporation of which more than 20% of the capital stock
is owned of record or voted by non-U.S. citizens or their representatives or by
a foreign government or a representative thereof, or by any corporation
organized under the laws of a foreign country. The Communications Act also
authorizes the FCC to prohibit the issuance of a broadcast license to, or the
holding of a broadcast license by, any corporation controlled by any other
corporation of which more than 25% of the capital stock is owned of record or
voted by aliens. The FCC has interpreted these restrictions to apply to other
forms of business organizations, including partnerships. As a result of these
provisions, the licenses granted to our subsidiaries that hold FCC licenses
could be revoked if more than 25% of our stock were directly or indirectly owned
or voted by aliens. Our certificate of incorporation contains limitations on
alien ownership and control substantially similar to those contained in the
Communications Act. Pursuant to our certificate of incorporation, we have the
right to refuse to sell shares to aliens or to repurchase alien-owned shares at
their fair market value to the extent necessary, in the judgment of our board of
directors, to comply with the alien ownership restrictions.

     Programming and Operation. The Communications Act requires broadcasters to
serve the public interest, convenience and necessity. The FCC has gradually
restricted or eliminated many of the more formalized procedures it had developed
to promote the broadcast of programming responsive to the needs of the station's
community of license. Licensees continue to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
viewers concerning a station's programming will be considered by the FCC when it
evaluates the licensee's renewal application, but these complaints may be filed
and considered at any time.

     Stations must also pay regulatory and application fees and follow various
FCC rules that regulate, among other things:

     - political advertising;

     - children's programming;
                                        13
<PAGE>   14

     - the broadcast of obscene or indecent programming;

     - sponsorship identification; and

     - technical operations.

     Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short, less than the maximum, renewal terms, or for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.

     Review of Must Carry Rules. FCC regulations implementing the Cable
Television Consumer Protection and Competition Act of 1992 require each
television broadcaster to elect, at three-year intervals beginning October 1,
1993, to either:

     - require carriage of its signal by cable systems in the station's market
       which is referred to as must carry rules; or

     - negotiate the terms on which such broadcast station would permit
       transmission of its signal by the cable systems within its market, which
       is referred to as retransmission consent.

     The United States Supreme Court upheld the must-carry rules in a 1997
decision. These must carry rights are not absolute, and their exercise is
dependent on a variety of factors such as:

     - the number of active channels on the cable system;

     - the location and size of the cable system; and

     - the amount of programming on a broadcast station that duplicates the
       programming of another broadcast station carried by the cable system.

     Therefore, under certain circumstances, a cable system may choose to
decline to carry a given station. We have elected must carry with respect to
each of our stations which are each carried on the related cable systems.

     Local Marketing Agreements. Under FCC rules, the licensee of a television
station providing more than 15% of another television station's programming
under a local marketing agreement is considered to have an attributable interest
in the other station for purposes of the FCC's national and local multiple
ownership rules if both stations are located in the same market. The FCC also
adopted a grandfathering policy providing that local marketing agreements that
are in compliance with the previous FCC rules and policies and were entered into
before November 5, 1996, would be permitted to continue in force until the FCC
conducts its biennial review of regulations in 2004. Local marketing agreements
entered into after November 5, 1996 but prior to the recently adopted FCC rules
will be grandfathered until August 2001.

     Prior to the adoption of the FCC's new rules, we did, from time to time,
enter into local marketing agreements, generally in connection with pending
station acquisitions. By using local marketing agreements, we can provide
programming and other services to a station that we have agreed to acquire
before we receive all applicable FCC and other governmental approvals.

     Subject to ownership restrictions in the new FCC rules and policies, FCC
rules and policies generally permit local marketing agreements if the station
licensee retains ultimate responsibility for and control of the applicable
station, including finances, personnel, programming and compliance with the
FCC's rules and policies. We cannot be sure that we will be able to air all of
our scheduled programming on a station with which we may have a local marketing
agreement with, or that we would receive the revenue from the sale of
advertising for such programming.

     Digital Television Services. The FCC has adopted rules for implementing
digital television service in the United States. Implementation of digital
television will improve the technical quality of television signals and provide
broadcasters the flexibility to offer new services, including high-definition
television and data broadcasting.

                                        14
<PAGE>   15

     The FCC has established service rules and adopted a table of allotments for
digital television. Under the table, all eligible broadcasters with a full-power
television station are allocated a separate channel for digital television
operation. Stations will be permitted to phase in their digital television
operations over a period of years following the adoption of a final table of
allotments, after which they will be required to surrender their license to
broadcast the analog, or non-digital, television signal. Affiliates of the top
four networks in the top thirty markets are already required to be on the air
with a digital signal. Our stations must be on the air with a digital signal by
May 1, 2002. Under applicable law and regulation, television broadcasters must
return their analog license to the government by 2006 unless specified
conditions exist, that in effect, limit the public's access to digital
television transmissions in a particular market.

     The Communications Act and the FCC's rules impose certain conditions on the
FCC's implementation of digital television service. Among other requirements,
the FCC must:

     - limit the initial eligibility for licenses to existing television
       broadcast licensees or permittees (who held those licenses or permits by
       April 3, 1997);

     - allow digital television licensees to offer ancillary and supplementary
       services; and

     - charge appropriate fees to broadcasters that supply ancillary and
       supplementary services for which such broadcasters derive certain
       non-advertising revenues.

     Equipment and other costs associated with the digital television
transition, including the necessity of temporary dual-mode operations, will
impose some near-term financial costs on television stations providing the
services. The potential also exists for new sources of revenue to be derived
from digital television. We cannot predict the overall effect the transition to
digital television might have on our business.

     Children's Television Act. FCC rules limit the amount of commercial matter
that a television station may broadcast during programming directed primarily at
children 12 years old and younger. FCC rules further require television stations
to serve the educational and informational needs of children 16 years old and
younger through the stations' own programming as well as through other means.
Television broadcasters must file periodic reports with the FCC to document
their compliance with foregoing obligations.

     Other Pending FCC and Legislative Proceedings. In 1995, the FCC issued
notices of proposed rulemaking proposing to modify or eliminate most of its
remaining rules governing the broadcast network-affiliate relationship. The
network-affiliate rules were originally intended to limit networks' ability to
control programming aired by affiliates or to set station advertising rates and
to reduce barriers to entry by networks. The dual network rule, which generally
prevents a single entity from owning more than one broadcast television network,
is among the rules under consideration in these proceedings. Although the
Telecommunications Act substantially relaxed the dual network rule by providing
that an entity may own more than one television network, none of the four major
national television networks may merge with each other or acquire certain other
networks in existence on February 8, 1996. We cannot predict how or when the FCC
proceeding will be resolved or how those proceedings or the relaxation of the
dual network rule may affect our business.

     The Satellite Home Viewer Act allows satellite carriers to deliver
broadcast programming to subscribers who are unable to obtain television network
programming over the air from local television stations. Congress recently
amended the act to facilitate the ability of satellite carriers to provide
subscribers with programming from both local and non-local television station.
The FCC has adopted rules to implement certain of those legislative changes and
is conducting rulemaking proceedings to implement others.

     On February 2, 2000, the FCC released a Report and Order which adopted new
rules requiring broadcast licensees to provide equal employment opportunities.
The new rules generally require broadcast licensees to widely disseminate
information on employment vacancies and to promote diversification in their
employment. The new rules supplemented a broadcaster's obligation to refrain
from racial or other prohibited discrimination in its employment practices under
other applicable federal as well as state and local laws and regulations. On
January 16, 2001, the United States Court of Appeals for the District of
Columbia Circuit declared certain portions of the new EEO rules to be
unconstitutional, and on January 31, 2001, the FCC suspended implementation of
all of its EEO rules. The FCC has asked the court to rehear certain aspects of
its ruling. It

                                        15
<PAGE>   16

is unclear at this date whether all or any of the FCC's EEO rules will be
reinstated or whether the FCC will initiate any effort to fashion new EEO rules
to comply with the court's ruling.

     Federal regulatory agencies and Congress from time to time consider
proposals for additional or revised rules. We cannot predict the resolution of
these issues or other issues discussed above, although their outcome could, over
a period of time, affect, either adversely or favorable, the broadcasting
industry generally or us specifically.

     The foregoing summary of FCC and other governmental regulations is not
intended to be comprehensive. For further information concerning the nature and
extent of federal regulation of broadcast stations, you should refer to the
Communications Act, other Congressional acts, FCC rules, and the public notices
and rulings of the FCC.

EMPLOYEES

     At December 31, 2000, we had 331 employees, including 37 at KPLR in St.
Louis who were subject to collective bargaining agreements. We believe that our
relationships with our employees and the union representing our unionized
employees are good.

FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 10-K includes forward-looking statements. We
have based these forward-looking statements on our current expectations and
projections about future events. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "intend," "should," "expect,"
"anticipate," "believe," "predict," "potential" "might" or "continue" or the
negative of such terms or other comparable terminology. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our and the television broadcast industry's actual results, levels of
activity, performance, achievements and prospects to be materially different
from those expressed or implied by such forward-looking statements. These risks,
uncertainties and other factors include those identified under "Risk Factors" in
this Annual Report on Form 10-K.

     We are under no duty to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
after the date of this Annual Report on Form 10-K. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
Annual Report on Form 10-K might not occur.

RISK FACTORS

     The following factors (in addition to others) could have a material and
adverse impact on the Company's business:

     Our highly leveraged financial position poses the following risks to
stockholders:

     - a substantial portion of our cash flow from operations will be required
       to service our indebtedness;

     - our ability to obtain financing in the future for working capital,
       capital expenditures and general corporate purposes, including
       acquisitions might be impeded; and

     - we are more vulnerable to economic downturns and our ability to withstand
       competitive pressures is limited.

     We derive substantially all of our revenues from advertisers in diverse
industries. If a number of our advertisers reduce their expenditures because of
a general economic downturn, or an economic downturn in one or more industries
or regions, or for any other reason, our results of operations would be
materially and adversely affected. For example, a number of our advertisers
reduced their advertising expenditures during the fourth quarter of 2000 and in
early 2001 and we expect total broadcast television advertising revenue to
decline during the first half of 2001.

                                        16
<PAGE>   17

     Our future cash flow might not be sufficient to meet our obligations and
commitments. If we do not meet our interest obligations under our credit
agreement or indentures or if we otherwise default under these instruments, our
debt may be accelerated under these instruments as well as other debt
instruments we have. In addition, because we are highly leveraged, it could
limit our ability to respond to market conditions or meet extraordinary capital
needs. If we are unable to generate sufficient cash flow from operations to meet
our obligations and commitments, we will be required to refinance or restructure
our indebtedness or raise additional debt or equity capital. Additionally, we
may be required to sell material assets or operations or delay or forego
acquisitions. These alternative strategies might not be effected on satisfactory
terms, if at all.

     Our credit agreement and our subsidiaries' indentures contain restrictive
covenants that may limit our ability to:

     - incur additional debt;

     - pay dividends;

     - merge, consolidate or sell assets;

     - make acquisitions or investments; or

     - change the nature of our business.

     Our credit agreement and indentures also require us to maintain certain
financial covenants, including specified financial tests. In 2000, we failed to
meet certain of these covenants and the banks waived our non-compliance.
Although we do not currently have any borrowings outstanding under our credit
facility, we expect to request a waiver of non-compliance, or an amendment
changing, our quarterly minimum EBITDA tests for 2001. Without waivers or
amendments, we may not be able to borrow under our credit agreement which might
adversely affect our ability to make acquisitions as planned or meet general or
extraordinary capital needs.

     If we experience a change of control, either with respect to the credit
agreement or either indenture, we might not have sufficient funds to repay all
amounts outstanding under our revolving credit facility and to repurchase the
notes, as may be required. Alternatively, if we are able to satisfy the change
of control provisions, it would require a substantial diversion of cash flow
from our operations and our acquisition plans and could have a material adverse
effect on our economic viability.

     We are a holding company with no operations of our own. Therefore, if our
subsidiaries are unable to pay dividends or make distributions to us, we would
be unable to make dividend payments to our stockholders or pay any future
indebtedness. Our subsidiaries' ability to pay dividends and distributions to us
is limited by the terms of our subsidiaries' credit agreement and indentures.

     We have incurred losses from continuing operations in each of our fiscal
years since inception and expect to continue to experience net losses in the
foreseeable future. These net losses, which may be greater than our net losses
in the past, are principally a result of interest expense on our outstanding
debt and non-cash charges for depreciation and amortization expense related to
fixed assets and goodwill related to acquisitions.

     Our growth could be limited if we are unable to successfully implement our
acquisition plans. Our ability to acquire additional television stations is
affected by the following:

     - many competing acquirers have greater resources available to make such
       acquisitions than we have;

     - desired stations might not be available for purchase;

     - we might be unable to obtain The WB Network affiliation for all of the
       stations we acquire;

     - we might not have the financial resources necessary to acquire additional
       stations;

     - we might be unable to obtain FCC approval of the assignments or transfers
       of control of FCC licenses; and

     - the law limits the number and location of broadcasting properties that
       any one person or entity, including its affiliates, may own and could
       limit our ability to pursue desired stations.

                                        17
<PAGE>   18

     Generally when we sign acquisition agreements, we enter into interim local
marketing agreements with the seller under which we receive all station revenues
and pay all station expenses. Because the seller retains ultimate programming
control, we bear the economic risks of paying station expenses until closing the
acquisition.

     Mr. Kellner's consulting agreement provides that he may perform services
for other businesses unaffiliated with ours that, in certain limited
circumstances, may be competitive. Because of Mr. Kellner's experience in the
television broadcast industry, if Mr. Kellner provides services to a competing
business, it could materially affect our operations.

     Mr. Kellner's ownership and position at The WB Network could create
conflicts with his position with us if our interests differ from those of The WB
Network. Because Mr. Kellner is both our Chief Executive Officer and The WB
Network's Chief Executive Officer, The WB Network requires that he recuse
himself from any material transaction between The WB Network and us.
Additionally, due to his responsibilities with AOL Time Warner's television
networks division and The WB Network, Mr. Kellner will have limited time
available to devote to us.

     If we experience a significant decline in broadcast cash flow from KPLR we
will not have any positive cash flow and will not be able to fulfill our current
and future obligations and commitments. Due to negative net cash flow at several
of our start-up stations, broadcast cash flow from KPLR accounted for more than
100% of our total broadcast cash flow in 2000.

     The required conversion of the broadcast industry to provide digitally
transmitted television signals will require us to make significant capital
expenditures which may not be balanced by consumer demand for digital
television. The FCC requires us to provide a digitally transmitted signal by
2002 for all of our stations and, generally, to stop using analog signals on the
stations by 2006. Because digital television is generally available only in some
of the top-ten viewing markets, we are unable to predict what the consumer
demand for digital division will be or when the demand will arise.

                                        18
<PAGE>   19

ITEM 2. PROPERTIES

     All of our leased studio, office and tower facilities are leased pursuant
to long-term leases. We believe that all facilities and equipment are adequate,
with minor changes and additions, for conducting operations as presently
contemplated. Set forth below is information with respect to our studios and
other facilities for our current stations. Information as to tower size reflects
the height above average terrain of the antenna radiation center.

<TABLE>
<CAPTION>
                       MARKET                         APPROXIMATE SIZE   OWNERSHIP
                       ------                         ----------------   ---------
<S>                                                   <C>                <C>
St. Louis, Missouri
  Studio and office facilities......................   36,000 sq. ft      Leased
  Tower.............................................     1,011 ft         Leased
Portland, Oregon
  Studio and office facilities......................   15,255 sq. ft       Owned
  Tower.............................................     1,785 ft         Leased
  Digital Tower(2)..................................     1,716 ft          Owned
Salt Lake City, Utah
  Studio and office facilities......................   9,500 sq. ft       Leased
  Tower.............................................     4,075 ft         Leased
  Digital Tower(2)..................................     4,125 ft          Owned
Albuquerque - Santa Fe, New Mexico
  Studio and office facilities (joint for KWBQ and
     KASY)..........................................   9,000 sq. ft       Leased
  Tower (KWBQ)......................................     1,234 ft         Leased
  Tower (KASY)......................................     4,187 ft         Leased
Dayton, Ohio
  Studio and office facilities......................   10,000 sq. ft      Leased
  Tower.............................................      485 ft           Owned
Knoxville, Tennessee
  Studio and office facilities......................   8,000 sq. ft       Leased
  Tower(1)..........................................     2,399 ft          Owned
Green Bay - Appleton, Wisconsin
  Studio and office facilities......................   2,640 sq. ft       Leased
  Tower(1)..........................................      660 ft          Leased
Ft. Myers - Naples, Florida
  Studio and office facilities......................   5,000 sq. ft       Leased
  Tower.............................................     1,000 ft         Leased
Champaign - Springfield - Decatur, Illinois
  Studio and office facilities......................   9,600 sq. ft        Owned
  Tower(1)..........................................     1,030 ft          Owned
</TABLE>

---------------
(1) Tower owned on leased property.

(2) Represents partnership interests in digital television towers in the Salt
    Lake City and Portland markets.

ITEM 3. LEGAL PROCEEDINGS

     We currently, and from time to time, are involved in litigation incidental
to the conduct of our business. We maintain comprehensive general liability and
other insurance that we believe to be adequate for the purpose. We are not
currently a party to any lawsuit or proceeding that we believe could have a
material adverse effect on our financial condition or results of operations.

                                        19
<PAGE>   20

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

     No matter was submitted to a vote of the security holders during the fourth
quarter of 2000.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth information about our executive officers at
December 31, 2000.

<TABLE>
<CAPTION>
                 NAME                   AGE                   POSITION
                 ----                   ---                   --------
<S>                                     <C>    <C>
Jamie Kellner.........................  53     Chairman of the Board and Chief
                                               Executive Officer
Douglas Gealy.........................  40     President, Chief Operating Officer and
                                               Director
Thomas Allen..........................  48     Executive Vice President, Chief
                                               Financial Officer and Director
Edward Danduran.......................  48     Vice President, Controller
</TABLE>

     Jamie Kellner is a founder of ACME and has served as our Chief Executive
Officer and Chairman of the Board since 1997. Mr. Kellner is also a founder,
Chief Executive Officer and partner of The WB Network since 1993. Previously,
Mr. Kellner was President of Fox Broadcasting Company since its inception in
1986 to 1993. In March 2001, Mr. Kellner also became Chairman and Chief
Executive Officer of AOL Time Warner's Television Networks division.

     Douglas Gealy is a founder of ACME and has served as our President and
Chief Operating Officer and as a member of our Board since 1997. Since December
of 1996, Mr. Gealy has been involved in development activities for ACME. Before
founding ACME, Mr. Gealy served for one year as Executive Vice President of
Benedek Broadcasting Corporation. From 1991 to 1996, Mr. Gealy was a Vice
President and General Manager of WCMH and its local marketing agreement, WWHO,
both in Columbus, Ohio, and following the acquisition of these stations by NBC,
served as President and General Manager of these stations.

     Thomas Allen is a founder of ACME and has served as our Executive Vice
President and Chief Financial Officer and as a member of our Board since 1997.
Since June 1996, Mr. Allen has been involved in development activities for ACME.
From August 1993 to May 1996, Mr. Allen was the Chief Operating Officer and
Chief Financial Officer for Virgin Interactive Entertainment. Before that Mr.
Allen served as Senior Vice President and Chief Financial Officer of the Fox
Broadcasting Company from 1986 to 1993.

     Edward Danduran has been our Vice President and Controller since July 1997.
From November 1995 until April 1997, Mr. Danduran was a Financial Consultant for
Virgin Interactive Entertainment, Inc. From 1989 to 1995, Mr. Danduran was the
Chief Financial Officer of Phoneby, a business communications company.

                                    PART II

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

     The Company's common stock is traded on the NASDAQ National Market under
the symbol ACME. The high sale price of the common stock during 2000 was $36.00
and the low sale price during the same period was $4.69. As of March 26, 2001,
there were 46 stockholders of record.

     We have not declared or paid any cash dividends or distributions on our
common stock since our inception. We anticipate that, for the foreseeable
future, all earnings will be retained for use in our business and no cash
dividends will be paid on our common stock. Any payment of future cash dividends
on our common stock will be dependent upon the ability of our subsidiaries to
pay dividends or make cash payments or advances to us. Our credit agreement and
our subsidiaries' indentures impose restrictions on our subsidiaries' ability to
make these payments. Our ability to pay future dividends will also be subject to
restrictions under any future debt obligations and other factors that our board
of directors deems relevant.

                                        20
<PAGE>   21

     Below are the Nasdaq high, low and closing prices of ACME Communications,
Inc. for each quarter of 2000 and the fourth quarter of 1999.

<TABLE>
<CAPTION>
                                          FIRST     SECOND      THIRD      FOURTH
                                         QUARTER    QUARTER    QUARTER    QUARTER*
                                         -------    -------    -------    --------
<S>                                      <C>        <C>        <C>        <C>
2000
High...................................  $36.00     $26.50     $18.00      $10.88
Low....................................   20.00       8.63       8.38        4.69
Close..................................   22.88      18.25       9.00        9.13
1999
High...................................     n/a        n/a        n/a      $39.63
Low....................................     n/a        n/a        n/a       27.00
Close..................................     n/a        n/a        n/a       33.25
</TABLE>

---------------
* the fourth quarter of 1999 includes September 30th, the first day the Company
  traded shares following its IPO.

ITEM 6. SELECTED FINANCIAL DATA

     Following is ACME Communications' inception-to-date selected consolidated
financial data. This data is derived from the audited Consolidated Financial
Statements of the Company and should be read in conjunction with the
Consolidated Financial Statements and Notes thereto (located at Item 8 of this
filing) and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" (located at Item 7 of this filing).

<TABLE>
<CAPTION>
                                                               FOR THE YEARS ENDED DECEMBER 31,
                                                     -----------------------------------------------------
                                                        1997          1998          1999          2000
                                                     ----------    ----------    ----------    -----------
                                                                        (IN THOUSANDS)
<S>                                                  <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................................  $   11,347    $   43,928    $   60,008    $    73,443
Operating expenses:
  Station operating expenses.......................      10,158        32,973        45,675         54,141
  Depreciation and amortization....................       1,215        11,355        17,325         20,885
  Corporate........................................       1,415         2,627         6,398          3,522
  Equity-based compensation(1).....................          --            --        39,688            529
                                                     ----------    ----------    ----------    -----------
Operating loss.....................................      (1,441)       (3,027)      (49,078)        (5,634)
Other income (expenses):
  Interest income..................................         287           231           499          1,497
  Interest expense.................................      (6,562)      (23,953)      (28,694)       (27,275)
  Gain (loss) on sale of assets....................          --         1,112           (11)         1,504
  Other............................................          --          (380)           --           (255)
                                                     ----------    ----------    ----------    -----------
Loss before income taxes and minority interest.....      (7,716)      (26,017)      (77,284)       (30,163)
Income tax benefit.................................          --         2,393         4,420          8,125
                                                     ----------    ----------    ----------    -----------
Loss before minority interest......................      (7,716)      (23,624)      (72,864)       (22,038)
    Minority interest..............................         237         1,684         2,085             --
                                                     ----------    ----------    ----------    -----------
         Net loss..................................  $   (7,479)   $  (21,940)   $  (70,779)   $   (22,038)
                                                     ==========    ==========    ==========    ===========
Pro forma net loss per share:
Loss before income taxes and minority interest, as
  reported.........................................  $   (7,716)   $  (26,017)   $  (77,284)   $   (30,163)
Pro forma tax benefit..............................          --         8,398        12,259          8,125
                                                     ----------    ----------    ----------    -----------
Loss before minority interest......................      (7,716)      (17,619)      (65,025)       (22,038)
Pro forma minority interest allocation.............         237         1,385         1,629             --
                                                     ----------    ----------    ----------    -----------
Pro forma net loss.................................  $   (7,479)   $  (16,234)   $  (63,396)   $   (22,038)
                                                     ==========    ==========    ==========    ===========
Pro forma net loss per share, basic and diluted....  $    (4.40)   $    (3.22)   $    (7.96)   $     (1.32)
                                                     ==========    ==========    ==========    ===========
Basic and diluted weighted average common shares
  outstanding......................................   1,701,370     5,045,256     7,961,379     16,750,000
                                                     ==========    ==========    ==========    ===========
</TABLE>

                                        21
<PAGE>   22

<TABLE>
<CAPTION>
                                                               FOR THE YEARS ENDED DECEMBER 31,
                                                     -----------------------------------------------------
                                                        1997          1998          1999          2000
                                                     ----------    ----------    ----------    -----------
                                                                        (IN THOUSANDS)
<S>                                                  <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
Total assets.......................................  $  220,475    $  286,827    $  407,707    $   399,445
Long-term debt(2)..................................     192,452       225,728       215,461        236,980
Total stockholders' equity.........................      16,306         1,413       126,835        105,326
SUPPLEMENTAL FINANCIAL DATA:
Broadcast cash flow and adjusted EBITDA(3):
  Operating loss...................................  $   (1,441)   $   (3,027)   $  (49,078)   $    (5,636)
  Add back:
    Equity-based compensation(1)...................          --            --        39,688            529
    Depreciation and amortization..................       1,215        11,355        17,325         20,885
    LMA Fees.......................................          --           228            28             --
    Amortization of program rights.................       1,433         5,321         8,475         13,662
    Corporate expenses.............................       1,415         2,627         6,398          3,522
    Adjusted program payments(3)...................      (1,598)       (5,124)       (8,441)       (12,912)
                                                     ----------    ----------    ----------    -----------
      Broadcast cash flow..........................       1,024        11,380        14,395         20,052
  Less:
    Corporate expenses.............................       1,415         2,627         6,398          3,522
                                                     ----------    ----------    ----------    -----------
         Adjusted EBITDA...........................  $     (391)   $    8,753    $    7,997    $    16,530
                                                     ==========    ==========    ==========    ===========
Broadcast cash flow margin(3)......................         9.0%         25.9%         24.0%          27.3%
Adjusted EBITDA margin(3)..........................         n/m          19.9%         13.3%          22.5%
Cash flows provided by (used in):
  Operating activities.............................  $     (599)   $      319    $    4,324    $    13,265
  Investing activities.............................  $ (191,730)   $  (20,879)   $  (80,705)   $    (8,190)
  Financing activities.............................  $  201,153    $   12,737    $   99,226    $     2,116
</TABLE>

---------------
(1) Equity-based compensation for 1999 is comprised of approximately $132,000
    relating to station operating expenses and $39.6 million relating to
    corporate expenses in 1999. For 2000, approximately $313,000 relates to
    station operating expenses and $216,000 relates to corporate expenses.

(2) Includes the Company's 12% senior secured discount notes, the 10 7/8% senior
    discount notes, convertible debt, revolving credit facility and the
    long-term portion of the capital lease obligations

(3) We define:

     - broadcast cash flow as operating income, plus equity-based compensation,
       depreciation and amortization, LMA fees, amortization of program rights,
       and corporate expenses, less program payments -- the latter as adjusted
       to reflect reductions for liabilities relating to expired rights or
       rights which have been written-off in connection with acquisitions;

     - adjusted EBITDA as broadcast cash flow less corporate expenses;

     - broadcast cash flow margin is broadcast cash flow as a percentage of net
       revenues; and

     - adjusted EBITDA margin is adjusted EBITDA as a percentage of net
       revenues.

     We have included broadcast cash flow, broadcast cash flow margin, adjusted
EBITDA and adjusted EBITDA margin data because management believes that these
measures are useful to an investor to evaluate our ability to service debt and
to assess the earning ability of our stations' operations. However, you should
not consider these items in isolation or as substitutes for net income, cash
flows from operating activities or other statement of operations or cash flows
data prepared in accordance with generally accepted accounting principles. These
measures are not necessarily comparable to similarly titled measures employed by
other companies.

                                        22
<PAGE>   23

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

Overview

     We derive revenues primarily from the sale of advertising time to local,
regional and national advertisers. Our revenues depend on popular programming
that attracts audiences in the demographic groups targeted by advertisers,
allowing us to sell advertising time at satisfactory rates. Our revenues also
depend significantly on factors such as the national and local economy and the
level of local competition.

     Our revenues are generally highest during the fourth quarter of each year,
primarily due to increased expenditures by advertisers in anticipation of
holiday season consumer spending and an increase in viewership during this
period. We generally pay commissions to advertising agencies on local, regional
and national advertising and to national sales representatives on national
advertising. Our revenues reflect deductions from gross revenues for commissions
payable to advertising agencies and national sales representatives.

     Our primary ongoing operating expenses are programming costs, employee
compensation, advertising and promotion expenditures and depreciation and
amortization. Programming expense consists primarily of amortization of
broadcast rights relating to syndicated programs as well as news production and
sports rights fees. Changes in employee compensation expense result primarily
from increases in total staffing levels, from adjustments to fixed salaries
based on individual performance and inflation and from changes in sales
commissions paid to our sales staff based on levels of advertising revenues.
Advertising and promotion expenses consist primarily of media and related
production costs resulting from the promotion of our stations and programs. This
amount is net of any reimbursement received or due to us for such advertisement
and promotion from The WB Network, UPN or from other program suppliers.

Results of Operations

Years Ended December 31, 2000 compared to Year Ended December 31, 1999

     Net revenues for the year ended December 31, 2000 increased $13.4 million
(22%) to $73.4 million as compared to $60.0 million for the year ended December
31, 1999. This increase reflects revenue gains at each station, and to a lesser
extent, to the full-year impact in 2000 of stations acquired or launched during
1999 which were on the air for the full year 2000. Increases in revenue were
driven primarily by increased ratings, improved distribution and higher unit
prices.

     Station operating expenses increased to $54.1 million compared to the prior
year's operating expenses of $45.7 million. This increase of 18% was due
primarily to increased programming expenses at many of our developing stations
coupled with the full year impact in 2000 of stations acquired or launched
during 1999.

     Depreciation and amortization expense for the year was $20.9 million
compared to $17.3 million for 1999. This $3.6 million increase reflects the full
year amortization of intangible assets and increased depreciation relating to
the stations that were newly built or acquired in 1999 and ongoing upgrades of
existing facilities, and the full year of amortization of the goodwill
associated with our purchase of our subsidiary ACME Intermediate, LLC's minority
interest upon our IPO.

     Corporate expenses for 2000 decreased to $3.5 million from $6.4 million in
1999. Our 1999 expense included a non-recurring $3.0 million charge relating to
IPO bonuses paid primarily to the Company's senior management founders. All
other corporate expenses increased 3% in 2000 over 1999 levels due primarily to
the increase in costs associated with being a publicly traded company which were
offset by a decrease in incentive compensation.

     Equity-based compensation of $529,000 in 2000 relates to options granted
below market value in 1999 to senior management in exchange for their
participation in the Company's previously established long term incentive plan.
The $39.7 million in 1999 relates primarily to a charge reflecting the fully
vested common stock issued in connection with the Company's initial public
offering in September 1999 in exchange for the management carry units that were
issued in June 1997 to our senior founding management members.

     Interest expense for the current year was $27.3 million compared to $28.7
million for 1999. This $1.4 million decrease in interest expense is the result
of the elimination in 2000 of interest charges related to
                                        23
<PAGE>   24

borrowings on the revolving credit facility and the Bridge Loan, both of which
were repaid with proceeds from the IPO in October 1999, offset by increasing
balances under the company's 10 7/8% Senior Discount Notes due 2004 (the
"Television Notes") and 12% Senior Secured Discount Notes due 2005 (the
"Intermediate Notes", and together with the Television Notes, the "Senior
Notes").

     In 2000, the Company sold its studio facility in St. Louis which resulted
in a gain of $1.572 million. We have leased these premises back under a
short-term lease and expect to move to new facilities by the spring of 2002. We
also sold our studio building in Albuquerque pursuant to a purchase option
previously granted and leased those premises back under a long-term lease. The
sale of the building in Albuquerque resulted in a loss of approximately $67,000.

     The tax benefit for 2000 was $8.1 million, representing an effective tax
benefit of 27%. The difference in the statutory federal rate of 34% and the
Company's effective tax benefit of 27% relates to the impact of non-deductible
expenses. Our 1999 tax benefit was $4.4 million, reflecting the tax benefit of
our fourth quarter taxable losses incurred subsequent to the September 30, 1999
termination of our non-taxable status and also includes the one-time impact of
that termination.

     Prior to the Reorganization, ACME Television Holdings, LLC was a limited
liability company, therefore, no income taxes have been provided for its
operations other than at its subsidiary ACME Television of Missouri, Inc. which
is a C corporation subject to federal and state taxation. Any liability or
benefit from the Company's non-taxable entities' consolidated income or loss is
the responsibility of, or benefit to, the individual members.

     In conjunction with the Reorganization, the Company terminated its
non-taxable status. In conjunction with this termination, the Company recorded
deferred tax assets and liabilities at the termination date for the difference
between the financial statement carrying amount and tax bases of assets and
liabilities.

     Minority interest represents the allocation of the loss for the respective
periods to the minority interest holders of our subsidiary ACME Intermediate
Holdings, LLC. Effective with the Company's September 1999 reorganization, the
minority interest holders exchanged their membership units of ACME Intermediate
Holdings, LLC for stock in ACME Communications, Inc. Accordingly, there was no
minority interest recorded for 2000 and the amount allocated to minority
interests for 1999 reflects allocations through September 1999, excluding
equity-based compensation charges, which were not allocated the minority
interest.

     Our broadcast cash flow for 2000 was $20.1 million, compared to a $14.4
million broadcast cash flow in 1999. This increase is primarily attributable to
the increased revenue and margins at most of our stations.

     Our net loss for the current year was $22.0 million as compared with the
$70.8 million loss incurred in 1999, a decrease of $48.8 million. This decrease
in our net loss is primarily the result of the significant reduction in our
equity-based compensation expense, a reduction of $1.4 million in interest
expense and our increased revenues and operating margins, net of increased
depreciation and amortization expenses.

Years Ended December 31, 1999 compared to Year Ended December 31, 1998

     Net revenues for the year ended December 31, 1999 increased $16.1 million
(37%) to $60.0 million as compared to $43.9 million for the year ended December
31, 1998. This increase is due primarily to increases in revenues at each
operating station, and to a lesser extent, to stations acquired or launched
during 1999. Increases in revenue were driven primarily by increased ratings,
distribution and higher unit prices.

     Station operating expenses increased to $45.7 million compared to the prior
year's operating expenses of $33.0 million. This increase of 38% was due to
increased programming expenses at many of our stations coupled with the impact
of newly acquired or launched stations during 1999.

     Corporate expenses for 1999 increased to $6.4 million from $2.6 million in
1998. This increase reflects a $3.0 million charge relating to IPO bonuses paid
primarily to the Company's senior management founders and to increased staffing
to support the additional stations launched or acquired in 1999.

                                        24
<PAGE>   25

     Equity-based compensation of $39.7 million in 1999 relates to a charge
reflecting the fully vested common stock issued in exchange for the management
carry units that were issued in June 1997 to our senior management members in
connection with the Company's initial public offering in September 1999. There
was no such expense in 1998.

     Depreciation and amortization expense for the year was $17.3 million
compared to $11.4 million for 1998. This $5.9 million increase reflects the
amortization of intangible assets relating to newly acquired or launched
stations in 2000 along with increased depreciation relating to newly built
stations and ongoing upgrades of existing facilities.

     Interest expense for the current year was $28.7 million compared to $24.0
million for 1998. This increase in interest expense relates to increasing
balances under the company's Senior Notes, increased borrowings on the revolving
credit facility, and interest expense associated with the Bridge Loan. The
Bridge Loan and the increased borrowings under the revolving credit facility
were both obtained to finance the purchase of WBDT, WBUI and WIWB, both of which
were repaid with proceeds from the IPO in October 1999.

     In 1998, the Company sold its interest in a construction permit for a
station in the Springfield, Missouri market at a gain of $1.1 million.

     The tax benefit for 1999 was $4.4 million, including the impact of the
termination of the Company's non-taxable status, compared to a tax benefit of
$2.4 million in 1998. The increase relates primarily to the effect of the
Company's taxable status in the fourth quarter of 1999.

     Prior to the Reorganization, ACME Television Holdings, LLC was a limited
liability company, therefore, no income taxes have been provided for its
operations other than at its subsidiary ACME Television of Missouri, Inc. which
is a C corporation subject to federal and state taxation. Any liability or
benefit from the Company's non-taxable entities' consolidated income or loss is
the responsibility of, or benefit to, the individual members.

     In conjunction with the Reorganization, the Company terminated its
non-taxable status. In conjunction with this termination, the Company recorded
deferred tax assets and liabilities at the termination date for the difference
between the financial statement carrying amount and tax bases of assets and
liabilities.

     Minority interest represents the allocation of the loss for the respective
periods to the minority interest holders of our subsidiary ACME Intermediate
Holdings, LLC. Effective with the Company's September 1999 reorganization, the
minority interest holders exchanged their membership units of ACME Intermediate
Holdings, LLC for stock in ACME Communications, Inc. The amount allocated to
minority interests for 1999 reflects allocations through September 1999,
excluding equity-based compensation charges, which were not allocated the
minority interest.

     Our broadcast cash flow for 1999 was $14.4 million, compared to an $11.4
million broadcast cash flow in 1998. This increase is primarily attributable to
the profitable operations at all of our stations that existed at the end of
1998, offset by start-up losses of approximately $700,000 at station KWBQ, which
launched in March 1999 and approximately $2.6 million at our three early-stage
development stations serving Dayton, Green Bay-Appleton and Champaign-Decatur
acquired from Paxson Communications in June 1999.

     Our net loss for the current year was $70.8 million as compared with the
$21.9 million loss incurred in 1998, an increase of $48.9 million. This
increased loss is primarily the result of the equity-based compensation charge
incurred in conjunction with our IPO along with increased interest, depreciation
and amortization expenses, net of improved broadcast cash flow.

     The Company's broadcast cash flow for the year ended December 31, 1999 was
$14.4 million, compared to an $11.4 million broadcast cash flow in 1998. This
increase is primarily attributable to improved profitability at stations KPLR,
KWBP and WBXX and reduced losses at KUWB, offset by losses at newly acquired or
launched stations KWBQ, WBDT, WIWB and WBUI.

                                        25
<PAGE>   26

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities was $13.3 million for the year
ended December 31, 2000 compared to net cash provided by operating activities of
$4.3 million for 1999, an increase of $9.0 million. The increase was primarily
due to higher broadcast cash flows, reduced corporate expense and lower cash
interest expense.

     Net cash used in investing activities was $8.2 million for the year ended
December 31, 2000, compared to $80.7 million for 1999. Most of the activity in
2000 relates to the Company's ongoing capital expenditures for the upgrading of
its stations, including the build-out of digital facilities, net of $2.6 million
in proceeds from the sale of the KPLR studio facility. The major cash flows used
in investing activities during 1999 related to the Company's acquisition
stations KASY, WBDT, WIWB and WBUI, the build-out of KWBQ, launched in March
1999, ongoing capital expenditures at the Company's other stations and the
acquisition of a 25% membership interests in digital facilities in Portland and
Salt Lake City.

     Net cash provided by financing activities for the year ended December 31,
2000 was $2.1 million, which represented the net new borrowings in excess of
repayments under the Company's various capital lease facilities. In 1999, net
cash provided by financing activities was $99.2 million and relates primarily to
the Company's October 1999 initial public offering, which generated $105.3
million in net proceeds to the Company, less net repayments on the Company's
revolving credit facility of $8 million.

     The Company's revolving credit facility was amended in December 2000 and in
connection with that amendment, the Company voluntarily reduced the banks'
commitment and the financial covenants were revised. The facility allows for
borrowings up to $30.0 million, dependent upon our meeting certain financial
ratio tests (see our Risk Factors in Item 1 of this filing). The facility
amortizes to $20.0 million by June 30, 2002 and expires on September 30, 2002.
The revolving credit facility can be used to fund future acquisitions of
broadcast stations and for general corporate purposes. At December 31, 2000, no
borrowings were outstanding under the facility and $30.0 million was available.

     The Company also has $4 million in capital lease facilities available at
December 31, 2000. Borrowings under these facilities are generally repaid over
five years. At December 31, 2000, amounts due under these facilities was $9.5
million bearing an implicit average interest rate of 8.87% per annum.

     Effective October 1, 2000, the Company's $175 million 10 7/8% Senior
Discount Notes due September 30, 2004 began accruing cash interest. Interest
payments on these notes amounts to approximately $9.5 million every six months,
with the first payment due on March 31, 2001.

     At December 31, 2000, the Company had cash and working capital of $31.0
million.

     The Company believes that existing cash balances, funds generated from
operations and borrowings under its credit agreement and capital lease
facilities, if necessary, will be sufficient to satisfy the Company's cash
requirements for its existing operations for at least the next twelve months.
The Company expects that any future acquisitions of television stations would be
financed through these same sources and, if necessary, through additional debt
and equity financings. However, there is no guarantee that such additional debt
and/or equity will be available or available at terms acceptable to the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's revolving credit facility has a variable interest rate.
Accordingly, the Company's interest expense could be materially affected by
future fluctuations in the applicable interest rate. The Company had no
borrowings outstanding as of December 31, 2000.

                                        26
<PAGE>   27

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
ACME Communications, Inc.:

     We have audited the accompanying consolidated balance sheets of ACME
Communications, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2000. In
connection with our audit of the consolidated financial statements, we have also
audited the financial statement schedules listed in the index of Item 14. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

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

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

                                          /s/ KPMG LLP

Los Angeles, California
February 13, 2001

                                        27
<PAGE>   28

                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                               AS OF DECEMBER 31,
                                                              --------------------
                                                                1999        2000
                                                              --------    --------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $ 23,846    $ 31,037
  Accounts receivable, net..................................    14,090      15,005
  Current portion of programming rights.....................    11,331      12,477
  Prepaid expenses and other current assets.................     2,026       2,444
  Deferred income taxes.....................................     2,448       1,139
                                                              --------    --------
     Total current assets...................................    53,741      62,102
Property and equipment, net.................................    25,116      29,471
Programming rights, net of current portion..................    14,704      10,984
Intangible assets, net......................................   303,812     287,748
Other assets................................................    10,334       9,140
                                                              --------    --------
          Total assets......................................  $407,707    $399,445
                                                              ========    ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  5,570    $  7,337
  Accrued liabilities.......................................     8,231       9,354
  Current portion of programming rights payable.............    10,727      12,108
  Current portion of obligations under lease................     1,617       2,271
                                                              --------    --------
     Total current liabilities..............................    26,145      31,070
Programming rights payable, net of current portion..........    13,605      10,205
Obligations under lease, net of current portion.............     5,796       7,258
Other liabilities...........................................       297         250
Deferred income taxes.......................................    25,364      15,614
10 7/8% senior discount notes...............................   161,695     175,000
12% senior secured notes....................................    47,970      54,722
                                                              --------    --------
          Total liabilities.................................   280,872     294,119
                                                              --------    --------
Stockholders' equity:
  Preferred stock, $.01 par value; 10,000,000 shares
     authorized, no shares issued and outstanding...........        --          --
  Common stock, $.01 par value; 16,750,000 shares issued and
     outstanding............................................       168         168
  Additional paid-in capital................................   130,279     130,808
  Accumulated deficit.......................................    (3,612)    (25,650)
                                                              --------    --------
     Total stockholders' equity.............................   126,835     105,326
                                                              --------    --------
          Total liabilities and stockholders' equity........  $407,707    $399,445
                                                              ========    ========
</TABLE>

             See the notes to the consolidated financial statements
                                        28
<PAGE>   29

                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           1998          1999          2000
                                                        ----------    ----------    -----------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>           <C>           <C>
Net revenues..........................................  $   43,928    $   60,008    $    73,443
Operating expenses:
  Station operating expenses..........................      32,973        45,675         54,141
  Depreciation and amortization.......................      11,355        17,325         20,885
  Corporate...........................................       2,627         6,398          3,522
  Equity-based compensation(1)........................          --        39,688            529
                                                        ----------    ----------    -----------
          Operating loss..............................      (3,027)      (49,078)        (5,634)
Other income (expenses)
  Interest income.....................................         231           499          1,497
  Interest expense....................................     (23,953)      (28,694)       (27,275)
  Gain (loss) on sale of asset........................       1,112           (11)         1,504
  Other...............................................        (380)           --           (255)
                                                        ----------    ----------    -----------
Loss before income taxes and minority interest........     (26,017)      (77,284)       (30,163)
Income tax benefit....................................       2,393         4,420          8,125
                                                        ----------    ----------    -----------
Loss before minority interest.........................     (23,624)      (72,864)       (22,038)
     Minority interest................................       1,684         2,085             --
                                                        ----------    ----------    -----------
          Net loss....................................  $  (21,940)   $  (70,779)   $   (22,038)
                                                        ==========    ==========    ===========
Pro forma net loss per share:
Loss before income taxes and minority interest, as
  reported............................................  $  (26,017)   $  (77,284)   $   (30,163)
Pro forma tax benefit.................................       8,398        12,259          8,125
                                                        ----------    ----------    -----------
Loss before minority interest.........................     (17,619)      (65,025)       (22,038)
Pro forma minority interest allocation................       1,385         1,629             --
                                                        ----------    ----------    -----------
     Pro forma net loss...............................  $  (16,234)   $  (63,396)   $   (22,038)
                                                        ==========    ==========    ===========
Pro forma net loss per share, basic and diluted.......  $    (3.22)   $    (7.96)   $     (1.32)
                                                        ==========    ==========    ===========
Basic and diluted weighted average common shares
  outstanding.........................................   5,045,256     7,961,379     16,750,000
                                                        ==========    ==========    ===========
</TABLE>

---------------
(1) Equity-based compensation is comprised of station operating expenses and
    corporate expenses of $132,000 and $39.6 million, respectively, in 1999 and
    $313,000 and $216,000, respectively, in 2000.

             See the notes to the consolidated financial statements
                                        29
<PAGE>   30

                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                         COMMON STOCK      ADDITIONAL                       TOTAL
                                       ----------------     PAID-IN      ACCUMULATED    STOCKHOLDERS'
                                       SHARES    AMOUNT     CAPITAL        DEFICIT         EQUITY
                                       ------    ------    ----------    -----------    -------------
                                                               (IN THOUSANDS)
<S>                                    <C>       <C>       <C>           <C>            <C>
Balance at December 31, 1997.........   4,074     $ 41      $ 23,744      $ (7,479)       $ 16,306
  Issuance of units, net.............   1,106       11         7,036            --           7,047
  Net loss...........................      --       --            --       (21,940)        (21,940)
                                       ------     ----      --------      --------        --------
Balance at December 31, 1998.........   5,180       52        30,780       (29,419)          1,413
  Equity-based compensation..........   1,720       17        39,671            --          39,688
  Issuance of stock options in
     exchange for long-term incentive
     plan............................      --       --           738            --             738
  Conversion of convertible debt.....   3,926       40        29,200            --          29,240
  Acquisition of minority interest...     924        9        21,241            --          21,250
  Initial public offering............   5,000       50       105,235            --         105,285
  Termination of non-taxable
     status..........................      --       --       (96,586)       96,586              --
  Net loss...........................      --       --            --       (70,779)        (70,779)
                                       ------     ----      --------      --------        --------
Balance at December 31, 1999.........  16,750      168       130,279        (3,612)        126,835
  Equity-based compensation..........      --       --           529            --             529
  Net loss...........................      --       --            --       (22,038)        (22,038)
                                       ======     ====      ========      ========        ========
Balance at December 31, 2000.........  16,750     $168      $130,808      $(25,650)       $105,326
                                       ======     ====      ========      ========        ========
</TABLE>

             See the notes to the consolidated financial statements
                                        30
<PAGE>   31

                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1998          1999       2000
                                                              --------      --------   --------
                                                                       (IN THOUSANDS)
<S>                                                           <C>           <C>        <C>
Cash flows from operating activities:
  Net loss..................................................  $(21,940)     $(70,779)  $(22,038)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
  Depreciation and amortization.............................    11,355        17,325     20,886
  Amortization of program rights............................     5,321         8,475     13,662
  Amortization of debt issuance costs.......................       989         1,044      1,607
  Amortization of discount on 10 7/8% senior discount
    notes...................................................    14,170        16,247     13,305
  Amortization of discount on 12% senior secured notes......     5,189         5,918      6,752
  Minority interest allocation..............................    (1,684)       (2,085)        --
  Equity-based compensation.................................        --        39,688        529
  Long-term incentive compensation..........................        --           738         --
  Deferred taxes............................................    (2,393)       (4,420)    (8,441)
  (Gain) loss on sale of assets.............................    (1,112)           11     (1,504)
Changes in assets and liabilities:
  Increase in accounts receivables, net.....................    (5,479)       (3,248)      (915)
  (Increase) decrease in prepaid expenses...................       364          (622)      (418)
  (Increase) decrease in other assets.......................      (576)         (105)       104
  Increase in accounts payable..............................        59         1,145      1,767
  Increase in accrued expenses..............................     2,639         4,021      1,125
  Payments for programming rights...........................    (6,588)       (9,936)   (13,109)
  Increase (decrease) in other liabilities..................         5           907        (47)
                                                              --------      --------   --------
         Net cash provided by operating activities..........       319         4,324     13,265
                                                              --------      --------   --------
Cash flows from investing activities:
  Purchases of property and equipment.......................    (8,320)       (8,587)    (9,958)
  Proceeds from sales of property and equipment.............        --            --      2,634
  Purchases of and deposits for station interests...........   (16,675)      (72,118)      (866)
  Cash acquired in acquisition -- St. Louis.................       779            --         --
  Proceeds from sale of station interest....................     3,337            --         --
                                                              --------      --------   --------
         Net cash used in investing activities..............   (20,879)      (80,705)    (8,190)
                                                              --------      --------   --------
Cash flows from financing activities:
  Increase in revolving credit facility.....................    11,000        32,000         --
  Increase in bridge loan...................................        --        15,000         --
  Payments on revolving credit facility.....................    (3,000)      (40,000)        --
  Payments on bridge loan...................................        --       (15,000)        --
  Proceeds from capital lease facilities....................     5,375         3,173      3,772
  Payments on capital lease facilities......................      (638)       (1,232)    (1,656)
  Proceeds from initial public offering.....................        --       115,000         --
  Costs of initial public offering..........................        --        (9,715)        --
                                                              --------      --------   --------
         Net cash provided by financing activities..........    12,737        99,226      2,116
                                                              --------      --------   --------
  Net increase (decrease) in cash...........................    (7,823)       22,845      7,191
  Cash at beginning of period...............................     8,824         1,001     23,846
                                                              --------      --------   --------
  Cash at end of period.....................................  $  1,001      $ 23,846   $ 31,037
                                                              ========      ========   ========
Supplemental disclosures of cash flow information:
  Cash payments for:
    Interest................................................  $    864      $  2,591   $    831
    Taxes...................................................  $     70      $     80   $    316
  Non-cash transactions:
    Non-cash program rights in exchange for program rights
      payable...............................................    24,066        20,107     10,841
    Issuance of equity in purchase transactions.............     7,047            --         --
    Use of deposit as consideration for purchase
      transaction...........................................   143,000            --         --
    Exchange of note receivable and option deposit as
      purchase consideration for station interest...........        --         7,000         --
    Acquisition of minority interest of ACME Intermediate
      Holdings, LLC.........................................        --        21,250         --
    Conversion of convertible debentures into common
      stock.................................................  $     --      $ 29,240   $     --
                                                              ========      ========   ========
</TABLE>

            See the notes to the consolidated financial statements.
                                        31
<PAGE>   32

                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF THE BUSINESS AND FORMATION

  Formation and Presentation

     ACME Communications, Inc. was formed on July 23, 1999, in preparation for
and in conjunction with an initial public offering of its stock.

     On September 27, 1999, the Board of Advisors of ACME Television Holdings,
LLC and its members approved a merger and reorganization (the "Reorganization"),
whereby ACME Communications became the direct parent of ACME Television
Holdings. As a result of the Reorganization, ACME Communications is the ultimate
parent of ACME Intermediate Holdings, LLC, and its wholly-owned subsidiary ACME
Television, LLC. All transactions contemplated as part of the Reorganization
closed on October 5, 1999.

     Among the significant transactions of the Reorganization were the exchange
of shares of the Company's common stock for members' units, management carry
units and convertible debt of ACME Television Holdings. The common stock
exchanged for members' units in ACME Television Holdings was recorded at
historical cost. The management carry units were treated as a variable
compensation plan. As the number of shares of common stock issued to the holders
of the management carry units were fixed and fully vested, compensation expense
was recorded for the difference between the fair value of the shares issued and
the expense previously recorded for the management carry units. The convertible
debt was converted pursuant to its original conversion terms, and accordingly,
no gain or loss was recognized. Also, the Company acquired the minority interest
in ACME Intermediate Holdings for 923,938 shares of the Company's common stock.
The acquisition of the minority interest was accounted for at fair market value.

     The financial statements for the years ended December 31, 1998 and 1999
give effect to the exchange of common stock for members' units.

     On October 5, 1999, the Company completed its initial public offering of
5,000,000 shares of common stock at $23 per share, before underwriters'
discounts and other issuance costs. The Company received net proceeds of
approximately $105 million.

     The accompanying consolidated financial statements are presented for ACME
Communications, Inc. ("ACME" or the "Company") and its wholly-owned
subsidiaries. Segment information is not presented since all of the Company's
revenues are attributed to a single reportable segment.

                                        32
<PAGE>   33
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  Nature of Business

     ACME Communications is a holding company with no assets or independent
operations other than its indirect wholly-owned subsidiary, ACME Television.
ACME Television, through its wholly-owned subsidiaries, owns and operates the
following ten commercially licensed broadcast television stations located
throughout the United States:

<TABLE>
<CAPTION>
                                                                             NETWORK
STATION - CHANNEL                          MARKET                          AFFILIATION
-----------------                          ------                          -----------
<S>                 <C>                                                    <C>
KPLR - 11           St. Louis............................................       WB
KWBP - 32           Portland, OR.........................................       WB
KUWB - 30           Salt Lake City.......................................       WB
KWBQ - 19           Albuquerque - Santa Fe...............................       WB
KASY - 50           Albuquerque - Santa Fe...............................      UPN
WBDT - 26           Dayton...............................................       WB
WBXX - 20           Knoxville............................................       WB
WIWB - 14           Green Bay - Appleton.................................       WB
WTVK - 46           Ft. Myers/Naples.....................................       WB
WBUI - 23           Champaign - Springfield - Decatur....................       WB
</TABLE>

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Basis of Consolidation

     The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. All significant inter-company transactions have been
eliminated.

  Revenue Recognition

     Revenue from the sale of airtime related to advertising and contracted time
is recognized at the time of broadcast. The Company records such revenues net of
commissions of advertising agencies and national sales representatives.

  Cash and Cash Equivalents

     For purposes of reporting the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.

  Accounts Receivable

     Accounts receivable are presented net of the related allowance for doubtful
accounts which totaled $716,000 and $1,009,000 at December 31, 1999 and 2000,
respectively.

  Concentration of Credit Risk and Fair Value of Financial Statements

     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of accounts receivable and cash. Due to the
short-term nature of these instruments, the carrying value approximates the fair
market value. The Company believes that concentrations of credit risk with
respect to accounts receivable, which are unsecured, are limited due to the
Company's ongoing relationship with its clients. The Company provides its
estimate of uncollectible accounts. The Company has not experienced significant
losses relating to accounts receivable. The estimated fair market of the 12%
senior discount notes and the 10 7/8% senior secured notes was approximately $43
million and $151 million, respectively, at December 31, 2000.

                                        33
<PAGE>   34
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  Program Rights

     Program rights represent costs incurred for the right to broadcast certain
features and syndicated television programs. Program rights are stated, on a
gross basis, at the lower of amortized cost or estimated realizable value. The
cost of such program rights and the corresponding liability are recorded when
the initial program becomes available for broadcast under the contract.
Generally, program rights are amortized over the life of the contract on a
straight-line basis related to the usage of the program. The portion of the cost
estimated to be amortized within one year and after one year are reflected in
the balance sheets as current and non-current assets, respectively. The gross
payments under these contracts that are due within one year and after one year
are similarly classified as current and non-current liabilities.

  Property and Equipment

     Property and equipment are stated at cost. The cost of maintenance is
expensed when incurred. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the respective assets.
When property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the appropriate accounts and any gain or loss is
included in the results of current operations. The principal lives used in
determining depreciation rates of various assets are as follows:

<TABLE>
<S>                                                           <C>
Buildings and Improvements..................................  20 - 30 years
Broadcast and other equipment...............................  3 - 20 years
Furniture and fixtures......................................  5 - 7 years
Vehicles....................................................  5 years
</TABLE>

  Intangible Assets

     Intangible assets consist of broadcast licenses and goodwill, both of which
are amortized on a straight-line basis over a 20-year life.

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           1999        2000
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Broadcast licenses.....................................  $199,731    $200,188
Goodwill...............................................   127,920     127,810
                                                         --------    --------
  Total intangible assets..............................   327,651     327,998
Less: accumulated amortization.........................   (23,839)    (40,250)
                                                         --------    --------
  Net intangible assets................................   303,812     287,748
                                                         ========    ========
</TABLE>

  Barter and Trade Transactions

     Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the estimated average
rate of the airtime exchanged. Trade transactions, which represent the exchange
of advertising time for goods or services, are recorded at the estimated fair
value of the products or services received. Barter and trade revenue is
recognized when advertisements are broadcast. Merchandise or services received
from airtime trade sales are charged to expense or capitalized and expensed when
used.

  Local Marketing Agreements

     In connection with station acquisitions, and pending FCC approval of the
transfer of license assets, the Company generally enters into local marketing
agreements with the sellers. Under the terms of these agreements, we obtain the
right to program and sell advertising time on 100% of the station's inventory of

                                        34
<PAGE>   35
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

broadcast time, incur certain operating expenses and may make payments to the
sellers. As the holder of the FCC license, the seller/licensee retains ultimate
control and responsibility for all programming broadcast on the station. We, in
turn, record revenues from the sale of advertising time and operating expenses
for costs incurred. Included in the accompanying consolidated statements of
operations for the years ended December 31, 1998, 1999, and 2000 are net
revenues of $6.8 million, $125,000 and $0, respectively, that relate to local
marketing agreements. Payments of fees to the sellers for the years ended
December 31, 1998, 1999, and 2000 were $228,000, $27,500, and $0 respectively.
At December 31, 2000, the Company was not obligated for any future payments to
sellers.

  Carrying Value of Long-lived Assets

     The Company follows Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The carrying value of long-lived assets (tangible, identifiable
intangible, and goodwill) is reviewed if the facts and circumstances suggest
that they may be impaired. For purposes of this review, assets are grouped at
the station level, which is the lowest level for which there are identifiable
cash flows. If this review indicates that an asset's carrying value will not be
recoverable, as determined based on future expected, undiscounted cash flows,
the carrying value is reduced to fair market value.

  Debt Discount

     The Company issued its 12% Senior Secured Discount Notes and 10 7/8% Senior
Discount Notes at a discount from the face value of the notes. The Company is
accreting the discount on the notes using the level yield method.

  Income Taxes

     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." In
accordance with SFAS No. 109, income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

     Prior to the Reorganization, ACME Television Holdings, LLC was a limited
liability company, therefore, no income taxes have been provided for its
operations other than at its subsidiary ACME Television of Missouri, Inc. which
is a "C" corporation subject to federal and state taxation. Any liability or
benefit from the Company's non-taxable entities' consolidated income or loss is
the responsibility of, or benefit to, the individual members.

     In conjunction with the Reorganization, the Company terminated its
non-taxable status. In conjunction with this termination, the Company recorded
deferred tax assets and liabilities at the termination date for the difference
between the financial statement carrying amount and tax bases of assets and
liabilities.

  Loss per Share

     The Company calculates loss per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share. SFAS No. 128
requires a presentation of basic earnings per share ("EPS") and diluted EPS.
Basic EPS includes no dilution and is computed by dividing income available to

                                        35
<PAGE>   36
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution from securities that
could share in the earnings of the Company, similar to fully diluted EPS under
APB No. 15. In calculating diluted EPS, no potential shares of common stock are
to be included in the computation when a loss from continuing operations
available to common stockholders exists. The statement requires dual
presentation of basic and diluted EPS by entities with complex capital
structures.

     The company calculated pro forma net loss per share for 1999 and 1998 based
upon the historical results of operations adjusted to reflect (i) a provision
for income taxes on historical earnings before income taxes, which gives effect
to the change in the Company's income tax status to a C corporation and (ii) the
impact on the net loss allocated to minority interests.

     In addition, the Company has reflected the exchange of common stock for
units for the years ended December 31, 1998 and 1999.

     Stock options outstanding amounting to 3,263,391 shares at December 31,
2000, were not included in the computation of diluted EPS because to do so would
have been antidilutive.

  Accounting for Stock Options

     The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," which permits entities to
recognize (over the vesting period) the expense of all stock-based awards. The
expense is calculated based on the fair value at the date of grant.
Alternatively, SFAS No. 123 allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide pro forma net income disclosure for employee
stock option grants made, as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

  Reporting Comprehensive Income

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement, which establishes standards for reporting and
disclosure of comprehensive income, is effective for interim and annual periods
beginning after December 15, 1997. The Company adopted SFAS No. 130 effective
January 1, 1998. Adoption had no impact on the Company's consolidated financial
position or results of operations.

  Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates include the allowance for doubtful accounts
net of the realizable value of programming rights and the evaluation of the
recoverability of intangible assets. Actual results could differ from those
estimates.

  Reclassifications

     Certain amounts previously reported for 1998 and 1999 have been
reclassified to conform to the 2000 financial statement presentation.

                                        36
<PAGE>   37
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           ------------------
                                                            1999       2000
                                                           -------    -------
                                                             (IN THOUSANDS)
<S>                                                        <C>        <C>
Land.....................................................  $ 1,097    $   541
Buildings and improvements...............................    5,555      5,459
Broadcast and other equipment............................   22,678     29,111
Furniture and fixtures...................................      776        909
Vehicles.................................................      290        470
Construction in process..................................      427      2,954
                                                           -------    -------
          Total..........................................   30,823     39,444
Less: Accumulated depreciation...........................   (5,707)    (9,973)
                                                           -------    -------
Net property and equipment...............................  $25,116    $29,471
                                                           =======    =======
</TABLE>

     Included in property and equipment are assets acquired under capital leases
with a total cost of $9,512,641 and $12,843,556 and the associated accumulated
depreciation of $2,045,668 and $3,647,846 at December 31, 1999 and 2000,
respectively.

(4) ACQUISITIONS

     On July 29, 1997, the Company entered into a stock purchase agreement to
acquire Koplar Communications, Inc. (KCI) the owner of station KPLR. On
September 30, 1997, the Company placed $143.0 million in to an escrow account.
In connection with this acquisition, the Company entered into a long-term local
marketing agreement with KPLR and filed the requisite applications with the FCC
for the transfer of the Station's license to the Company.

     Pursuant to the local marketing agreement, the Company retained all
revenues generated by the station, bore substantially all operating expenses
(excluding depreciation and amortization) of the station and was obligated to
pay a local marketing agreement fee. These revenues and expenses for the period
October 1 through December 31, 1997 are included in the Company's operating
results for the year ended December 31, 1997.

     On March 13, 1998, the Company completed its acquisition of Koplar
Communications, Inc. ("KCI") and acquired all of the outstanding stock of KCI
for a total consideration of approximately $146.3 million. The acquisition was
accounted for using the purchase method. Pursuant to the local marketing
agreement referred to above, all revenues and operating expenses of the station
(excluding depreciation and amortization) for the period from September 30, 1997
to March 31, 1998 (the effective date of the purchase transaction) are included
in the Company's operating results. The purchase transaction was recorded on the
consolidated balance sheet of the Company effective March 31, 1998 and the
Company's results of operations includes revenues and expenses (including
amortization of intangible assets) beginning April 1, 1998.

                                        37
<PAGE>   38
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The fair value of the assets acquired and liabilities assumed relating to
the acquisition of KPLR (in thousands):

<TABLE>
<S>                                                           <C>
Assets acquired:
Cash and cash equivalents...................................  $    779
  Accounts receivables, net.................................     1,703
  Program broadcast rights..................................     8,490
  Property and equipment....................................     2,233
  Prepaid expenses and other current assets.................       416
  FCC license...............................................    82,563
  Goodwill..................................................    93,775
  Other assets..............................................       395
                                                              --------
          Total assets acquired.............................  $190,354
                                                              ========
Liabilities assumed:
  Accounts payable..........................................  $ (1,005)
  Accrued liabilities.......................................    (1,332)
  Program broadcast rights payable..........................    (8,258)
  Deferred income taxes.....................................   (29,889)
  Other liabilities.........................................    (3,531)
                                                              --------
          Total liabilities assumed.........................  $(44,015)
                                                              --------
          Total purchase price..............................  $146,339
                                                              ========
</TABLE>

     During 1997, the Company entered into an agreement that provided it with
the right to: (i) acquire 49% of the licensee of KUPX (formerly KZAR) in
exchange for membership units valued at $6.0 million, and (ii) pay $3.0 million
for an option to acquire the remaining 51% interest in the licensee of KUPX for
$5.0 million, exercisable immediately after the station commences on-air
operations. On December 15, 1997, the Company acquired the 49% interest in the
licensee of KUPX, paid $3.0 million to acquire the option and loaned the sellers
$4.0 million (to be applied to the subsequent majority interest purchase price).
On January 22, 1998, the Company issued $6.0 million of its member units to the
sellers for the 49% interest in the license of KUPX in connection with the above
transaction. The amount of the issuance was based upon a fixed dollar amount of
consideration. The Company accounted for the 49% investment using the equity
method of accounting. On February 16, 1999, the Company acquired the remaining
51% interest in KUPX. The $4.0 million loan was applied against the remaining
purchase price of $5.0 million.

     In May 1998 the Company and the majority owners of KUPX entered into an
agreement with another broadcaster in Salt Lake City to (i) swap KUPX for KUWB,
subject to FCC approval (ii) enable the Company to operate KUWB under a local
marketing agreement and (iii) enable the owner of KUWB to operate KUPX under a
local marketing agreement. Pursuant to the LMA's, the Company retains all
operating revenues and expenses (excluding depreciation and amortization) of
KUWB and the owner of KUWB retains all operating revenues and expenses
(excluding depreciation and amortization) of KUPX. In March 1999, the FCC
approved the swap of KUPX for KUWB and the transaction closed during the third
quarter of 1999. The Company has accounted for the swap as a business
combination and has recorded KUPX at its fair value. There was no significant
difference between the fair value of KUPX and the historical cost of KUWB.

     On August 22, 1997, the Company entered into an agreement with affiliates
of the sellers of KZAR to acquire 100% of the interests in the construction
permit for KAUO for a consideration of $10,000. This agreement was consummated
on January 22, 1998. Subsequently, the call letters of KAUO were changed to
KWBQ. Construction of KWBQ was completed and the station commenced broadcasting
in March 1999.

                                        38
<PAGE>   39
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     On June 30, 1998, the Company acquired substantially all the assets and
assumed certain liabilities of WTVK - Channel 46 serving the Fort
Myers - Naples, Florida marketplace for approximately $14.5 million in cash and
1,047 membership units (valued at approximately $1.0 million). The acquisition
was accounted for using the purchase method. The excess of the purchase price
over the fair value of the net assets assumed of approximately $15.5 million has
been recorded as an intangible broadcast license and goodwill, both of which are
being amortized over a period of 20 years. The Company had entered into a local
marketing agreement with WTVK wherein the Company, effective March 3, 1998,
retained all revenues generated by the station, bore all operating expenses of
the station (excluding depreciation and amortization) and had the right to
program the station (subject to WTVK's ultimate authority for programming) and
the station's existing programming commitments. The local marketing agreement
terminated upon the consummation of the acquisition. Consequently, under the
local marketing agreement the revenues and operating expenses (excluding
depreciation and amortization) of the station are included in the Company's
results of operations from March 3, 1998 to June 30, 1998. The purchase
transaction was recorded on the consolidated balance sheet of the Company on
June 30, 1998 and the Company's results of operations includes revenues and
expenses (including amortization of intangible assets) beginning July 1, 1998.

     On April 23, 1999, the Company acquired the non-FCC license assets of three
Paxson Communication Corporation stations serving the Dayton, OH, Green Bay, WI
and Champaign - Decatur, IL markets for $32.0 million. On June 23, 1999,
following FCC approval of the transfer of the FCC licenses to ACME, the Company
acquired the licenses and completed the acquisition of the three stations by
making a final payment to PCC of $8.0 million. The Company entered into local
marketing agreements with the seller wherein the Company, effective June 2,
1999, retained all revenues generated by the stations, bore all operating
expenses of the stations (excluding amortization) and had the right to program
the stations (subject to the seller's ultimate authority for programming) and
the stations' existing programming commitments. The local marketing agreement
terminated upon the consummation of the acquisition. Consequently, under the
local marketing agreement the revenues and operating expenses (excluding
amortization) of the station are included in the Company's results of operations
from June 2, 1999 to June 23, 1999. The purchase of the FCC licenses was
recorded on the consolidated balance sheet of the Company on June 23, 1999 and
the Company's results of operations includes revenues and expenses (including
amortization of intangible assets) beginning June 24, 1999. The Company financed
this $40.0 million transaction by a $25.0 million borrowing under its revolving
credit agreement and a $15.0 million loan from certain of its members (the
"Bridge Loan"). The acquisition was accounted for using the purchase method. The
excess of the purchase price over the fair market value of the assets acquired
of approximately $35.6 million has been recorded as intangible broadcast
licenses and goodwill, all of which are being amortized over a period of 20
years.

     On December 3, 1999, the Company acquired substantially all of the assets
and assumed certain liabilities of station KASY TV - 50, serving the
Albuquerque - Santa Fe, New Mexico market, from Ramar Communications ("Ramar")
for approximately $27 million. The Company entered into an interim LMA
arrangement with Ramar to begin operating the station effective November 1,
1999. The interim LMA terminated upon the completion of the acquisition. Under
the local marketing agreement, all of the revenues and operating expenses
(excluding depreciation and amortization) of the station are included in the
Company's results of operations from November 1, 1999 to December 3, 1999. The
purchase transaction was recorded on December 3, 1999 and the Company's results
of operations (including depreciation and amortization) beginning December 3,
1999.

     The unaudited pro forma financial information for the years ended December
31, 1998 and 1999, set forth below reflects the net revenues and net loss
assuming the KWBP, WBXX, KPLR, KUWB, WTVK, KWBQ, KASY, WBDT, WBUI and WIWB
transactions had taken place at the beginning of each respective

                                        39
<PAGE>   40
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

year. This unaudited pro forma financial information does not necessarily
reflect the results of operations that would have occurred had the acquisitions
occurred on January 1, 1998 and 1999.

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                         ------------------------
                                                            1998          1999
                                                         ----------    ----------
                                                               (UNAUDITED)
<S>                                                      <C>           <C>
Net revenues...........................................   $ 49,905      $ 63,109
Net loss...............................................    (25,988)      (74,576)
Net loss per share.....................................   $  (5.15)     $  (9.37)
</TABLE>

(5) UNIT OFFERING AND 12% SENIOR SECURED DISCOUNT NOTES

     On September 30, 1997, ACME Intermediate issued 71,634 Units (the Unit
Offering) consisting of 71,634 membership units (representing 8% of the ACME
Intermediate's outstanding membership equity) and $71,634,000 (par value at
maturity) in 12% senior secured discount notes due 2005 (Intermediate Notes).
Cash interest on the Intermediate Notes is payable semi-annually in arrears,
commencing with the six-month period ending March 31, 2003. The Notes mature on
September 30, 2005 and may not be prepaid without penalty prior to October 1,
2003. The net proceeds from the Unit Offering, after the deduction of
underwriter fees and other related offering costs, were $38.3 million and were
received by the Company on September 30, 1997. The Company allocated
approximately $4.2 million of such net proceeds to minority interest, $35.6
million to the Intermediate notes and $1.5 million to prepaid financing
costs -- the latter which is being amortized over the eight-year term of the
notes. The Intermediate Notes contain certain covenants and restrictions
including restrictions on future indebtedness and restricted payments, as
defined, and limitations on liens, investments, transactions with affiliates and
certain asset sales. The Company was in compliance with all such covenants and
restrictions at December 31, 2000. In connection with the Reorganization the
membership units issued in the unit offering (representing a minority interest)
were acquired by the Company for shares of the Company's stock. The acquisition
of minority interest was recorded based upon the fair market value of the stock
issued.

     The Intermediate Notes are secured by a first priority lien on the limited
liability company interests in ACME Television and ACME Subsidiary Holdings II,
LLC, both of which are direct wholly-owned subsidiaries of ACME Intermediate.
ACME Subsidiary Holdings II, LLC was formed solely to own a 0.5% interest in
ACME Television, has no other assets or operations and does not constitute a
substantial portion of the collateral for the Intermediate Notes.

(6) 10 7/8% SENIOR DISCOUNT NOTES

     On September 30, 1997, ACME Television issued 10.875% senior discount notes
due 2004 (Notes) with a face value of $175,000,000 and received $127,370,000 in
gross proceeds from such issuance. These Notes provide for semi-annual cash
interest payments commencing with the six-month period ending on March 31, 2001.
At December 31, 2000 $4,758,000 in accrued interest on these notes was included
in current accrued liabilities. The Notes are subordinated to ACME Television's
bank revolver (see Note 7) and to the ACME Television's capital equipment
finance facilities (see Note 10). The Notes mature on September 30, 2004. Other
than prepayment with the proceeds of a public equity offering, the notes may not
be prepaid prior to September 30, 2001 and may not be prepaid without penalty
prior to October 1, 2003.

     The Notes contain certain covenants and restrictions including restrictions
on future indebtedness and limitations on investments, and transactions with
affiliates. ACME Television was in compliance with all such covenants and
restrictions at December 31, 2000.

     Costs associated with the issuance of these notes, including the
underwriters fees and related professional fees are included in long-term other
assets and will be amortized over the seven year term of the notes.

                                        40
<PAGE>   41
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     ACME Television's subsidiaries (hereinafter referred to in this section
collectively as Subsidiary Guarantors) are fully, unconditionally, and jointly
and severally liable for ACME Television's notes. The Subsidiary Guarantors are
wholly owned and constitute all of ACME Television's direct and indirect
subsidiaries except for ACME Finance Corporation, a wholly owned finance
subsidiary of ACME Television with essentially no independent operations that is
jointly and severally liable with the Company on the Notes. ACME Television has
not included separate financial statements of the aforementioned subsidiaries
because (i) ACME Television is a holding company with no assets or independent
operations other than its investments in its subsidiaries and (ii) the separate
financial statements and other disclosures concerning such subsidiaries are not
deemed material to investors.

     Various agreements to which ACME Television and/or the Subsidiary
Guarantors are parities restrict the activity of the Subsidiary Guarantors to
make distributions to the Company. The Investment and Loan Agreement (the
Investment Agreement), dated June 17, 1997, as amended, among the Company and
the parties thereto and the Limited Liability Company Agreement (the LLC
Agreement), dated June 17, 1997, as amended, among the Company and the parties
thereto each contain certain restrictions on the ability of the Subsidiary
Guarantors to declare or pay dividends to ACME Television in the absence of the
consent of certain parties thereto. The Indenture governing the Notes prevents
the Subsidiary Guarantors from declaring or paying any dividend or distribution
to ACME Television unless certain financial covenants are satisfied and there
has been no default thereof. The revolving credit facility with Canadian
Imperial Bank Corporation (see Note 7) also prohibits distributions from the
Subsidiary Guarantors to ACME Television except in certain circumstances during
which default has not occurred thereunder.

(7) BANK REVOLVER

     ACME Television has a revolving credit facility (the Loan Agreement) with
Canadian Imperial Bank Corporation (CIBC), as agent and lead lender. Under the
terms of the Loan Agreement, advances bear interest at a base rate, that at our
option, is either the bank's prime rate or LIBOR, plus a spread. Commitment fees
are charged at a rate of .5% per annum, paid quarterly, on the unused portion of
the facility. On December 29, 2000, the Loan Agreement was amended to provide
less restrictive financial covenants and the Company voluntarily reduced the
Banks' aggregate commitment from $40 million to $30 million as of December 31,
2000. The commitment amortization rate was reduced throughout the balance of the
term, which ends September 30, 2002. As of December 31, 1999 and 2000 there were
no outstanding balances under the Loan Agreement.

     The Loan Agreement contains certain covenants and restrictions including
restrictions on future indebtedness and limitations on investments and
transactions with affiliates. ACME Television was in compliance with all such
covenants and restrictions at December 31, 2000.

     Costs associated with the procuring of bank credit facilities, including
loan fees and related professional fees, are included in long-term other assets
and are amortized over the term of the Loan Agreement.

(8) CONVERTIBLE DEBENTURES

     On June 30, 1997 and on September 30, 1997 the Company issued convertible
debentures to certain investors in the aggregate amount of $24,756,000. The
debentures bore an interest rate of 10% per annum, compounded annually.

     Pursuant to the terms of the debentures, on September 30, 1999, the holders
elected to convert all of the outstanding principal and accrued interest into
membership units of ACME Television Holdings, LLC which were then converted into
ACME Communications, Inc. common stock in connection with the Reorganization.
The conversion rate was fixed by contract and represented 24,756 membership
units that were converted to 3,926,191 shares of common stock.

                                        41
<PAGE>   42
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) BRIDGE LOAN

     On April 23, 1999, the Company entered into a $15.0 million loan agreement
(the Bridge Loan) with certain investors, and the proceeds were used to
partially fund the acquisition of the property and equipment assets of Stations
WBDT, WBWI and WBUI.

     The entire loan, plus the accrued interest, was repaid at the closing of
our initial public offering on October 5, 1999.

(10) COMMITMENTS AND CONTINGENCIES

  Obligations Under Operating Leases

     The Company is obligated under non-cancelable operating leases for office
space, office equipment, broadcast equipment and tower sites. Future minimum
lease payments as of the year ended December 31, 2000, under non-cancelable
operating leases with initial or remaining terms of one year or more are:

<TABLE>
<CAPTION>
                                                         (IN THOUSANDS)
                                                         --------------
<S>                                                      <C>
2001...................................................      $1,752
2002...................................................       1,430
2003...................................................       1,289
2004...................................................       1,067
2005...................................................         754
Thereafter.............................................       3,178
                                                             ------
          Total........................................      $9,470
                                                             ======
</TABLE>

     Total rental expense under operating leases for the twelve months ended
December 31, 1998, 1999 and 2000 was approximately $967,463, $850,383 and
$1,739,591, respectively.

  Obligations Under Capital Leases

     As of December 31, 2000, certain equipment was leased under capital
equipment facilities. These capital lease obligations expire over the next five
years. Future minimum lease payments as of December 31, 2000 under capital
leases are:

<TABLE>
<CAPTION>
                                                         (IN THOUSANDS)
                                                         --------------
<S>                                                      <C>
2001...................................................     $ 2,917
2002...................................................       2,897
2003...................................................       2,721
2004...................................................       1,724
2005...................................................         918
                                                            -------
Total..................................................     $11,177
Less: Amount representing interest.....................      (1,648)
                                                            -------
Present value of minimum lease payments................       9,529
Less: Current portion..................................      (2,271)
                                                            -------
Long-term portion......................................     $ 7,258
                                                            =======
</TABLE>

  Program Rights Payable

     Commitments for program rights that have been executed, but which have not
been recorded in the accompanying financial statements, as the underlying
programming is not yet available for broadcast, were approximately $7,862,000
and $23,475,000 as of December 31, 1999 and 2000, respectively.

                                        42
<PAGE>   43
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Maturities on the Company's program rights payables (including commitments
not recognized in the accompanying financial statements due to the lack of
current availability for broadcast) for each of the next five years are:

<TABLE>
<CAPTION>
                                                         (IN THOUSANDS)
                                                         --------------
<S>                                                      <C>
2001...................................................     $12,108
2002...................................................      12,107
2003...................................................      10,299
2004...................................................       7,866
2005...................................................       3,385
Thereafter.............................................          23
                                                            -------
          Total........................................     $45,788
                                                            =======
</TABLE>

  Certain Compensation Arrangements

     In June 1997, the Company issued an aggregate of 100 management carry units
to certain members of management. These units entitled holders to certain
distribution rights upon achievement of certain returns by non-management
investors and are subject to forfeiture or repurchase by the Company in the
event of termination of each individual's employment by the Company under
certain specified circumstances. These management carry units were accounted for
as a variable plan and expensed as it became probable that any such
distributions would be made. The Company determined the value of these at the
issuance date to be immaterial. Upon the closing of our IPO these management
carry units were exchanged for fully vested shares of our common stock. During
1999, the Company recorded an expense of $39.6 million relating to the units. No
expense was recorded relating to these units in 2000 or 1998.

  Legal Proceedings

     We are currently, and from time to time, involved in litigation incidental
to the conduct of our business. We are not currently a party to any lawsuit or
proceeding that we believe would have a material adverse effect on our financial
condition, results of operations or liquidity.

(11) INCOME TAXES

     The income tax benefits consists of the following:

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                              -------------------------------
                                               1998        1999        2000
                                              -------     -------     -------
                                                (IN THOUSANDS)
<S>                                           <C>         <C>         <C>
Current:
  Federal income taxes......................  $    --     $    --     $    --
  State income taxes........................       --          --         316
                                              -------     -------     -------
          Total current tax expense.........  $    --     $    --     $   316
Deferred:
  Federal income taxes......................  $(2,393)    $(4,420)    $(7,517)
  State income taxes........................       --          --        (924)
                                              -------     -------     -------
          Total deferred tax benefit........   (2,393)     (4,420)     (8,441)
                                              -------     -------     -------
          Total income tax benefit..........  $(2,393)    $(4,420)    $(8,125)
                                              =======     =======     =======
</TABLE>

                                        43
<PAGE>   44
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The differences between the income tax benefit and income taxes computed
using the U.S. Federal statutory income tax rates (34%) consist of the
following:

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                              -------------------------------
                                               1998        1999        2000
                                              -------    --------    --------
                                                     EXPENSE/(BENEFIT)
                                                      (IN THOUSANDS)
<S>                                           <C>        <C>         <C>
Tax benefit at U.S. Federal rate............  $(8,273)   $(25,567)   $(10,255)
State income taxes, net of Federal tax
  benefit...................................     (261)       (489)       (627)
Termination of non-taxable status...........       --        (953)         --
Losses allocated to LLC members.............    4,802       7,193          --
Nondeductible expenses......................    1,430      15,202       2,373
Other.......................................      (91)        194         384
                                              -------    --------    --------
     Income tax benefit.....................  $(2,393)   $ (4,420)   $ (8,125)
                                              =======    ========    ========
</TABLE>

     Deferred Income Taxes. Prior to our reorganization into a "C" corporation
in October 1999, the Company was a limited liability corporation and, therefore,
all federal tax attributes were passed through to the members of the Company,
other than those tax attributes for its Missouri operations which are organized
as "C" corporations. The data listed below take into consideration the tax
effect to the Company after its reorganization.

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                         ------------------------
                                                            1999          2000
                                                         ----------    ----------
                                                              (IN THOUSANDS)
<S>                                                      <C>           <C>
Current deferred tax assets:
  Accrued vacation.....................................   $    170      $    200
  State income taxes...................................         49            49
  Bad debt and other reserves..........................      2,126           386
  Deferred revenue.....................................         86           141
  Other................................................         17           363
                                                          --------      --------
          Total current deferred tax assets............      2,448         1,139
                                                          --------      --------
Non-current deferred tax liabilities:
  Fixed asset depreciation.............................       (500)         (146)
  Intangible amortization..............................    (28,700)      (27,164)
  Deferred compensation................................        332           546
  Net operating loss carryforward......................      4,971        12,759
  Program amortization.................................     (1,533)       (1,801)
  Charitable contributions.............................         66            98
  Other................................................         --            94
                                                          --------      --------
          Total non-current............................    (25,364)      (15,614)
                                                          --------      --------
Total net deferred income tax liabilities..............   $(22,916)     $(14,475)
                                                          ========      ========
</TABLE>

(12) RELATED PARTY TRANSACTIONS

     The Company's stations have entered into affiliation agreements and, from
time to time, related marketing arrangements with The WB Network. Jamie Kellner,
Chairman of the Board and Chief Executive Officer, is an owner and the chief
executive officer of The WB Network.

     Pursuant to June 1995 agreements among Koplar Communications, Inc., Roberts
Broadcasting, Michael Roberts and Steven C. Roberts, Roberts Broadcasting cannot
(i) transfer its license for WHSL, East

                                        44
<PAGE>   45
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

St. Louis, Illinois, (ii) commit any programming time of the station for
commercial programming or advertising or (iii) enter into a local marketing
agreement with respect to such station until June 1, 2000. In the event that the
current affiliation agreement for WHSL is terminated, the substitute format must
be substantially similar to the current home shopping network format or, in the
alternative, an infomercial format. The annual payment from KPLR for these
agreements was $200,000 during the first three years. The Company paid $300,000
in both 1998 and 1999 under this agreement, no payments were made in 2000.

     In connection with our Salt Lake City and New Mexico stations, the Company
has entered into long-term agreements to lease studio facilities and/or
transmission tower space for KUWB, KUPX and KWBQ from an affiliate of Michael
Roberts. Michael Roberts serves on the Company's Board of Directors. These
leases have terms of approximately fifteen years and provide for monthly
payments aggregating approximately $25,000, subject to adjustment based on the
Consumer Price Index.

     In connection with the acquisition of WBUI, WIWB and WBDT in June of 1999,
we paid CEA, Inc. a broker's fee of $125,000. CEA, Inc. also received
compensation from the seller in connection with the purchase of WBUI, WIWB and
WBDT. One of our directors, Mr. Collis, is an officer of an affiliate of CEA
Capital Partners.

(13) DEFINED CONTRIBUTION PLAN

     In 1999, the Company established a 401(k) defined contribution plan (the
Plan) which covers all eligible employees (as defined in the Plan). Participants
are allowed to make non-forfeitable contributions up to 15% of their annual
salary, but may not exceed the annual maximum contribution limitations
established by the Internal Revenue Service. The Company currently matches 50%
of the amounts contributed by each participant but does not match participants'
contributions in excess of 6% of their contribution per pay period. The Company
contributed and expensed $200,000 to the Plan for the year ended December 31,
1998, $173,000 for the year ended December 31, 1999 and $273,000 for the year
ended December 31, 2000.

(14) STOCK OPTION COMPENSATION

     Our 1999 Stock Incentive Plan provides additional means to attract,
motivate, reward and retain key personnel. The Compensation Committee of the
Board of Directors (the plan administrator) has the authority to grant different
types of stock and cash incentive awards and to select participants. While only
stock options and restricted stock awards are contemplated at this time, other
forms of awards may be granted give us flexibility to structure future
incentives. Our employees, officers, directors, and consultants may be selected
to receive awards under the plan.

     A maximum of 4,200,000 shares of our common stock may be issued under the
plan, (approximately 25.08% of our current outstanding shares). The number of
shares subject to stock options and stock appreciation rights granted under the
plan to any one person in a calendar year cannot exceed 1,000,000 shares. The
number of shares subject to all awards granted under the plan to any one person
in a calendar year cannot exceed 1,000,000 shares. Performance-based awards
payable solely in cash that are granted under the plan to any one person in a
calendar year cannot provide for payment of more than $1,000,000.

     Each share limit and award under the plan is subject to adjustment for
certain changes in our capital structure, reorganizations and other
extraordinary events. Shares subject to awards that are not paid or exercised
before they expire or are terminated are available for future grants under the
plan.

     In conjunction with the reorganization and initial public offering,
approximately 2,834,091 shares subject to options were granted.

                                        45
<PAGE>   46
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Currently outstanding options represent 10-year stock option grants. The
outstanding option grants consist of:

     - Options to acquire 283,500 shares upon conversion of our long-term
       incentive compensation plan awards. These options were granted at an
       exercise price of $15.00 per share and vest in equal thirds on December
       31, 2000, 2001 and 2002.

     - Options to acquire approximately an additional 341,500 shares granted as
       incentives to employees and other eligible persons. Of these grants,
       options to acquire 58,500 shares were granted at an exercise price of
       $18.00 per share and options to acquire 283,000 shares were granted at
       $23.00 per share, the initial public offering price of our shares of
       common stock. These options vest in equal installments over five years.

     - Options to acquire an additional 2,209,091 shares, or approximately 13%
       of our common stock after giving effect to the Company's initial public
       offering, were granted to Messrs. Kellner, Gealy, and Allen. Of this
       number, options to acquire 838,635 shares were granted to Mr. Kellner,
       options to acquire 685,228 shares were granted to Mr. Gealy, and options
       to acquire 685,228 shares were granted to Mr. Allen. These options were
       granted at $23.00 per share, the initial public offering price of our
       shares of common stock and vest in four equal annual installments. The
       first installment vested on September 29, 2000. Vesting of these options
       accelerates upon a change of control, death, disability or termination
       without cause.

     - Options to acquire 451,050 shares granted as incentives to employees
       during the year ended December 31, 2000. These options were granted at
       exercise prices ranging from $9.13 to $25.06 per share (market price at
       the date of grant) and vest equally over a period of three to five years.

     Stock option activity during the years ended December 31, 1999 and 2000
consisted of the following:

<TABLE>
<CAPTION>
                                                           1999                         2000
                                                 -------------------------    -------------------------
                                                               WEIGHTED                     WEIGHTED
                                                 NUMBER OF   AVERAGE PRICE    NUMBER OF   AVERAGE PRICE
                                                  SHARES       PER SHARE       SHARES       PER SHARE
                                                 ---------   -------------    ---------   -------------
<S>                                              <C>         <C>              <C>         <C>
Stock options outstanding, beginning of year...         --      $   --        2,831,591      $22.56
1999 Options granted (per share: $15.00 to
  $23.00)......................................  2,834,091       22.56               --          --
2000 Options granted (per share: $9.13 to
  $25.06)......................................         --          --          451,050       16.49
Options forfeited..............................      2,500       23.00           19,250       23.38
Options exercised..............................         --                           --
                                                 =========      ======        =========      ======
Stock options outstanding, end of year.........  2,831,591      $22.56        3,263,391      $21.31
                                                 =========      ======        =========      ======
Stock options exercisable, end of year.........    552,273      $23.00        1,263,785      $22.36
                                                 =========      ======        =========      ======
Options available for grant, end of year.......  1,368,409          --          936,609          --
                                                 =========                    =========
</TABLE>

                                        46
<PAGE>   47
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table summarizes information concerning currently outstanding
and exercisable options:

<TABLE>
<CAPTION>
                           WEIGHTED    WEIGHTED                 WEIGHTED
                            AVERAGE    AVERAGE                  AVERAGE
  EXERCISE     OPTIONS     REMAINING   EXERCISE     NUMBER      EXERCISE
   PRICE     OUTSTANDING     LIFE       PRICE     EXERCISABLE    PRICE
  --------   -----------   ---------   --------   -----------   --------
  <S>        <C>           <C>         <C>        <C>           <C>
   $ 9.13       240,000       5.0       $ 9.13            --     $ 9.13
   $15.00       283,500       5.0       $15.00        94,500     $15.00
   $18.00        58,500       5.0       $18.00        11,700     $18.00
   $23.00     2,474,791       5.0       $23.00     1,157,585     $23.00
   $24.88       206,100       5.0       $24.88            --     $24.88
   $25.06           500       5.0       $25.06            --     $25.06
              ---------                            ---------
              3,263,391                            1,263,785
              =========                            =========
</TABLE>

     The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations, in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized for options granted at or above fair
market value at the time of grant. For the grants that were made at an option
price lower than fair market value at the time of grant, compensation expense of
$132,000 was recognized in the fourth quarter of 1999 (the first quarter of the
vesting period) and $529,000 for the year ended December 31, 2000. The options
granted at below fair market value at the date of grant were granted upon
conversion of the Company's Long Term Incentive Plan (LTIP) in 1999. The Company
recognized compensation expense under the LTIP of $338,000 during the year ended
December 31, 1999 and $400,000 during the year ended December 31, 1998. All
amounts expensed prior to the conversion of the LTIP ($738,000) are netted
against the total of the below market option compensation expense to arrive at
the expense to be recognized over the vesting period of such options.

     Had the Company chosen to adopt the provisions of Statement of Financial
Accounting Standards No. 123, and recognized compensation cost based upon the
fair value of all options granted (including those granted at or above fair
market value) at the date of grant, the Company's net loss (in thousands) and
net loss per share for the years ended December 31, 1999 and 2000 would have
been as follows:

<TABLE>
<CAPTION>
                                                      AS REPORTED               PROFORMA
                                                  --------------------    --------------------
                                                    1999        2000        1999        2000
                                                  --------    --------    --------    --------
<S>                                               <C>         <C>         <C>         <C>
Net loss to common stockholders.................  $(70,779)   $(22,038)   $(72,403)   $(29,395)
Net loss per common share.......................  $  (7.96)   $  (1.32)   $  (9.09)   $  (1.75)
</TABLE>

     The fair value of the options granted were used to calculate the pro forma
net income and net income per common share above, on the date of grant, using a
binomial option-pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                             1999      2000
                                                            ------    -------
<S>                                                         <C>       <C>
Dividend yield............................................      --         --
Expected volatility.......................................   50.00     121.00%
Risk free interest rate...................................    6.11%      5.87%
Expected life (in months).................................      60         60
Weighted average fair value of grants.....................  $12.03    $ 13.99
</TABLE>

                                        47
<PAGE>   48
                   ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      YEAR TO
                                          Q-1        Q-2         Q-3         Q-4        DATE
                                        -------    --------    --------    -------    --------
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                     <C>        <C>         <C>         <C>        <C>
2000
Net revenues..........................  $16,218    $ 19,169    $ 18,045    $20,010    $ 73,442
Operating loss........................   (2,921)       (851)       (901)      (963)     (5,636)
Net loss..............................   (6,190)     (4,185)     (6,295)    (5,368)    (22,038)
Net loss per common share.............    (0.37)      (0.25)      (0.38)     (0.32)      (1.32)
1999
Net revenues..........................  $11,123    $ 15,512    $ 15,803    $17,570    $ 60,008
Operating loss........................   (4,294)     (9,403)    (34,626)      (755)    (49,078)
Net loss..............................   (9,278)    (19,121)    (38,768)    (3,612)    (70,779)
Pro forma net loss....................   (5,998)    (15,341)    (37,308)    (4,749)    (63,396)
Pro forma net loss per common share...    (1.16)      (2.96)      (7.20)     (0.29)      (7.96)
</TABLE>

                                        48
<PAGE>   49

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

     The response to this item is contained, in part, under the caption
"Executive Officers of the Company" in Part I, Item 4 hereof, and the remainder
is contained in the Company's Proxy Statement for its 2001 Annual Meeting of
Shareholders (the "2001 Proxy Statement") under the caption "Election of
Directors" and is incorporated herein by reference.

     The information required pursuant to Item 405 of Regulation S-K will be
contained under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement, and such is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

     The response to this item is contained in the Company's 2001 Proxy
Statement under the captions "Directors Compensation," "Executive Compensation,"
and "Other Agreements," and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The response to this item is contained in the Company's 2001 Proxy
Statement under the caption "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The response to this item is contained in the Company's 2001 Proxy
Statement under the caption "Certain Relationships and Related Transactions" and
is incorporated herein by reference.

                                        49
<PAGE>   50

                                    PART IV

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

     (a)1. Financial Statements

     The following financial statements are included in Item 8:

          ACME Communications, Inc. and Subsidiaries:

          - Consolidated Balance Sheets as of December 31, 2000 and December 31,
            1999.

          - Consolidated Statements of Operations for the years ended December
            31, 2000, December 31, 1999 and December 31, 1998.

          - Consolidated Statements of Members' Capital for the years ended
            December 31, 2000, December 31, 1999 and 1998.

          - Consolidated Statements of Cash Flows for the years ended December
            31, 2000, December 31, 1999 and December 31, 1998.

          - Notes to the Consolidated Financial Statements.

     (a)2. Financial Statement Schedules

     The following financial statement schedules are included in Item 14 (d):

     Schedule I -- Condensed Financial Information of ACME Communications, Inc.
(Parent Company):

      - Balance Sheet as of December 31, 2000 and December 31, 1999.

      - Statements of Operations for the years ended December 31, 2000, December
        31, 1999 and December 31, 1998

      - Statements of Cash Flows for the years ended December 31, 2000, December
        31, 1999 and December 31, 1998

      - Notes to the Condensed Financial Statements

     Schedule II -- Valuation and Qualifying Accounts

     All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto, included in Item 8 herewith.

     (a)3. Exhibits

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                        EXHIBIT DESCRIPTION
     -------                       -------------------
    <S>        <C>
     2.1(10)   Form of Agreement and Plan of Reorganization Relating to the
               Capitalization of ACME Communications, Inc. by and among the
               parties listed in the signature pages thereof.
     2.2(10)   Form Exchange Agreement among ACME Communications, Inc. and
               the parties listed on the signature pages thereto.
     2.3(10)   Form of Agreement of Merger by and among ACME Television
               Holdings, LLC, ACME Communications, Inc. and ACME
               Communications Merger Subsidiary, LLC.
     3.1(10)   Form of Restated Certificate of Incorporation of ACME
               Communications, Inc., a Delaware corporation.
     3.2(10)   Form of Restated Bylaws of ACME Communications, Inc.
     4.1(1)    Indenture, dated September 30, 1997, by and among ACME
               Intermediate Holdings, LLC and ACME Intermediate Finance,
               Inc., as Issuers, and Wilmington Trust Company.
</TABLE>

                                        50
<PAGE>   51

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                        EXHIBIT DESCRIPTION
     -------                       -------------------
    <S>        <C>
     4.2(1)    Indenture, dated September 30, 1997, by and among ACME
               Television, LLC and ACME Finance Corporation, as issuers,
               the Guarantors named therein, and Wilmington Trust Company.
     4.3(4)    First Supplemental Indenture, dated February 11, 1998, by
               and among ACME Television, LLC and ACME Finance Corporation,
               the Guarantors named therein, and Wilmington Trust Company.
     4.4(4)    Second Supplemental Indenture, dated March 13, 1998, by and
               among ACME Television, LLC and ACME Finance Corporation, the
               Guarantors named therein, and Wilmington Trust Company.
     4.5(6)    Third Supplemental Indenture, dated August 21, 1998, by and
               among ACME Television, LLC and ACME Finance Corporation, as
               issuers, the Guarantors named therein, and Wilmington Trust
               Company.
    10.1(9)    Asset Purchase Agreement, dated April 23, 1999, by and among
               Paxson Communications Corporation, Paxson Communications
               License Company, LLC, Paxson Communications of Green Bay-14,
               Inc., Paxson Communications of Dayton-26, Inc., Paxson
               Dayton License, Inc., Paxson Communications of Decatur-23,
               Inc., Paxson Decatur License, Inc., ACME Television of Ohio,
               LLC, ACME Television Licenses of Ohio, LLC, ACME Television
               of Wisconsin, LLC, ACME Television Licenses of Wisconsin,
               LLC, ACME Television of Illinois, LLC and ACME Television
               Licenses of Illinois, LLC for WDPX(TV), Springfield, Ohio,
               WPXG(TV), Suring, WI and WPXU(TV), Decatur, IL.
    10.2(3)    Time Brokerage Agreement, dated April 23, 1999, by and among
               Paxson Communications License Company, LLC, Paxson
               Communications of Green Bay-14, Inc., and ACME Television of
               Wisconsin, LLC for Station WPXG-TV, Suring, Wisconsin.
    10.3(3)    Time Brokerage Agreement, dated April 23, 1999, by and among
               Paxson Decatur License, Inc., Paxson Communications of
               Decatur-23, Inc., and ACME Television of Illinois, LLC for
               Station WPXU-TV, Decatur, Illinois.
    10.4(3)    Time Brokerage Agreement, dated April 23, 1999, by and among
               Paxson Dayton License, Inc., Paxson Communications of
               Dayton-26, Inc., and ACME Television of Ohio, LLC for
               Station WDPX-TV, Springfield, Ohio.
    10.5(10)   Amendment to Asset Purchase Agreement, dated July 30, 1999,
               by and between ACME Television of New Mexico, LLC and ACME
               Television Licenses of New Mexico, LLC and Ramar
               Communications II, Ltd., with respect to television station
               KASY-TV, Santa Fe, New Mexico.
    10.6(8)    Asset Purchase Agreement, dated February 19, 1999, by and
               between ACME Television of New Mexico, LLC and ACME
               Television Licenses of New Mexico, LLC and Ramar
               Communications II, Ltd., with respect to television station
               KASY-TV, Albuquerque, New Mexico.
    10.7(10)   Station Affiliation Agreement, dated March 15, 1998, by and
               between ACME Television Holdings, LLC and The WB Television
               Network Partners, L.P.
    10.8(1)    Station Affiliation Agreement, dated September 24, 1997, by
               and between ACME Holdings of St. Louis, LLC and The WB
               Television Network Partners, L.P.
    10.9(3)    Management Agreement between Edward J. Koplar and ACME
               Television Licenses of Missouri, Inc.
    10.10(3)   Station Affiliation Agreement, dated August 18, 1997, by and
               between ACME Holdings of Knoxville, LLC and The WB
               Television Network Partners, L.P.
    10.11(3)   Station Affiliation Agreement, dated June 10, 1997, by and
               between ACME Holdings of Oregon, LLC and The WB Television
               Network Partners, L.P.
</TABLE>

                                        51
<PAGE>   52

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                        EXHIBIT DESCRIPTION
     -------                       -------------------
    <S>        <C>
    10.12(10)  Joint Sales Agreement by and between ACME Television
               Holdings, LLC and DP Media, Inc., dated April 23, 1999.
    10.13(10)  Option Agreement, dated April 23, 1999, by and between ACME
               Television Holdings, LLC and DP Media, Inc.
    10.14(1)   Station Affiliation Commitment Letter dated August 21, 1997,
               to ACME Communications, Inc. from The WB Television Network.
    10.15(10)  ACME Communications, Inc. 1999 Stock Incentive Plan.
    10.16(10)  Form of Employment Agreement, as amended, by and between
               ACME Communications, Inc. and Doug Gealy.
    10.17(10)  Form of Employment Agreement, as amended, by and between
               ACME Communications, Inc. and Tom Allen.
    10.18(10)  Consulting Agreement, as amended, by and between ACME
               Communications, Inc. and Jamie Kellner.
    10.19(1)   First Amended and Restated Credit Agreement, dated as of
               December 2, 1997, by and among ACME Television, LLC, the
               Lenders named therein and Canadian Imperial Bank of
               Commerce, New York Agency, as agent for the Lenders.
    10.20(3)   Securities and Pledge Agreement, dated December 2, 1997, by
               and between ACME Subsidiary Holdings III, LLC and Canadian
               Imperial Bank of Commerce, as agent for the benefit of CIBC,
               Inc. and other financial institutions.
    10.21(10)  Amendment No. 1 to First Amended and Restated Credit
               Agreement, dated June 30, 1998.
    10.22(10)  Amendment No. 2 to First Amended and Restated Credit
               Agreement, dated June 30, 1998.
    10.23(10)  Third Amendment to First Amended and Restated Credit
               Agreement, dated March 1, 1999.
    10.24(10)  Fourth Amendment to First Amended and Restated Credit
               Agreement, dated April 23, 1999.
    10.25(10)  Fifth Amendment to Credit Agreement, dated September 1999.
    10.26*     Sixth Amendment to Credit Agreement, dated December 29,
               1999.
    10.27*     Seventh Amendment to Credit Agreement, dated December 29,
               2000.
    10.28(3)   Form of Guaranty by and among ACME subsidiaries, Canadian
               Imperial Bank of Commerce, as agent, and the Lenders under
               the First Amended and Restated Credit Agreement.
    10.29(3)   Form of Security and Pledge Agreement by and among ACME
               subsidiaries, Canadian Imperial Bank of Commerce, as agent,
               and the Lenders under the First Amended and Restated Credit
               Agreement.
    10.30(10)  Form of Registration Rights Agreement, by and among ACME
               Communications, Inc. and the parties on the signature pages
               thereto.
    10.31(1)   Note Purchase Agreement, dated September 24, 1997, by and
               among ACME Intermediate Holdings, LLC, ACME Intermediate
               Finance, Inc. and CIBC Wood Gundy Securities Corp., as
               Initial Purchaser.
    10.32(2)   Note Purchase Agreement, dated September 24, 1997, by and
               among ACME Television, LLC, ACME Finance Corporation, CIBC
               Wood Gundy Securities Corp. and Merrill Lynch, Pierce,
               Fenner & Smith Incorporated.
    10.33(1)   Securities Pledge Agreement, dated September 30, 1997, by
               and between ACME Intermediate Holdings, LLC and ACME
               Intermediate Finance, Inc., as Pledgers, and Wilmington
               Trust Company, as Trustee.
</TABLE>

                                        52
<PAGE>   53

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                        EXHIBIT DESCRIPTION
     -------                       -------------------
    <S>        <C>
    10.34(10)  Employment Agreement, dated September 27, 1999 by and
               between ACME Communications, Inc. and Ed Danduran.
    10.35(10)  Amended and Restated Investment and Loan Agreement, dated as
               of June 17, 1999, by and among ACME Television Holdings, LLC
               and Jamie Kellner, Douglas Gealy, Thomas Allen, CEA Capital
               Partners USA, L.P. CEA ACME, Inc., Alta Communications VI,
               L.P., Alta Subordinated Debt Partners III, L.P., Alta-Comm S
               by S, LLC, Alta ACME, Inc., BancBoston Ventures, Inc., CEA
               Inc. and Alta Inc.
    10.36(10)  Form of Convertible Debenture of ACME Television Holdings,
               LLC. Due June 30, 2008.
    10.37(10)  Station Affiliation Agreement, dated April 9, 1998, by and
               between ACME Television Licenses of Utah LLC and The WB
               Television Network.
    10.38(10)  Station Affiliation Agreement, dated March 4, 1999, by and
               between ACME Television Licenses of New Mexico LLC and The
               WB Television Network.
    10.39(10)  Station Affiliation Agreement, dated May 1, 1999, by and
               between ACME Television Licenses of Wisconsin LLC and The WB
               Television Network.
    10.40(10)  Station Affiliation Agreement, dated May 1, 1999, by and
               between ACME Television Licenses of Illinois LLC and The WB
               Television Network.
    10.41(10)  Station Affiliation Agreement, dated May 1, 1999, by and
               between ACME Television Licenses of Ohio LLC and The WB
               Television Network.
    10.42(10)  Bridge Loan Agreement, dated April 23, 1999, by and among
               ACME Television Holdings, LLC, Alta Communications VI, L.P.,
               Alta Comm S by S, LLC, Alta Subordinated Debt Partners III,
               L.P., BancBoston Investments Inc., CEA Capital Partners USA,
               L.P., CEA Capital Partners USA CI, L.P., TCW Shared
               Opportunity Fund III, L.P., Shared Opportunity Fund IIB, LLC
               and TCW Leveraged Income Trust II, L.P.
    10.43(10)  Form of Stockholder and Voting Agreement by and among ACME
               Communications Inc. and the parties on the signature pages
               thereto.
    10.44(10)  Form of Voting Agreement by and among ACME Communications
               Inc. and the parties on the signature pages thereto.
    10.45(11)  Second Amendment to Asset Purchase Agreement, dated November
               1, 1999, by and between ACME Television of New Mexico, LLC
               and Ramar Communications II, Ltd., with respect to
               television station KASY-TV, Santa Fe, New Mexico.
    10.46(11)  Time Brokerage Agreement dated November 1, 1999, by and
               between Ramar Communications, II, Ltd. and ACME Television
               of New Mexico, LLC.
    21.0(11)   Subsidiaries of Registrant.
</TABLE>

---------------
  *  Filed herewith.

 (1) Incorporated by reference to the Registration Statement for ACME
     Intermediate Holdings, LLC on Form S-4, File No. 333-4027, filed on
     November 14, 1997.

 (2) Incorporated by reference to the Registration Statement for ACME
     Television, LLC on Form S-4, File No. 333-40281, filed on November 14,
     1997.

 (3) Incorporated by reference to the Registration Statement for ACME
     Television, LLC on Form S-4/A, File No. 333-40281, filed on January 16,
     1998

 (4) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending March 31, 1998.

 (5) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending June 30, 1998.

                                        53
<PAGE>   54

 (6) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending September 30, 1998.

 (7) Incorporated by reference to ACME Intermediate Holdings LLC's Annual Report
     on Form 10-K for the for the year ended December 31, 1998.

 (8) Incorporated by reference to ACME Television Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending March 31, 1999.

 (9) Incorporated by reference to ACME Intermediate Holdings LLC's Report on
     Form 8-K filed May 7, 1999.

(10) Incorporated by reference to the Registration Statement for ACME
     Communications, Inc. on Form S-1, File No. 333-84191, filed on September
     29, 1999.

(11) Incorporated by reference to ACME Communications, Inc.'s Annual Report on
     Form 10-K for the year ended December 31, 1999.

     (b) Reports on Form 8-K.

     The Company filed no reports on Form 8-K during the three months ended
December 31, 2000.

                                        54
<PAGE>   55

                                   SIGNATURES

     Pursuant to the requirements of Sections 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.

                                          ACME Communications, Inc.

March 30, 2001                            --------------------------------------
                                          Thomas D. Allen
                                          Executive Vice President and Chief
                                          Financial Officer and Director
                                          (Principal Financial Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.

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

/s/ JAMIE KELLNER                                         Chairman of the Board and     March 30, 2001
-----------------------------------------------------      Chief Executive Officer
Jamie Kellner                                           (Principal Executive Officer)

/s/ DOUGLAS GEALY                                       President and Chief Operating   March 30, 2001
-----------------------------------------------------       Officer and Director
Douglas Gealy

/s/ THOMAS D. ALLEN                                    Executive Vice President, Chief  March 30, 2001
-----------------------------------------------------   Financial Officer (Principal
Thomas D. Allen                                           Financial and Accounting
                                                            Officer) and Director

/s/ JAMES COLLIS                                                  Director              March 30, 2001
-----------------------------------------------------
James Collis

/s/ THOMAS EMBRESCIA                                              Director              March 30, 2001
-----------------------------------------------------
Thomas Embrescia

/s/ BRIAN MCNEILL                                                 Director              March 30, 2001
-----------------------------------------------------
Brian McNeill

/s/ MICHAEL ROBERTS                                               Director              March 30, 2001
-----------------------------------------------------
Michael Roberts

/s/ DARRYL SCHALL                                                 Director              March 30, 2001
-----------------------------------------------------
Darryl Schall
</TABLE>

                                        55
<PAGE>   56

                                                                      SCHEDULE I

                           ACME COMMUNICATIONS, INC.
                                (PARENT COMPANY)

                        CONDENSED FINANCIAL INFORMATION
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1999        2000
                                                              --------    --------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 19,834    $ 20,690
                                                              --------    --------
          Total current assets..............................    19,834      20,690
Notes Receivable and accrued interest.......................       112          --
Investment in and advances to subsidiaries..................    86,593      65,580
Intangible assets, net......................................    20,840      19,784
                                                              --------    --------
          Total assets......................................  $127,379    $106,054
                                                              ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $    240    $    123
  Accrued liabilities.......................................        89          11
  Deferred income taxes.....................................       177         594
                                                              --------    --------
          Total current liabilities.........................       506         728
Other liabilities...........................................        38          --
                                                              --------    --------
          Total liabilities.................................       544         728
                                                              --------    --------
Stockholders' equity:
  Preferred stock, $.01 par value; 10,000,000 shares
     authorized, no shares issued and outstanding...........        --          --
  Common stock, $.01 par value; 16,750,000 shares issued
     outstanding at December 31, 1999 and December 31,
     2000...................................................       168         168
  Additional paid-in capital................................   130,279     130,279
  Accumulated deficit.......................................    (3,612)    (25,650)
                                                              --------    --------
          Total stockholders' equity........................   126,835     105,326
                                                              --------    --------
          Total liabilities and stockholders' equity........  $127,379    $106,054
                                                              ========    ========
</TABLE>

         See accompanying notes to the condensed financial statements.

                                       S-1
<PAGE>   57
                                                          SCHEDULE I (CONTINUED)

                           ACME COMMUNICATIONS, INC.
                                (PARENT COMPANY)

                        CONDENSED FINANCIAL INFORMATION
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1998        1999        2000
                                                             --------    --------    --------
                                                                      (IN THOUSANDS)
<S>                                                          <C>         <C>         <C>
Administrative expense.....................................  $     --    $    (16)   $   (233)
Amortization of intangibles................................        --        (264)     (1,055)
                                                             --------    --------    --------
          Total operation expenses.........................        --        (280)     (1,288)
Interest income............................................        20         418       1,249
Interest expense...........................................    (2,575)     (3,192)         --
Other income (expenses)....................................       (13)         --          --
                                                             --------    --------    --------
  Loss before equity in the net loss of sub-sidiaries and
     income taxes..........................................    (2,568)     (3,054)        (39)
Equity in the net loss of subsidiaries.....................   (19,372)    (67,548)    (21,405)
                                                             --------    --------    --------
  Loss before income taxes.................................   (21,940)    (70,602)    (21,444)
Income tax expense.........................................        --        (177)       (594)
                                                             ========    ========    ========
          Net loss.........................................  $(21,940)   $(70,779)   $(22,038)
                                                             ========    ========    ========
</TABLE>

         See accompanying notes to the condensed financial statements.

                                       S-2
<PAGE>   58
                                                          SCHEDULE I (CONTINUED)

                           ACME COMMUNICATIONS, INC.
                                (PARENT COMPANY)

                        CONDENSED FINANCIAL INFORMATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                COMMON STOCK     ADDITIONAL                     TOTAL
                                               ---------------    PAID-IN     ACCUMULATED   STOCKHOLDERS'
                                               SHARES   AMOUNT    CAPITAL       DEFICIT        EQUITY
                                               ------   ------   ----------   -----------   -------------
                                                                     (IN THOUSANDS)
<S>                                            <C>      <C>      <C>          <C>           <C>
Balance at December 31, 1997.................   4,074    $ 41     $ 23,744     $ (7,479)      $ 16,306
  Issuance of common stock, net..............   1,106      11        7,036           --          7,047
  Net Loss...................................      --      --           --      (21,940)       (21,940)
                                               ------    ----     --------     --------       --------
Balance at December 31, 1998.................   5,180      52       30,780      (29,419)         1,413
  Issuance of common stock for 100% of the
     members' units of ACME Television
     Holdings, LLC...........................   6,570      66       91,742           --         91,808
  Initial public offering....................   5,000      50      104,343           --        104,393
  Termination of non-taxable status..........      --      --      (96,586)      96,586             --
  Net loss...................................      --      --           --      (70,779)       (70,779)
                                               ------    ----     --------     --------       --------
Balance at December 31, 1999.................  16,750     168      130,279       (3,612)       126,835
  Equity-based compensation..................      --      --          529           --            529
  Net loss...................................      --      --           --      (22,038)       (22,038)
                                               ------    ----     --------     --------       --------
Balance at December 31, 2000.................  16,750    $168     $130,808     $(25,650)      $105,326
                                               ======    ====     ========     ========       ========
</TABLE>

         See accompanying notes to the condensed financial statements.

                                       S-3
<PAGE>   59
                                                          SCHEDULE I (CONTINUED)

                           ACME COMMUNICATIONS, INC.
                                (PARENT COMPANY)

                        CONDENSED FINANCIAL INFORMATION
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED
                                                                 DECEMBER 31,
                                                             --------------------
                                                               1998        1999        2000
                                                             --------    --------    --------
                                                                      (IN THOUSANDS)
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities:
  Net loss.................................................  $(21,940)   $(70,779)   $(22,038)
Adjustments to reconcile net loss to net cash:
  provided by operating activities:
  Amortization.............................................        --         264       1,056
  Amortization of debt issuance costs......................       122         492          --
  Equity in net loss of subsidiary.........................    19,372      67,548      21,405
  Deferred taxes...........................................        --         177         417

Changes in assets and liabilities:
  (Increase) decrease in accounts receivables, net.........       (20)        119         112
  Decrease in prepaid expenses.............................        25          --          --
  Increase (decrease) in accounts payable..................        --         240        (117)
  Increase (decrease) in other current liabilities.........         2       1,692         (38)
  Increase (decrease)in accrued expenses...................     2,476         335         (78)
                                                             --------    --------    --------
       Net cash provided by operating activity.............        37          88         719

Cash flows from investing activities:
  Purchase of station interests............................        --     (62,655)         --
  Investments in and advances to subsidiaries..............         7     (22,932)        137
                                                             --------    --------    --------
       Net cash provided by (used in) investing
          activities.......................................         7     (85,587)        137

Cash flows from financing activities:
  Initial public offering, net of expenses.................        --     105,285          --
                                                             --------    --------    --------
       Net cash provided by financing activities...........        --     105,285          --
  Net increase in cash.....................................        44      19,786         856
  Cash at beginning of period..............................         4          48      19,834
                                                             --------    --------    --------
  Cash at end of period....................................  $     48    $ 19,834    $ 20,690
                                                             ========    ========    ========

Supplemental disclosures of cash flow information:

Non-cash transactions:
  Issuance of equity as purchase consideration.............  $  7,047    $     --    $     --
  Conversion of convertible debt...........................  $     --    $ 29,240    $     --
  Acquisition of minority interest of ACME Intermediate
     Holdings, LLC.........................................  $     --    $ 21,250    $     --
                                                             ========    ========    ========
</TABLE>

         See accompanying notes to the condensed financial statements.
                                       S-4
<PAGE>   60

                           ACME COMMUNICATIONS, INC.
                                (PARENT COMPANY)

                    NOTES TO CONDENSED FINANCIAL INFORMATION

1. FORMATION AND BASIS OF PRESENTATION

     Pursuant to the rules and regulations of the Securities and Exchange
Commission, the Condensed Financial Statements of ACME Communications, Inc., do
not include all of the information and notes normally include with financial
statements prepared in accordance with generally accepted accounting principles.
It is therefore suggested that these Condensed Financial Statements be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included at Item 8 of this filing.

     ACME Communications, Inc. was formed on July 23, 1999, in preparation for
and in conjunction with an initial public offering of its stock.

     On September 27, 1999, the Board of Advisors of ACME Television Holdings,
LLC and its members approved a merger and reorganization (the "Reorganization"),
whereby ACME Communications became the direct parent of ACME Television
Holdings. As a result of the Reorganization, ACME Communications is the ultimate
parent of ACME Intermediate Holdings, LLC, and its wholly-owned subsidiary ACME
Television, LLC. All transactions contemplated as part of the Reorganization
closed on October 5, 1999.

     Among the significant transactions of the Reorganization were the exchange
of shares of the Company's common stock for members' units, management carry
units and convertible debt of ACME Television Holdings. The common stock
exchanged for members' units in ACME Television Holdings was recorded at
historical cost. The management carry units were treated as a variable
compensation plan. As the number of shares of common stock issued to the holders
of the management carry units were fixed and fully vested, compensation expense
was recorded for the difference between the fair value of the shares issued and
the MCU expense previously recorded. The convertible debt was converted pursuant
to its original conversion terms, and accordingly, no gain or loss was
recognized. Also, the Company acquired the minority interest in ACME
Intermediate Holdings for 923,938 shares of the Company's common stock. The
acquisition of the minority interest was accounted for at fair market value.

     The financial statements give effect to the exchange of common stock for
members' units for the years ended December 31, 1998 and 1999.

     On October 5, 1999, the Company completed its initial public offering of
5,000,000 shares of common stock at $23 per share, before underwriters'
discounts and other issuance costs. The Company received net proceeds of
approximately $105 million.

     The accompanying condensed financial statements are presented for ACME
Communications, Inc.

2. CASH DIVIDENDS

     There have been no cash dividends declared by the Company.

3. INTANGIBLE ASSET

     The acquisition of ACME Intermediate Holdings' minority interest during the
Reorganization in October of 1999 was accounted for at fair market value. The
difference between the fair market value and the carrying value of the minority
interest was $21,103,000 and was recorded as an intangible asset with a useful
life of 20 years. Amortization expense for the year ended December 31, 1999 and
2000 was $264,000 and $1,055,000, respectively.

4. LONG-TERM DEBT

     There are no cash interest payments due on ACME Intermediate Holdings,
LLC's Senior Secured Discount Notes until March 31, 2003. There are no cash
interest payments due on ACME Television, LLC's

                                       S-5
<PAGE>   61

Senior Discount Notes until March 31, 2001. At December 31, 2000, the Company
has $4,759,000 included in accrued liabilities for the interest payment due
March 31, 2001.

5. RECLASSIFICATIONS

     Certain amounts previously reported for 1998 and 1999 have been
reclassified to conform to the 2000 financial statement presentation.

                                       S-6
<PAGE>   62

                           ACME COMMUNICATIONS, INC.

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
  FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999 AND DECEMBER 31,
                                      2000

<TABLE>
<CAPTION>
                                                                 ADDITIONS
                                    BALANCE AT    ADDITIONS     ACQUIRED IN                   BALANCE AT
                                    BEGINNING     CHARGED TO      PURCHASE                      END OF
 ALLOWANCE FOR DOUBTFUL ACCOUNTS    OF PERIOD      EXPENSE      TRANSACTIONS    DEDUCTIONS      PERIOD
 -------------------------------    ----------    ----------    ------------    ----------    ----------
<S>                                 <C>           <C>           <C>             <C>           <C>
Year ended December 31, 1998......    51,000       224,000        280,000             --        555,000
Year ended December 31, 1999......   555,000       485,000             --        324,000        716,000
Year ended December 31, 2000......   716,000       562,000             --        269,000      1,009,000
</TABLE>

                                       S-7
<PAGE>   63

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                        EXHIBIT DESCRIPTION
 -------                       -------------------
<S>        <C>
 2.1(10)   Form of Agreement and Plan of Reorganization Relating to the
           Capitalization of ACME Communications, Inc. by and among the
           parties listed in the signature pages thereof.
 2.2(10)   Form Exchange Agreement among ACME Communications, Inc. and
           the parties listed on the signature pages thereto.
 2.3(10)   Form of Agreement of Merger by and among ACME Television
           Holdings, LLC, ACME Communications, Inc. and ACME
           Communications Merger Subsidiary, LLC.
 3.1(10)   Form of Restated Certificate of Incorporation of ACME
           Communications, Inc., a Delaware corporation.
 3.2(10)   Form of Restated Bylaws of ACME Communications, Inc.
 4.1(1)    Indenture, dated September 30, 1997, by and among ACME
           Intermediate Holdings, LLC and ACME Intermediate Finance,
           Inc., as Issuers, and Wilmington Trust Company.
 4.2(1)    Indenture, dated September 30, 1997, by and among ACME
           Television, LLC and ACME Finance Corporation, as issuers,
           the Guarantors named therein, and Wilmington Trust Company.
 4.3(4)    First Supplemental Indenture, dated February 11, 1998, by
           and among ACME Television, LLC and ACME Finance Corporation,
           the Guarantors named therein, and Wilmington Trust Company.
 4.4(4)    Second Supplemental Indenture, dated March 13, 1998, by and
           among ACME Television, LLC and ACME Finance Corporation, the
           Guarantors named therein, and Wilmington Trust Company.
 4.5(6)    Third Supplemental Indenture, dated August 21, 1998, by and
           among ACME Television, LLC and ACME Finance Corporation, as
           issuers, the Guarantors named therein, and Wilmington Trust
           Company.
10.1(9)    Asset Purchase Agreement, dated April 23, 1999, by and among
           Paxson Communications Corporation, Paxson Communications
           License Company, LLC, Paxson Communications of Green Bay-14,
           Inc., Paxson Communications of Dayton-26, Inc., Paxson
           Dayton License, Inc., Paxson Communications of Decatur-23,
           Inc., Paxson Decatur License, Inc., ACME Television of Ohio,
           LLC, ACME Television Licenses of Ohio, LLC, ACME Television
           of Wisconsin, LLC, ACME Television Licenses of Wisconsin,
           LLC, ACME Television of Illinois, LLC and ACME Television
           Licenses of Illinois, LLC for WDPX(TV), Springfield, Ohio,
           WPXG(TV), Suring, WI and WPXU(TV), Decatur, IL.
10.2(3)    Time Brokerage Agreement, dated April 23, 1999, by and among
           Paxson Communications License Company, LLC, Paxson
           Communications of Green Bay-14, Inc., and ACME Television of
           Wisconsin, LLC for Station WPXG-TV, Suring, Wisconsin.
10.3(3)    Time Brokerage Agreement, dated April 23, 1999, by and among
           Paxson Decatur License, Inc., Paxson Communications of
           Decatur-23, Inc., and ACME Television of Illinois, LLC for
           Station WPXU-TV, Decatur, Illinois.
10.4(3)    Time Brokerage Agreement, dated April 23, 1999, by and among
           Paxson Dayton License, Inc., Paxson Communications of
           Dayton-26, Inc., and ACME Television of Ohio, LLC for
           Station WDPX-TV, Springfield, Ohio.
10.5(10)   Amendment to Asset Purchase Agreement, dated July 30, 1999,
           by and between ACME Television of New Mexico, LLC and ACME
           Television Licenses of New Mexico, LLC and Ramar
           Communications II, Ltd., with respect to television station
           KASY-TV, Santa Fe, New Mexico.
</TABLE>
<PAGE>   64

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                        EXHIBIT DESCRIPTION
 -------                       -------------------
<S>        <C>
10.6(8)    Asset Purchase Agreement, dated February 19, 1999, by and
           between ACME Television of New Mexico, LLC and ACME
           Television Licenses of New Mexico, LLC and Ramar
           Communications II, Ltd., with respect to television station
           KASY-TV, Albuquerque, New Mexico.
10.7(10)   Station Affiliation Agreement, dated March 15, 1998, by and
           between ACME Television Holdings, LLC and The WB Television
           Network Partners, L.P.
10.8(1)    Station Affiliation Agreement, dated September 24, 1997, by
           and between ACME Holdings of St. Louis, LLC and The WB
           Television Network Partners, L.P.
10.9(3)    Management Agreement between Edward J. Koplar and ACME
           Television Licenses of Missouri, Inc.
10.10(3)   Station Affiliation Agreement, dated August 18, 1997, by and
           between ACME Holdings of Knoxville, LLC and The WB
           Television Network Partners, L.P.
10.11(3)   Station Affiliation Agreement, dated June 10, 1997, by and
           between ACME Holdings of Oregon, LLC and The WB Television
           Network Partners, L.P.
10.12(10)  Joint Sales Agreement by and between ACME Television
           Holdings, LLC and DP Media, Inc., dated April 23, 1999.
10.13(10)  Option Agreement, dated April 23, 1999, by and between ACME
           Television Holdings, LLC and DP Media, Inc.
10.14(1)   Station Affiliation Commitment Letter dated August 21, 1997,
           to ACME Communications, Inc. from The WB Television Network.
10.15(10)  ACME Communications, Inc. 1999 Stock Incentive Plan.
10.16(10)  Form of Employment Agreement, as amended, by and between
           ACME Communications, Inc. and Doug Gealy.
10.17(10)  Form of Employment Agreement, as amended, by and between
           ACME Communications, Inc. and Tom Allen.
10.18(10)  Consulting Agreement, as amended, by and between ACME
           Communications, Inc. and Jamie Kellner.
10.19(1)   First Amended and Restated Credit Agreement, dated as of
           December 2, 1997, by and among ACME Television, LLC, the
           Lenders named therein and Canadian Imperial Bank of
           Commerce, New York Agency, as agent for the Lenders.
10.20(3)   Securities and Pledge Agreement, dated December 2, 1997, by
           and between ACME Subsidiary Holdings III, LLC and Canadian
           Imperial Bank of Commerce, as agent for the benefit of CIBC,
           Inc. and other financial institutions.
10.21(10)  Amendment No. 1 to First Amended and Restated Credit
           Agreement, dated June 30, 1998.
10.22(10)  Amendment No. 2 to First Amended and Restated Credit
           Agreement, dated June 30, 1998.
10.23(10)  Third Amendment to First Amended and Restated Credit
           Agreement, dated March 1, 1999.
10.24(10)  Fourth Amendment to First Amended and Restated Credit
           Agreement, dated April 23, 1999.
10.25(10)  Fifth Amendment to Credit Agreement, dated September 1999.
10.26*     Sixth Amendment to Credit Agreement, dated December 29,
           1999.
10.27*     Seventh Amendment to Credit Agreement, dated December 29,
           2000.
10.28(3)   Form of Guaranty by and among ACME subsidiaries, Canadian
           Imperial Bank of Commerce, as agent, and the Lenders under
           the First Amended and Restated Credit Agreement.
10.29(3)   Form of Security and Pledge Agreement by and among ACME
           subsidiaries, Canadian Imperial Bank of Commerce, as agent,
           and the Lenders under the First Amended and Restated Credit
           Agreement.
</TABLE>
<PAGE>   65

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                        EXHIBIT DESCRIPTION
 -------                       -------------------
<S>        <C>
10.30(10)  Form of Registration Rights Agreement, by and among ACME
           Communications, Inc. and the parties on the signature pages
           thereto.
10.31(1)   Note Purchase Agreement, dated September 24, 1997, by and
           among ACME Intermediate Holdings, LLC, ACME Intermediate
           Finance, Inc. and CIBC Wood Gundy Securities Corp., as
           Initial Purchaser.
10.32(2)   Note Purchase Agreement, dated September 24, 1997, by and
           among ACME Television, LLC, ACME Finance Corporation, CIBC
           Wood Gundy Securities Corp. and Merrill Lynch, Pierce,
           Fenner & Smith Incorporated.
10.33(1)   Securities Pledge Agreement, dated September 30, 1997, by
           and between ACME Intermediate Holdings, LLC and ACME
           Intermediate Finance, Inc., as Pledgers, and Wilmington
           Trust Company, as Trustee.
10.34(10)  Employment Agreement, dated September 27, 1999 by and
           between ACME Communications, Inc. and Ed Danduran.
10.35(10)  Amended and Restated Investment and Loan Agreement, dated as
           of June 17, 1999, by and among ACME Television Holdings, LLC
           and Jamie Kellner, Douglas Gealy, Thomas Allen, CEA Capital
           Partners USA, L.P. CEA ACME, Inc., Alta Communications VI,
           L.P., Alta Subordinated Debt Partners III, L.P., Alta-Comm S
           by S, LLC, Alta ACME, Inc., BancBoston Ventures, Inc., CEA
           Inc. and Alta Inc.
10.36(10)  Form of Convertible Debenture of ACME Television Holdings,
           LLC. Due June 30, 2008.
10.37(10)  Station Affiliation Agreement, dated April 9, 1998, by and
           between ACME Television Licenses of Utah LLC and The WB
           Television Network.
10.38(10)  Station Affiliation Agreement, dated March 4, 1999, by and
           between ACME Television Licenses of New Mexico LLC and The
           WB Television Network.
10.39(10)  Station Affiliation Agreement, dated May 1, 1999, by and
           between ACME Television Licenses of Wisconsin LLC and The WB
           Television Network.
10.40(10)  Station Affiliation Agreement, dated May 1, 1999, by and
           between ACME Television Licenses of Illinois LLC and The WB
           Television Network.
10.41(10)  Station Affiliation Agreement, dated May 1, 1999, by and
           between ACME Television Licenses of Ohio LLC and The WB
           Television Network.
10.42(10)  Bridge Loan Agreement, dated April 23, 1999, by and among
           ACME Television Holdings, LLC, Alta Communications VI, L.P.,
           Alta Comm S by S, LLC, Alta Subordinated Debt Partners III,
           L.P., BancBoston Investments Inc., CEA Capital Partners USA,
           L.P., CEA Capital Partners USA CI, L.P., TCW Shared
           Opportunity Fund III, L.P., Shared Opportunity Fund IIB, LLC
           and TCW Leveraged Income Trust II, L.P.
10.43(10)  Form of Stockholder and Voting Agreement by and among ACME
           Communications Inc. and the parties on the signature pages
           thereto.
10.44(10)  Form of Voting Agreement by and among ACME Communications
           Inc. and the parties on the signature pages thereto.
10.45(11)  Second Amendment to Asset Purchase Agreement, dated November
           1, 1999, by and between ACME Television of New Mexico, LLC
           and Ramar Communications II, Ltd., with respect to
           television station KASY-TV, Santa Fe, New Mexico.
10.46(11)  Time Brokerage Agreement dated November 1, 1999, by and
           between Ramar Communications, II, Ltd. and ACME Television
           of New Mexico, LLC.
21.0(11)   Subsidiaries of Registrant.
</TABLE>
<PAGE>   66

---------------
  *  Filed herewith.

 (1) Incorporated by reference to the Registration Statement for ACME
     Intermediate Holdings, LLC on Form S-4, File No. 333-4027, filed on
     November 14, 1997.

 (2) Incorporated by reference to the Registration Statement for ACME
     Television, LLC on Form S-4, File No. 333-40281, filed on November 14,
     1997.

 (3) Incorporated by reference to the Registration Statement for ACME
     Television, LLC on Form S-4/A, File No. 333-40281, filed on January 16,
     1998

 (4) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending March 31, 1998.

 (5) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending June 30, 1998.

 (6) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending September 30, 1998.

 (7) Incorporated by reference to ACME Intermediate Holdings LLC's Annual Report
     on Form 10-K for the for the year ended December 31, 1998.

 (8) Incorporated by reference to ACME Television Holdings LLC's Quarterly
     Report on Form 10-Q for the period ending March 31, 1999.

 (9) Incorporated by reference to ACME Intermediate Holdings LLC's Report on
     Form 8-K filed May 7, 1999.

(10) Incorporated by reference to the Registration Statement for ACME
     Communications, Inc. on Form S-1, File No. 333-84191, filed on September
     29, 1999.

(11) Incorporated by reference to ACME Communications, Inc.'s Annual Report on
     Form 10-K for the year ended December 31, 1999.