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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>As filed with the Securities and Exchange Commission on
October 11, 2000.</B>

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<HR size="1" width="100%" align="left">
</DIV>

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<HR size="1" width="100%" align="left">
</DIV>

<P align="center">
<B><FONT size="5">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B><FONT size="5">FORM S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center">
<B>UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center">
<B><FONT size="6">StarBand Communications Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Exact Name of Registrant as Specified in its
Charter)</FONT></B>
</DIV>

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<HR size="1" width="30%" align="center">

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="34%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="32%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="28%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="center" valign="top"><FONT size="2">
        <B>Delaware</B></FONT></TD>
        <TD></TD>
        <TD align="center" valign="top"><FONT size="2">
        <B>4899</B></FONT></TD>
        <TD></TD>
        <TD align="center" valign="top"><FONT size="2">
        <B>54-1977597</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="center" valign="top"><FONT size="2">
        <B>(State or Other Jurisdiction of Incorporation or Organization)
        </B></FONT></TD>
        <TD></TD>
        <TD align="center" valign="top"><FONT size="2">
        <B>(Primary Standard<BR>
        Industrial Classification Code Number)</B></FONT></TD>
        <TD></TD>
        <TD align="center" valign="top"><FONT size="2">
        <B>(I.R.S. Employer<BR>
        Identification Number)</B></FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">1760 Old Meadow Road, McLean, Virginia 22102,
tel.: 703-287-3000</FONT></B>

<DIV align="center">
<B><FONT size="2">(Address, including zip code, and telephone
number, including area code, of Registrant&#146;s principal
executive offices)</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<B><FONT size="2">Zur Feldman, Chief Executive Officer and
Co-Chairman</FONT></B>

<DIV align="center">
<B><FONT size="2">1760 Old Meadow Road, McLean, Virginia 22102,
tel.: 703-245-1700</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Name, address, including zip code and
telephone number, including area code, of agent for service)
</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center">

<P align="center">
<I><FONT size="2">Copies to:</FONT></I>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="56%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="41%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="center" valign="top"><FONT size="2">
        <B>Anthony&nbsp;J. Renzi, Jr.<BR>
        Sara Hanks<BR>
        Clifford Chance Rogers&nbsp;&#38; Wells LLP<BR>
        607 Fourteenth Street, NW<BR>
        Washington, DC 20005<BR>
        Tel: (202)&nbsp;434-0700<BR>
        Fax: (202)&nbsp;434-0800</B></FONT></TD>
        <TD></TD>
        <TD align="center" valign="top"><FONT size="2">
        <B>Winthrop&nbsp;B. Conrad, Jr.<BR>
        Davis Polk&nbsp;&#38; Wardwell<BR>
        450 Lexington Avenue<BR>
        New York, NY 10017<BR>
        Tel: (212)&nbsp;450-4000<BR>
        Fax: (212)&nbsp;450-4800</B></FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Approximate date of commencement of proposed
sale to the public:</FONT></B><FONT size="2"> As soon as
practicable after the registration statement becomes effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant
to Rule&nbsp;415 of the Securities Act of 1933, check the
following box.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is filed to register additional
securities for an offering pursuant to Rule&nbsp;462(b) under the
 Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is a post-effective amendment filed
pursuant to Rule&nbsp;462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is a post-effective amendment filed
pursuant to Rule&nbsp;462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If delivery of the prospectus is expected to be
made pursuant to Rule&nbsp;434 under the Securities Act, please
check the following box.&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT>

<P align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

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<TR>
        <TD width="55%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
</TR>

<TR>
        <TD colspan="9"></TD>
</TR>

<TR>
        <TD align="center" nowrap colspan="9"><HR size="1"></TD>
</TR>

<TR>
        <TD colspan="9"></TD>
</TR>

<TR>
        <TD align="center" nowrap colspan="9"><HR size="1"></TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Proposed</B></FONT></TD>
        <TD></TD>
        <TD colspan="3"></TD>
</TR>

<TR>
        <TD align="center" nowrap><FONT size="2"><B>Title of Each Class</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Maximum Aggregate</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount of</B></FONT></TD>
</TR>

<TR>
        <TD align="center" nowrap><FONT size="2"><B>Securities to be Registered</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Offering Price(1)(2)</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Registration Fee</B></FONT></TD>
</TR>

<TR>
        <TD colspan="9"></TD>
</TR>

<TR>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="left"><HR size="1"></TD>
        <TD></TD>

</TR>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Common stock, par value $0.05&nbsp;per share</FONT></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">287,500,000</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">75,900</FONT></TD>
        <TD></TD>
</TR>

<TR>
        <TD colspan="9" align="left"><HR size="1"></TD>

</TR>

<TR>
        <TD colspan="9" align="left"><HR size="1"></TD>

</TR>

</TABLE>
</CENTER>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">(1)&nbsp;</FONT></TD>
        <TD align="left">
        <FONT size="2">Estimated solely for the purpose of calculating
        the registration fee in accordance with Rule&nbsp;457(o) under
        the Securities Act.</FONT></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">(2)&nbsp;</FONT></TD>
        <TD align="left">
        <FONT size="2">Includes shares issuable upon the
        underwriters&#146; exercise of their over-allotment option.
        </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this registration
statement shall thereafter become effective in accordance with
Section&nbsp;8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
 Commission, acting pursuant to said Section&nbsp;8(a), may
determine.</FONT></B>

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<B><FONT size="2" color="#FF0000">The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is
 effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
 </FONT></B><FONT size="2" color="#FF0000"> <BR>
</FONT>
</TD></TR></TABLE>

<P align="center">
<B>Subject to Completion</B>

<DIV align="center">
<B>Preliminary Prospectus dated October&nbsp;&nbsp;&nbsp;, 2000
</B>
</DIV>

<P align="left">
<B><U>PROSPECTUS</U></B>

<P align="center">
<B><FONT size="5">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</FONT></B>

<P align="center">
<IMG src="w41075stabanl1.gif" alt="(STARBAND LOGO)">

<P align="center">
<B><FONT size="4">Common Stock</FONT></B>

<P align="center">
<HR size="1" width="27%" align="center">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is StarBand Communications Inc.&#146;s initial public
offering. StarBand is selling all of the shares offered. The U.S.
 underwriters are offering
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 in the U.S. and Canada and the international managers are
offering
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 outside the U.S. and Canada.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect the public offering price to be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. Currently, no public market exists for the shares. After
pricing of the offering, we expect that the shares will be quoted
 on the Nasdaq National Market under the symbol &#147;STRB.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock involves risks that are
described in the &#147;Risk Factors&#148; section beginning on
page&nbsp;6 of this prospectus.</B>

<P align="center">
<HR size="1" width="27%" align="center">

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="68%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Per Share</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Total</B></FONT></TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Public offering price</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Underwriting discount</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Proceeds, before expenses, to StarBand</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S. underwriters may also purchase up to an additional
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 from StarBand at the public offering price, less the
underwriting discount, within 30&nbsp;days from the date of this
prospectus to cover over-allotments. The international managers
may similarly purchase up to an additional
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 from StarBand.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shares will be ready for delivery on or about
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
 2000.

<P align="center">
<HR size="1" width="27%" align="center">

<P align="left">
<B><FONT size="5">Merrill Lynch &#38; Co.</FONT></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="15%"></TD>
        <TD width="85%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">
        <B><FONT size="5">Credit&nbsp;Suisse&nbsp;First&nbsp;Boston
        </FONT></B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="31%"></TD>
        <TD width="69%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">
        <B><FONT size="5">Salomon Smith Barney</FONT></B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="47%"></TD>
        <TD width="53%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">
        <B><FONT size="5">CIBC World Markets</FONT></B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="63%"></TD>
        <TD width="37%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD align="left">
        <B><FONT size="5">ING Barings</FONT></B></TD>
</TR>

</TABLE>

<DIV align="center">
<HR size="1" width="27%" align="center">
</DIV>

<P align="center">
The date of this prospectus is
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2000.

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<PRE>
INSIDE FRONT COVER

It's w i d e r than narrowband.

It's BIGGER than broadband.

It's StarBand.

The first

        consumer
        always-on
        two-way
        high-speed
        Internet service
        via satellite


StarBand Communications
[Depiction of StarBand logo]

A joint venture of Gilat Satellite Networks Ltd., EchoStar Communications
Corporation, and Microsoft Corporation [Logos of Gilat Satellite Networks,
Echostar Communications Corporation, and Microsoft Corporation]

FOLD OUT PAGES

The StarBand Solution
[Satellite photo of North America is background]
StarBand Communications is creating a new category in high-speed Internet
access, bundling fast StarBand Internet access with a multi-megabit-speed
content delivery service. Our service is targeted to underserved suburban and
rural markets where terrestrial broadband alternatives are limited.

RELIABLE HIGH-SPEED ACCESS

- Up to 500 kilobits per second downstream speeds
- Proven technology based on Gilat Satellite Networks solution
- Single-hop architecture, independent from terrestrial networks
- Always-on connection

[photo of family using Internet]

UNPARALLELED CONSUMER EXPERIENCE

- Ultra high-speed multicast content delivery
- Exclusive StarBand Carousel(SM) technology for personalized content
applications
- Always-on
- Single-dish solution for high-speed Internet and satellite television

[photo of couple using Internet]

NATIONWIDE AND SCALABLE

- Available to virtually everyone, everywhere
- Over 90% of U.S. single family households have satellite line-of-sight
- Centralized network and redundant operations

[photo of installer]

THE STARBAND CONNECTION

-Small satellite dish
-StarBand modem

[photo of the StarBand CPE]
</PRE>
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<!-- TOC -->
<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">SUMMARY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">OTHER RELEVANT INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">DIVIDEND POLICY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">CAPITALIZATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">DILUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">SELECTED FINANCIAL INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">BUSINESS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">MANAGEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">PRINCIPAL STOCKHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">RELATED PARTY TRANSACTIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">DESCRIPTION OF CAPITAL STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">DESCRIPTION OF INDEBTEDNESS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">SHARES ELIGIBLE FOR FUTURE SALE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">UNDERWRITING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">LEGAL MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">WHERE YOU CAN FIND ADDITIONAL INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">INDEX TO FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="w41075ex3-1.txt">AMENDED AND RESTATED CERTIFICATE OF INCORPORATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="w41075ex3-2.txt">AMENDED AND RESTATED BYLAWS</A></TD></TR>
<TR><TD colspan="9"><A HREF="w41075ex23-1.txt">CONSENT OF ERNST & YOUNG LLP</A></TD></TR>
<TR><TD colspan="9"><A HREF="w41075ex27-1.txt">Financial Data Schedule</A></TD></TR>
</TABLE>
</CENTER>
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<P><HR noshade><P>

<P align="center"><B>TABLE OF CONTENTS</B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="89%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Summary</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Risk Factors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Forward-Looking Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Other Relevant Information</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Use of Proceeds</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Dividend Policy</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Capitalization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Dilution</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Selected Financial Information</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Management&#146;s Discussion and Analysis of Financial Condition
	and Results of Operations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Business</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Management</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Principal Stockholders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Related Party Transactions</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Description of Capital Stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Description of Indebtedness</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Shares Eligible for Future Sale</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Material United States Federal Income Tax Considerations for
	Non-U.S.&nbsp;Holders</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Underwriting</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Legal Matters</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Experts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Where You Can Find Additional Information</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Index to Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in
this prospectus is accurate only as of the date on the front
cover of this prospectus. Our business, financial condition,
results of operations and prospects may have changed since that
date.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
StarBand<SUP>SM</SUP> and the StarBand family of marks are owned
by StarBand Communications Inc. All other brand names, trademarks
 and service marks appearing in the prospectus are the property
of their respective holders.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
References in this prospectus to &#147;we,&#148; &#147;our,&#148;
 &#147;us,&#148; &#147;our company&#148; and &#147;StarBand&#148;
 are to StarBand Communications Inc. On September&nbsp;29, 2000,
we changed our name to StarBand Communications Inc. from
Gilat-To-Home Inc.

<P align="center">i
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SUMMARY" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center"><B>SUMMARY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary does not contain all the information that may be
important to you. You should read the entire prospectus
carefully, including the financial statements and related notes
beginning on page&nbsp;F-1, before making an investment decision.
</I>

<P align="left"><B>Our Company</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
StarBand is the first nationwide provider of two-way, always-on,
high-speed Internet access via satellite to residential and small
 office/ home office customers. We have deployed a proven and
scalable network using leased capacity on existing communications
 satellites which we believe can provide our StarBand service
today to any location in the United States with a clear view of
the southern sky. We are targeting our StarBand service primarily
 to rural and suburban households with few or no high-speed
Internet access alternatives. We estimate that approximately
55&nbsp;million households do not presently have access to cable
modem or digital subscriber line, or DSL, technology. Our basic
service package offers unlimited access time at an affordable
monthly flat rate. We have extensively tested our service
offering at over 9,000 locations and, in combination with our
strategic partners, are launching service nationwide in the
fourth quarter of 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our high-speed Internet access service benefits from the unique
abilities of our one-hop satellite network architecture. Unlike
terrestrial networks, satellite networks possess the ability to
multicast, or simultaneously send common content, to millions of
subscribers. Our solution is unique because it delivers high
bandwidth content directly to the personal computer or other
storage device at a subscriber&#146;s home. We can therefore
expand the edge of the Internet directly to our subscribers and
avoid potential congestion inherent in the terrestrial network.
We intend to use our multicasting services to aggregate and
filter high quality content and create an unparalleled experience
 for our subscribers. We will multicast content such as music,
movies, software and emerging multimedia content at significantly
 higher speeds than existing broadband alternatives and, in 2001,
 we expect to introduce the StarBand Carousel<SUP>SM</SUP>, a
personalized high-speed digital delivery service, significantly
enhancing our subscribers&#146; experience and generating
additional revenue opportunities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have three primary strategic partners and founding investors.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	 <B>Gilat Satellite Networks Ltd., and its subsidiaries</B>,
	leaders in satellite communications, are supplying their advanced
	 networking technology and proven customer premises equipment to
	StarBand on an exclusive basis in the United States and Canada.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	 <B>Microsoft Corporation,</B> the owner of MSN, a leading
	consumer Internet service provider with over 3&nbsp;million
	subscribers, has agreed to sell high-speed Internet access using
	our wholesale service offering through over 7,000 RadioShack
	locations.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	 <B>EchoStar Communications,</B> one of the two leading
	U.S.&nbsp;direct broadcast satellite television companies with
	over 4.5&nbsp;million subscribers, has agreed to co-market our
	services to customers of its DISH television service and has
	provided us with access to more than 20,000 DISH retailers. In
	addition to our Internet only access package, we will offer a
	joint StarBand/ EchoStar single-dish solution for direct
	broadcast television and high-speed Internet access in a bundled
	package.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our strategic partners and founding investors have played key
roles in our development by providing us access to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	proprietary proven technology;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a large existing customer base;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	strong consumer brand names;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	broad retail and wholesale distribution channels.</TD>
</TR>

</TABLE>

<P align="center">1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that a substantial business opportunity exists for us
as a result of the tremendous growth of the Internet, the
increasing availability of broadband content and applications and
 the growing demand for high-speed Internet connections.
Forrester Research estimates that 36.4&nbsp;million U.S.
households will have broadband Internet connections by 2004.
Because of the high cost, complexity and physical limitations
involved in providing DSL and cable modem services, the rollout
of these services has been slow or impractical in most rural and
many suburban areas. As illustrated by the recent success of
direct broadcast satellite television, which was one of the most
successful rollouts of a consumer electronics product, we believe
 that consumers in underserved markets will embrace our
satellite-based solution for high-speed Internet access. Pioneer
Consulting estimates that the satellite broadband access market
in the United States will grow to approximately
$13.2&nbsp;billion by 2005.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The StarBand network consists of sophisticated and proven
equipment at the subscriber&#146;s premises, two network
operations centers connected to the Internet and satellite
capacity linking subscriber equipment to the network operations
centers. The customer premises equipment used in the StarBand
network is comprised of a small satellite dish and outdoor
components connected by cables to communications electronics that
 are installed in the subscriber&#146;s home. The primary central
 network operations center from which Gilat manages the
telecommunications elements of our network, located in Marietta,
Georgia, has a robust, redundant connection to the Internet and
the requisite equipment to manage the network. The network design
 allows us to manage the amount of satellite capacity allocated
to particular subscribers, and therefore to provide each
subscriber specified minimum performance levels, even during peak
 periods. We continuously develop and optimize our technology to
maintain and enhance network performance and monitor usage.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are launching our service using existing Ku band satellite
capacity that we and Gilat lease from several owners of
geostationary satellites. By utilizing leased capacity, we
minimize our investments in fixed capital assets and avoid the
risks of deploying our own satellites. In order to further
increase the cost efficiency of our network, we are working with
leading suppliers to implement a next-generation satellite system
 which we expect will significantly increase our overall
satellite capacity and decrease its cost on a per subscriber
basis. The supplier we select will undertake the responsibility
and expense of building and launching these satellites. We will
enter into a long-term lease for capacity on these new
satellites.

<P align="left"><B>Our Strategy</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our mission is to become the leading provider of two-way,
always-on, satellite-based high-speed Internet access. In order
to achieve this goal, we intend to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	rapidly expand our subscriber base;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	implement a targeted marketing plan to attract subscribers;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	maintain a low cost and capital-efficient business model;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	develop opportunities to sell higher-margin value-added services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	continue to enhance our subscribers&#146; StarBand
	experience;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pursue additional distribution and content partnerships.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To date, we have raised $126&nbsp;million of equity from our
strategic partners and founding investors. We have recently
renegotiated our existing senior debt facility. We are also
negotiating a bank facility to prefund our satellite capacity
lease with Loral Skynet. We face many risks and uncertainties.
For example, we have a limited operating history and as of
August&nbsp;31, 2000, we had an accumulated deficit of
approximately $88.0&nbsp;million. In addition, we operate in a
highly competitive market and we expect to record substantial
losses for at least the next few years.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a Delaware corporation. Our principal executive offices
are located at 1760 Old Meadow Road, McLean, Virginia 22102, and
our telephone number is 703-287-3000.

<P align="center">2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>The Offering</B>

<P align="left">
Common stock offered by StarBand:

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="32%"></TD>
	<TD width="1%"></TD>
	<TD width="67%"></TD>
</TR>

<TR>
	<TD valign="top">
	&nbsp;&nbsp;U.S.&nbsp;offering</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
	<TD valign="top">
	&nbsp;&nbsp;International offering</TD>
	<TD></TD>
	<TD valign="top">
	<U>
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
	</U></TD>
</TR>

<TR>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Shares outstanding after the offering</TD>
	<TD></TD>
	<TD valign="top">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Use of proceeds</TD>
	<TD></TD>
	<TD valign="top">
	We estimate that our net proceeds from this offering, without
	exercise of the over-allotment options, will be approximately
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
	 We intend to use these net proceeds:</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&#149;&nbsp; to fund the continued growth of our business and
	operations and expand our subscriber base; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
</TD>
	<TD></TD>
	<TD valign="top">
	&#149;&nbsp; to the extent remaining, for general corporate and
	working capital purposes.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Risk factors</TD>
	<TD></TD>
	<TD valign="top">
	See &#147;Risk Factors&#148; and other information included in
	this prospectus for a discussion of factors you should carefully
	consider before deciding to invest in shares of our common stock.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR>
	<TD valign="top">
	Proposed Nasdaq National Market symbol</TD>
	<TD></TD>
	<TD valign="top">
	STRB</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless otherwise indicated, all information in this prospectus,
including the outstanding share information above, is based on
88,108,650&nbsp;shares outstanding as of August&nbsp;31, 2000 on
a pro forma basis to reflect the automatic conversion of all
outstanding preferred stock, and the issuance and conversion of
additional convertible preferred stock, to be issued as dividends
 thereon, into 54,228,893&nbsp;million shares of common stock
upon completion of this offering. The outstanding share
information excludes:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	8&nbsp;million shares of common stock reserved for issuance under
	 our 2000 stock incentive plan, of which 5,449,220&nbsp;shares of
	 common stock are subject to outstanding options with a weighted
	average exercise price of $2.50;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	1,873,477 and 1,910,947&nbsp;shares of common stock issuable upon
	 the exercise of warrants and rights to purchase Series&nbsp;C
	and D mandatorily redeemable convertible preferred stock,
	respectively, and assumed immediate conversion thereof into
	common stock with a weighted average exercise price of $4.49 per
	share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	116,000&nbsp;shares of common stock issuable upon the exercise of
	 warrants issued to various third parties with a weighted average
	 exercise price of $2.50; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
	 of common stock issuable if the underwriters exercise their
	over-allotment option in full.</TD>
</TR>

</TABLE>

<P align="center">3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>Summary Financial Data</B>

<DIV align="center">
<B>(in thousands, except share and per share data)</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the table below, we provide you with summary historical
financial data of StarBand Communications&nbsp;Inc. We have
prepared this information using the financial statements of
StarBand Communications&nbsp;Inc. for the period from
January&nbsp;11, 2000 (inception) to August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
When you read this summary historical financial data, it is
important that you read along with it the historical financial
statements and related notes, as well as the section titled
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We face many risks and uncertainties. For example, we have a
limited operating history and as of August&nbsp;31, 2000, we had
an accumulated deficit of approximately $88.0&nbsp;million. In
addition, we operate in a highly competitive market and we expect
 to record substantial losses for at least the next few years.

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="73%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January 11, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(Inception)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>through</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August&nbsp;31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	<B>Statement of Operations Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total revenues</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total cost and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,584</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Loss from operations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(68,577</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net loss attributable to common stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(82,094</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Basic and diluted loss per share</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4.06</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma net loss attributable to common stockholders
	(unaudited)(1)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma basic and diluted loss per share (unaudited)(2)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1.23</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma as adjusted net loss attributable to common
	stockholders (unaudited)(1)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma as adjusted basic and diluted loss per share
	(unaudited)(3)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	<B>Weighted Average Shares Outstanding:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Basic and diluted</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,232,428</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma basic and diluted (unaudited)(2)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54,456,199</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma as adjusted basic and diluted (unaudited)(3)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="53%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>As of August&nbsp;31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>As Adjusted</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(unaudited)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(unaudited)</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(4)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(5)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Balance Sheet Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,303</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,303</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Restricted cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158,862</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158,862</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Working capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,602</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,602</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,512</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,512</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total debt</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,089</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,089</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total mandatorily redeemable convertible preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142,870</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total stockholders&#146; (deficit) equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,770</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,100</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	The pro forma and pro forma as adjusted net loss attributable to
	common stockholders reflects the elimination of the preferred
	stock dividends and accretion.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	The pro forma statement of operations data gives effect to the
	conversion of all outstanding mandatorily redeemable convertible
	preferred stock and dividends thereon into 32,643,118 and
	1,580,653&nbsp;shares of common stock, respectively, on a
	weighted average basis, and excludes common shares issuable upon
	exercise of outstanding stock options, issuance of common stock
	and pursuant to Series&nbsp;C and D mandatorily redeemable
	convertible preferred stock, because such shares are not
	automatically issuable upon consummation of this offering.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	The pro forma as adjusted statement of operations data gives
	effect to the pro forma adjustments discussed in (2) above, in
	addition to the sale of
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	 shares of common stock offered hereby at an assumed initial
	public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
	 share as if such sale had occurred on January&nbsp;11, 2000
	(inception).</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	The pro forma balance sheet data gives effect to the automatic
	conversion of all outstanding shares of mandatorily redeemable
	convertible preferred stock and dividends thereon into 51,727,573
	 and 2,501,320&nbsp;shares of common stock, respectively, and
	excludes common shares issuable upon exercise of stock options
	(5,449,220&nbsp;shares), warrants to purchase common stock
	(116,000&nbsp;shares), Series&nbsp;C mandatorily redeemable
	convertible preferred stock (1,873,477 common share equivalents),
	 and Series&nbsp;D mandatorily redeemable convertible preferred
	stock (1,910,947 common share equivalents) as such shares are not
	 automatically issuable upon consummation of this offering.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	The pro forma as adjusted balance sheet data gives effect to the
	pro forma adjustments discussed in&nbsp;(4), above, and to the
	sale of
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
	 of common stock at an assumed initial public offering price of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	 per share, after deducting underwriting discounts and
	commissions and estimated offering expenses payable by us as if
	such sale had occurred on August&nbsp;31, 2000.</TD>
</TR>

</TABLE>

<P align="center">5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="center"><B>RISK FACTORS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This offering and an investment in our common stock involve a
high degree of risk. You should carefully consider the following
risks and the other information in this prospectus before
investing in our common stock. If any of the following risks and
uncertainties develop into actual events, our business, financial
 condition and results of operations could be seriously harmed.
This could cause the trading price of our common stock to
decline, and you may lose all or part of your investment.</I>

<P align="center"><B>Risks Related to Our Business</B>

<P align="left"><B>We have an unproven business model and a limited operating
history in a new and rapidly evolving industry, and we may not be
 able to implement our business plan.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business model is still in development. Our limited
historical financial and operating data are not a good indication
 of how our business is doing or how it is evolving and may make
it difficult for you to evaluate our performance. You must
consider our business and prospects in light of the risks and
difficulties typically encountered by companies in new and
rapidly evolving industries such as ours. We may not adequately
address these risks, and if we do not, we may not be able to
implement our business plan as we intend.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were incorporated in January&nbsp;2000 and first began service
 operations in April&nbsp;2000 by initiating a large-scale pilot
program. We expect to initiate nationwide services on our network
 during the fourth quarter of 2000. Our services may not achieve
broad consumer or commercial acceptance. Our business model
contemplates that we will generate revenues from basic
subscription services, value-added services, advertising and
e-commerce. These revenues may not materialize if we fail to
successfully implement our strategy for attracting subscribers.

<P align="left"><B>We have incurred operating and net losses since our inception
and expect to incur future losses for at least the next few
years. Accordingly, we may not be able to achieve profitability
and even if we do become profitable, we may not be able to
sustain profitability.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have incurred operating and net losses since our inception and
 expect to continue to operate at a loss for at least the next
few years, primarily because we intend to increase capital
expenditures and operating expenses in order to expand our
network and to market and provide our services to a growing
number of potential subscribers. As of August&nbsp;31, 2000, we
had an accumulated deficit of approximately $88.0&nbsp;million.
As we build our business to provide our services, we do not
expect our revenues to increase as rapidly and as substantially
as we expect our capital costs and other expenditures to increase
 over the next few years. As a result, we expect to incur
additional operating and net losses for at least the next few
years.

<P align="left"><B>If we fail to manage our potential rapid growth and expansion
effectively, or expand and allocate our resources efficiently, we
 may not be able to retain or grow our subscriber base.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have grown rapidly and expect to continue to do so by hiring
new employees, adding new subscribers and expanding into new
distribution channels. Our growth has placed, and will continue
to place, a significant strain on our management and our
operating and financial systems, including billing and
information systems. Our employees, outsourcing arrangements,
systems, procedures and controls may be inadequate to support our
 future operations. In particular, we expect that demands on the
network infrastructure and our technical support resources will
increase rapidly as our subscriber base grows. We may therefore
experience difficulties meeting a high demand for services in the
 future. In order to meet this demand, we will need to hire,
train and retain the appropriate personnel, as well as the
third-party service providers we depend on for customer service,
to manage our operations. We will also need to adapt our
financial and management controls, reporting systems, operating
systems and billing and information systems. Our failure to
manage growth and expansion effectively, or the failure by one of
 our service

<P align="center">6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
providers to adequately perform its services, could harm our
ability to retain or grow our subscriber base which in turn would
 harm our business, financial condition and results of
operations.
</DIV>

<P align="left"><B>If our assumptions regarding the usage patterns of our
subscribers are wrong, or if our subscribers&#146; usage patterns
 change, we could have either too little or too much satellite
capacity, and our business would be harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our business plan we make critical assumptions about how much
satellite capacity our subscribers will use and at what times of
day their usage will occur. These assumptions are based on our
understanding regarding other Internet and satellite services, as
 well as data gathered from our pilot program. We use these
assumptions to calculate the number of subscribers that can be
supported on a given transponder, or unit of satellite capacity.
If our assumptions are wrong, or if our subscribers&#146; usage
patterns change in the future as broadband applications become
more widely available, we could have either insufficient capacity
 to maintain our expected level of service and lose customers, or
 have excess capacity and suffer inefficiencies in our business.
If we fail to effectively manage our satellite resources, our
business could be harmed, the quality of service we provide to
our subscribers could deteriorate and we could lose existing, or
fail to attract new, subscribers.

<P align="left"><B>If we are unable to attract or retain subscribers, our
business will be harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our success depends upon our ability to rapidly grow our
subscriber base. Several factors may negatively impact this
ability, including:
<P>

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	loss of our existing sales and distribution channels, resulting
	in our lack of access to potential subscribers;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	failure to obtain additional distribution channels, also
	resulting in our lack of access to potential subscribers;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	failure to establish and maintain the StarBand brand through
	advertising and marketing, or erosion of our brand due to
	misjudgments in service offerings;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	failure to obtain content that appeals to the evolving
	preferences of our subscribers;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	failure to provide the minimum transmission speeds and quality of
	 service our customers expect.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, our service requires customers to first purchase our
 satellite system equipment and then pay us monthly subscriber
fees. The price of our equipment and our subscription fees are
currently higher than those of many dial-up, DSL and cable modem
Internet access services. In many instances, we expect to
subsidize our subscribers&#146; customer premises equipment to
encourage the purchase of our service and to offset their higher
relative costs. If we are unable to reduce the cost of our
equipment, or if our subsidies are insufficient to attract or
retain new subscribers, our business would be harmed.

<P align="left"><B>If we fail to adequately develop, or consumers fail to accept,
 our high-speed Internet content and applications services, our
business would be harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A key component of our strategy is to provide a more compelling
interactive experience to Internet users than they currently
experience from dial-up and other Internet service providers. We
believe that we must also provide high-quality multimedia
Internet content and applications to our customers. Our success
in obtaining and delivering this content and these applications,
and in charging a premium for our service, is dependent on the
ability of content and applications providers to create and
support high-quality, high-speed multimedia Internet content and
applications that work well with our technology and our ability
to aggregate content and applications offerings in a manner that
subscribers find useful and compelling.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We rely upon new technologies, products and services that we
intend to introduce, such as multicasting, the StarBand Carousel
<SUP>SM</SUP> and our planned next generation StarBand modem. We
may not be able to develop and introduce these new technologies,
products and services quickly or effectively. In addition, our
plans to introduce multicasting and the StarBand Carousel<SUP>SM
</SUP>, planned for 2001, depend upon

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<DIV align="left">
our ability to attract content providers and reach agreements
with them. Our ability to establish these content partnerships
will depend on our ability to build and maintain a subscriber
base large enough to justify investments in the development of
this content and these applications. We currently have no
agreements with any content providers and we cannot assure you
that we will be successful in these endeavors. If the
introduction of our new technologies, products and services is
not successful, we may not be able to successfully implement our
business plan and our results of operations and financial
condition will be significantly harmed.
</DIV>

<P align="left"><B>Intense competition in the Internet services market and
inherent limitations in existing satellite technology may
negatively affect the number of our subscribers and our revenues.
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Competition in the market for consumer Internet access services
is intense and we expect the level of competition to intensify in
 the future. We compete with providers of various high-speed
communications technologies for local access connections, such as
 cable modem and DSL. We also may face competition from
traditional telephone companies, competitive local exchange
carriers and wireless communication companies. In many of our
target markets, our service may currently be the only high-speed
service available. As our competitors expand their operations to
offer high speed Internet services, we may no longer be the only
high speed service available in these markets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also expect additional competitors with satellite-based
networks to begin operations soon. In particular, some satellite
companies have announced that in the future they may offer
high-speed Internet service at the same price or at a lower price
 than we currently intend to offer our services. If we are forced
 to lower our prices to compete with these satellite companies,
our financial results will suffer. Many of our current and
potential competitors have longer operating histories, greater
brand name recognition, larger subscriber bases and substantially
 greater financial, technical, marketing and other resources than
 we do. Therefore, they may be able to respond more quickly than
we can to new or changing opportunities, technologies, standards
or subscriber requirements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, as a satellite technology provider, we face inherent
 limitations that our terrestrial competitors do not. For
example, two-way, real-time games and voice over Internet
Protocol telephony, available through cable modem and DSL
broadband providers, do not work optimally on satellite-based
systems such as ours and use significant amounts of our satellite
 capacity. If these Internet applications become popular, our
subscriber base may decline because other access technologies
work better with these applications. Additionally, satellite
signals sometimes suffer from deterioration or interruption
during inclement weather, or rain fade, while terrestrial
connections generally are not so affected. If we are unable to
compete effectively, our business will be harmed.

<P align="left"><B>We are heavily dependent on our strategic partnership with
Gilat for key network technology, hardware and software, and we
may be significantly harmed if Gilat fails to meet our
expectations or if our relationship with Gilat terminates or
changes.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We depend on Gilat and its affiliates and suppliers for the
satellite technology used to deliver our services. We have an
agreement with Gilat pursuant to which they have agreed to
provide us with the equipment, technology and services that we
will use in our business. If we are not able to perform our
obligations under our agreements with Gilat, or if Gilat is
unable or fails to continue to sell us this technology under the
current terms of our agreement, our ability to operate our
network would be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our future growth depends on a number of technological advances
Gilat expects to attain over its existing satellite technology
and which Gilat has agreed to license to us. These technological
advances include:
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	the development of software that we expect will enable us to
	optimize the allocation of subscribers across our leased
	satellite capacity and reduce our satellite capacity costs per
	subscriber;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	efficiency improvements relating to multicasting and future
	StarBand Carousel<SUP>SM</SUP> service features;&nbsp;and</TD>
</TR>

</TABLE>

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	implementation of a next generation universal serial bus modem
	which we expect will lower our subscriber acquisition costs.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Gilat does not meet our expectations regarding these
technological advances, our financial condition and results of
operations would be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also depend on Gilat as our principal supplier for satellite
networking components and hardware used to build and manage the
network and offer our services. Gilat also depends upon a single
manufacturer for all outdoor electronics. If we successfully
execute our business plan and continue to expand our subscriber
base, we expect to demand a significant quantity of goods over a
short time period from Gilat, including all customer premises
equipment. Gilat may be unable to obtain an adequate supply of
required components from its suppliers, or supply shortages of
particular components may substantially curtail the production of
 any of the equipment that Gilat is obligated to provide under
the supply agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat&#146;s principal offices, manufacturing and research and
development facilities are located in the State of Israel. Gilat
is directly affected by the political, economic and military
conditions in Israel. Gilat&#146;s production is dependent upon
components imported from outside of Israel and any major
hostilities involving Israel or the interruption or curtailment
of trade between Israel and its present trading partners could
significantly harm Gilat&#146;s ability to meet its supply
obligations to us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 If Gilat does not meet our demand for its products, for any
reason, or if the terms of our agreements with Gilat change and
we decide to pursue other strategic partners, it is unlikely that
 we would be able to find a replacement supplier without
significant harm to our business operations. Similarly, our
business model is substantially dependent on the pricing of the
equipment we obtain from Gilat. Our supply agreement with Gilat
provides for reviews of pricing at least every two years. If the
prices of the equipment increase, we may not be able to pass
these increases on to our subscribers and our operating results
would be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also depend upon Spacenet and its subsidiaries to provide us
services that we require to run our business and operate the
network we use to provide our service. In addition, we are not a
licensee of the Federal Communications Commission, or FCC, and do
 not hold any authorization to operate satellite communications
facilities. We depend upon licenses held by Spacenet and its
subsidiaries for our satellite communications. If their licenses
are limited or revoked, if the FCC limits the number of their
customer premises earth stations or if they fail to operate the
earth stations providing service to us and our subscribers in a
satisfactory manner, our business could be seriously harmed.

<P align="left"><B>If we are unable to maintain or expand our retail distribution
 relationship with EchoStar, we could lose access to a
substantial subscriber base.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;22, 2000, we entered into a memorandum of
agreement with EchoStar, pursuant to which EchoStar has agreed to
 cooperate with us to sell our service directly to consumers
through its retailers. The arrangement terminates on
March&nbsp;31, 2001. The parties are currently negotiating an
extension of this agreement. If we do not extend this agreement,
EchoStar will not be obligated to make its distribution channel
available to us in the future. Our arrangement with EchoStar is
not exclusive. EchoStar may stop co-marketing with us and begin
marketing services that compete with ours, such as the service
offering WildBlue Communications is developing. EchoStar has
invested $50&nbsp;million in WildBlue. We could lose our primary
retail distribution channel, which in turn would harm our
business, financial condition and results of operations.

<P align="left"><B>If we are unable to maintain or expand our wholesale
distribution relationship with Microsoft, our business would be
harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Microsoft agreed to purchase our products and network services on
 a wholesale basis as the means to deliver its MSNHigh Speed
Internet portal via satellite, for a period of at least four
years after our

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<DIV align="left">
completion of milestones under our agreement with them. We have
not yet, and may never, complete these milestones. If we do not
complete the milestones, Microsoft will not be required to
purchase our products and network services and we may lose an
important revenue stream, distribution channel and source of
potential subscribers that we depend upon to implement our
strategy. In addition, if we fail to complete the milestones,
Microsoft would be permitted to sell its ownership stake in our
company to Spacenet and we would lose the strategic and
operational benefits associated with our strategic partnership
with Microsoft. We are currently negotiating with Microsoft to
amend this agreement, but there can be no assurance that we will
be able to amend this agreement to our satisfaction, if at all.
</DIV>

<P align="left"><B>We depend on third parties to provide critical satellite
capacity and functionality to us. If we do not have continued
access to sufficient and reliable satellite capacity, we may be
unable to provide our services and our business would be harmed.
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently lease, either directly or through Gilat, all of our
satellite transponder capacity from third parties, including
Loral Skynet and GE Americom. There is no assurance that these
third parties will continue to provide the capacity and
positioning we need on reasonable terms, or at all. If we are
forced to change our satellite capacity providers, we would be
forced to spend significant time and resources finding
alternative providers and repointing antennas. In addition, while
 Spacenet has applied for the authority to communicate with Loral
 Skynet&#146;s Telstar&nbsp;7 satellite, the Federal
Communications Commission has not yet granted that authority. If
we fail to receive this authority, we will be unable to fully
implement our business plan and our business would be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 If we achieve the substantial subscriber growth that we
anticipate, we will need to procure additional satellite
capacity. If we are unable to procure this capacity, we may be
unable to provide service to our subscribers or the quality of
service we provide may not meet their expectations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We anticipate leasing satellite capacity on a hybrid Ku/Ka band
satellite to be launched by a third party in the fourth quarter
of 2002 which, if successful, will enable us to significantly
lower our space segment costs on a per subscriber basis. At
present, the satellite has not been built. Although we plan to
operate with our next-generation hybrid StarBand satellite system
 by the fourth quarter of 2002, the launch of the hybrid
satellite may be delayed or fail. If the satellite is not built,
or if it does not work as anticipated, our business plan and
results of operations will be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, our ability to provide service is entirely dependent
 on the functionality of satellites on which we lease
transponders. These satellites may experience failure, loss,
damage or destruction from a variety of causes, including war,
anti-satellite devices and collision with space debris. If this
occurs, we are likely to suffer:
<P>

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	permanent loss of service;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	temporary gaps in service availability;&nbsp;or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	decreased quality of service.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result, we could lose business and our operating results and
 financial condition would be harmed.

<P align="left"><B>We depend on third parties for key ground equipment, software
and services. If we do not have continued access to sufficient
equipment, software and services, we may be unable to provide our
 services and our business would be harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We rely on Channel Master, a leading manufacturer of satellite
dish antennas in the U.S.&nbsp;marketplace, and other suppliers
that Channel Master uses, to provide us with satellite antennas,
mounts and consolidation services. We purchase all of our antenna
 and mount hardware from Channel Master, which also acts as our
consolidator creating customer premises equipment kits for
shipment to our

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<DIV align="left">
customers. Although we believe that there are alternative
suppliers and consolidators for this equipment if we are not able
 to continue our relationship with Channel Master on terms
attractive to us, it could take significant time and expense to
establish new relationships with alternative suppliers or
consolidators and substitute their technologies or equipment into
 our network and products.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We license software from third parties, including applications
that are integrated with internally developed software and used
in the customer premises equipment and equipment used in the
network operations center. These technology licenses may not
continue to be available to us on commercially reasonable terms,
or at all, and we may not be able to obtain licenses for other
existing or future technologies that we desire to integrate into
our products. As a result, we may not be able to operate our
business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We rely on third-party independent contractors to install our
customer premises equipment at new subscribers&#146; homes. We
may not have adequate control over the hiring, training,
certification and monitoring of these installers. If growth of
our new subscriber base outpaces growth of our installer base or
if the installers fail to provide the quality of service that our
 customers expect, our business and reputation will be harmed.

<P align="left"><B>If our products contain defects, we may be subject to
significant liability claims from our subscribers and other users
 of our products and incur significant unexpected expenses and
lost sales.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our products are complex and may contain undetected errors or
failures. If this happens, we may experience delay in or loss of
market acceptance and sales, product returns, diversion of
research and development resources, injury to our reputation or
increased service and warranty costs. We also have exposure to
significant liability claims from our customers because our
products are designed to provide critical communications
services. Although we attempt to limit such exposure through
product liability insurance and through contractual limitations
in our customer agreements, such precautions may not cover all
potential claims resulting from a defect in one or more of our
products.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may also seek indemnification from manufacturers of defective
products, including Gilat, if we suffer losses as a result of the
 defective products. Our ability to recover our losses from a
manufacturer is uncertain and would typically be limited to the
replacement cost of the defective product. Even if we are able to
 recover these costs, there are additional substantial costs we
will not be able to recover from any third party such as those
associated with visiting each subscriber location to repair
defective equipment or damage to our reputation in the consumer
market. A defect in one or more of our products could
significantly harm our business and financial condition.

<P align="left"><B>Our success depends upon our ability to retain management and
other key personnel and to attract additional skilled employees.
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our success depends in significant part upon the continued
service of our senior management personnel including Yoel Gat,
Zur Feldman and David Trachtenberg and other employees who
possess technical knowledge of our operations. While we do not
maintain any &#147;key person&#148; insurance, we have entered
into employment agreements with some key employees. Our future
success also depends on our ability to attract, train, retain and
 motivate highly skilled personnel. For example, we do not have a
 chief financial officer, but we are currently conducting a
search for one. Competition for qualified, high-level
telecommunications personnel is intense and we cannot assure you
that we will be able to attract and retain such personnel. The
loss of the services of one or more of our key individuals, or
the failure to attract and retain additional key personnel, could
 harm our business.

<P align="left"><B>Our principal stockholders and management own a significant
percentage of our company, will be able to exercise significant
influence over our company and may have interests that conflict
with ours or our other stockholders.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our executive officers and directors and principal stockholders
together beneficially own 90.5% of our shares, and after
completion of this offering will continue to own a substantial
majority of our shares. Accordingly, these stockholders will be
able to exert significant influence over the composition of our
board

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<DIV align="left">
of directors and all other matters requiring stockholder approval
 and will continue to have significant influence over our
affairs. This concentration of ownership could have the effect of
 delaying or preventing a change in our control or otherwise
discouraging a potential acquirer from attempting to obtain
control of us, which may prevent our stockholders from realizing
an attractive return on their investment.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat, EchoStar and Microsoft have substantial business
operations and opportunities apart from our business. They may
also develop different business objectives than ours. As a
result, situations may arise in which their interests diverge
from ours or our other shareholders. For example, we expect to be
 one of Gilat&#146;s largest customers for their technology,
equipment and software. We will seek to purchase those items from
 Gilat at prices favorable to us, but Gilat will seek to sell
those items to us at prices favorable to them. Similarly, we
expect Microsoft and EchoStar to primarily target new customers
for their MSN and DISH businesses by offering our high-speed
Internet access in conjunction with their products, but we may
wish to primarily focus on existing MSN and DISH subscribers as
the greater opportunity to sell our service.

<P align="left"><B>Our relationships with our principal stockholders keep us from
 seeking business opportunities with some of their competitors
and may deter those competitors from doing business with us,
which could harm our development.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To initiate our strategic partnerships and develop our
relationships with Gilat, Microsoft and EchoStar, we agreed to
refrain from dealing with a limited number of their competitors.
We are currently negotiating to reduce the scope of these
restrictions. Competitors of Gilat, Microsoft and EchoStar also
may choose not to engage in commercial relationships with us
because of our close relationship with these principal
stockholders. Our limited ability to do business with some of the
 competitors of our principal stockholders, where that business
might otherwise benefit our company, could reduce our ability to
expand the scope and geographic reach of our services and could
harm our development and profitability.

<P align="left"><B>We may have underestimated our capital requirements for our
continued operations, which may require us to seek substantial
amounts of additional capital. If this additional capital is not
available to us on acceptable terms, our business could be
harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to need additional capital in order to:
<P>

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	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	fund our planned rapid expansion;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	pursue customer sales;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	develop or enhance our service offering and implement new
	technologies;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	respond to competitive pressures;&nbsp;or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	promote our brand identity.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may have underestimated the amount of capital that we will
need. We developed our business model based upon a number of
assumptions such as our ability to increase the number of
subscribers per transponder to 20,000 subscribers. If this or any
 material assumption in our business model proves to be wrong, or
 if we failed to account for any material contingencies, our
estimated capital requirements may be inadequate.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may not be able to raise additional capital on terms
acceptable to us, if at all. Financings may be on terms that are
dilutive or potentially dilutive to our stockholders. If adequate
 capital is not available on acceptable terms, we may be unable
to fund our expansion, or respond to competitive pressures. Any
inability to do so could have an adverse effect on our business,
revenues, financial condition and results of operations.

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<P align="left"><B>The discretion of our management will be limited by covenants
contained in the agreements governing our indebtedness and future
 debt instruments, and management may not be able to take actions
 that would otherwise benefit our company or stockholders.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The current agreements governing our indebtedness contain
provisions that restrict us from doing certain things, including
incurring additional indebtedness, exceeding stated limits on our
 aggregate capital expenditures, creating liens on our assets,
making asset dispositions, conducting other business, and
entering into transactions with affiliates and related persons
without our creditors&#146; consent. These covenants will limit
our ability to finance future operations or capital needs or to
engage in other business activities that our management might
otherwise pursue. If we fail to comply with the obligations
contained in the agreements, we may trigger default under the
agreements, which could permit acceleration of the related debt,
make additional financing unavailable to us and significantly
harm our financial condition and results of operations.

<P align="left"><B>Our dependence on third parties for our intellectual property
puts us at risk if this intellectual property is not properly
protected or infringes upon the rights of others.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except for a series of StarBand marks, we rely on third parties
including Gilat, Spacenet and Channel Master for most of the
intellectual property employed in our network. If any of our
suppliers fails to adequately protect their intellectual property
 or is found to be infringing on the intellectual property rights
 of other parties, our business may, in turn, be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Infringement claims could materially harm our business. From time
 to time, we may receive notice of claims of infringement of
third parties&#146; proprietary rights. The fields of
telecommunications and Internet communications are filled with
patents, both pending and issued. We may unknowingly infringe
such a patent. We may be exposed to future litigation based on
claims that the network technology infringes the intellectual
property rights of others, especially patent rights. Someone,
including a competitor, might file a suit with little merit, in
order to harm us commercially, to force us to re-allocate
resources to defending such a claim, or extract a large
settlement. In addition, our employees might utilize proprietary
and trade secret information from their former employers without
our knowledge, even though we prohibit these practices. Any
litigation, with or without merit, could be time consuming to
defend, result in high litigation costs, divert our
management&#146;s attention and resources or cause us to delay
deployment of related technology. A jury or judge may decide
against us even if we had not in fact infringed. If we lose or
are forced to settle, we could be required to remove or replace
allegedly infringing technology, to develop non-infringing
technology or to enter into royalty or licensing arrangements.
These royalty or licensing arrangements, if required, may not be
available on terms acceptable to us, or at all.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Globecomm Systems, Inc. commenced a lawsuit against us alleging
the willful infringement of their U.S.&nbsp;patent relating to a
particular means for transferring communications signals between
a remote terminal and a network operations center via satellite.
We have not yet filed an answer to the complaint of Globecomm. We
 will answer the complaint and vigorously contest the claims made
 by Globecomm.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, Hughes Electronics Corporation commenced a lawsuit
against Gilat and Spacenet concerning, among other things, a
patent for personal computer based receiver cards that Gilat
sells to us for use as part of our service offering to consumers.
 Gilat and Spacenet have filed motions for partial summary
judgment on the issue of patent claim construction and the court
has scheduled a hearing on these motions for November&nbsp;20,
2000. Although we are not a party to this litigation, if Hughes
prevails, we could lose access to equipment and technology that
is critical to our business.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The outcome of these lawsuits is inherently uncertain. Patent
litigation is highly complex, diverts the efforts of management
and can extend for a protracted period of time. Accordingly, the
expense and diversion of resources associated with these matters
could harm our business and financial condition. We do not have
insurance that would indemnify us for any liability that may be
imposed in connection with the legal actions described above.
Accordingly, if any of these events occur, it could result in a
substantial reduction in our revenue and could result in losses
over an extended period of time.

<P align="center">13

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<P align="center"><B>Risks Related to Our Industry</B>

<P align="left"><B>If we fail to remain competitive with rapid technological
advancements, our business will be harmed.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The high-speed Internet access industry is subject to rapid
technological change, frequent new service introductions and
evolving industry standards. We believe that our future success
will depend largely on our ability to anticipate or adapt to such
 changes and to offer, on a timely basis, services that meet
evolving standards. We cannot predict the extent to which
competitors using existing or currently undeployed methods of
delivery of Internet access services will compete with our
services. Existing, proposed or undeveloped technologies could
render our satellite-based network less profitable or less viable
 than contemplated in our current business plan. In addition, we
may not be able to acquire new technologies or respond to
technological changes in a timely and cost effective manner. If
we cannot keep our technology competitive, we may not be able to
implement our business plan.

<P align="left"><B>A system failure or breach of network security at our ground
facilities could cause delays or interruptions of service to our
subscribers and could result in liability, damage our brand
image, lead to a loss of subscribers and result in a significant
decrease of revenues.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations depend on our ability to support our terrestrial
service infrastructure and avoid damage from fires, earthquakes,
hurricanes, floods, power losses, excessive sustained or peak
user demand and similar events. The occurrence of a natural
disaster or other unanticipated problems at the network
operations centers could cause interruptions in the services we
provide. Any damage or failure that causes interruptions in our
operations could materially and adversely affect our business,
operating results and financial condition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our network may be vulnerable to unauthorized access, computer
viruses and other disruptive problems. Providers of Internet
services have in the past experienced, and may in the future
experience, interruptions in service as a result of accidental or
 intentional actions of Internet users, current and former
employees and others. Other technologies similar to our own have
been subject to service outages. The consequence of these
interruptions in service may be that some subscribers terminate
our service and that some potential subscribers reject our
service. Moreover, we may be required to give discounts to
subscribers who experience service interruption. Interruptions of
 service may therefore result in decreased revenues and
subscriber base. Eliminating computer viruses and alleviating
other security problems, including problems created by one of our
 employees or a vendor&#146;s employee, may require
interruptions, delays or cessation of service to our subscribers.

<P align="left"><B>Unauthorized access could harm our business, and always-on
Internet services, such as ours, may be subject to additional
security risks which could cause us to lose existing subscribers,
 deter potential subscribers and harm our reputation.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unauthorized access could potentially jeopardize the security of
confidential information stored in the computer systems of our
subscribers, which might cause our subscribers to bring liability
 claims against us and also might deter potential subscribers
from using our services. Since our services allow subscribers to
be connected to the Internet at all times, unauthorized users may
 have a greater ability to access information stored in our
subscribers&#146; computer systems. Always-on Internet services
may give unauthorized users, or hackers, more and longer
opportunities to break into a subscriber&#146;s computer or
access, misappropriate, destroy or otherwise alter data accessed
through the Internet. We are currently working to implement data
security systems that are designed to protect a subscriber&#146;s
 computer from unauthorized access through the Internet, but we
cannot ensure that the security risks will be eliminated.

<P align="left"><B>We may be subject to liability for information retrieved and
replicated through our network.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because subscribers will download and redistribute material and
we may cache or replicate material in connection with our
services, claims may be made against us for defamation, or other
theories based on the nature and content of such materials. These
 types of claims have been brought, and sometimes

<P align="center">14

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<DIV align="left">
successfully litigated, against online service providers in the
past. Although we carry general liability insurance, our
insurance may not cover potential claims of the these types, or
may not be adequate to indemnify us for all liability that may be
 imposed. Any imposition of liability that is not covered by
insurance or is in excess of insurance coverage could have a
material adverse effect on our business, operating results and
financial condition.
</DIV>

<P align="left"><B>We depend on FCC-regulated and other licenses to operate our
network.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We depend upon licenses granted to Spacenet and its subsidiaries
by the FCC. These licenses are subject to renewal as determined
by the FCC. Major changes in operations or facilities require
modifications to the FCC licenses, which must be approved by the
FCC. If the FCC does not renew these licenses as their initial
terms expire or does not approve any modifications needed for
changes in the services provided to support our operations, we
may be unable to operate our system or implement our business
plan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FCC granted the licenses for the two smallest remote user
antennas, measuring 0.96 meters and 0.75 meters on a conditional
basis for use in up to 20,000 locations pending the outcome of a
public proceeding concerning the type of network access scheme
used by many satellite data networks. If the outcome of the
proceeding is unfavorable and Spacenet or any of its subsidiaries
 is required to modify the remote user antennas or any new
facilities, our business plan will be harmed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A subsidiary of Spacenet has filed an application with the FCC to
 increase the number of remote user locations that Spacenet may
operate. That application also seeks authority for communications
 with Telstar&nbsp;7. The FCC may not approve both or either
parts of this application. If either part of this application is
denied by the FCC, our ability to grow our business will be
significantly harmed because we depend on our ability to increase
 the number of subscribers for our service in order to
successfully implement our business plan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
State and local zoning ordinances restricting the installation of
 satellite antennas might also reduce market demand for our
service. Either the FCC or state or local authorities may
increase regulation regarding the potential radiation hazard
posed by transmitting earth station satellite antennas&#146;
emissions of radio frequency energy.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, FCC regulations may prevent us from choosing our
business partners or restrict our activities as an Internet
service provider. For example, the FCC may decide that high-speed
 data networks used to provide access to the Internet should be
made available generally to Internet service providers and we may
 therefore be required to provide our wholesale service to any
Internet service providers that request it, including entities
that compete with us and with MSN.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the FCC imposes additional obligations on us such as these, we
 would be forced to comply with potentially costly requirements
and limitations on our business activities. This could
significantly harm our financial condition and results of
operations.

<P align="center">15

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<P align="center"><B>Risks Related to the Offering and the Price of Our Shares</B>

<P align="left"><B>There has been no prior market for our shares and an active
trading market for our shares may not develop.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
shares. We can give no assurance that an active trading market
for our shares will develop or, if developed, be sustained
following the closing of this offering. If an active trading
market is not developed or maintained, the liquidity and trading
price of the shares could be adversely affected. The offer price,
 which may bear no relationship to the price at which the shares
will trade upon completion of this offering, will be determined
by negotiations between the representatives of the underwriters
and us, based upon factors that may not be indicative of future
market performance.

<P align="left"><B>New investors will incur immediate and substantial dilution.
</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares purchased in this offering will incur immediate and
substantial dilution in net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share assuming an initial
public offering price equal to the mid-point of the estimated
offering price range. To the extent that currently outstanding
options or warrants are exercised or converted, there will be
further dilution to your shares. As a result of this offering,
our existing stockholders will enjoy an aggregate unrealized gain
 of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.

<P align="left"><B>The trading market price of our stock may decline as a result
of substantial sales of our common stock after the offering.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock held by
our existing stockholders will become freely tradable in the
public market 180&nbsp;days after this offering. The market price
 of our common stock could fall in response to sales of a large
number of shares of our common stock in the market after this
offering or in response to the perception that sales of a large
number of shares could occur. In addition, such sales could
create the perception to the public of difficulties or problems
with our products and services. As a result, these sales also
might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that
we deem appropriate. For a more detailed discussion of shares
eligible for sale after the offering, see &#147;Shares Eligible
for Future Sale.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, some of our current stockholders have
&#147;demand&#148; and &#147;piggyback&#148; registration rights
in connection with future offerings of our common stock.
&#147;Demand&#148; rights enable the holders to demand that their
 shares be registered and may require us to file a registration
statement under the Securities Act at our expense.
&#147;Piggyback&#148; rights provide for notice to the relevant
holders of our stock if we propose to register any of our
securities under the Securities Act, and grant such holders the
right to include their shares in the registration statement. All
holders with registrable securities have agreed not to exercise
their registration rights until 180&nbsp;days following the date
of this prospectus without the consent of Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated.

<P align="left"><B>The market price for our common stock will likely be volatile
and you may suffer a loss on your investment.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stock market has experienced significant price and trading
volume fluctuations, and the market prices of technology
companies generally, and Internet-related companies particularly,
 have been extremely volatile. Recent initial public offerings by
 technology companies have been accompanied by exceptional share
price and trading volume changes in the first days and weeks
after the securities were released for public trading. Investors
may not be able to resell their shares at or above the initial
public offering price. In the past, following periods of
volatility in the market price of a public company&#146;s
securities, securities

<P align="center">16
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<DIV align="left">
class action litigation has often been instituted against that
company. Such litigation could result in substantial costs to us
and a diversion of our management&#146;s attention and resources.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The market price may vary in response to any of the following
factors:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	changes in financial estimates or investment recommendations
	relating to our stock by securities analysts;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	changes in market valuations of similar Internet operations and
	services businesses;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	fluctuations in the stock market price and volume of traded
	shares generally, especially fluctuations in the traditionally
	volatile technology sector.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, an active public trading market may not develop or
be sustained after this offering. If an active and liquid trading
 market does not develop, you may have difficulty selling your
shares.

<P align="left"><B>Provisions of our charter documents and Delaware law could
deter takeover attempts that may offer you a premium, which could
 adversely affect our stock price.</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provisions of our charter documents and Delaware law make
acquiring control of us without the support of our board of
directors difficult for a third party, even if the change of
control would be beneficial to you. The existence of these
provisions may deprive you of an opportunity to sell your shares
at a premium over the prevailing market price for our common
stock. The potential inability of our stockholders to obtain a
control premium could adversely affect the market price for our
common stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because stockholders do not have the ability to require the
calling of a special meeting of stockholders and are subject to
timing requirements in submitting stockholder proposals for
consideration at any annual meeting, any third party takeover not
 supported by the board of directors would be subject to
significant delays and difficulties.

<P align="center">17

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<P align="center"><B>FORWARD-LOOKING STATEMENTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus contains forward-looking statements. These
forward-looking statements are not historical facts, but rather
are based on our current expectations, estimates and projections
about our industry, our beliefs and assumptions. Words such as
&#147;anticipates,&#148; &#147;expects,&#148;
&#147;intends,&#148; &#147;plans,&#148; &#147;believes,&#148;
&#147;seeks,&#148; &#147;estimates,&#148; &#147;projects,&#148;
&#147;may,&#148; &#147;will,&#148; &#147;should,&#148;
&#147;could,&#148; &#147;pending,&#148; &#147;potential,&#148;
&#147;predicts&#148; and similar expressions are intended to
identify forward-looking statements. These forward-looking
statements include, without limitation, statements about our
market opportunities, strategies, competition, expected
activities and expenditures as we pursue our business plan. These
 statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which
are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or
forecasted in the forward-looking statements. Many factors could
cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements that may be expressed or implied by these
forward-looking statements, including:
<P>

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	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	any failure of the satellite communications network delivering
	our service to perform adequately or claims by customers for
	errors in our products;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the loss of one of our strategic partners;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the loss of satellite capacity;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the loss of the right to use proprietary technology and any
	third-party claims against us for infringement;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	difficulty in raising additional capital funds;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our inability to manage effectively our potential rapid growth;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our failure to develop new channels to sell our products or to
	successfully compete in our chosen markets or to expand into new
	markets;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	unanticipated downturns in the markets for high-speed Internet
	access;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our inability to achieve positive operating results.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These factors are not exhaustive. Factors that could cause our
actual results, performance or achievements to differ include,
but are not limited to, those discussed in &#147;Risk
Factors.&#148; Given this level of uncertainty, you should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this prospectus.

<!-- link1 "OTHER RELEVANT INFORMATION" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center"><B>OTHER RELEVANT INFORMATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We use market data and industry forecasts throughout this
prospectus, which we have obtained from internal surveys, market
research, publicly available information and industry
publications. Industry publications generally state that the
information they provide has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such
information is not guaranteed. Similarly, we believe that the
surveys and market research we or others have performed are
reliable, but we have not independently verified this
information. Neither we nor any of the underwriters represents
that this information is accurate.

<P align="center">18

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<DIV align="left"><A NAME="004"></A></DIV>

<P align="center"><B>USE OF PROCEEDS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that we will receive net proceeds from the sale of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 in this offering of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
 based on an assumed offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
 share and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us. If the
 underwriters&#146; over-allotment option is exercised in full,
we estimate that we will receive net proceeds from this offering
of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use these net proceeds:
<P>

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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	to fund the continued growth of our business and operations and
	expand our subscriber base;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	to the extent remaining, for general corporate and working
	capital purposes.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pending the uses described above, we intend to invest the net
proceeds to us from the offering in short-term, investment-grade,
 interest-bearing securities. We cannot predict whether the
proceeds will be invested to yield a favorable return.

<!-- link1 "DIVIDEND POLICY" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center"><B>DIVIDEND POLICY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not previously paid any cash or other dividends with
respect to our common stock. We do not expect to pay any
dividends on our common stock for the foreseeable future. We
currently intend to retain earnings, if any, to finance the
operations of our business. In addition, our bank credit facility
 limits our ability to pay cash dividends on our common stock.
Our board of directors will decide from year to year whether
dividends will be paid based on factors such as our results of
operations, general business conditions, capital requirements,
overall financial condition and any other factors that the board
considers relevant.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have accrued non-cash preferred dividends of
$12.7&nbsp;million on all convertible preferred shares of stock
issued. These dividends will be paid in kind in additional shares
 of convertible preferred stock which will automatically convert
into common stock upon consummation of the offering.

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<DIV align="left"><A NAME="006"></A></DIV>

<P align="center"><B>CAPITALIZATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our capitalization as of
August&nbsp;31, 2000 on:
<P>

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<TR>
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	<TD width="1%"></TD>
	<TD width="96%"></TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an actual basis;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a pro forma basis after giving effect to the automatic conversion
	 of all outstanding shares of convertible preferred stock and
	accrued dividends thereon into 54,228,893&nbsp;shares of common
	stock;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a pro forma as adjusted basis to reflect our sale of
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock at an
	assumed initial public offering price of
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per&nbsp; share, after deducting
	underwriting discounts and commissions and estimated offering
	expenses payable by us.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma and pro forma as adjusted amounts exclude
 the effects of the issuance of 5,449,220&nbsp;shares of common
stock pursuant to exercise of outstanding stock options;
1,873,477 and 1,910,947 shares of common stock issuable upon the
exercise of warrants or rights to purchase Series&nbsp;C and
Series&nbsp;D mandatorily redeemable convertible preferred stock,
 respectively; and warrants to purchase 116,000&nbsp;shares of
common stock issued to third parties. Except for rights to
purchase Series&nbsp;D mandatorily redeemable preferred stock,
none of the outstanding stock options or warrants to purchase our
 stock were exercisable at August&nbsp;31, 2000. You should read
this table in conjunction with &#147;Management&#146;s Discussion
 and Analysis of Financial Condition and Results of
Operations&#148; and the financial statements and related notes
included elsewhere in this prospectus.

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<CENTER>
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<TR>
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	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="53%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>As of August&nbsp;31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Actual</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>As Adjusted</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>(in thousands, except share data)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,303</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,303</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Restricted cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158,862</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158,862</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="16">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Term loan at face value</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Mandatorily redeemable convertible preferred stock:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Series&nbsp;A, A-1, A-2, B, C, and D mandatorily redeemable
	convertible preferred stock, $.05&nbsp;par value; 12% cumulative
	dividends:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;A; 55&nbsp;million shares authorized; 49,228,259,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,494</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;A-1; 55&nbsp;million shares authorized; 49,228,259,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,526</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;A-2; 30&nbsp;million shares authorized; 24,686,284,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,839</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;B; 150&nbsp;million shares authorized; 140,111,199,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,011</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;C and D; 10&nbsp;million shares authorized each; none
	 issued and outstanding for actual, pro forma or pro forma as
	adjusted shares issued and outstanding</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total mandatorily redeemable convertible preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142,870</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Stockholders&#146; (deficit)&nbsp;equity:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Common stock, $.05&nbsp;par value; 110&nbsp;million shares
	authorized; 33,879,757 actual, 88,108,650 pro forma, and
	&nbsp;&nbsp; pro forma as adjusted shares issued and outstanding,
	 respectively</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,694</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,405</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Additional capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,463</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">157,622</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,952</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,952</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Deficit accumulated during development stage</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(87,975</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(87,975</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total stockholders&#146; (deficit)&nbsp;equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,770</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,100</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total capitalization</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">156,100</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">156,100</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">21
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "DILUTION" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center"><B>DILUTION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the public offering price
 per share of our common stock and the pro forma as adjusted net
tangible book value per share of our common stock after this
offering. Our pro forma net tangible book value as of
August&nbsp;31, 2000 was $46,822,456, or $0.53&nbsp;per share of
common stock. Pro forma net tangible book value per share
represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock
outstanding, after giving effect to the conversion of all
outstanding shares of preferred stock and accrued dividends
thereon into 54,228,893&nbsp;shares of common stock upon
consummation of this offering. Assuming the sale by us of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 of common stock in this offering at an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
 share, our pro forma net tangible book value as of
August&nbsp;31, 2000 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or

$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
 share of common stock. This represents an immediate and
substantial increase in net tangible book value of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
 share to existing stockholders and an immediate and substantial
dilution of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
 share to new investors purchasing the shares in this offering.
The following table illustrates the per share dilution:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="79%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Assumed initial public offering price per share</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	$</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Pro forma net tangible book value per share as of August&nbsp;
	31, 2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">
	$0.53</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Increase per share attributable to new investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Pro forma as adjusted net tangible book value per share after
	this offering</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Dilution per share to new investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	$</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes, on a pro forma basis as of
August&nbsp;31, 2000, the number of shares of common stock
(including all shares of convertible preferred stock, which will
be converted into 54,228,893&nbsp;shares of common stock upon the
 closing of the offering) purchased from us, the total
consideration paid to us and the average price per share paid by
existing stockholders and by new investors. The information
presented is based upon an assumed initial public offering price
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
 share for shares purchased in this offering, before deducting
the underwriting discounts and commissions and estimated offering
 expenses:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="39%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="5"><FONT size="2"><B>Shares Purchased</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="5"><FONT size="2"><B>Total Consideration</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="5"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="5"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Average Price</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Amount</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Per Share</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Existing stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">
	88,108,650</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">
	$126,000,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.43</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	New investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">
	$&nbsp;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The discussion and tables above exclude:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	1,873,477 and 1,910,947&nbsp;shares of common stock issuable upon
	 the exercise of warrants and rights to purchase Series&nbsp;C
	and D mandatorily redeemable convertible preferred stock,
	respectively, and assumed immediate conversion thereof into
	common stock with a weighted average exercise price of $4.49 per
	share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	116,000&nbsp;shares of common stock issuable upon the exercise of
	 warrants issued to various third parties with a weighted average
	 exercise price of $2.50; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
	 of common stock issuable if the underwriters exercise their
	over-allotment option in full.</TD>
</TR>

</TABLE>

<P align="center">22
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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At August&nbsp;31, 2000, we had 2,550,780&nbsp;shares of common
stock available for future issuance under our stock plans through
 December&nbsp;31, 2000 plus an additional 15,000,000&nbsp;shares
 of common stock available for issuance effective January&nbsp;1,
 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent these options and warrants are exercised, there
will be further dilution to the new investors. If the
underwriters&#146; over-allotment option is exercised in full,
the number of shares held by new investors will increase to
&nbsp;&nbsp;&nbsp;shares, or &nbsp;&nbsp;% of the total number of
 shares of common stock outstanding after this offering.

<P align="center">23

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SELECTED FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center"><B>SELECTED FINANCIAL INFORMATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the table below, we provide you with selected historical
financial data of StarBand Communications Inc. We have prepared
this information using the financial statements of StarBand
Communications Inc. for the period from January&nbsp;11, 2000
(inception)&nbsp;to August&nbsp;31, 2000. These financial
statements have been audited by Ernst&nbsp;&#38; Young LLP,
independent auditors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
When you read this selected historical financial data, it is
important that you read along with it the historical financial
statements and related notes, as well as the section titled
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations.&#148;

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="62%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="14%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="14%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;11, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(inception) through</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August&nbsp;31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(in thousands, except for</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>share and per share data)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	<B>Statement of Operations Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Revenues:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Internet access</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Customer premises equipment and installation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total revenues</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Costs and expenses:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Network</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,149</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Customer premises equipment and installation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,707</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Sales and marketing</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,822</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	General and administrative (exclusive of non-cash compensation
	expense shown below)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,862</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Non-cash compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">301</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">742</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total costs and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,584</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Loss from operations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(68,577</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Non-operating income, net</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,728</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Loss before provision for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Provision for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net loss</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Preferred stock dividends and accretion</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,245</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net loss attributable to common stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(82,094</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Basic and diluted loss per share</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4.06</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Shares used in the calculation of basic and diluted loss per
	share</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,232,428</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="69%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="12%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="12%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>As of</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August&nbsp;31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(in thousands)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	<B>Balance Sheet Data:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,303</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Restricted cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158,862</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Working capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,602</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,512</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total debt</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,089</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total mandatorily redeemable convertible preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142,870</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Total stockholders&#146; deficit</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,770</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">24
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<P align="center"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL</B>

<DIV align="center">
<B>CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should read the following discussion and analysis in
conjunction with &#147;Selected Financial Information&#148; and
the financial statements and related notes included elsewhere in
this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. See
&#147;Forward-Looking Statements.&#148; Our actual results could
differ materially from those discussed here. Factors that could
cause or contribute to such differences include those discussed
in &#147;Risk Factors&#148; as well as those discussed elsewhere
in this prospectus.</I>

<P align="left"><B>Overview</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
StarBand is the first nationwide provider of two-way, always-on,
high-speed Internet access via satellite to residential and small
 office/home office customers. We were founded on
January&nbsp;11, 2000 by Spacenet Inc., a wholly owned subsidiary
 of Gilat, and began offering our services in April&nbsp;2000.
Since our inception we have:
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	entered into distribution agreements with Microsoft and EchoStar;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
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	deployed and tested our scalable nationwide consumer satellite
	network;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	installed and tested more than 9,000 StarBand systems at test
	locations with pilot program participants and retail
	distributors, including approximately 4,700 residential and home
	office consumer locations, 1,600 DISH retailer locations and
	3,600 RadioShack stores;</TD>
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	<TD>&#149;&nbsp;</TD>
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	trained over 8,000 third-party installers;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
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	raised $126&nbsp;million of equity financing and also arranged
	debt financing;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
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	leased 23 transponders on existing satellites;&nbsp;and</TD>
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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	hired over 127 employees.</TD>
</TR>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have successfully completed pilot testing our network and are
launching our service nationwide in the fourth quarter of 2000.
We will initially offer our branded retail service through
EchoStar, and co-branded wholesale service with Microsoft for
distribution at RadioShack stores.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have only a limited operating history upon which you can
evaluate our prospects and have experienced net losses of
approximately $66.8&nbsp;million since our inception in
January&nbsp;2000. We expect that we will continue to incur net
losses over at least the next few years as we continue to incur
substantial subscriber acquisition costs, develop our sales and
marketing and administrative organizations, expand our product
offerings and experience continued depreciation charges relating
to the network infrastructure. We cannot assure you that we will
achieve or sustain profitability or positive cash flow from
operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our future financial performance and our ability to achieve
positive operating cash flow will depend on a number of factors,
some of which we cannot control. We believe that improvements in
our financial performance depend largely on our ability to:
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	build our subscriber base rapidly and cost-effectively;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	provide reliable and high-quality services at competitive prices;</TD>
</TR>

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	<TD>&nbsp;</TD>
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	<TD>&#149;&nbsp;</TD>
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	offer additional high-margin value-added content delivery
	services;</TD>
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	develop and implement technology to improve our satellite
	capacity cost per subscriber;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&#149;&nbsp;</TD>
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	attract qualified personnel;</TD>
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	<TD>&nbsp;</TD>
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	<TD>&#149;&nbsp;</TD>
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	reduce cost and increase the volume of subscribers per
	transponder with next-generation technology;</TD>
</TR>

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	<TD>&nbsp;</TD>
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	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
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	minimize subscriber turnover;&nbsp;and</TD>
</TR>

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	identify and integrate the necessary administrative and
	operations support systems, including installation and customer
	care, to manage our growth effectively.</TD>
</TR>

</TABLE>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Revenues</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to derive most of our revenues for the foreseeable
future from monthly Internet access fees paid by our subscribers
and from fees paid by MSN or others for our wholesale service. We
 will also receive revenue from the sale of our customer premises
 equipment. In the future, we also expect to derive revenues from
 value-added content delivery services, such as the sale of
music, movies, software and other rich media content through our
multicast service.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are currently offering our network services through both
retail and wholesale channels to maximize our ability to take
advantage of our first-to-market presence to rapidly acquire
subscribers. The retail channel generates higher revenue streams
per user than the wholesale channel. Our wholesale channel
provides us additional scale for our business while minimizing
the subsidies and other costs of subscriber acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Retail Channel.</I> Upon our commercial launch in the fourth
quarter of 2000, we will sell our services directly to retail
subscribers, typically with a minimum one-year contract term.
These subscribers will pay monthly fees for the service,
initially ranging from $59.99 to $69.99, which we anticipate will
 decrease over time as high-speed Internet access alternatives
become more widely available. Typically, retail StarBand
subscribers must purchase the customer premises equipment for an
initial suggested retail price of $399, including the antenna,
the modem and all necessary hardware. This price reflects a
substantial subsidy from us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Wholesale Channel.</I> In the wholesale channel, the reseller
purchases the customer premises equipment from us. The wholesale
price is initially lower than our cost for the equipment, though
we expect our cost to decrease due to volume discounts. We also
charge an additional fee for network services, second-level
technical support and other optional services if requested by the
 reseller. Our first wholesale partner, MSN, purchases the
customer premises equipment at a price starting at
$1,100&nbsp;per unit, which we expect to decline pursuant to our
agreement with them. This agreement provides for pricing of
network services that we will provide to MSN which will generate
losses. We believe these losses will decrease as our network
services costs per subscriber decrease. We view these early stage
 losses as an investment in building a large subscriber base with
 our strategic investor, and we intend to sell value-added
services to these subscribers from which we expect to generate
higher-margin revenues.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Costs and Expenses</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Network.</I> Our network expense is primarily a function of
satellite capacity expenses which consist of satellite
transponder lease payments and network operations costs such as
hardware depreciation, telecommunications costs and personnel
expenses related to our customer support center. We believe that
the type of satellite capacity we use generally ranges in cost
from $150,000 to $200,000&nbsp;per month per transponder. We are
negotiating the terms of leases for our satellite capacity and
expect to obtain lease rates at or below the bottom of this
range.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that we can currently support approximately 7,500
subscribers per satellite transponder. Our goal is to increase
the number of subscribers per transponder to approximately 20,000
 through the implementation of software upgrades currently under
development. We will continue to add satellite capacity as
necessary to meet the bandwidth requirements of additional
StarBand network subscribers. As we acquire transponder capacity
to prepare for additional subscribers, we may be forced to lease
capacity some time prior to our need for such capacity. These
leases would be subject to availability in the open market at
potentially less favorable prices.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Customer Premises Equipment and Installation.</I> In the
retail channel, we are heavily subsidizing the retail consumer
price of the customer premises equipment. We expect that over
time, the customer premises equipment subsidy will decrease
substantially as the cost of the equipment to us decreases due to
 volume discounts and improvements and efficiencies in the
technology. We have negotiated an agreement

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<DIV align="left">
with Gilat to purchase customer premises equipment. Our agreement
 with Gilat contains milestones that reduce the price we pay per
unit as the total number of units we purchase exceeds specified
levels. We therefore expect our costs to decrease over time. In
the wholesale channel, we are presently subsidizing limited
quantities of customer premises equipment to MSN. In the future,
we expect to provide little or no customer premises equipment
subsidy to MSN or any other wholesale channels. Periodically we
may offer free or subsidized installations to new customers as
part of sales promotions or discounts aimed at acquiring new
subscribers.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sales and Marketing.</I> These expenses consist primarily of
in-store retailer demonstration units, sales personnel costs,
trade shows, distributor training, advertising, branding, market
research, promotional literature and other public relations
expenses. Much of our sales and marketing expenses for the
current period are due to marketing campaigns to provide in-store
 retailer demonstration units. In late 2000, we will begin to
incur marketing expenses associated with our nationwide service
launch. Marketing, branding-related and sales expenses will rise
for the foreseeable future as we expand our sales and marketing
organization and aggressively pursue our targeted marketing
campaign. We will continue to grow our sales and marketing
infrastructure to improve the rate and efficiency of subscriber
acquisition. We anticipate that the activation fees and/or
commissions that we pay to our retail distribution partners that
generate new subscribers will range from $100 to $300&nbsp;per
subscriber. In addition to the activation fees, we anticipate
that some retail distributors will receive ongoing royalties of
$1 to $3&nbsp;per subscriber per month so long as the subscriber
uses our services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and Administrative.</I> These expenses consist of
salaries and benefits for our administration, executive, finance,
 legal, and human resources departments, including their
associated overheads, as well as outside accounting and legal
expenses and depreciation of fixed assets. Many general and
administrative services are provided to us by Gilat and Spacenet,
 including information technology, office space and legal,
finance and human resources services. For operational reasons
during our development stage, all of our employees were leased
from Spacenet. Substantially all of these personnel will be
transferred to our direct payroll and no longer be leased from
Spacenet prior to the end of 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect the general and administrative expenses that we pay to
Gilat and Spacenet will decrease over time as we develop our own
internal administration and other resources. We believe our
payments to Gilat and Spacenet for general and administrative
assistance payments approximate the actual costs incurred by
Gilat and Spacenet to provide those services to us. We also
expect that our general and administrative expenses as a whole
will increase over time and possibly exceed revenues for some
time as we establish and expand our administrative infrastructure
 to meet the demands of our personnel and our growing subscriber
base.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Non-Cash Compensation.</I> These costs are primarily
attributable to stock options granted to employees below fair
market value and the fair value of options and warrants granted
to third parties, including consultants, leased employees and
others. The vesting period for the majority of the options is
four years. We expect non-cash compensation expense to increase
substantially in future periods as options which were granted at
below fair market value continue to vest over the vesting period
of the options granted through August&nbsp;31, 2000 due to the
large number of options granted in late August for which very
little amortization has been expensed. In the future, StarBand
intends to issue options at fair market value in order to
minimize non-cash compensation expense.

<P align="left"><B>Our Accounting for Revenues, Costs, Expenses and Subscriber
Acquisition Costs</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We consider the sale of customer premises equipment, related
installation and monthly Internet access to be a multi-element,
single arrangement with our subscribers. Total revenue from the
subscriber arrangements are recognized as earned on a
straight-line basis over the service period, which is the shorter
 of the contractual term of the subscription period or expected
subscription period. We generally begin recognizing revenues on
subscriber arrangements upon activation of Internet access. Some
service contracts include cancellation clauses which permit the
subscriber to cancel the service without substantial penalty

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<DIV align="left">
during the initial service period. We defer revenue from those
contracts and recognize it on a straight-line basis over the
service period remaining after the risk-fee cancellation period.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The connection of the subscriber to our network requires that
certain equipment, such as customer premises equipment, be
installed at the subscribers&#146; location. The cost of customer
 premises equipment and installation are generally capitalized
and related revenues are deferred. These costs and revenues are
recognized on a straight-line basis over the service period. The
cost of this equipment generally exceeds the amount that is
charged to the subscriber. We are currently expensing the excess
of costs over deferred revenue as the realization of future cash
flows is not assured due to our lack of sufficient operating
history. This accounting policy conforms with Staff Accounting
Bulletin No.&nbsp;101. See &#147;&#151;Recent Accounting
Pronouncements.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our industry, subscriber acquisition costs are an important
measure of the efficiency with which subscribers are added to the
 network. Our subscriber acquisition costs will consist of
customer premises equipment subsidies together with activation
fees and sales commissions which we report as part of sales and
marketing. We expect our subscriber acquisition costs will
decrease over time as hardware subsidies decrease. We anticipate
that we will not incur subscriber acquisition costs in the
wholesale channel.

<P align="left"><B>Results of Operations from January&nbsp;11, 2000 (Inception)
through August&nbsp;31, 2000</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our inception period operating results set forth in our financial
 statements that appear elsewhere in this prospectus are not
indicative of our future operations, as substantially all
subscribers were participants in our pilot program and were not
required to pay a significant amount, if any, for monthly access,
 customer premises equipment or installation.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Revenues</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our total revenues for the period from inception through
August&nbsp;31, 2000 were $6,945, attributable to the ratable
recognition of fees associated with customer premises equipment,
installation and monthly access services for installed
subscribers whose cancellation period has expired. During this
period, pursuant to our accounting policies, we deferred revenues
 of $1.7&nbsp;million, derived almost entirely from the sales of
customer premises equipment to customers purchasing service
through the EchoStar retail channel and a small number of
customers from other pilot groups. The absence of significant
revenues from monthly Internet access fees is a reflection of the
 pilot program currently in place that gives subscribers a number
 of months of free service prior to the start of their commercial
 service and our deferral of revenues. We expect to begin
receiving monthly access fees in the fourth quarter of 2000 or
the first quarter of 2001.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Costs and Expenses</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Network.</I> Our network expense was $4.1&nbsp;million for the
 period ended August&nbsp;31, 2000. This amount was attributable
to our satellite capacity expenses, network operations costs
including hardware depreciation, telecommunications costs and
personnel expenses related to our customer support center.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Customer Premises Equipment and Installation.</I> Customer
premises equipment costs, including subsidies, for the period
ended August&nbsp;31, 2000 were $19.8&nbsp;million. These costs
were unusually high on a per subscriber basis due to our
packaging of a personal computer with the antenna for all pilot
subscribers, and due to our inability to achieve volume-related
price discounts for our equipment purchases. We also consider
installation costs as a component of our customer premises
equipment expense. During our pilot program we heavily subsidized
 installation costs for our pilot subscribers. A significant
component of our installation costs was the cost of training
third parties to install our customer premises equipment. The
total costs for installation services were $2.9&nbsp;million for
the period ended August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sales and Marketing.</I> Our sales and marketing expenses were
 $14.8&nbsp;million for the period ended August&nbsp;31, 2000.
These expenses reflect significant personnel-related expenses
such as salaries for sales and marketing personnel and
commissions, recruiting fees and other costs of hiring, as well
as a significant cost to provide and install several thousand
in-store retailer demonstration units.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and Administrative.</I> Our general and administrative
 expenses were $25.9&nbsp;million for the period ended
August&nbsp;31, 2000. These expenses primarily consist of
salaries to our executive employees, and payment for services
provided directly to us by Gilat, Spacenet and their employees.
Services provided directly to us by Gilat, Spacenet and their
employees made up approximately $14.3&nbsp;million, or 51% of the
 total general and administrative costs and included expenses
and/or fees for sales, marketing, engineering, information
systems, logistics and accounting and legal activities performed
for or on our behalf.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Non-Cash Compensation.</I> Non-cash compensation expense
through August&nbsp;31, 2000 was $0.3&nbsp;million, attributable
to the portion of the deferred compensation amortized in the
period. Non-cash compensation expense is accrued for stock
options granted to employees, non-employees and third parties,
and then amortized over the vesting period of the options.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Interest Income</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net interest income for the period was $1.7&nbsp;million.
Interest expense of $1.6&nbsp;million was offset by interest
income of $3.3&nbsp;million. Interest income was due to interest
earned on equity funds and on the proceeds of the funds in a
restricted bank account.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Net Loss</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the foregoing, we had a net loss of $66.8&nbsp;million for
 the period ended August&nbsp;31, 2000. Our net loss attributable
 to common stockholders was $82.1&nbsp;million, or $4.06&nbsp;per
 share. Our pro&nbsp;forma net loss and net loss attributable to
common stockholders was $66.8&nbsp;million for the period ended
August&nbsp;31, 2000, or $1.23&nbsp;per share.

<P align="left"><B>Liquidity and Capital Resources</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal capital requirements to date have been to fund:
<P>

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	working capital needs;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our pilot program testing of our network;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	sales and marketing;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	administrative infrastructure;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	capital expenditures.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have funded our liquidity needs during the period from
inception through August&nbsp;31, 2000 through a combination of
funds provided by private equity placements and revenues
generated from our limited operations to date. Net cash used for
operating activities for the period ended August&nbsp;31, 2000
was $48.2&nbsp;million. Our use of cash for operating activities
was primarily associated with the acquisition of customer
premises equipment inventory, deferred charges for customer
premises equipment installed at subscriber sites, prepaid fees
for transponder capacity, sales and marketing, and the purchase
of services from Gilat and Spacenet. For the period from
January&nbsp;11, 2000 (inception) through August&nbsp;31, 2000 we
 incurred approximately $95.0&nbsp;million of reimbursable
expenses and capital expenditures for equipment supplied and
services rendered to us by Gilat and Spacenet. As of
August&nbsp;31, 2000, we have paid approximately
$38.7&nbsp;million to Spacenet and approximately
$20.0&nbsp;million to Gilat for such costs and expenses. We have
accrued the remaining $36.3&nbsp;million we owe to Spacenet and
Gilat at August&nbsp;31, 2000 and are required to pay this amount
 in October&nbsp;2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities for the period ended
August&nbsp;31, 2000 was $99.1&nbsp;million. This amount includes
 $89.6&nbsp;million from the proceeds of the issuance of
long-term debt, which was placed in a restricted account pursuant
 to the terms of the debt and is reflected in our financial
statements in &#147;restricted cash and cash equivalents.&#148;
The balance of $9.5&nbsp;million was used in the purchase of
capital assets, including enterprise resource planning software
and customer premises equipment.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash flows from financing activities for the period ended
August&nbsp;31, 2000 were $215.6&nbsp;million, consisting of
$126.0&nbsp;million from sales of common and preferred stock and
$89.6&nbsp;million from net proceeds

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<DIV align="left">
of bank loans. We have a senior debt facility of
$90.0&nbsp;million with Bank Leumi USA, maturing in June 2003
with interest at LIBOR plus 75 basis points, equivalent to
7.5625% at August&nbsp;31, 2000, payable quarterly and with a
principal balloon upon maturity. The funds drawn under this
facility are reflected in our financial statements in
&#147;restricted cash and cash equivalents.&#148; On
September&nbsp;8, 2000, the First International Bank of Israel
and The Israel Discount Bank joined as lenders to the facility
and extended an additional $30.0&nbsp;million each, bringing the
total amount of financing to $150.0&nbsp;million. This facility
is secured by substantially all our assets other than our rights
under the transponder leases, and is subject to significant
affirmative and negative covenants including restrictions on
prepayment, restrictions on the incurrence of further debt and a
limitation on aggregate capital expenditures.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are currently renegotiating these bank credit facilities and
expect to repay the First International Bank of Israel facility
with restricted cash attributable to that facility upon
consummation of this offering. The funds drawn down under these
facilities will appear as &#147;restricted cash and cash
equivalents.&#148; We are also currently negotiating an
additional bank facility for approximately $100&nbsp;million to
prefund our satellite capacity lease with Loral Skynet.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the net proceeds from this offering, together
with our existing cash, available credit facilities and future
revenue generated from operations, will be sufficient to fund our
 operating losses, capital expenditures, subscriber acquisition
costs and working capital requirements for the next twelve
months. We expect that our business will continue to realize
significant operating losses over the next few years.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect that additional financing will be required in the
future. We expect to raise financing through some combination of
commercial bank borrowings, leasing, vendor financing or the
private or public sale of equity or debt securities. Our capital
requirements may vary based upon the timing and success of the
commercial launch of our network and as a result of regulatory,
technological and competitive developments or if:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	demand for our services or our anticipated cash flow from
	operations is less or more than expected;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our development plans or projections change or prove to be
	inaccurate;&nbsp;or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	we engage in any acquisitions.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Equity or debt financing may not be available to us on favorable
terms or at all. See &#147;Risk Factors&nbsp;&#151; Our continued
 operations may require us to seek substantial amounts of
additional capital, which may not be available to us.&#148;

<P align="left"><B>Recent Accounting Pronouncements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December&nbsp;1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No.&nbsp;101,<I> Revenue
Recognition in Financial Statements</I>. SAB No.&nbsp;101 is
effective in the fiscal quarter commencing October&nbsp;1, 2000
and provides clarification of existing authoritative guidance
with regard to the manner and timing of revenue recognition. We
elected to adopt the guidance provided by SAB No.&nbsp;101
effective upon our commencement of operations. Future
interpretations of SAB No.&nbsp;101 will be evaluated upon
issuance but are not expected to have a material effect on future
 operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;16, 2000, the Emerging Issues Task Force issued
EITF 99-19, <I>Recording Revenue Gross as a Principal versus Net
as an Agent</I>. The EITF discusses various indicators that a
company would use in determining whether to record revenue on a
gross versus net basis. We considered these indicators in
developing our revenue recognition policies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS No.133, &#147;Accounting for Derivative Instruments and
Hedging Activities,&#148; requires companies to record
derivatives on the balance sheet as assets or liabilities,
measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives are accounted for
depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows.

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<DIV align="left">
SFAS No.133 is effective for fiscal years beginning after
June&nbsp;15, 2000. We believe that the adoption of SFAS No.133
will have no material effect on our financial statements.
</DIV>

<P align="left"><B>Quantitative and Qualitative Disclosures about Market Risk</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our major market risk exposure is to changing interest rates. Our
 policy is to manage interest rates through the use of a
combination of fixed and floating rate debt. We have evaluated
the use of interest rate swap contracts to manage our exposure to
 fluctuations in interest rates on our floating-rate debt,
substantially all of which is based on LIBOR. At August&nbsp;31,
2000, we have determined that the current variable rate debt is
the most effective form of debt, and we have not sought to cap
such interest rate exposure.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not believe that we currently have any other material
exposure to any market risks.

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<DIV align="left"><A NAME="010"></A></DIV>

<P align="center"><B>BUSINESS</B>

<P align="left"><B>Overview</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
StarBand is the first nationwide provider of two-way, always-on,
high-speed Internet access via satellite to residential and small
 office/ home office customers. We have deployed a proven and
scalable network using leased capacity on existing communications
 satellites which we believe can provide our StarBand service
today to any location in the United States with a clear view of
the southern sky. We are targeting our StarBand service primarily
 to rural and suburban households with few or no high-speed
Internet access alternatives. We estimate that approximately
55&nbsp;million households do not presently have access to cable
modem or digital subscriber line, or DSL, technology. Our basic
service package offers unlimited access time at an affordable
monthly flat rate and can be bundled with EchoStar&#146;s DISH
direct broadcast satellite television service. We have
extensively tested our service offering at over 9,000 locations
and, in combination with our strategic partners, are launching
service nationwide in the fourth quarter of 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our high-speed Internet access service benefits from the unique
abilities of our one-hop satellite network architecture. Unlike
terrestrial networks, satellite networks possess the ability to
multicast, or simultaneously send common content, to millions of
subscribers. Our solution is unique because it delivers high
bandwidth content directly to the personal computer or other
storage device at a subscriber&#146;s home. We can therefore
expand the edge of the Internet directly to our subscribers and
avoid potential congestion inherent in the terrestrial network.
We intend to use our multicasting services to aggregate and
filter high quality content and create an unparalleled experience
 for our subscribers. We will multicast content such as music,
movies, software and emerging multimedia content at significantly
 higher speeds than existing broadband alternatives and, in 2001,
 we expect to introduce the StarBand Carousel<SUP>SM</SUP>, a
personalized high-speed digital delivery service, significantly
enhancing our subscribers&#146; experience and generating
additional revenue opportunities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our strategic partners and founding investors, Gilat Satellite
Networks, Microsoft Corporation and EchoStar Communications have
played key roles in our development by providing us access to:
<P>

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	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	proprietary proven technology;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a large existing customer base;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	strong consumer brand names;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	broad retail and wholesale distribution channels.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To date, we have raised $126&nbsp;million of equity from our
strategic partners and founding investors.

<P align="left"><B>Market Opportunity</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we have a substantial business opportunity as a
result of the following four factors:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	growing use of the Internet;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	large and growing demand for high-speed Internet services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	limitations of existing broadband alternatives;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	acceptance of satellite services by consumers.</TD>
</TR>

</TABLE>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Growing Use of the
Internet</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Internet has grown rapidly since the early 1990s to become a
global medium that enables millions of people to obtain and share
 information, programming, products and services as well as
communicate and conduct business electronically. Yankee Group
projects that the number of Internet-connected households in the
United States will grow at a compound annual growth rate of 17%
from

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<DIV align="left">
approximately 33&nbsp;million in 1999 to approximately
71&nbsp;million in 2004. An industry source projects that
U.S.&nbsp;Internet service provider revenues will grow from
$17.7&nbsp;billion in 1999 to $60.5&nbsp;billion in 2004.
</DIV>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Large and Growing Demand
for High-Speed Internet Services</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While the vast majority of consumers still access the Internet
through dial-up connections, there is a growing demand for
high-speed alternatives. According to Yankee Group, the number of
 broadband subscribers in the United States grew from
1.6&nbsp;million at the end of 1999 to just over 3.0&nbsp;million
 in July&nbsp;2000. Pioneer Consulting estimates the number of
broadband residential subscribers in the United States will grow
from 6.2&nbsp;million in 2000 to 44.2&nbsp;million by the end of
2005, a compound annual growth rate of 48%.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe this growing demand is driven by consumers who are
frustrated by dial-up connections or are used to the benefits of
always-on, high-speed connectivity in the workplace and are now
demanding comparable services in the home. According to Yankee
Group, consumers interested in high-speed Internet access rank
high-speed and an always-on connection as the two most important
characteristics of Internet access. In addition, consumers
increasingly want access to rich Internet content that requires
higher-speed connections than dial-up provides, including audio,
video, multimedia and interactive services. Many companies are
developing specific content to exploit the characteristics of
high-speed access and several broadband-only portals have emerged
 that require high-speed connections to access the full range of
their available rich content.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Limitations of Existing
Broadband Alternatives</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, no broadband Internet access providers serve consumers
 on a fully nationwide basis. Despite the high profile rollouts
of DSL and cable modem services, Yankee Group estimates that
approximately 55&nbsp;million U.S.&nbsp;households currently have
 no terrestrial broadband access services available to them and
in 2004, cable modem and DSL will be unavailable to
29&nbsp;million and 33&nbsp;million homes, respectively. These
technologies require the large-scale upgrade of facilities at
every central office or cable point-of-presence that serves a
particular neighborhood, making it complex and costly for them to
 build out their networks and provision their services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Existing terrestrial networks also suffer from the cost and
congestion associated with the multiple connections necessary to
deliver content from the source to the user. When Internet
connection points, such as servers or routers, receive data that
exceed their capacity, portions of the data may be lost and
quality of service may deteriorate. For example, rich media
streams will often stop and restart while waiting for the lost
data to arrive. As a result, other content distribution networks
provide solutions that push common content to thousands of
storage servers spread throughout the existing Internet
infrastructure. While helping to improve the performance of
terrestrial access networks, these solutions are still vulnerable
 to congestion in the network created by multiple connections
between the closest storage server and the Internet user.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Acceptance of Satellite
Services by Consumers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The introduction of direct broadcast satellite television in 1994
 was one of the most successful rollouts of a consumer
electronics product. According to The Satellite Broadcasting and
Communication Association, the number of direct broadcast
satellite television subscribers grew from 0.6&nbsp;million in
1994 to 11.4&nbsp;million in 1999 in the United States. The
success of direct broadcast satellite television demonstrates
U.S.&nbsp;consumers&#146; acceptance of satellite technology for
home use as a mainstream alternative to terrestrial services such
 as cable, particularly in regions outside the largest urban
centers, where direct broadcast satellite television has seen its
 most significant market penetration.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
High-speed Internet access using satellite technology is a
compelling alternative to DSL, cable modem and dial-up services
in many areas. Pioneer Consulting estimates that the
U.S.&nbsp;satellite high-speed access market will grow from
$170&nbsp;million in 1999 to $13.2&nbsp;billion in 2005, a
compound annual growth rate of 107%. Pioneer further projects
that $7.8&nbsp;billion, almost 60% of the market in 2005, will be
 generated from consumer access fees.

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<P align="left"><B>The StarBand Solution</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our nationwide network is designed to provide high-speed Internet
 access to meet the demands of underserved, rural and suburban
markets where broadband alternatives are limited. We provide our
service through a small satellite dish installed at the
subscriber&#146;s home and connected to communications
electronics located either in the subscriber&#146;s personal
computer or in a stand-alone StarBand modem. Our solution offers:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reliable high-speed, always-on access;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an unparalleled subscriber experience;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	nationwide and scalable infrastructure.</TD>
</TR>

</TABLE>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Reliable High-Speed,
Always-On Access</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our offering represents a significant improvement over
 alternatives available in our target markets. Our service
offering is designed to maximize the speed available to
subscribers while maintaining an affordable price. We are
initially offering our standard high-speed access at downstream
speeds from the Internet to the subscriber of up to 500 kilobits
per second, with a peak-hour service goal of at least 150
kilobits per second downstream, and upstream speeds from the
subscriber to the Internet of up to 150 kilobits per second. In
the future, we will also offer Internet access at higher speeds
to subscribers who choose our premium services. Subscribers will
also have access to multicast content, initially at speeds of one
 megabit per second or more, which we expect to increase to 40
megabits per second upon introduction of our second-generation
network architecture. We also plan to offer our subscribers
flat-rate pricing regardless of the amount of time they spend
on-line, subject to our standard subscriber agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our always-on service provides our subscribers with immediate
access to the Internet and the content that they wish to view,
without the need for a phone line. Because our network is
independent of terrestrial infrastructure, there is no need to
dedicate a phone line to Internet use, to wait for a dial-up
connection to be established or to qualify customers based upon
the quality and condition of their telephone or cable lines.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have based our solution upon the proven technology of our
founding partner, Gilat, which is a leading provider of reliable
satellite-based networks for hundreds of corporations and
enterprises worldwide and has extensive experience in designing
and operating satellite networks. Gilat&#146;s technology enables
 an effective and highly reliable data networking environment
that is easy to install at the subscriber&#146;s home or office
and allows for quick service activation.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Unparalleled Subscriber
Experience</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we will deliver an unparalleled subscriber experience
by offering multicast content and the StarBand Carousel<SUP>SM
</SUP> features with our two-way, always-on, high-speed Internet
access. Our platform enables high-speed broadcast, or multicast,
of music, movies, software and emerging multimedia content
simultaneously to multiple subscribers, utilizing the same
downstream bandwidth, a feature not currently available on a
nationwide basis from terrestrial services. Popular live Internet
 events such as fashion shows, sporting events and concerts
create significant backbone congestion or even crash services, as
 many users simultaneously seek to connect individually to the
source of the content. While terrestrial companies may use
satellite technology to relieve backbone congestion by
multicasting and caching content at their local offices, our
solution extends the multicast all the way to the subscriber,
avoiding last-mile bottlenecks and providing our subscribers with
 high-performance access to the desired content.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2001, we intend to introduce the StarBand Carousel<SUP>SM
</SUP>, the first high-speed digital content delivery service for
 consumers, which will allow subscribers to order and schedule
the delivery of a wide array of programming, products and
services over our network. The StarBand Carousel<SUP>SM</SUP>
will deliver ultra-high-speed multicast content and e-commerce
products for use by subscribers immediately or on a scheduled or

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<DIV align="left">
subscription basis. Our subscribers will be able to receive and
store that Internet content on their personal computers according
 to predefined personal preferences.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subscribers who purchase our Internet access service bundled with
 EchoStar&#146;s DISH direct broadcast satellite television
service will also enjoy a single satellite dish solution to meet
their high-speed Internet and television entertainment demands.
This bundled offer provides a viable alternative to local cable
monopolies and provides subscribers with the convenience of a
single monthly invoice for their Internet access and television
services. For subscribers who purchase bundled service,
installers will position the satellite antenna to receive signals
 from multiple satellites with one set of cables connected to a
DISH television set-top box and a second set of cables connected
to the subscriber&#146;s StarBand system.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Nationwide and Scalable
Infrastructure</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon our nationwide market launch in the fourth quarter of 2000,
we will offer high-speed Internet access to any customer at any
location with a clear view of the southern sky, which we estimate
 includes approximately 90% of all households in the United
States. We believe we can introduce our service easily and cost
efficiently across the United States even in sparsely populated
areas and without extensive capital expenditures. The nationwide
availability of our service also will allow potential customers,
including large corporations with employees in locations across
the country, to subscribe to residential high-speed Internet
access from a single provider.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The network can be scaled centrally without any visits to our
subscribers to upgrade their hardware or software. Unlike
terrestrial services, we do not need to manage, equip or
interconnect hundreds of local office switching centers across
the country. In addition, we benefit from end-to-end control of
the network from a central location and do not depend upon a
terrestrial infrastructure that is operated and controlled by
third parties. As a result, we believe we have a better ability
to manage quality of service and provide our network services
than our terrestrial competitors. Because our system delivers
communications from a central network operations center via
satellite, we can increase the overall network capacity by simply
 adding equipment to the network operations facility, increasing
the capacity of its connection to the Internet backbone and
increasing our space segment capacity. We lease satellite
capacity and can therefore increase that amount incrementally
when our subscriber base grows.

<P align="left"><B>Our Strategy</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our mission is to become the leading nationwide provider of
two-way high-speed Internet access via satellite and to create a
new category of Internet service which combines high-speed access
 with our multicast content delivery service. We intend to
implement the following strategies to achieve this goal:

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Rapidly Expand Our
Subscriber Base</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As the first national provider of two-way, always-on, high-speed
Internet access via satellite to residential, small office, and
home office users, we intend to rapidly build a nationwide
subscriber base. We are leveraging our powerful existing
wholesale and retail distribution channels, including
approximately 7,000 RadioShack stores and 20,000 DISH retailers,
to build this subscriber base. While these channels will
initially focus on attracting new customers, we also intend to
market our services to MSN&#146;s and DISH&#146;s existing base
of approximately 3&nbsp;million and 4.5&nbsp;million subscribers,
 respectively. We intend to leverage the installed base and
marketing activities of our affiliate, Spacenet, to identify and
capture corporate-sponsored home worker and Internet access
employee benefit opportunities. Our emphasis on quickly building
a substantial and growing subscriber base will help lower our
cost to serve each incremental subscriber as we spread our fixed
network costs over a larger base of subscribers. A large base of
subscribers will also provide us with significant additional
opportunities to sell higher-margin value-added services and an
enhanced ability to attract premium content providers to our
network.

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<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Implement a Targeted
Marketing Plan to Attract Subscribers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are initially implementing an aggressive and targeted
marketing campaign directed primarily at promoting our service to
 potential users in underserved, rural and suburban markets where
 access to flat-rate Internet service providers and other
broadband alternatives is limited. We plan to build nationwide
brand presence, especially through the expected media coverage of
 StarBand&#146;s launch as the first available nationwide two-way
 high-speed satellite Internet service. The majority of our
marketing budget will be reserved for media that directly target
prospective subscribers in local markets. We expect that our
initial focus will primarily include local print, radio and
billboard advertisements that support our retailers by driving
potential subscribers to their stores. In addition, we have
planned an aggressive direct marketing program aimed at the
approximately 4.5&nbsp;million existing DISH direct broadcast
satellite television subscribers. We are also targeting the
estimated 4&nbsp;million households in states with local
regulations that require metered service charges for every phone
call, including local calls, causing dial-up customers to pay
per-minute telephone charges for their Internet use.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Maintain a Low-Cost and
Capital-Efficient Business Model</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have designed and are operating the network around a low-cost
and capital-efficient business model. For example, by leasing
satellite capacity on existing communications satellites for our
network rather than investing the significant time and capital
necessary to design, launch and operate a proprietary fleet of
satellites, we have significantly limited our capital costs
without the risk associated with deploying new satellites. By
utilizing Gilat&#146;s network solution, we benefit from
Gilat&#146;s significant investment of time and resources to
develop this technology. We have partnered with companies like
MSN and EchoStar to efficiently reach potential customers at a
lower cost than we could on our own. As we grow our subscriber
base, we will further lower our costs by working with Gilat and
other partners to develop next-generation equipment and satellite
 capacity. We believe that our low-cost and capital-efficient
business model will ultimately provide for higher returns on
investment and continue to be a key competitive advantage by
allowing us to allocate the majority of our resources to acquire
subscribers rather than build network infrastructure.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Develop Opportunities to
Sell Higher-Margin Value-Added Services</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to generate high-margin revenues by providing optional
value-added services that take advantage of our multicast and
other advanced service features. We believe our subscribers will
pay for the delivery of content such as music, movies and
software multicast to their homes. We will also target
communities of interest, composed of large groups of subscribers
with common interests, such as ethnic and religious groups,
regional sports fans and music enthusiasts that who will pay
premium rates to receive customized video and interactive
content. While our base service offering will be adequate for
many users, we believe that some subscribers, including many
small office/home office users, will pay to upgrade their service
 to higher bandwidth offerings at a premium price.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Continue to Enhance our
Subscribers&#146; StarBand Experience</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to continuously improve our subscribers&#146; StarBand
experience by maintaining our technological leadership. To
improve the subscriber&#146;s Internet browsing experience, we
are taking advantage of Gilat&#146;s proprietary software that
increases the rate at which web pages display on the user&#146;s
personal computer screen and other network features, like the
StarBand Carousel<SUP>SM</SUP>, that take advantage of our
multicasting capabilities. We are currently working with Gilat on
 our next-generation StarBand modem that will feature smaller
subscriber electronics and improved interfaces. We are also
collaborating with Gilat and EchoStar to develop a single modem
with built-in storage that will provide for two-way interactive
television combined with Internet access. By constantly improving
 the subscriber experience through technological leadership, we
intend to continue growing the size and loyalty of our subscriber
 base.

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<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Pursue Additional
Distribution and Content Partnerships</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to strengthen our position in the high-speed Internet
access market by aggressively pursuing new partnerships to expand
 our distribution channels and increase our access to rich media
content. We are currently in discussions with several additional
high-volume retailers to broaden distribution of both the
Internet-only and bundled Internet/ DISH entertainment services.
We also intend to pursue relationships with other Internet
service providers that will provide either a wholesale or
co-branded retail service offering. Simultaneously, we are
engaged in discussions with a number of established content
providers who are interested in offering rich media content
initially through our multicasting service and eventually through
 our StarBand Carousel<SUP>SM</SUP> service. By emphasizing
additional distribution channels and content partners, we intend
to increase the availability of our service offerings,
substantially differentiate our service, further accelerate
subscriber growth and improve the subscriber experience.

<P align="left"><B>Our Strategic Partners</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We began operations in April&nbsp;2000 upon the consummation of
equity investments in our company by our three founding
investment and strategic partners: Gilat Satellite Networks,
Microsoft Corporation and EchoStar Communications. These
strategic partners provide us with proprietary proven technology,
 access to a large existing customer base, strong consumer brand
names and broad retail and wholesale distribution channels.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Gilat</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat, an Israel-based company listed on Nasdaq, is a leading
provider of telecommunications solutions based on satellite
network technology and delivers satellite-based, end-to-end
enterprise networking and rural telephony solutions to customers
across six continents. In addition, Gilat markets interactive
broadband data services to its enterprise customers through
Spacenet&nbsp;Inc., its wholly-owned subsidiary. Gilat is an
industry leader in the development of high-speed satellite-based
Internet technology, and has a reputation for highly reliable,
low-cost satellite hardware.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat was early to recognize the substantial business opportunity
 available by targeting the large, underserved consumer and small
 office/home office high-speed Internet access market. As a
result, Gilat founded our company to pursue this opportunity, and
 our service is based upon satellite networking technology it
developed, and hardware and software it manufactures. We believe
our partnership with Gilat has allowed us to be first to market
and will help us to maintain our competitive advantage as we
scale the business and introduce new services and technologies.
Our business represents a significant opportunity for Gilat to
expand its market for satellite networking solutions and we
expect to become one of its largest customers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February&nbsp;2000, we entered into a five-year supply
agreement with Gilat and Spacenet. The Gilat supply agreement
sets forth the commercial terms under which we will offer
StarBand service outside our arrangement with MSN, and the terms
under which Gilat and Spacenet provide us with licenses,
intellectual property and satellite capacity on the GE Americom
GE4 satellite for that purpose. In addition, Spacenet and Gilat
have agreed not to offer services that compete with our service
to residential and small office/home office customers throughout
North America.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to enter into a four-year master supply and services
agreement with Gilat and Spacenet that will amend the terms under
 which they supply products and services to us. This agreement
will automatically renew for two-year periods unless terminated
by one of these parties. Under this agreement, Gilat and Spacenet
 will provide equipment, technology and systems that we will use
in our business and operations. Gilat and Spacenet will also
provide us with technical and administrative services and
research and development support. Gilat and Spacenet will grant
us exclusive rights throughout the United States and Canada to
the technology required to provide our services, and we will
purchase most of the equipment and services necessary for our
business exclusively from Gilat and Spacenet. In exchange, Gilat
has committed to deliver our consumer modems in quantities
specified by us in rolling quarterly forecasts. Gilat and
Spacenet also granted us the right to provide service in Mexico.
We are currently considering

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contributing these rights to an affiliate which has the rights to
 provide similar services throughout the rest of Latin America in
 exchange for a minority equity interest in this affiliate.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to operating our network operations center and
leasing facilities to us, Spacenet will grant us a sublicense to
use its enterprise resource planning system and the software with
 which we perform back-office functions. In the future, we may
provide Spacenet with equipment and services for re-sale to
enterprise and small office/home office customers.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Microsoft</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Microsoft, a Redmond, Washington-based public company, develops,
manufactures, licenses and supports a wide range of software
products for a multitude of computing devices. Microsoft&#146;s
online efforts, which serve approximately 3&nbsp;million
subscribers, include The Microsoft Network L.L.C., or MSN,
network of Internet products and services, e-commerce platforms
and alliances with companies involved with high-speed Internet
access and various forms of digital interactivity. We believe our
 relationship with Microsoft will give us immediate access to a
large number of potential subscribers upon the nationwide
commercial launch of our service.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a nationwide Internet service provider, MSN established a
strategy to offer high-speed Internet access to its subscribers,
regardless of their location. MSN has partnered with other
broadband service providers to bundle the MSN service with their
high-speed access. Microsoft selected us as its satellite-based
high-speed Internet access provider for MSN sales due to our
ability to offer service on a nationwide basis, particularly in
areas where other high-speed alternatives are not available. MSN
has an agreement with RadioShack to market and sell its Internet
services in RadioShack stores. Microsoft is currently rolling out
 its MSN satellite-based product offering, MSN powered by
StarBand, in RadioShack stores using the Internet access we
provide to them under our wholesale agreement. Microsoft may
offer our service in the future through many of its other retail
distribution channels.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2000, we and Gilat entered into a broadband supply
agreement with MSN governing the commercial terms pursuant to
which we will provide MSN with wholesale broadband access. The
term of the agreement is four years and renews automatically for
additional one year terms unless terminated earlier by one of the
 parties. This agreement establishes the material terms and
conditions of this relationship, such as MSN&#146;s purchase of
consumer premises equipment, the rates MSN pays us for wholesale
monthly Internet access and exclusivity arrangements. We and MSN
have recently agreed in principle to amend this agreement and we
are currently negotiating a definitive agreement. We expect that
the revised agreement will provide that MSN must purchase minimum
 quantities of consumer premises equipment once we achieve a
single production related milestone and amend the exclusivity
arrangements.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>EchoStar/ DISH</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
EchoStar, a Denver, Colorado-based public company, is the second
largest provider of direct broadcast satellite television
services in the United States through its DISH network. EchoStar
is also an international manufacturer of digital satellite
receiver systems and a provider of other satellite services. We
will specifically target EchoStar&#146;s DISH customer base,
which, we believe, already appreciates the benefits of other
satellite-based services and is likely to consider purchasing our
 satellite-based Internet access. In addition, this relationship
provides us with access to the over 20,000 DISH retailers which
we have authorized to sell our service. As a result of our
partnership, we believe we will benefit from EchoStar&#146;s
substantial experience in launching, marketing and installing a
satellite-based service for customers nationwide.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through its partnership with us, EchoStar will be able to offer
our high-speed Internet access services to DISH&#146;s over
4.5&nbsp;million U.S.&nbsp;direct broadcast satellite television
subscribers. DISH&#146;s subscriber base has been growing at a
rate of approximately 150,000 subscribers per month. The ability
to offer high-speed Internet service is a key part of DISH&#146;s
 strategy and protects it against encroachment by other direct

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broadcast satellite television and broadband providers on
DISH&#146;s subscriber base. In addition, our partnership with
DISH offers both parties the opportunity to realize incremental
revenues from cross-selling services to each other&#146;s
subscribers.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, Gilat and EchoStar entered into a memorandum of agreement on
February&nbsp;22, 2000 setting forth the terms under which the
parties agreed, pending execution of definitive agreements, to
cooperate in providing high-speed Internet access to DISH&#146;s
direct broadcast satellite television customers through the
StarBand network. This arrangement with EchoStar expires on
March&nbsp;31, 2001. We are currently negotiating with EchoStar
for an extension of this agreement. Pursuant to this arrangement,
 EchoStar is marketing our service to their customers and DISH
retailers and we will market DISH&#146;s satellite television
programming service together with our high-speed Internet access
service. EchoStar has made no commitments to us and is subject to
 no penalties if it ceases to sell our service. EchoStar and
Gilat are also currently conducting research and development of a
 product to provide our Internet service through a TV-centric
platform in the future. This memorandum of agreement contains
provisions which restrict us and EchoStar from entering into
co-marketing relationships with competitors of each other for a
limited time.

<P align="left"><B>The StarBand Experience</B>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Service Features</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we offer consumers a new category of Internet service
which combines high-speed Internet access with our multicast
content delivery service. We utilize proven satellite technology
to provide reliable and cost-effective service to subscribers
nationwide under the StarBand brand and through our partners,
including MSN and EchoStar.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our StarBand services include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reliable, always-on, high-speed Internet access nationwide via
	satellite at downstream speeds of up to 500 kilobits per second,
	with a peak-hour service goal of at least a 150 kilobits per
	second downstream, and upstream speeds of up to 150 kilobits per
	second;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	customized rich media content multicast at high speeds directly
	to our subscribers&#146; computers;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	a personalized home page and customized Internet
	browser;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	tiered bandwidth and premium service packages.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our service offering includes all equipment and software
necessary to establish and maintain an always-on, high-speed
Internet connection. Our retail customers will be able to access
the Internet through our home page, which the subscriber can
personalize to include stock quotes, weather, news and other
content of interest. Our homepage will also enable our
subscribers to order service upgrades or content subscriptions,
add e-mail accounts, create personal web pages and make billing
inquiries. Other subscribers will have access to the StarBand
homepage by a single click from their homepage portal. We are
currently developing a customized browser that will enable our
subscribers to navigate the Internet and simultaneously access
multicast content, including media streams, using an electronic
programming guide.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Next year, we plan to introduce StarBand Biz, a premium service
package targeted primarily toward small office/home office
subscribers. In addition, we expect to offer a specially packaged
 home local area network solution with additional bandwidth and
shared access to the StarBand modem to provide enhanced service
to subscribers with multiple personal computers.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Multicast and StarBand
Carousel&nbsp;<SUP>SM</SUP></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our service is significantly enhanced by the unique abilities of
our one-hop satellite network architecture. Unlike terrestrial
networks, satellite networks have the ability to multicast, or
simultaneously send common content, to any number of designated
subscribers. Our solution is unique in its ability to

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distribute high-bandwidth content directly to a subscriber&#146;s
 personal computer or other home storage device independent of
the terrestrial infrastructure. Our model allows us to expand the
 edge of the Internet all the way to our subscribers&#146; homes
and avoid the congestion inherent in the terrestrial networks.
Experiments on terrestrial networks similar to multicast, known
as push technologies, have failed until now because they require
additional bandwidth for each user and drain the operating
resources of the user&#146;s personal computer, dramatically
slowing down Internet browsing. In contrast, our multicast
capabilities create an unparalleled experience by providing a
high-speed overlay network that does not limit bandwidth
available for Internet browsing.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to aggregate and filter high quality content for our
subscribers through our multicasting capabilities. Internet users
 often find it difficult to identify the best sources of
broadband content and services. Though individual Internet users
generally seek content personalized to his or her individual
interests, Internet users as a group often seek common content
from popular web sites that are visited by many users each day.
We plan to offer a menu of multicast services that will feature
high quality content at ultra-high speeds that appeal to broad
groups of subscribers. As a result, we expect to significantly
enhance the perceived value of our services and distinguish
ourselves from other Internet access services by delivering
personalized, yet commonly requested, high quality content to our
 subscribers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are actively working with Gilat to complete the development of
 the StarBand Carousel<SUP>SM</SUP> in 2001. Building upon the
multicast content delivery system, the StarBand Carousel<SUP>SM
</SUP> will offer our subscribers a menu of high quality content
and rich data files that can be simultaneously delivered at
specified times to all subscribers who have placed a request. We
will offer the available content to subscribers at significantly
higher speeds than our basic Internet access service. In addition
 to large data files such as software applications, we expect to
offer some of the most popular and bandwidth-intensive content on
 the Internet which will be ordered via an electronic programming
 guide. After delivery of the content to the subscribers, they
may store it on their personal computer or other local storage
device. Multimedia offerings such as the recent presidential
debates, popular movies, best selling books or leading audio
files might be among the available choices.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Multicast and StarBand
Carousel&nbsp;<SUP>SM</SUP> Applications</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our initial plan is to use our multicasting and StarBand Carousel
<SUP>SM</SUP> capabilities to deliver the following services:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	media streaming;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reliable distribution of large data files;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	distribution of common content for local caching.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Media streaming is a distribution process that allows
simultaneous broadcasting and playback of video and audio
content. The terrestrial Internet infrastructure was not designed
 to support the traffic load created by broadcasting full motion
video or high-fidelity audio. By contrast, we believe our
multicasting capabilities ideally position us to offer popular
audio and video streams to our subscribers. For example,
multicasting enables the network to simultaneously transmit a
live web event, such as a fashion show or fast-breaking news
story, to any number of designated subscribers at a superior
quality to what they would receive through a broadband
terrestrial Internet connection. Replays of the web event could
also be sent to subscribers. In many instances, we believe our
subscribers may pay additional fees for access to this and other
premium content.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our multicast and StarBand Carousel<SUP>SM</SUP>
features provide our subscribers quicker, more reliable and more
efficient access to large data files, including software and
multimedia games, when compared to other electronic or
traditional content delivery methods. For example, software
applications and games featuring realistic three-dimensional
graphics can often consist of files that are 100MB or more in
size. This size often causes transmission difficulties over
dial-up or broadband Internet connections, and a customer might
otherwise have no alternative for receiving the file except for
physical delivery of a CD-ROM or other physical storage media.
Through the multicast and StarBand Carousel<SUP>SM</SUP> content
delivery

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systems, however, our subscribers would be able to enjoy the
convenience of high-speed electronic access to the large data
file without the significant costs of packaging and mailing
physical storage media. Software companies, such as Microsoft,
and our subscribers may also see significant value in our ability
 to reliably deliver large data files to any number of
geographically dispersed locations at once.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Using our multicast and StarBand Carousel<SUP>SM</SUP>
capabilities, we can deliver the most popular content to our
subscribers for storage in their personal computer or other local
 storage device. By learning from the common usage patterns of
our subscribers, we may regularly multicast the most often
requested web content such as news, popular web services and
other content to further enhance the subscriber experience and
reduce unnecessary demands on our two-way capacity. In this way,
our subscribers may avoid potential congestion over the
terrestrial network as we expand the edge of the Internet
directly to them. We intend to use these capabilities to, among
other things, enable the high-speed delivery of specific content
targeted to select interest groups who may be dispersed across
the entire United States but united by a common interest or sense
 of community, such as regional sports team fans, religious
groups or ethnic groups.

<P align="left"><B>Marketing, Sales and Distribution</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We initially intend to market, sell and distribute our wholesale
and retail offerings through existing channels with our strategic
 partners that currently provide a nationwide network of over
27,000 outlets covering our core rural and suburban target
markets. We also expect to add additional retail channels such as
 consumer electronic chains, direct-to-consumer distribution and
major account sales.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Wholesale Service
Offering</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We offer our services on a wholesale basis to large Internet
service providers or other access providers to complement their
existing offerings. The basic components of our wholesale
offering are customer premises equipment, satellite network
transmission services and second-level help desk services. We
also have the ability to provide additional services to our
wholesale customers, such as Internet access, billing and
first-level help desk services for an additional fee. Under our
typical wholesale arrangements, our wholesale customer will buy
our customer premises equipment and pay us a monthly fee per
subscriber for our high speed satellite transmission services. In
 the wholesale model, we would not typically fund subscriber
acquisition costs, market the service or provide first-level
customer support or pay for tier one access from our hub to the
Internet. Because we provide fewer services than in the retail
channel, we charge a substantially reduced monthly subscriber
fee. We currently allow our wholesale customers to offer private
label or co-branded services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
MSN is our first wholesale customer which will package, price and
 promote the offering under its MSN brand to the marketplace
through RadioShack and other retail organizations. RadioShack
will initially market MSNHigh Speed Internet, powered by
StarBand, a service/hardware package comprised of a Compaq PC
required to be purchased from RadioShack for approximately $899,
a StarBand satellite system costing approximately $299, and a
one-year MSN service contract of approximately $59.95/month. MSN,
 as the Internet service provider, will provide first-level help
desk assistance and all billing services to subscribers. We will
provide the high-speed transmission for MSN from our hub via our
satellite network to the MSN subscriber.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;27, 2000, MSN and RadioShack jointly announced
the nationwide launch of the MSN high-speed Internet service
through RadioShack. In late October&nbsp;2000, we will begin
delivery of our service through this channel. At present, we have
 installed satellite demonstration capabilities at over 3,500
RadioShack locations. We have also completed training of over 75%
 of sales management, including the important RadioShack
franchisee group, which we believe reaches the core demographic
of our targeted suburban and rural Internet customers. By
year-end, we expect nearly 5,000 RadioShack locations to be
outfitted with satellite-ready Microsoft Internet Centers
featuring self-paced and sales-assisted tutorials on MSN&#146;s
high-speed Internet access.

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<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Retail Service Offering
</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also offer our services through our retail channel in which we
 sell our branded services directly to consumers. Our retail
arrangements are structured so that our per subscriber revenues
are higher than the wholesale channel although, we are required
to subsidize more of the associated subscriber acquisition costs.
 Typically, our distribution arrangements in this channel are
with consumer electronics stores and other direct-to-consumer
retailers. Components of our retail service include high-speed
Internet access, customer premises equipment and features we
offer as an Internet service provider.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
EchoStar is our first retail distribution channel. Beginning in
late fall 2000, we intend to sell our services through 20,000
DISH retailers nationwide. Together with DISH, we also will offer
 bundled direct broadcast satellite television and Internet
services. Initially, we expect DISH retailers to sell complete
StarBand systems at a suggested retail price of $399. Our monthly
 Internet-only service fee will be approximately $69.95. Our
price levels initially reflect the large unmet demand that we
believe exists for two-way high-speed Internet access, though we
expect that we will lower our prices to retail customers in the
future as market conditions change. We expect that additional
promotional and discounted rates will be available for
subscribers receiving bundled services. Professional installation
 is required and is paid directly to the installers at a
suggested retail price of $175.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and DISH have already jointly installed over 1,500 dealer
locations with operational demonstration systems and plan to
continue installing StarBand demonstration systems in additional
retail locations. Currently, we are training DISH retailers to
sell our services and to install the subscriber hardware. DISH
retailers have the option to stock inventory, which could allow
same-day installation and activation of our service.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also plan to sell our services through other retail channels.
Beginning in 2001, we expect our customers to be able to order
our services directly over the Internet. Our on-line sales
capability will enable all of our retail subscribers to order
subscription services and other individualized or premium
services. Additionally, we are currently pursuing relationships
with large, high-volume consumer electronics chain stores and we
are recruiting and training a direct sales force.

<P align="left"><B>Provisioning and Customer Support</B>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Logistics</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will maintain inventory levels consistent with our forecasts
and intend to minimize inventory levels while at the same time
maintaining our ability to quickly fill subscriber orders.
Channel Master, a leading manufacturer of satellite dishes in the
 U.S.&nbsp;marketplace, provides us with the antennas, mounts,
and warehousing and consolidation services. Gilat ships StarBand
customer electronics directly to Channel Master, where they are
packaged with the satellite dish antenna and mount, creating a
customer premises kit. Channel Master&#146;s facility currently
serves as our primary U.S. warehouse, from which the customer
premises kits are shipped to our customers at our direction.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both Echostar and MSN will keep limited inventory of our product
at their warehouses, and we will ensure that additional product
is available at the Channel Master warehouse to react to
variations in demand.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Installation and
Maintenance</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We outsource installations to third parties using over 8,000
experienced satellite installation professionals. Installation of
 all equipment and software necessary to begin using our service
generally takes less than three hours, and we intend to shorten
that time period. We have trained and qualified several
nationwide and regional installation companies, including
EchoStar&#146;s DISH Network Service Corp. and RadioShack&#146;s
Amerilink subsidiary, as well as many of the individual DISH
retailers to ensure high-quality nationwide coverage and depth in
 key markets. The RadioShack Amerilink organization will provide
installation services for the MSN service offering. StarBand
quality control teams are responsible for the overall company
goal of single-visit, error-free installation and these teams
spot check actual

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<DIV align="left">
subscriber installations. In the future, we expect to offer a
self-installation option as an alternative to third party
installation.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to deliver an Internet access service that is virtually
 trouble free for our subscribers. In order to reduce costly and
frustrating on-site visits, we intend to provide self-healing
diagnostic software but will deploy a qualified technician when
an on-site maintenance visit is required. We will offer warranty
plans to cover all of our customer premises equipment.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Customer Support and
Billing</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide customer support through the Marietta, Georgia central
 network operations center. This facility provides both
first-level and second-level customer support. We staff our
customer call center with highly trained customer service
representatives 24&nbsp;hours a day, seven days a week. Our
customer service representatives have the capability to access
the network management system, which gives them real-time access
to network performance and subscriber information. We recently
installed resource management software from Siebel Systems that
maintains all maintenance and call activity data for each of our
subscribers individually. We will contract with an outsourced
customer service center to address pre-sale and non-network
related issues, improve sales support, administer email addresses
 and provide billing support when applicable.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Billing of StarBand subscribers will be performed by either our
partners or StarBand, according to our distribution agreements.
In our initial distribution channels, EchoStar will generate a
co-branded bill for our subscribers, and MSN will bill its
subscribers directly. In other future channels, such as our
on-line channel, StarBand will directly bill and collect from its
 subscribers using our SAP enterprise resource planning and other
 related systems.

<P align="left"><B>Network Overview</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The network, based upon a proven design developed by Gilat and
currently operated by Spacenet pursuant to a telecommunications
services agreement, is composed of three main components:
satellite capacity, network operations centers and the customer
premises equipment.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Satellite Capacity</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Satellite capacity provides the transmission medium for the
network and provides the bandwidth over which our subscribers
communicate with the Internet through the network operations
center. We introduced our service by leasing, directly and
through Spacenet, capacity on existing satellites that provide
service coverage throughout North America. In the future, we also
 intend to offer our service via leased next-generation
satellites that will increase our network capacity and the
bandwidth available to our subscribers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We lease satellite capacity in large increments known as
transponders. A transponder serves as a reflector by receiving a
signal, amplifying the signal and retransmitting it to or from
the subscriber and the network operations center. Our satellite
capacity currently operates in the Ku band frequency. The Ku band
 frequency is more resistant to weather interference and
therefore limits satellite service interruption known as
&#147;rain fade.&#148; Satellite companies are developing
next-generation satellites that will operate in a higher
frequency known as Ka band. There is currently more unused
frequently in the Ka band. However, it is less resistant to
weather interference than Ku band. Gilat is designing a
next-generation hybrid satellite that will use both Ku band and
Ka band frequencies to take advantage of the benefits of each.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Allocation of Transponder Space.</I> We transmit
communications across our network using satellite transponders
that allow multiple users to share the same bandwidth. Our
network loading assumptions take into account a number of
factors. Based on the experience of our partners in providing
Internet access and satellite Internet protocol networks, we
anticipate that only a subset of our user base will be actively
online at any time. Because Internet traffic is bursty, or
intermittent, with users ordering and then reading delivered
content, a number of users can share bandwidth without perceiving
 any reduction in speed. As

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<DIV align="left">
the number of users increases and becomes more geographically
dispersed, we are able to achieve statistical gains on our
loading assumptions. Our centralized network architecture permits
 us to optimize each subscriber&#146;s experience and our
satellite capacity planning by aggregating users of different
characteristics, such as time zone location or day versus evening
 users, onto the same transponder.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business model is based on achieving an economical satellite
capacity cost per subscriber that reflects the number of
subscribers sharing bandwidth and our cost of satellite capacity.
 Over the next two years we intend to implement a series of
software and hardware improvements for the network developed by
Gilat. One of Gilat&#146;s software improvements reduces network
traffic by reducing repetitive administrative network
acknowledgements required by Internet protocols and instead
transmits only the actual content. We expect that this and other
improvements will enable us to increase the number of subscribers
 that we allocate to a transponder from 7,500 to a target of
approximately 20,000 over time, thus decreasing our space segment
 cost per subscriber.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Current Satellite Capacity.</I> Our network currently operates
 on existing Ku band frequency transponders leased by Spacenet
from GE Americom on the GE4 satellite located at the 105(LOGO)
West longitude orbital location. Spacenet has a five-year lease
for up to six Ku band transponders on this satellite. In
addition, we recently signed an agreement with Loral Skynet to
lease up to 17 Ku band transponders on the Telstar 7 satellite
located at the 129(LOGO) West longitude orbital location. This
lease has a seven-year term with options to extend the lease for
the life of the satellite, which generally will be approximately
an additional six years. Subject to market availability, pricing
and other considerations, we intend to lease additional Ku
capacity as necessary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Next-Generation Satellite Capacity.</I> In the future we
intend to use next-generation satellites engineered as a hybrid
system that incorporates the strengths of both Ku band and Ka
band frequencies in order to increase the capacity of our system
and lower the cost of our network. This hybrid satellite system
features a design that utilizes the Ka band frequency between the
 hubs and the satellite and the Ku band frequency between the
satellite and the subscriber&#146;s customer premises equipment.
Use of Ka band between the hubs and the satellite gives us the
ability to increase the amount of bandwidth that we provide to
our subscribers. Use of Ku band technology for transmissions
between subscriber locations and the satellite allows us to
overcome most weather-related interference and use existing
low-cost, highly reliable Ku band equipment at our
subscribers&#146; homes.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each hybrid satellite will communicate to six zones with four Ku
beams each, enabling the reuse of frequency over 24 beams. Our
two initial hybrid satellites will have a combined total capacity
 of up to 6.2 Gigabits per second downstream from the Internet to
 our subscribers and up to 2.5 Gigabits per second upstream from
the subscribers to the satellite. These satellites also will have
 six Ka spot beams from the satellite to separate hubs, each
connected to the Internet. Our hybrid satellites will also have
nationwide beams for multicast transmissions of over 40 megabits
per second. Because both satellites will be in a single orbital
location, we will be able to provide a backup system for our
subscribers. However, in the case of a failure of either
satellite, subscribers may temporarily experience a lower data
rate until full service is restored.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend these hybrid satellites, tentatively called StarBand 1
and StarBand 2, to be built, launched, and operated by an
established satellite industry partner. We intend to lease
capacity on these satellites under pre-established terms that are
 presently being negotiated. We currently anticipate that these
satellites will be in service by late 2002.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Network Operations
Centers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The main network operations center, located in Marietta, Georgia,
 serves as the central point from which we manage the nationwide
network. The network operations center includes the earth station
 satellite networking equipment and engineering and operations
staff which continuously monitors and optimizes the network
performance. The satellite networking equipment receives and
processes the data sent to us by our users via the satellite. We
use sophisticated, high-capacity satellite data networking
switches to direct traffic over our network, which are connected
from the network operations center via a pair of high-speed
redundant links to the Internet.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our early subscribers will be served from a Spacenet
managed network operations center located in McLean, Virginia.
Backbone connectivity at this facility features a dual, fully
redundant connection. We expect this network operations center to
 transition to the Marietta, Georgia facility in early 2001. Our
network operations centers are presently staffed by
Spacenet&#146;s highly experienced satellite network engineers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the future, when we begin to use the hybrid satellites, each
of the six Ka band spot beams will require a separate earth
station and network switching equipment. These six facilities
will be connected terrestrially to the Marietta network
operations center. High-capacity fiber optic cables will connect
each of the facilities to the Internet backbone.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Customer Premises
Equipment</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our customer premises equipment enables our subscribers to send
and receive data from and to the Internet via satellite
transponders. This equipment consists of an external satellite
modem or a pair of internal personal computer cards, connected to
 a satellite dish antenna by two coaxial cables.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are introducing our nationwide service by offering two
distinct personal computer connection devices. All subscribers
other than those acquiring our service through RadioShack will
require a StarBand modem, which is an external box with an
industry standard universal serial bus interface to allow for
plug-and-play functionality with the subscriber&#146;s personal
computer. Subscribers who acquire our service through the
RadioShack channel will be required to purchase a personal
computer from RadioShack with the StarBand personal computer
cards already integrated into the computer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We plan to introduce a second-generation StarBand modem with a
universal serial bus connection in 2001. Gilat is simplifying the
 components of its current StarBand modem into a smaller and
aesthetically pleasing package and we are working with Gilat to
reduce the cost as low as possible.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are working with EchoStar to jointly introduce a
satellite-based home networking gateway that will provide both
direct broadcast satellite television and high-speed Internet
access. We expect this single box design to connect to the
consumer&#146;s television, personal computer and other Internet
appliances and include a large hard drive for downloading and
storing large files such as feature-length films.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our dish antenna unit is installed outdoors, typically on a roof
or ground pole mount. The antenna requires a clear view of the
southern sky in order to have line-of-sight to the satellites
carrying our services. The antenna unit will initially measure
0.75m in diameter, although we expect this size to be reduced
eventually to 0.6m.

<P align="left"><B>Competition</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although we believe we currently face no direct competition from
any other nationwide, two-way satellite high-speed Internet
access provider in the consumer marketplace, the overall market
for consumer Internet access is highly competitive. While our
current strategy is to focus on customers in those areas
underserved by terrestrial networks, we expect that our target
markets will become more competitive in the future. Our basis for
 competition includes:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	availability of service;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	no pre-qualifications to receive the service;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the user&#146;s Internet experience;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	bundling of Internet service with television services;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reliability and consistency of service from installation
	throughout the service life.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We face competition from traditional telephone companies, cable
modem service providers, competitive local exchange carriers,
wireless communication companies and satellite service providers.
 Many of our competitors have longer operating histories and
greater financial, technical, marketing and

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<DIV align="left">
other resources than we do and thus may be able to respond more
quickly to new or changing opportunities and customer
requirements.
</DIV>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Traditional Telephone
Companies</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The traditional telephone companies represent strong competition
in all of our target market areas as providers of dial-up
Internet access. In particular, the traditional telephone
companies have an established brand name in their service areas
and own their copper lines. As they continue rolling out DSL
services, they will increasingly be able to bundle their DSL
services with voice services provided to their existing
customers.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Cable Modem Service
Providers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cable modem service providers such as Roadrunner, Excite@Home
Network and MediaOne, and their respective cable partners, are
deploying high-speed Internet access services over hybrid fiber
coaxial cable networks. These networks have become the primary
architecture utilized by cable operators in recent and ongoing
upgrades of their systems. Where deployed, these networks provide
 higher-speed Internet access than we provide. We believe the
cable modem service providers face a number of challenges, such
as the inability to offer service on a nationwide basis. Also,
much of the current cable infrastructure in the United States
must be upgraded to support cable modems, a process that we
believe will be expensive and time-consuming.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Competitive Local
Exchange Carriers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many competitive local exchange carriers such as Covad
Communications, Rhythms NetConnections and NorthPoint
Communications offer high-speed digital services. Their ability
to provide service requires interconnection agreements with the
traditional telephone companies, pursuant to which they must
acquire central office space and install DSL hardware. We believe
 this requirement will result in competitive local exchange
carriers focusing primarily on areas of high density.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Wireless Providers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may face competition from terrestrial wireless services,
including 2 GHz and 28 GHz wireless cable services, Multi-channel
 Microwave Distribution System, or MMDS, and Local Multi-channel
Distribution System, or LMDS, and 18 GHz and 39 GHz
point-to-point microwave systems. The FCC is currently
considering new rules to permit MMDS licensees to use their
systems to offer two-way services, including high-speed data,
rather than solely to provide one-way video services. The FCC has
 also recently auctioned spectrum for LMDS services in all
markets. This spectrum is expected to be used for wireless cable
and telephony services, including high-speed digital services. We
 believe it is unlikely that a nationwide wireless provider will
emerge in the near future because these licenses are awarded on a
 region-to-region basis.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Satellite-Based Systems
</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may face competition from other providers of satellite
services, including Hughes Communications and WildBlue. We
believe our competitors will have data networking expertise.
Hughes has significant experience in running satellite data
networking services, and may enter the market soon with a two-way
 Ku band-based consumer offering. WildBlue has announced plans to
 launch a satellite-based Internet service in 2002, but has not
yet developed its satellite networking infrastructure. Other
potential satellite-based competitors could include Teledesic,
Cyberstar, Skybridge, Tachyon and Astrolink.

<P align="left"><B>Government Regulation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our satellite network uses earth stations that transmit and
receive radio signals (the earth segment) and satellite space
stations that relay these signals between earth stations (the
space segment). Pursuant to the Communications Act of 1934, as
amended, the FCC regulates the use of radio spectrum in the
United States, including satellite communications. Space stations
 and transmitting earth stations, as distinguished

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<DIV align="left">
from receive-only stations, must be authorized by the FCC.
Installation of satellite antennas may also be subject to state
and local regulations such as zoning ordinances.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are not an FCC licensee and do not hold any authorizations to
operate earth stations or satellites. We obtain the satellite
communications links used to provide our services pursuant to a
services agreement with Gilat and Spacenet Inc., a wholly owned
subsidiary of Gilat. Spacenet and its subsidiaries hold licenses
for the earth stations used for our service and Spacenet provides
 some of our satellite capacity pursuant to contracts with owners
 of U.S.-licensed satellites.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Earth station licenses are granted for ten-year terms. The FCC
generally renews these licenses routinely, but there is no
guarantee that they will be renewed or that renewals will be for
full terms. Major changes in operations and earth station
facilities require preapproval by the FCC and a modification to
the applicable FCC licenses.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subsidiaries of Spacenet hold licenses for several network
operations center stations, which exchange data with many users,
connect the users to the Internet backbone and control the
communications equipment at subscriber locations. Subsidiaries of
 Spacenet also hold blanket domestic licenses issued by the FCC
for several types of customer premises equipment that we use to
provide our service, including 0.75m and 0.96m dish antennas.
Customer premises equipment is located on each customer&#146;s
premises and communicates with only one of the network operations
 centers via satellite. Each blanket license covers many
subscriber remote antennas installed within the continental U.S.,
 Alaska, Hawaii, Puerto Rico and the Virgin Islands.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Very small aperture terminal, or VSAT, remote stations use small
dish antennas that are suited for residential and other
non-industrial areas. The type of VSAT dish antenna that each
customer needs is determined by geographic location. The FCC
routinely approves dish antennas that conform to rules specifying
 beamwidth requirements or, alternatively, that do not conform to
 the rules but which the licensee demonstrates are compatible
with the FCC&#146;s satellite spacing policy. The larger VSAT
remote dish antennas used for our service conform to the
beamwidth rules. The FCC approved the two smallest VSAT remote
dish antennas used for our service, 0.96m and 0.75m designs, on
the required showing. The FCC granted blanket licenses for these
two VSAT dish antennas in June and July&nbsp;2000 for use in up
to 20,000 locations, conditioned upon the outcome of a public
proceeding concerning the type of network access scheme used by
many satellite data networks. A subsidiary of Spacenet currently
has an application on file with the FCC to seek authority for
communications with Telstar&nbsp;7 and increase the number of
0.75m remote user locations Spacenet may operate to 100,000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FCC requires satellite communications systems to operate in a
 way that does not cause harmful interference with the operation
of other satellites. Earlier this year, the FCC staff raised a
question whether a provision of the FCC rules could be read to
prohibit a longstanding industry practice regarding network
access schemes (the conventions that determine when and how
remote stations communicate with the satellite). In granting the
licenses for the 0.96m and 0.75m VSAT remote dish antennas, the
FCC waived the rule to the extent that it might be construed to
prohibit the use of industry-standard network access schemes and
conditioned the licenses on the outcome of the pending
proceeding. At the staff&#146;s request, Spacenet petitioned the
FCC for a declaratory ruling interpreting the rules to permit the
 longstanding industry practice. The public comment period ended
on June&nbsp;14, 2000, and the satellite industry supported
granting the type of relief sought by Spacenet. We expect FCC
action before the end of the year. It is not possible to predict
precisely the manner in which the FCC will resolve this issue.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FCC has established guidelines for human exposure to radio
frequency energy. Between the feed horn and the reflector of our
VSAT dish antennas, the radio frequency exposure exceeds the
acceptable level established by the FCC. There is a risk of
injury to anyone who places part of their body in this area of
the VSAT dish antenna for a prolonged period of time. Spacenet
has provided the FCC with information concerning the typical
installation and placement of the dish antennas used for our
service and the technical safeguards and warnings that we will
use to minimize the risk of injury. We believe that these methods
 will satisfy the FCC or that we, together with Gilat, can
develop procedures to satisfy the FCC&#146;s concerns.

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some localities attempt to impose restrictions on the
installation of satellite dish antennas, usually in the form of
zoning ordinances. While not directly regulating us, those
restrictions might reduce market demand for the our service. The
FCC has adopted rules limiting the circumstances under which
restrictions can be imposed and has preempted many types of
restrictions entirely. The FCC is also considering further action
 to prevent localities from interfering with the federal interest
 in widespread and competitive availability of broadband
services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;28, 2000, the FCC instituted a public
proceeding inquiring as to whether companies offering high-speed
data networks should be required to make their networks available
 generally to any Internet service provider that would like to
use them to reach customers or whether this access will be
available on the open market without regulation. There is no way
to determine how the FCC will decide this issue. It may, after
receiving public comment, elect not to impose any regulatory
requirements. If, however, the FCC decides that high-speed data
networks used to provide access to the Internet should be made
available generally to Internet service providers, we may be
required to provide our wholesale service to any Internet service
 provider that requests it, including entities that compete with
us and with MSN. At this point, however, it is not possible to
predict whether or when such regulations will be adopted or the
precise obligations they may impose on us.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FCC also regulates telecommunications common carriers under
Title&nbsp;II of the Communications Act of 1934, as amended.
Providers of Internet access services, such as the service we
offer, are not subject to regulation under Title&nbsp;II. The FCC
 does, however, have the power to impose some forms of regulation
 on providers of Internet access services under Title&nbsp;I of
the Communications Act, which gives the FCC the power to regulate
 interstate communications by wire or radio. As an Internet
service provider, we are potentially subject to such regulation.
To date, the FCC has avoided regulation of Internet service
providers, but there is no guarantee that the FCC will continue
to refrain from regulating them or some of their services in the
future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, one legitimate ground for local regulation is safety.
While localities have generally not regulated the emission of
radio frequency energy, the possibility exists that local
jurisdictions may restrict the installation of transmitting earth
 stations to achieve legitimate safety goals. We believe it is
unlikely that such a restriction could be used to prevent
installation of the VSAT remote stations used for our service
because of the very low safety risk posed by the antennas.

<P align="left"><B>Technology and Licensing</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat is our primary technology partner and will continue
research and development projects with us and on our behalf.
Gilat research and development teams are located in both Israel
and the United States, and include satellite experts in the field
 of hardware development, satellite access software and
application protocols such as Internet Protocol. They are working
 with us to ensure continued technological leadership. Gilat has
agreed to continue research and development of our current
products and we have agreed to pay a portion of the research and
development costs. One major research and development effort is
the multicast software, including the future StarBand Carousel
<SUP>SM</SUP> through which content will be multicast on a
scheduled basis.

<P align="left"><B>Employees</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of August&nbsp;31, 2000 we had 127 full-time employees and a
total of 40 consultants and other individuals working for us
pursuant to management services agreements. For operational
reasons, during our development stage, all of our employees were
leased from Spacenet. Substantially all of these personnel will
be transferred to our direct payroll prior to the end of 2000.
Our agreement with Spacenet requires us to make timely payment of
 the full cost incurred by Spacenet including salary, bonuses,
benefits, taxes, processing costs and related items. Of that
number, 70 are based in our offices in McLean, Virginia, and 95
are based in Marietta, Georgia. We have 12 employees in our sales
 force and 22 in research and engineering. None of our employees
is a party to a collective bargaining agreement, and we

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<DIV align="left">
have never experienced a work stoppage. We consider our
relationship with our employees to be good and have not
experienced any interruptions of operations due to labor
disagreements.
</DIV>

<P align="left"><B>Properties</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our corporate headquarters facility of approximately 42,000
square feet is located in McLean, Virginia. Spacenet leases the
McLean facility from a third party and we occupy the premises
pursuant to a sublease with Spacenet under which we pay Spacenet
the same price that they pay under their lease. The lease for
this facility expires in April&nbsp;2005 with an option for
renewal. In addition, we occupy a facility of approximately
58,000 square feet in Marietta, Georgia, where the network
operations center is located. Spacenet leases the Marietta
facility from a third party and we occupy the premises pursuant
to a sublease with Spacenet under which we pay same price to
Spacenet as they pay under their lease. The lease for this
facility expires in September&nbsp;2001.

<P align="left"><B>Legal Proceedings</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On or about July&nbsp;26, 2000, Globecomm Systems, Inc. commenced
 a lawsuit against us in the Eastern District of New York
alleging the willful infringement of their U.S.&nbsp;patent
relating to a particular means for transferring and receiving
communications signals between a remote terminal and a network
operations center via satellite. This proceeding is at an early
stage. We will respond appropriately to Globecomm&#146;s
complaint and vigorously defend our rights in this matter.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, on May&nbsp;8, 2000, Hughes Electronics Corporation
commenced a lawsuit against Gilat and Spacenet in the District of
 Maryland, alleging willful infringement of four patents. We are
not a party to the lawsuit and only one of the infringement
claims may be relevant to the equipment we purchase from Gilat. A
 ruling against Gilat or Spacenet would significantly harm our
business because we license technology from them that forms part
of Hughes&#146; claim. In particular, the single potentially
relevant claim is related to personal computer based receiver
cards that we use as part of our service offering to consumers.
We may not be able to continue to use the technology if Hughes
prevails on its claim regarding this technology. Gilat and
Spacenet have filed motions for partial summary judgment on the
issue of patent claim construction and the Court has scheduled a
hearing on these motions for November&nbsp;20, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based upon our analysis of the information available to us at
these preliminary stages and the technology we use to operate our
 network, we believe that these suits represent minimal risk to
our business and financial condition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not have insurance that would indemnify us for any
liability that may be imposed in connection with the legal
actions described above. Accordingly, if any of these events
occur, it could result in a substantial reduction in our revenue
and could result in losses over an extended period of time.

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<!-- link1 "MANAGEMENT" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center"><B>MANAGEMENT</B>

<P align="left"><B>Executive Officers and Directors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information with respect to our
executive officers and directors:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="45%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="45%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Age</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Position</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Yoel Gat</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">48</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Co-Chairman and Director(1)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Zur Feldman</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">42</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Co-Chairman, Chief Executive Officer and Director(1)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	David Trachtenberg</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">38</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	President and Chief Marketing Officer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	William McMoil</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">36</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Corporate Controller, Secretary and Treasurer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Orey Gilliam</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Vice President Engineering and Operations and Chief Information
	Officer</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Richard De Shong</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">53</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Vice President Logistics</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Donna Tanenbaum</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Vice President Human Resources and Administration</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Sandy Colony</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">55</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Vice President Corporate Communications</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Amit Dembsky</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">41</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Vice President Product Integration</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Jon DeVaan</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Director(2)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Brian Friedman</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Director(3)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Mark Jackson</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">39</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Director(4)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Nominated to our board of directors by Spacenet. See
	&#147;Principal Stockholders&nbsp;&#151; Stockholders
	Agreement.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	Nominated to our board of directors by Microsoft. See
	&#147;Principal Stockholders&nbsp;&#151; Stockholders
	Agreement.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Nominated to our board of directors by ING Furman Selz
	Investments. See &#147;Principal Stockholders&nbsp;&#151;
	Stockholders Agreement.&#148;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	Nominated to our board of directors by EchoStar. See
	&#147;Principal Stockholders&nbsp;&#151; Stockholders
	Agreement.&#148;</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Yoel Gat</I> served as Chairman of our board of directors
since our inception in January&nbsp;2000 and became Co-Chairman
in August&nbsp;2000. Mr.&nbsp;Gat co-founded Gilat Satellite
Networks Ltd. in 1987 and since that time has served as Chairman
of the board of directors and Chief Executive Officer of that
company. Mr.&nbsp;Gat is also the Chairman of the board of
directors of KSAT, and serves on the board of ILAN-GAT
Engineering Ltd. Mr.&nbsp;Gat holds a B.S. in Electrical
Engineering and Electronics from the Technion-Israel Institute of
 Technology and an M.M.S. from the Recanati Graduate School of
Business Administration of Tel Aviv University. Mr.&nbsp;Gat is a
 two-time winner of the Israel Defense Award, Israel&#146;s most
prestigious research and development award.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Zur Feldman</I> has been our Chief Executive Officer since
February&nbsp;2000 and was named Co-Chairman of our board of
directors in August&nbsp;2000. Mr.&nbsp;Feldman served as the
Executive Vice President of Packard Bell Electronics from 1995 to
 1999 and as Vice President of Operations from 1989 to 1995.
Mr.&nbsp;Feldman holds a B.A. in Photo Journalism, Television
Broadcasting and Communications. Mr.&nbsp;Feldman has also
completed a two-year program at the University of California, Los
 Angeles professional Business and Management school. In
addition, Mr.&nbsp;Feldman graduated from the Stanford University
 Graduate School of Business and Management for Executives.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>David Trachtenberg</I> has served as our President and Chief
Marketing Officer since August&nbsp;2000. Mr.&nbsp;Trachtenberg
served as President and Chief Operating Officer of Prodigy
Communications Corporation from November&nbsp;1998 to
June&nbsp;2000. In addition, from 1990 to 1998, he was employed
at MCI Communications, where he was Executive Director of
Marketing from 1996 to 1998. Mr.&nbsp;Trachtenberg

<P align="center">50

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<DIV align="left">
holds a B.A. in International Relations from Tufts University, an
 M.A. from the University of Pennsylvania and an M.B.A. from The
Wharton Business School of the University of Pennsylvania.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>William McMoil</I> has served as our Corporate Controller,
Secretary and Treasurer since May&nbsp;2000. Prior to joining our
 company, Mr.&nbsp;McMoil served as Controller and Secretary
Treasurer for OnePoint Communications Corp., a residential CLEC,
from 1998 to 2000. In addition, he served as Controller for
IoWave, Inc., a wireless telecommunications equipment
manufacturer from 1997 to 1998. From 1995 to 1997,
Mr.&nbsp;McMoil was Director of Finance of Martin&#146;s Herend
Imports, Inc. Mr.&nbsp;McMoil holds a B.A. degree from Furman
University and an M.B.A. from George Mason University.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Orey Gilliam</I> has served as our Vice President of
Engineering and Operations and Chief Information Officer since
January 2000. Mr.&nbsp;Gilliam joined Gilat in 1992 and served in
 various operation and marketing positions until 1998 when he was
 appointed Vice President and General Manager of Gilat, Inc.,
then the U.S.&nbsp;subsidiary of Gilat. In 1999, after leading
the U.S.&nbsp;integration team for the acquisition of the company
 by Gilat, Mr.&nbsp;Gilliam was appointed Chief Information
Officer of Spacenet Inc. and continues to hold that position.
Prior to joining Gilat, Mr.&nbsp;Gilliam worked for Intel
Corporation in technical and marketing positions.
Mr.&nbsp;Gilliam graduated with honors from the Technion-Israel
Institute of Technology with a degree in Computer Engineering.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Richard De Shong</I> has been our Vice President of Logistics
since he joined us in March&nbsp;2000. Prior to joining us,
Mr.&nbsp;De Shong worked for Packard Bell NEC, Inc. where he
served as Director of Materials from 1997 to 2000 and Director of
 Planning and Scheduling from 1993 to 1997. From 1992 to 1993,
Mr.&nbsp;De Shong served as Project Manager at Western Data
Systems and from 1989 to 1990 he was Senior Manager of
Manufacturing Systems Consulting with Price Waterhouse.
Mr.&nbsp;De Shong earned a B.S. in business administration from
Arizona State University.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Donna Tanenbaum</I> has been our Vice President of Human
Resources and Administration since February&nbsp;2000. Prior to
her employment with us, Ms.&nbsp;Tanenbaum was Vice President of
Human Resources with Teleglobe Communications Corporation from
1996 to 2000. Prior to her position with Teleglobe,
Ms.&nbsp;Tanenbaum held various positions in human resources with
 Science Applications International Corporation from 1994 to
1996, and also with MCI Communications Corporation, Freddie Mac
and Metropolitan Life Insurance. Ms.&nbsp;Tanenbaum earned an
M.E. with an emphasis in Organizational Development from the
Harvard Graduate School of Education and her B.S. in Human
Development from Cornell University.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sandy Colony</I> has been our Vice President of Corporate
Communications since August&nbsp;2000. Prior to joining us,
Ms.&nbsp;Colony served as the Vice President of Corporate
Communications for Road Runner, the first high-speed online
service over cable in the United States, from 1998 to 2000.
Before working at Road Runner, Ms.&nbsp;Colony served as the Vice
 President of Corporate Communications at Time Warner Cable of
New York City from 1996 to 1998. She also worked with TV Food
Network from 1994 to 1996 as the Vice President of Public
Relations. Ms.&nbsp;Colony earned a B.A. in history from Skidmore
 College and holds an M.A. in psychology from The New School of
Social Research.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amit Dembsky</I> has served as our Vice President of Product
Integration since May&nbsp;2000. Prior to joining us,
Mr.&nbsp;Dembsky was Vice President of Product Development at
Synthonics Inc. from January&nbsp;2000 until joining us. Prior to
 working at Synthonics, Mr.&nbsp;Dembsky was with Packard Bell
NEC Inc. from 1992 to 1999, where he served in various capacities
 including Director of the Advanced Technology Group.
Mr.&nbsp;Dembsky attended the Israel Air Force Electronics
Officers&#146; Academy, earned a B.Sc. in Architecture from
Technion-Israel Institute of Technology and studied computer
science at UCLA and Pierce College.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Jon DeVaan</I> has served as a director of our company since
February&nbsp;2000. Mr.&nbsp;DeVaan is a Senior Vice President of
 Microsoft Corporation&#146;s Personal Services and Devices
Group. Prior to his current position, Mr.&nbsp;DeVaan was vice
president of development and director of development of Microsoft
 Office 95 and 97. From 1985 to 1994 Mr.&nbsp;DeVaan served in
various capacities at Microsoft, from software design

<P align="center">51
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<DIV align="left">
engineer to development manager of various versions of Microsoft
Excel. Mr.&nbsp;DeVaan earned B.S. degrees in mathematics and
computer science from Oregon State University.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Brian Friedman</I> has served as a director of our company
since April&nbsp;2000. Mr.&nbsp;Friedman has been the President
of ING Furman Selz Investments, a private equity investment firm,
 since 1994. Mr.&nbsp;Friedman also serves on the boards of
directors of Acapulco Restaurants, Inc., Au Bon Pain Corporation,
 BricsNet N.V., California Pizza Kitchen, Inc., Cognitive Arts,
Inc. and IDB Carries B.V. Mr.&nbsp;Friedman also serves on the
boards of managers of Apartment Media Works LLC, Beacon
Industrial Group LLC and Stagebill LLC.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mark Jackson</I> has served as a director of our company since
 April&nbsp;2000. Mr.&nbsp;Jackson also serves as Senior Vice
President of EchoStar Technologies Corporation, a division of
EchoStar Communications Corporation, where he has been employed
since he began as Director of Engineering in April of 1993. Prior
 to joining EchoStar, Mr.&nbsp;Jackson was Director of
Engineering at Tandon Corporation, Inc. for seven years.
Mr.&nbsp;Jackson attended Texas Tech University.

<P align="left"><B>Committees of the Board of Directors</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors has established an audit committee and a
compensation committee and may also establish additional
committees to assist it in its duties. The functions of the audit
 committee include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	recommending to the board of directors the retention of
	independent auditors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reviewing the scope of the annual audit undertaken by our
	company&#146;s independent auditors and the progress and results
	of their work;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reviewing our company&#146;s financial statements, internal
	accounting and auditing procedures and corporate program to
	ensure compliance with applicable laws.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The functions of the compensation committee include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reviewing and approving executive compensation policies and
	practices;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	reviewing salaries and bonuses for some of our officers; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	considering other matters as may from time to time be referred to
	 the committee by our board of directors.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to expand our board of directors to include three
independent directors, who will serve on our audit committee.

<P align="left"><B>Election of Directors and Officers</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors consists of five directors, all of whom
are elected by our shareholders for one-year terms. Our executive
 officers are elected by the board of directors and may be
removed at any time by the board of directors. Our executive
officers do not serve fixed terms of office. Our principal
stockholders have entered into a stockholders agreement to vote
to ensure that a specified number of directors nominated by these
 principal stockholders are appointed to the board. See
&#147;Principal Stockholders&nbsp;&#151; Stockholders
Agreement.&#148;

<P align="left"><B>Board Compensation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No director will receive cash compensation for services as a
director. All directors will, however, be reimbursed for their
expenses incurred in attending meetings. Zur Feldman, our
Co-Chairman, currently has been granted options to acquire a
total of 2,568,220&nbsp;shares of our common stock.

<P align="left"><B>Executive Compensation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth all compensation awarded to,
earned by or paid to our Chief Executive Officer and the next
four most highly compensated executive officers of our company
whose annual salary

<P align="center">52

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<DIV align="left">
and bonus is expected to exceed $100,000 in 2000 for services
rendered in all capacities. In accordance with the rules of the
SEC, other compensation in the form of perquisites and other
personal benefits has been omitted for the named executive
officers because the aggregate amount of perquisites and other
personal benefits is expected to be less than the lesser of
$50,000 or 10% of the total of annual salary and bonuses for each
 of the named executive officers in 2000.
</DIV>

<P align="center"><B>Summary Compensation Table</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="60%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Annual Compensation</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>All Other</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name and Principal Position</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Salary(1)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Bonus(2)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Compensation</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Zur Feldman, Chief Executive Officer</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">$500,000(3)</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	David Trachtenberg, President and Chief Marketing Officer</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,000(3)</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Orey Gilliam, Chief Information Officer and Vice President,
	Engineering and Operations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">180,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Richard De Shong, Vice President, Logistics</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">160,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Sandy Colony, Vice President, Corporate Communications</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">160,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">75,000(3)</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Full calendar year.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	Annualized target.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Transition bonus.</TD>
</TR>

</TABLE>

<P align="left"><B>Option Grants and August&nbsp;31, 2000 Option Values</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding options
granted to the named executive officers listed above during the
period from our inception through August&nbsp;31, 2000 pursuant
to our 2000 Stock Incentive Plan.

<P align="center"><B>Option Grants</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="26%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><FONT size="2"><B>Individual Grants</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="15"><HR size="1"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent of</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Total</B></FONT></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>Potential Realizable Value</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Securities</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercise</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>at Assumed Annual Rates</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Underlying</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Granted to</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>or Base</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>of Stock Price Appreciation</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Employees</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Price</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Expiration</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><FONT size="2"><B>for Option Term(5)</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Granted</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>in 2000</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>($/Share)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Date</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(1)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(2)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(3)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(4)</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>0%</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>5%</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>10%</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Zur Feldman</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,568,220</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47.1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5/26/10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,144,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,562,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,545,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	David Trachtenberg</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27.5</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.45</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8/23/10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,925,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,010,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,344,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Orey Gilliam</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5/26/10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">494,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,001,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,779,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Richard DeShong</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5/26/10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">198,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">400,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">711,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Sandy Colony</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.45</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8/7/10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">237,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">480,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">854,000</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	All options were granted under our 2000 Stock Incentive Plan.
	These options are subject to vesting in the event of a change in
	control of our company.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	Based on options to purchase 5,449,220&nbsp;shares of our common
	stock granted to employees in 2000.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	The exercise or base price per share reflects the fair value of
	the common stock if the options are issued with exercise prices
	below that amount. The actual exercise prices of each of
	Mr.&nbsp;Trachtenberg&#146;s and Ms.&nbsp;Colony&#146;s options
	granted in August 2000 were $2.50&nbsp;per share which resulted
	in an unrealized gain on the date of grant of approximately
	$5.9&nbsp;million and $0.2&nbsp; million, respectively.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	The options have ten year terms, subject to earlier termination
	upon death, disability or termination of employment.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	Potential realizable value based on actual exercise price of
	$2.50&nbsp;per share and the estimated market value of $6.45 per
	share at August&nbsp;31, 2000.</TD>
</TR>

</TABLE>

<P align="center">53
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><B>Aggregate Option Exercises in 2000 and Option Values</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, for the named executive officers
listed above, the shares acquired and the value realized on each
exercise of stock options during the current year, and the number
 and value of securities underlying unexercised options held by
these executive officers at August&nbsp;31, 2000. The value of
unexercised in-the-money options at August&nbsp;31, 2000 has been
 calculated using $6.45&nbsp;per share.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="28%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Number of Securities</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Value of</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Underlying Unexercised</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Unexercised In-The-</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Options</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Money Options ($)</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Acquired</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Value</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>on Exercise</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Realized</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercisable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercisable</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Zur Feldman</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,568,220</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,144,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	David Trachtenberg</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,925,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Orey Gilliam</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">494,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Richard De Shong</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">198,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Sandy Colony</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">237,000</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left"><B>2000 Stock Incentive Plan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may issue up to 23.0&nbsp;million shares of common stock
pursuant to the StarBand Communications Inc. 2000 Stock Incentive
 Plan, which has been adopted by our Board of Directors and
approved by our stockholders. No more than 8.0&nbsp;million
shares may be issued pursuant to awards under this plan prior to
January&nbsp;1, 2001. The plan provides for the granting to
employees and directors of incentive stock option and
nonqualified options to purchase shares of our common stock. The
plan also provides for the granting of shares of restricted stock
 and stock appreciation rights (SARs). As of August&nbsp;31,
2000, we have granted options to purchase an aggregate of
5.4&nbsp;million shares of common stock, and 2.6&nbsp;million
shares of common stock remain available for grants until
January&nbsp;1, 2001. As of August&nbsp;31, 2000, none of the
options granted are exercisable.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plan is administered by our Board of Directors. The
administrator of the plan has the power to determine the persons
to whom, the times at which, and the prices at which awards shall
 be granted, and to determine the type of option or award to be
granted and the number of shares subject to options and awards.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we merge with or into another corporation or sell all or
substantially all of our assets and we are not the surviving
corporation, the options and SARs will become immediately
exercisable unless the successor company agrees to assume or
provide equivalent options or SARs. If we are the surviving
corporation in such an event, any option granted under the plan
will apply to the securities that the holders of shares of our
company would have been entitled to immediately following such
transaction had the holder of such option exercised the option in
 full immediately prior to such transaction.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the outstanding shares are modified by reason
of a recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or
other distribution payable in capital stock, the administrator of
 the plan will adjust the number and kind of shares available
under the plan, the number of shares outstanding and the price
per share of outstanding awards made under the plan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The administrator of the plan determines the option price for
options. For an incentive stock option, the option price shall be
 100% of the fair market value of a share of company stock on the
 date the option is granted. If the recipient of an incentive
stock option owns more than 10% of our outstanding securities,
the option price shall be at least 110% of the fair market value
of a share of company stock on the date of grant. Options granted
 pursuant to the plan generally vest at a rate of 25% at the end
of the first year and 6.25% at the end of each quarter
thereafter, and generally expire ten years from the date on which
 they are granted. All of the options granted will become
exercisable according to the terms of each specific agreement.

<P align="center">54

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><B>Employment Agreements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have employment agreements with Zur Feldman, our Chief
Executive Officer and David Trachtenberg, our President and Chief
 Marketing Officer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Feldman entered into an employment agreement with us on
March&nbsp;9, 2000. Under the agreement, Mr.&nbsp;Feldman will be
 employed for a period of three years from February&nbsp;7, 2000,
 at an annual salary of $250,000, subject to an annual review and
 possible upward adjustment of his salary at the discretion of
our board of directors. The agreement also provides for an annual
 performance bonus of up to $150,000 upon achieving mutually
agreed targets. The agreement contains non-compete provisions
prohibiting Mr.&nbsp;Feldman from competing with us during his
term of employment and for twelve months following the term. If
we terminate the agreement without cause, or if Mr.&nbsp;Feldman
terminates the agreement for cause, we are obligated to pay him
$1.5&nbsp;million as severance.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Trachtenberg entered into an employment agreement with
us on August&nbsp;15, 2000. Under the agreement,
Mr.&nbsp;Trachtenberg will be employed for a period of three
years from the date of the agreement, at an annual salary of
$200,000, subject to an annual review and possible upward
adjustment of his salary at the discretion of our board of
directors. The agreement also provides for an annual performance
bonus of up to $150,000 upon achieving mutually agreed targets.
The agreement contains non-compete provisions prohibiting
Mr.&nbsp;Trachtenberg from competing with us during the term of
his employment and for twelve months following the term. If we
terminate the agreement without cause, or if
Mr.&nbsp;Trachtenberg terminates the agreement for cause, we are
obligated to pay him his remaining base salary over the original
employment term.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of these agreements contains confidentiality restrictions,
as well as provisions recognizing that we own or license all
intellectual property rights to any products, hardware, software,
 or services that the named executive officer may work on during
the term of his employment agreement.

<P align="left"><B>Limitation of Liability and Indemnification Matters</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have adopted provisions in our amended and restated
certificate of incorporation that limit the liability of our
directors for monetary damages for breach of their fiduciary duty
 as directors, except for liability that cannot be eliminated
under the Delaware General Corporation Law, or DGCL. In addition,
 we have taken out directors and officers insurance with a
maximum coverage of $5&nbsp;million per claim. The DGCL provides
that directors of a company will not be personally liable for
monetary damages for breach of their fiduciary duty as directors,
 except liability associated with any of the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	any breach of their duty of loyalty to the company or its
	stockholders;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	acts or omissions not in good faith or which involve intentional
	misconduct or a knowing violation of law;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	unlawful payment of dividends or unlawful stock repurchases or
	redemptions;&nbsp; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	any transaction from which the director derived an improper
	personal benefit.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated certificate of incorporation and bylaws
also provide for indemnification of our directors and officers to
 the fullest extent permitted by the DGCL. We intend to enter
into separate indemnification agreements with our directors and
some of our officers that could require us, among other things,
to indemnify these persons against liabilities that may arise by
reason of their status or service as directors or officers and to
 advance their expenses as a result of any proceeding against
them as to which they could be indemnified. We believe that the
limitation of liability provision in our amended and restated
certificate of incorporation and the indemnification agreements
will facilitate our ability to continue to attract and retain
qualified individuals to serve as directors and officers.

<P align="center">55
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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P align="center"><B>PRINCIPAL STOCKHOLDERS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding beneficial
ownership of our common stock as of August&nbsp;31, 2000, and as
adjusted to reflect the sale of common stock offered in this
offering, as to:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	each person (or group of affiliated persons) who is known by us
	to beneficially own five percent or more of the outstanding
	shares of our common stock;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	each of our directors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	each of our executive officers named in the summary compensation
	table;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	all of our directors and executive officers as a group.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes
voting and/or investment power with respect to securities. Unless
 otherwise noted, we believe that all persons named in the table
have sole voting and sole investment power with respect to all
shares shown as beneficially owned by them. Shares of common
stock subject to options currently exercisable or exercisable, or
 subject to conversion, within 60&nbsp;days of August&nbsp;31,
2000 are deemed outstanding for purposes of computing the
percentage beneficially owned by the person holding options but
are not deemed outstanding for purposes of computing the
percentages beneficially owned by any other person.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="56%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Beneficial Ownership</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Beneficial Ownership</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Prior to Offering</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>After Offering(1)</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name or Group of Beneficial Owner</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>Executive Officers and Directors</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Yoel Gat(2)(3)(4)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,345,338</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Zur Feldman(3)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	David Trachtenberg</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Orey Gilliam(3)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Richard De Shong</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Sandy Colony</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Jon DeVaan</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Mark Jackson</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Brian Friedman(5)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,823,385&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	All executive officers and directors as a group (13&nbsp;
	persons)(2)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,168,723</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11.5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	<B>Five Percent or Greater Stockholders</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Spacenet Inc.(4)(6)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,423,351</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44.7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Microsoft G-Holdings, Inc.(7)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,748,844</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19.0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	EchoStar Communications Corporation(8)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16,755,317</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19.0</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	ING Furman Selz Investments(5)(9)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,823,385</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.7</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>(1)&nbsp;</TD>
	<TD align="left">
	Assumes the issuance of
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
	 shares offered by this prospectus and that the
	underwriters&#146; over-allotment option is not exercised.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(2)&nbsp;</TD>
	<TD align="left">
	Represents shares held by an irrevocable trust, the beneficiaries
	 of which include the children and other family members of
	Mr.&nbsp; Gat. Mr.&nbsp;Gat expressly disclaims beneficial
	ownership of the shares held by the trust, and the filing of this
	 registration statement is not an admission that Mr.&nbsp; Gat is
	 the beneficial owner of these shares.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(3)&nbsp;</TD>
	<TD align="left">
	Mr.&nbsp;Feldman beneficially owns 3,125 shares of common stock
	of Gilat, issuable upon the exercise of options exercisable
	currently or within 60&nbsp;days of August&nbsp;31, 2000.
	Mr.&nbsp;Gilliam beneficially owns 26,683 shares of Gilat, 17,375
	 of which are issuable upon the exercise of options held by
	Mr.&nbsp;Gilliam and exercisable currently or within 60&nbsp;
	days of August&nbsp;31, 2000. The beneficial ownership of these
	shares represents less than 1% of the outstanding shares of
	Gilat. Mr.&nbsp;Gat is the beneficial owner of</TD>
</TR>

</TABLE>

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<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	325,336&nbsp;shares of common stock of Gilat, of which 146,871
	are subject to the exercise of options exercisable currently or
	within 60&nbsp;days of August&nbsp;31, 2000, and representing
	approximately 1% of the outstanding shares of common stock of
	Gilat.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(4)&nbsp;</TD>
	<TD align="left">
	Includes 306,155 shares of common stock issuable upon conversion
	of a note issued by Spacenet Inc. to the trust described in note
	(2), based upon the capitalization of StarBand as of
	August&nbsp;31, 2000, including warrants issued as of that date,
	pursuant to the terms of the note. Currently, and until the note
	is converted by the trust, the shares issuable upon conversion of
	 the note are deemed to be beneficially owned by both the trust
	and Spacenet Inc.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(5)&nbsp;</TD>
	<TD align="left">
	Mr.&nbsp;Friedman is deemed a control person of the manager
	making the investment decisions for these entities, and as such
	may be deemed, for purposes of determining the beneficial
	ownership of these shares, to have shared voting and investment
	power with respect to these shares. Accordingly, the beneficial
	ownership of these shares has been attributed to both
	Mr.&nbsp;Friedman and ING&nbsp; Furman Selz Investments.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(6)&nbsp;</TD>
	<TD align="left">
	Includes 28,022,240 shares issuable upon conversion of
	140,111,199 shares of Series&nbsp;B convertible preferred stock
	and 1,401,112 shares issuable upon conversion of accrued
	dividends. The address for Spacenet Inc. is 1750 Old Meadow Road,
	 McLean, VA 22102.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(7)&nbsp;</TD>
	<TD align="left">
	Includes 9,845,652 shares issuable upon conversion of 49,228,259
	shares of Series&nbsp;A convertible preferred stock and 453,170
	shares issuable upon conversion of accrued dividends. The address
	 for Microsoft G-Holdings, Inc. is c/o Microsoft Corporation, One
	 Microsoft Way, Redmond, WA 98052.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(8)&nbsp;</TD>
	<TD align="left">
	Includes 9,845,652 shares issuable upon conversion of 49,228,259
	shares of Series&nbsp;A-1 convertible preferred stock and 459,643
	 shares issuable upon conversion of accrued dividends. The
	address for EchoStar Communications Corporation is 5701
	S.&nbsp;Santa Fe Drive, Littleton, CO 80120.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>(9)&nbsp;</TD>
	<TD align="left">
	Includes 4,014,030 shares issuable upon conversion of 24,686,284
	shares of Series&nbsp;A-2 convertible preferred stock and 187,394
	 shares issuable upon conversion of accrued dividends, consisting
	 of 3,007,596, 257,772, 146,324, 2,584,139, 578,357, and
	249,197&nbsp;shares held by Furman Selz Investors II L.P., FS
	Employees Investors L.L.C., FS Parallel Fund L.P., ING Furman
	Selz Investors III L.P., ING Barings U.S. Leveraged Equity Plan
	L.L.C. and ING Barings Global Leveraged Plan, Ltd., respectively,
	 all affiliates of ING Furman Selz Investments. The address for
	the ING Furman Selz Investments entities is c/o ING Furman Selz
	Investments, 55 East 52nd Street, New York, NY 10055.</TD>
</TR>

</TABLE>

<P align="left"><B>Investment Agreements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Spacenet, EchoStar, Microsoft and ING Furman Selz Investment
entities purchased shares of our preferred stock pursuant to
investment agreements with us in February and April 2000. Under
the investment agreement with Microsoft, we have the obligation
to repurchase all of our shares held by Microsoft if we, Gilat or
 Spacenet breach any of the material terms of the MSN satellite
broadband access supply agreement and related ancillary
agreements. In August 2000, we assigned this contingent
obligation to Spacenet.

<P align="left"><B>Stockholders Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Spacenet, EchoStar, Microsoft and the ING Furman Selz Investments
 entities have entered into a stockholders agreement with us
relating to their ownership, transfer and voting of our common
and preferred shares. Under the stockholders agreement, all
shares owned by these principal stockholders are subject to
resale restrictions. Each of EchoStar, Microsoft and the ING
Furman Selz Investments entities are restricted from selling or
otherwise transferring their shares, except in limited
circumstances, until April&nbsp;2001. Spacenet is similarly
restricted until April&nbsp;2003. Gilat is required to hold
sufficient shares of Spacenet so that Gilat will remain our
affiliate at all times. Each principal stockholder has a right of
 first

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<DIV align="left">
refusal to purchase when another principal stockholder wishes to
transfer its shares to an unaffiliated third party in a
transaction that is not conducted on Nasdaq.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the stockholders agreement, our principal
stockholders may appoint and remove a controlling majority of our
 board of directors. Our board currently consists of five
directors. Our principal stockholders have agreed that they will
vote to ensure that the board of our company will include:
<P>

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	<TD width="1%"></TD>
	<TD width="96%"></TD>
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<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	two directors nominated by Spacenet, currently Yoel Gat and Zur
	Feldman;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	one director nominated by Microsoft, currently Jon DeVaan;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	one director nominated by EchoStar, currently Mark
	Jackson;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	one director nominated by the ING Furman Selz Investments
	entities, currently Brian Friedman.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The presence of the Microsoft-nominated director and either the
EchoStar-nominated director or the ING Furman Selz
Investments-nominated director is required in order to constitute
 a quorum at a meeting of the board of directors. The
stockholders agreement will be amended to provide for the
election of three independent directors. In addition, EchoStar
and Microsoft each have the right to appoint one observer to our
board. The observers are entitled to attend all meetings of the
board of directors but do not have voting rights.

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<!-- link1 "RELATED PARTY TRANSACTIONS" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="center"><B>RELATED PARTY TRANSACTIONS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have engaged in transactions with our principal stockholders.
We describe these transactions in further detail in Note&nbsp;3
to our financial statements contained elsewhere in this
prospectus. We provide details of the material transactions with
our principal stockholders below. We believe that each of the
transactions described below were on terms no less favorable than
 we could have obtained from unaffiliated third parties.

<P align="left"><B>Gilat Satellite Networks and Spacenet</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since we began operations, Gilat and Spacenet have provided us
with:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	technology, research and development;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	customer premises equipment;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	network operations technology, facilities and services;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	office space;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	management services;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	administrative services encompassing information technology,
	marketing, legal, finance and human resources.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;11, 2000, we issued 10 shares of our common stock
 to Spacenet for $10, in connection with our organization and
initial capitalization. From our inception until August&nbsp;31,
2000, in addition to issuing shares of our common stock to
Spacenet, we paid a total of approximately $20.0&nbsp;million to
Gilat and approximately $38.7&nbsp;million to Spacenet as payment
 for services rendered to us under our various agreements and
arrangements with them.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Gilat Supply Agreements
</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February&nbsp;2000, we entered into a five-year supply
agreement with Gilat and Spacenet. The Gilat supply agreement
sets forth the commercial terms under which we will offer
StarBand service outside our arrangement with MSN, and the terms
under which Gilat and Spacenet provide us with licenses,
intellectual property and satellite capacity on the GE Americom
GE4 satellite for that purpose. In addition, Spacenet and Gilat
have agreed not to offer services that compete with our service
to residential and small office/home office customers throughout
North America.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to this agreement we are obligated to pay
$7.2&nbsp;million to Spacenet, which has been accrued as part of
our payable to Gilat, as reimbursement for a payment made by
Spacenet to reserve the GE4 satellite capacity. GE Americom owns
approximately 19% of the outstanding shares of common stock of
Gilat.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Master Supply and
Services Agreement</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to enter into a four-year master supply and services
agreement with Gilat and Spacenet that will replace the existing
Gilat supply agreements. This agreement will automatically renew
for two-year periods. Pricing terms, however, will be
renegotiated every two years. Under this agreement, Gilat and
Spacenet will provide us with the facilities, equipment, software
 and services that we will use in our business, including:
<P>

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	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	customer premises equipment, network operations equipment,
	software necessary for the network to operate, and our multicast
	system;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	consulting and administrative services, including information
	technology, marketing, financial, and legal services for a
	transition period while we establish our own systems and
	processes, for which we expect the total cost to be approximately
	 $2.1&nbsp;million per calendar quarter. While we will pay for
	these administrative and management services for up to two years,
	 we may terminate these services</TD>
</TR>

</TABLE>

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	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD></TD>
	<TD align="left">
	at any time without penalty or payment obligation, with some
	exceptions, with ninety days written notice. In this event, the
	termination will take effect as of the last day of the next
	calendar quarter;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	facilities in Virginia and Georgia; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	research and development support in connection with hardware,
	equipment and software maintenance that arises out of this
	agreement. During the first two years of the agreement, we will
	pay Gilat $1.0&nbsp;million per calendar quarter to assist with
	basic ongoing research and development expenses associated with
	the products provided under the agreement. Beginning in 2001, we
	will share with Gilat product development costs focused
	exclusively on reducing the cost to manufacture the
	next-generation StarBand modem.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each month we will submit to Gilat order forecasts that specify
the equipment we will need in the following twelve months. The
forecast for the first three months is a firm order. The
forecasts for the second and third three-month periods are
binding, subject to an adjustment within predetermined limits
established in the forecasts. The forecast for the final three
months is non-binding. Gilat will allocate up to 70% of its
manufacturing capacity for the production and delivery of
products that we order from Gilat.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will purchase most of the equipment and services necessary for
 our business exclusively from Gilat and Spacenet, and they will
grant us exclusive rights to use the technology that we require
to provide our service to customers in the United States, Canada
and Mexico. Upon establishment of StarBand Latin America, which
will be our affiliate, we are considering contributing exclusive
rights in Mexico in return for a minority equity stake in
StarBand Latin America. We will pay Gilat various one-time fees
in connection with its assistance in the preparation of our
business plan, product plan, and training program.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Spacenet will grant us rights to use its enterprise resource
planning system and the software with which we perform
back-office functions. We will in the future provide Spacenet
with equipment and services that Spacenet may then re-sell to
various enterprise and small office/home office non-residential
customers, subject to Spacenet&#146;s recognition of our
exclusive marketing rights and compliance with guidelines that we
 establish.

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Telecommunications
Service Agreement</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We entered into a one-year telecommunications services agreement
with Spacenet dated February&nbsp;15, 2000, which is renewable
for up to four years at the option of Microsoft. MSN is the
third-party beneficiary of this agreement. Under this agreement,
Spacenet operates telecommunications facilities and provides
services, including access to Spacenet&#146;s transmission and
switching facilities necessary for us to fulfill our obligations
to MSN, for which we reimburse Spacenet at their cost. In
addition, in exchange for technologies and equipment provided to
us by Spacenet, we issued 9,999,989&nbsp;shares of our common
stock and 140,111,199&nbsp;shares of our Series&nbsp;B
convertible preferred stock to Spacenet.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Yoel Gat, Co-Chairman of our board of directors, also serves as
Chairman of the board of directors and Chief Executive Officer of
 Gilat. Orey Gilliam, our Vice President of Engineering and
Operations and Chief Information Officer, also serves as Chief
Information Officer of Spacenet.

<P align="left"><B>Microsoft/ MSN</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March&nbsp;2000, in connection with Microsoft&#146;s
investment in our company, we entered into a four-year agreement
to supply wholesale satellite broadband Internet access to MSN.
The agreement renews automatically for additional one-year terms
unless terminated by either us or MSN. The agreement requires us
to achieve five milestones during the initial term relating
primarily to our fulfilling production levels for our StarBand
modem, achieving minimum levels of MSN subscribers and other
technical matters set forth in the agreement. MSN&#146;s
commitment to the agreement is contingent upon our meeting these
milestones. To date, we have not completed any of the milestones
set forth in this agreement. Upon our completion of the
milestones, MSN will purchase StarBand modem-based systems in
predetermined quantities and at predetermined prices for use as
part of a high-speed Internet access offering by MSN. We agreed
to supply MSN with StarBand modems in accordance with a specified
 production schedule. MSN will provide a subsidy for a portion of
 the cost of the customer premises equipment for MSN

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<DIV align="left">
subscribers. Pursuant to this agreement, we agreed to pay MSN a
one time fee of $1.25&nbsp;million to offset a portion of
MSN&#146;s subscriber acquisition costs.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement also sets the monthly per subscriber fee we will
collect from MSN, and the minimum monthly fees that MSN will
collect from its subscribers. We also granted MSN most favored
customer status and agreed, for a limited time, to refrain from
providing our service to a number of Internet service providers.
We have entered into a series of other operative agreements with
MSN, Gilat and Spacenet in order to carry out the objectives and
meet the obligations set forth in the MSN agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March&nbsp;2000, Gilat entered into a performance guarantee
agreement pursuant to which Gilat unconditionally and irrevocably
 guaranteed to MSN our compliance with various material
obligations under the MSN broadband supply agreement and related
operative agreements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and MSN recently agreed in principle to amend the agreement
and we are currently negotiating a definitive agreement which if
approved would:
<P>

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	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	replace the five production related milestones currently in the
	agreement with a single milestone that requires us to produce a
	specified quantity of our next generation StarBand modems in
	compliance with mutually agreed upon technical specifications;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	amend the exclusivity provisions in the current agreement;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	eliminate Gilat&#146;s guarantee to MSN of our performance of
	obligations under various operating agreements;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	cancel the $1.25&nbsp;million fee we owe MSN as reimbursement for
	 a portion of MSN&#146;s subscriber acquisition cost
	subsidy;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	establish revised minimum equipment purchase commitments for MSN.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Jon DeVaan, a member of our board of directors, also serves as
Senior Vice President of Microsoft&#146;s Personnel Services and
Devices Group.

<P align="left"><B>EchoStar/ DISH</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, Gilat and EchoStar entered into a memorandum of agreement on
February&nbsp;22, 2000 setting forth the terms under which we
will jointly market our high-speed Internet access service with
EchoStar&#146;s DISH direct broadcast satellite television
service. The agreement with EchoStar expires on March&nbsp;31,
2001. EchoStar will market our service to their customers and
DISH retailers. In exchange, we have agreed to market DISH&#146;s
 satellite television programming service together with our
high-speed Internet access service. EchoStar has made no
commitments to us and is subject to no penalties if it ceases to
sell our service. EchoStar and Gilat are also currently
conducting research and development of a product to provide our
Internet service through a TV-centric platform in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of this memorandum of agreement, we will pay
EchoStar activation fees and residual commissions for each
StarBand subscriber we acquire through the DISH retail sales
channel. We will provide all customer premises equipment and
EchoStar will provide the initial point of contact for service
calls. DISH Network Service Corporation, an EchoStar affiliate,
will install the equipment and EchoStar will split any associated
 costs of such installation with us. We will pay incentive fees
to EchoStar&#146;s independent installers and DISH retailers who
sell our equipment. We will also market EchoStar&#146;s DISH
direct broadcast satellite television services to StarBand
subscribers not acquired through EchoStar for which EchoStar will
 pay us commissions. This memorandum of agreement contains
provisions which restrict us and EchoStar from entering into
co-marketing relationships with competitors of each other for a
limited time.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mark Jackson, a member of our board of directors, also serves as
Senior Vice President of EchoStar Technologies Corporation, a
division of EchoStar.

<P align="center">61

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<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P align="center"><B>DESCRIPTION OF CAPITAL STOCK</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following statements summarize several provisions of our
amended and restated certificate of incorporation and by-laws and
 Delaware law. These summaries do not purport to be complete and
are qualified in their entirety by reference to our amended and
restated certificate of incorporation and by-laws which have been
 filed as exhibits to this registration statement, of which this
prospectus forms a part, and to the provisions of applicable law.

<P align="left"><B>General</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our authorized capital stock consists of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	110,000,000&nbsp;shares of common stock, $0.05&nbsp;par value per
	 share; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	310,000,000&nbsp;shares of preferred stock, par value
	$0.05&nbsp;per share, as follows:</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="5%"></TD>
	<TD width="3%"></TD>
	<TD width="92%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	55,000,000&nbsp;shares of Series&nbsp;A convertible preferred
	stock, $0.05&nbsp;par value per share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	55,000,000&nbsp;shares of Series&nbsp;A-1 convertible preferred
	stock, $0.05&nbsp;par value per share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	30,000,000&nbsp;shares of Series&nbsp;A-2 convertible preferred
	stock, $0.05&nbsp;par value per share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	150,000,000&nbsp;shares of Series&nbsp;B convertible preferred
	stock, $0.05&nbsp;par value per share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	10,000,000&nbsp;shares of Series&nbsp;C convertible preferred
	stock, $0.05&nbsp;par value per share; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#151;&nbsp;</TD>
	<TD align="left">
	10,000,000&nbsp;shares of Series&nbsp;D convertible preferred
	stock, $0.05&nbsp;par value per share.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, there will be
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 of common stock outstanding and no shares of preferred stock
outstanding.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of August&nbsp;31, 2000, we had:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	33,879,757&nbsp;shares of common stock outstanding;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	263,254,001&nbsp;shares of convertible preferred stock
	outstanding;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	outstanding options and warrants to purchase
	9,349,644&nbsp;shares of common stock.</TD>
</TR>

</TABLE>

<P align="left"><B>Common Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of our common stock are entitled to one vote for each
 share on all matters to be voted on by stockholders. Our amended
 and restated certificate of incorporation does not provide for
cumulative voting in connection with the election of directors,
and accordingly, holders of more than 50% of the shares voting
will be able to elect all of the directors.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of shares of common stock are entitled to share ratably
in dividends, if any, as may be declared from time to time by the
 board of directors in its discretion, from available funds. Upon
 any voluntary or involuntary liquidation, dissolution, or
winding up of our affairs, the holders of shares of our common
stock are entitled to share ratably in all assets remaining after
 payment in full of creditors and holders of preferred stock. All
 of the outstanding shares of common stock are, and the shares
offered by us will be, fully paid and non-assessable.

<P align="left"><B>Preferred Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under our amended and restated certificate of incorporation, our
board of directors is authorized to issue additional shares of
preferred stock from time to time without stockholder approval.
Our board of directors will also be authorized to establish the
number of shares to be included in such series and to fix the
terms, limitations, relative rights and preferences and
variations to each series. Although we have no present plans to
issue additional shares of preferred stock, the issuance of
shares of preferred stock, or the issuance of rights to purchase
such shares, could decrease the amount of earnings and assets
available for distribution to the holders of common stock, could
adversely affect the rights and powers, including voting rights,
of the common stock, and could have the effect of delaying,
deterring or preventing a change in control of StarBand or an
unsolicited acquisition proposal.

<P align="center">62

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<P align="left"><B>Warrants</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the June&nbsp;2000 senior debt facility
between us and Bank Leumi USA, for itself and in its capacity as
agent for the additional lenders, we entered into a Series&nbsp;C
 convertible preferred stock purchase warrant agreement with each
 of Bank Leumi USA, The First International Bank of Israel Ltd.
and the Israel Discount Bank Ltd. As discussed in detail below,
the lenders have the right to purchase the number of
Series&nbsp;C shares that, assuming conversion to common stock on
 the exercise date, equals an aggregate of either 2.0% of our
fully diluted outstanding common stock, if exercised on the date
of our initial public offering, or up to 2.25% of our fully
diluted outstanding common stock, if exercised after
June&nbsp;26, 2002. The Bank Leumi USA warrants are exercisable
on the earlier of (i)&nbsp;the date of our initial public
offering or (ii)&nbsp;June&nbsp;26, 2002 and automatically expire
 on June&nbsp;26, 2005. The First International Bank of Israel
and the Israel Discount Bank Ltd. warrants are exercisable on the
 earlier of (i)&nbsp;the date of this offering or
(ii)&nbsp;August&nbsp;7, 2002 and automatically expire on
August&nbsp;7, 2005.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The lenders were issued warrants to purchase shares of
Series&nbsp;C convertible preferred stock based on its respective
 funding commitment to the financing. We issued Bank Leumi USA
warrants to purchase the number of Series&nbsp;C preferred shares
 convertible into 1.2% of the fully diluted outstanding common
stock if exercised prior to June&nbsp;26, 2002 or 1.35% of the
fully diluted outstanding common stock if exercised after
June&nbsp;26, 2002. We issued each of The First International
Bank of Israel and the Israel Discount Bank Ltd. warrants to
purchase the number of Series&nbsp;C preferred shares convertible
 into 0.4% of the fully diluted outstanding common stock if
exercised prior to August&nbsp;7, 2002 or 0.45% of the fully
diluted outstanding common stock if exercised after
August&nbsp;7, 2002. Currently, these warrants have an exercise
price of $3.74&nbsp;per Series&nbsp;C preferred share, and the
lenders are entitled to purchase, for an aggregate purchase price
 of approximately $7.0&nbsp;million, 11,521,886&nbsp;shares of
Series&nbsp;C convertible preferred stock, which may be converted
 into 1,873,477&nbsp;shares of common stock upon the this
offering. The lenders also received the right to purchase
1,910,947&nbsp;shares of common stock, issuable upon the
conversion of Series&nbsp;D convertible preferred stock with a
weighted average price of $4.49. Pursuant to this right the
lenders had the ability to use $10&nbsp;million in principal
amount of the term loan for the purchase. This right expired in
September&nbsp;2000.

<P align="left"><B>Authorized But Unissued Capital Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that following this offering we will have
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(or
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
the underwriters&#146; over-allotment option is exercised in
full) shares of authorized but unissued stock. Delaware law does
not require stockholder approval for the issuance of authorized
shares. However, the listing requirements of the Nasdaq National
Market, which apply so long as the common stock remains included
in that inter-dealer quotation system, require prior stockholder
approval of specific issuances, including issuances of shares
bearing voting power equal to or exceeding 20% of the
pre-issuance outstanding voting power or pre-issuance outstanding
 number of shares of common stock. These additional shares could
be used for a variety of corporate purposes, including future
public offerings to raise additional capital or to facilitate
corporate acquisitions. We currently do not have any plans to
issue additional shares of common stock other than in connection
with employee stock option plans or warrants already issued. One
of the effects of the existence of issued and unreserved common
stock may be to enable the Board to issue shares to persons who
may agree or be inclined to vote in concert with current
management on issues put to consideration of stockholders, which
issuance could render more difficult or discourage an attempt to
obtain control of us by means of a merger, tender offer, proxy
contest or otherwise, and protect the continuity of our
management and possibly deprive the stockholders of the
opportunity to sell their shares of common stock at prices higher
 than prevailing market prices.

<P align="left"><B>Section&nbsp;203 of the Delaware General Corporation Law</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;203 of the Delaware General Corporation Law could
make the acquisition of StarBand Communications and the removal
of its officers and directors difficult. The statute is expected
to discourage specific types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to
acquire control of StarBand Communications to negotiate with us
first. We believe that

<P align="center">63

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<DIV align="left">
the benefits of increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited
proposal to acquire or restructure StarBand Communications
outweigh the disadvantages of discouraging proposals, because,
among other things, negotiation of proposals could result in an
improvement in their terms.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to the provisions of Section&nbsp;203 of the
Delaware General Corporation Law. In general, this statute
prohibits a publicly-held Delaware corporation from engaging in a
 &#147;business combination&#148; with an &#147;interested
stockholder&#148; for a period of three years after the date that
 the person became an interested stockholder unless (with some
exceptions) the business combination the transaction in which the
 person became an interested stockholder is approved in a
prescribed manner. Generally, a &#147;business combination&#148;
includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally,
an &#147;interested stockholder&#148; is a person who, together
with affiliates and associates, owns (or within three years
prior, did own) 15% or more of the corporation&#146;s voting
stock. These provisions may have the effect of delaying,
deferring or preventing a change of control of us without further
 action by our stockholders.

<P align="left"><B>Registration Rights Agreements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and our principal stockholders are party to an agreement that
grants our principal stockholders registration rights. Each of
our principal stockholders has an option to cause us to effect up
 to three registrations of the shares owned by it and its
affiliates and transferees. If one party exercises its
registration rights, the other parties having registration rights
 may elect to include their shares in the registered offering.
Our principal stockholders have agreed not to exercise their
registration rights until after the transfer restriction dates
set forth in the registration rights agreement. The transfer
restriction dates are April&nbsp;2001 for Microsoft, EchoStar and
 ING Furman Selz Investments, and April&nbsp;2003 for Spacenet.
The registration rights agreement also provides that if we
register any equity securities for an offering after the transfer
 restriction dates set forth in the agreement, we must permit
each of our principal stockholders, and anyone to whom they have
transferred shares in a private placement, to include their
shares in the offering. We have agreed to bear a portion of the
expenses related to any of these registered offerings.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also party to registration rights agreements with each of
Bank Leumi USA, The First International Bank of Israel Ltd. and
Israel Discount Bank Ltd. We entered into each of these
registration rights agreements as part of debt financing we
consummated with these three banks. Each of these registration
rights agreements contains substantially the same provisions.
Each bank has an option to cause us to effect up to three
registrations of the shares it may own in the future issued by us
 pursuant to the conversion of preferred shares they may obtain
by exercising warrants or converting debt instruments. If any
securityholder exercises its registration rights, each bank may
elect to include their shares in the registered offering. Each of
 the banks has agreed not to exercise any of their registration
rights until after the completion of this offering. The
registration rights agreements also provide that if we register
any equity securities in a subsequent public offering, we must
permit each bank, and anyone to whom they have transferred shares
 in a private placement, to include their shares in the offering.
 We have agreed to bear a portion of the expenses related to any
of these registered offerings.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed to comply with other covenants set forth in the
registration rights agreements. Among other things, we have
agreed to indemnify, hold harmless against and pay on behalf of
or reimburse any losses which our principal stockholders or third
 parties may suffer or become subject to as a result of untrue
statements, misrepresentations or material omissions we may make
in the registration of our shares.

<P align="left"><B>Transfer Agent and Registrar</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Transfer Agent and Registrar for the common shares is
American Stock Transfer&nbsp;&#38; Trust Company.

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<DIV align="left"><A NAME="015"></A></DIV>

<P align="center"><B>DESCRIPTION OF INDEBTEDNESS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We entered into a senior debt facility on June&nbsp;26, 2000 with
 Bank Leumi USA, as agent and lender, under which Bank Leumi USA
made a term loan to us in principal amount of $90&nbsp;million.
The senior debt facility was amended on September&nbsp;8, 2000,
when The First International Bank of Israel Ltd. and the Israel
Discount Bank Ltd. joined the agreement as additional lenders and
 provided loans of $30&nbsp;million each, bringing the total
amount of financing to $150&nbsp;million. All $150&nbsp;million
is currently held in interest-bearing accounts. Once we have
expended the $126&nbsp;million raised in our earlier equity
placements with Microsoft, EchoStar, ING Furman Selz Investments
and the other investors, we may use all or a portion of the loan
funds deposited in the accounts to fund our business operations.
We have also entered into ancillary security agreements with the
lenders to provide them with collateral for the loan. Under the
security agreements, we have granted to Bank Leumi USA, as agent
for the lenders, a security interest in substantially all of our
assets except our contractual rights to receive capacity and
other services under our transponder lease agreements. The term
loan will become due and payable on June&nbsp;26, 2003, with
interest payable quarterly in arrears. As of August&nbsp;31,
2000, the entire loan amount of $90&nbsp;million was bearing
interest at LIBOR plus 0.75%. The interest rate will rise to
LIBOR plus 1.5% after June&nbsp;26, 2002. Subject to certain
conditions, we are permitted to convert the LIBOR loan to a base
rate loan, which would bear interest at the higher of the prime
rate and the Federal Funds Rate plus 0.5%. We may prepay the term
 loan, in whole or in part, without premium or penalty after
June&nbsp;26, 2001. In the event that we receive an aggregate
amount of proceeds in excess of $50&nbsp;million in a public
offering of capital stock or if we receive at least
$10&nbsp;million in insurance proceeds or from the sale of any
asset, we are required to prepay the term loan. We are
negotiating with the lenders to obtain a waiver of the prepayment
 requirement for this offering. We expect that the First
International Bank of Israel will require prepayment of its
portion of the loan, but the other lenders will waive prepayment.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the term loan we also issued each of the
lenders warrants to purchase our Series&nbsp;C convertible
preferred stock, and granted a right to acquire Series&nbsp;D
convertible preferred stock in exchange for $10&nbsp;million of
the principal amount of the loan. This right to acquire
Series&nbsp;D convertible preferred stock expired in September
2000. If the preferred shares were converted into shares of our
common stock prior to June&nbsp;26, 2002, the lenders would own
in the aggregate approximately 3.9% of our fully diluted common
stock. If the preferred shares were converted into shares of our
common stock after August&nbsp;7, 2002, the lenders would own in
the aggregate approximately 4.12% of our fully diluted common
stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a condition of the term loan, we are required to provide
financial reports and other information to the lenders and
maintain insurance, and we are not permitted to incur additional
bank loans and certain other types of indebtedness. We are also
not permitted to exceed stated limits on aggregate capital
expenditures without the prior written consent of the lenders.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Events of default under the term loan include, among others:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	non-payment;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	breach of obligation;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	misrepresentation;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	invalidity or illegality of documents;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	insolvency or insolvency proceedings;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	change of control;&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	breach or termination of material contracts.</TD>
</TR>

</TABLE>

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<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->
<DIV align="left"><A NAME="016"></A></DIV>

<P align="center"><B>SHARES ELIGIBLE FOR FUTURE SALE</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no market for our common
stock. Future sales of substantial amounts of our common stock in
 the public market could adversely affect prevailing market
prices. Furthermore, because only a limited number of shares of
our common stock will be available for resale after this offering
 due to existing contractual and legal restrictions on sale as
described below, there may be sales of substantial amounts of our
 common stock in the public market after these restrictions
lapse. Such sales may adversely affect the then prevailing market
 price and our ability to raise equity capital in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will have
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 of common stock outstanding, assuming no exercise of options
outstanding as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2000. Of these shares, the
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 sold in this offering will be freely transferable without
restrictions or further registration under the Securities Act,
except for any shares purchased by one of our existing
&#147;affiliates,&#148; as that term is defined in Rule&nbsp;144
under the Securities Act. The remaining
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 of common stock outstanding are &#147;restricted shares&#148; as
 defined in Rule&nbsp;144. Restricted shares may be sold in the
public market only if their offering is registered or qualifies
for an exemption from registration under Rules&nbsp;144 or 701
under the Securities Act. As a result of the contractual 180-day
lock-up period described below and the provisions of
Rules&nbsp;144 and 701, these shares will be available for sale
in public market as follows:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="37%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="60%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Number of Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Date</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	On the date of this prospectus</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	After &nbsp;&nbsp; (subject, in some cases, to volume
	limitations)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	At various times after &nbsp;&nbsp; (subject, in some cases, to
	volume limitations)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left"><B>Lock-Up Agreements</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, our directors and executive officers and our existing
stockholders have each agreed not to offer, pledge, sell,
contract to sell, lend, or otherwise transfer or dispose of any
shares of common stock for a period of 180 days after the date of
 the U.S. purchase agreement, subject to limited exceptions. See
&#147;Underwriting.&#148; Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated, however, may in its sole
discretion, at any time without notice, release all or any
portion of the shares subject to lock-up agreements. See
&#147;Underwriting.&#148;

<P align="left"><B>Rule&nbsp;144</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144, beginning 90&nbsp;days after the
 date of this offering, a person, or persons whose shares are
aggregated, who has owned shares that were purchased from us, or
any affiliate, for at least one year, is entitled to sell within
any three-month period a number of shares that does not exceed
the greater of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	1% of our then outstanding shares of common stock which will
	equal approximately
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
	 immediately after this offering;&nbsp;or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the average weekly trading volume of our common stock on the
	Nasdaq National Market during the four calendar weeks preceding
	the filing of the notice of the sale on Form&nbsp;144.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to manner of sale
provisions, notice requirements and the availability of current
public information about us. Any person, or persons whose shares
are aggregated, who is not deemed to have been one of our
affiliates at any time during the three months preceding a sale,
and who has owned shares within the definition of
&#147;restricted securities&#148; under Rule&nbsp;144 that were
purchased from us, or any affiliate, for at least at least two
years, would be entitled to sell shares under Rule&nbsp;144(k)
without regard to the volume limitations, manner of sale
provisions, public information requirements or notice
requirements.

<P align="center">66
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<P align="left"><B>Rule&nbsp;701</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to limitations on the aggregate offering price of a
transaction and other conditions, Rule&nbsp;701 may be relied
upon for the resale of securities originally purchased from us by
 our employees, directors or officers prior to the date we became
 subject to the reporting requirements of the Securities Exchange
 Act of 1934, or the Exchange Act. Those purchases must have been
 made pursuant to written compensatory benefit plans or written
contracts relating to the compensation of these persons. In
addition, the Securities and Exchange Commission has indicated
that Rule&nbsp;701 will apply to typical stock options granted by
 an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired
upon exercise of the options. This would include exercises after
the date of this prospectus. Securities issued in reliance on
Rule&nbsp;701 are restricted securities and, subject to the
contractual restrictions described above, may be sold by persons
other than affiliates subject only to the manner of sale
provisions of Rule&nbsp;144 and by affiliates under Rule&nbsp;144
 without compliance with its maximum holding period requirements.

<P align="left"><B>Stock Options</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of August&nbsp;31, 2000, options to purchase a total of
5.4&nbsp;million shares of common stock under our 2000 Stock
Incentive Plan have been granted. Substantially all shares
issuable pursuant to outstanding options are subject to lock-up
agreements until
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. An
additional 2.6&nbsp;million shares of common stock are currently
available for future grants under the plan. As of
January&nbsp;2001, options for an additional 15&nbsp;million
shares will be available for future grants under our stock plans.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we intend to file a
registration statement under the Securities Act covering all
shares of common stock subject to outstanding options or issuable
 under our stock option plans. Subject to Rule&nbsp;144 volume
limitations applicable to affiliates, shares registered under any
 registration statements will be available for sale in the open
market beginning 180&nbsp;days after the date of the prospectus,
except to the extent that the shares are subject to vesting
restrictions with us or the contractual restrictions described
above.

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<!-- link1 "MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS" -->
<DIV align="left"><A NAME="017"></A></DIV>

<P align="center"><B>MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS</B>

<DIV align="center">
<B>FOR NON-U.S.&nbsp;HOLDERS</B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a general discussion of the material
U.S.&nbsp;federal income and estate tax consequences of the
ownership and disposition of our common stock by a beneficial
owner that is a &#147;Non-U.S.&nbsp;Holder.&#148; A
&#147;Non-U.S.&nbsp;Holder&#148; is a person or entity that, for
U.S.&nbsp;federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a
foreign estate or trust.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This discussion is based on the Internal Revenue Code of 1986, as
 amended (the &#147;Code&#148;), and administrative
interpretations as of the date of this prospectus, all of which
are subject to change, including changes with retroactive effect.
 This discussion does not address all aspects of
U.S.&nbsp;federal income and estate taxation that may be relevant
 to Non-U.S.&nbsp;Holders in light of their particular
circumstances and does not address any tax consequences arising
under the laws of any state, local or foreign jurisdiction.
Prospective holders should consult their tax advisors with
respect to the particular tax consequences to them of owning and
disposing our common stock, including the consequences under the
laws of any state, local or foreign jurisdiction.

<P align="left"><B>Dividends</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dividends paid to a Non-U.S.&nbsp;Holder of our common stock
generally will be subject to withholding tax at a 30% rate or a
reduced rate specified by an applicable income tax treaty. For
purposes of determining whether tax is to be withheld at a
reduced rate under an income tax treaty, we will presume that
dividends paid on or before December&nbsp;31, 2000 to an address
in a foreign country are paid to a resident of that country
unless we have knowledge that the presumption is not warranted.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to obtain a reduced rate of withholding for dividends
paid after December&nbsp;31, 2000, a Non-U.S.&nbsp;Holder will be
 required to provide us with an Internal Revenue Service
Form&nbsp;W-8BEN certifying its entitlement to benefits under a
treaty. In addition, in some cases where dividends are paid to a
Non-U.S.&nbsp;Holder that is a partnership or other pass-through
entity, persons holding an interest in the entity may need to
provide us with the required certification.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The withholding tax does not apply to dividends paid to a
Non-U.S.&nbsp;Holder that provides a Form&nbsp;W-8ECI, certifying
 that the dividends are effectively connected with the
Non-U.S.&nbsp;Holder&#146;s conduct of a trade or business within
 the United States. Instead, the effectively connected dividends
will be subject to regular U.S.&nbsp;income tax as if the
Non-U.S.&nbsp;Holder were a U.S.&nbsp;resident. A
non-U.S.&nbsp;corporation receiving effectively connected
dividends may also be subject to an additional &#147;branch
profits tax&#148; imposed at a rate of 30% (or a lower treaty
rate) on an earnings amount that is net of the regular tax.

<P align="left"><B>Gain on Disposition of Common Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Non-U.S.&nbsp;Holder generally will not be subject to
U.S.&nbsp;federal income tax on gain realized on a sale or other
disposition of our common stock unless:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the gain is effectively connected with a trade or business of the
	 Non-U.S.&nbsp; Holder in the United States;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	in the case of some Non-U.S.&nbsp;Holders who are non-resident
	alien individuals and hold our common stock as a capital asset,
	the individuals are present in the United States for 183 or more
	days in the taxable year of the disposition;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the Non-U.S.&nbsp;Holder is subject to tax under the provisions
	of the Code regarding the taxation of
	U.S.&nbsp;expatriates;&nbsp;or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the Non-U.S.&nbsp;Holder beneficially owns or has owned 5% or
	more of our common stock and at any time within the five-year
	period preceding the disposition or the
	Non-U.S.&nbsp;Holder&#146;s holding period, whichever period is
	shorter, we are or were a U.S.&nbsp;real property holding
	corporation at any time within such period.</TD>
</TR>

</TABLE>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we are not, and do not anticipate becoming, a
U.S.&nbsp;real property holding corporation.

<P align="left"><B>Information Reporting Requirements and Backup Withholding</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must report to the IRS the amount of dividends paid, the name
and address of the recipient, and the amount of any tax withheld.
 A similar report is sent to the Non-U.S.&nbsp;Holder. Under tax
treaties or other agreements, the IRS may make its reports
available to tax authorities in the recipient&#146;s country of
residence. Dividends paid on or before December&nbsp;31, 2000 at
an address outside the United States are not subject to backup
withholding, unless we have knowledge that the payee is a
U.S.&nbsp;person. However, a Non-U.S.&nbsp;Holder may need to
certify its non-U.S.&nbsp;status in order to avoid backup
withholding at a 31% rate on dividends paid after
December&nbsp;31, 2000 or dividends paid on or before that date
at an address inside the United States.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
U.S.&nbsp;information reporting and backup withholding generally
will not apply to a payment of proceeds of a disposition of our
common stock where the transaction is effected outside the United
 States through a non-U.S.&nbsp;office of a non-U.S.&nbsp;broker.
 However, a Non-U.S.&nbsp;Holder may need to certify its
non-U.S.&nbsp;status in order to avoid information reporting and
backup withholding at a 31% rate on disposition proceeds where
the transaction is effected by or through a U.S.&nbsp;office of a
 broker. In addition, U.S.&nbsp;information reporting
requirements may apply to the proceeds of a disposition effected
by or through a non-U.S.&nbsp;office of a U.S.&nbsp;broker, or by
 a non-U.S.&nbsp;broker with specified connections to the United
States.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. When withholding results
in an overpayment of taxes, a refund may be obtained if the
required information is furnished to the IRS.

<P align="left"><B>Federal Estate Tax</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An individual Non-U.S.&nbsp;Holder who is treated as the owner
of, or has made particular lifetime transfers of, an interest in
our common stock will be required to include the value of the
stock in his gross estate for U.S.&nbsp;federal estate tax
purposes, and may be subject to U.S.&nbsp;federal estate tax
unless an applicable estate tax treaty provides otherwise.

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<!-- link1 "UNDERWRITING" -->
<DIV align="left"><A NAME="018"></A></DIV>

<P align="center"><B>UNDERWRITING</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to offer the shares in the U.S.&nbsp;and Canada through
 the U.S.&nbsp;underwriters and elsewhere through the
international managers. Merrill Lynch, Pierce, Fenner&nbsp;&#38;
Smith Incorporated, Credit Suisse First Boston Corporation,
Salomon Smith Barney Inc., CIBC World Markets Corp. and ING
Barings LLC are acting as U.S.&nbsp;representatives of the
U.S.&nbsp;underwriters named below. Subject to the terms and
conditions described in a U.S.&nbsp;purchase agreement among us
and the U.S.&nbsp;underwriters, and concurrently with the sale of

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 to the international managers, we have agreed to sell to the
U.S.&nbsp;underwriters, and the U.S.&nbsp;underwriters severally
have agreed to purchase from us, the number of shares listed
opposite their names below.

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="79%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>U.S. Underwriter</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>of Shares</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith<BR>
	Incorporated</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Credit Suisse First Boston Corporation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Salomon Smith Barney Inc.&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	CIBC World Markets Corp.&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	ING Barings LLC</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also entered into an international purchase agreement
with the international managers for sale of the shares outside
the U.S.&nbsp;and Canada for whom Merrill Lynch International,
Credit Suisse First Boston (Europe) Limited, Salomon Brothers
International Limited, CIBC World Markets plc and ING Barings
Limited are acting as lead managers. Subject to the terms and
conditions in the international purchase agreement, and
concurrently with the sale of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 to the U.S.&nbsp;underwriters pursuant to the U.S.&nbsp;purchase
 agreement, we have agreed to sell to the international managers,
 and the international managers severally have agreed to purchase

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 from us. The initial public offering price per share and the
total underwriting discount per share are identical under the
U.S.&nbsp;purchase agreement and the international purchase
agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;underwriters and the international managers have
agreed to purchase all of the shares sold under the U.S.&nbsp;and
 international purchase agreements if any of these shares are
purchased. If an underwriter defaults, the U.S.&nbsp;and
international purchase agreements provide that the purchase
commitments of the nondefaulting underwriters may be increased or
 the purchase agreements may be terminated. The closings for the
sale of shares to be purchased by the U.S.&nbsp;underwriters and
the international managers are conditioned on one another.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed to indemnify the U.S.&nbsp;underwriters and the
international managers against certain liabilities, including
liabilities under the Securities Act, or to contribute to
payments the U.S.&nbsp;underwriters and international managers
may be required to make in respect of those liabilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the
purchase agreements, such as the receipt by the underwriters of
officers&#146; certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.

<P align="left"><B>Commissions and Discounts</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;representatives have advised us that the
U.S.&nbsp;underwriters propose initially to offer the shares to
the public at the initial public offering price on the cover page
 of this prospectus and to dealers at that price less a
concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The U.S.&nbsp;underwriters may allow, and

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<DIV align="left">
the dealers may reallow, a discount not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the public offering price, underwriting
 discount and proceeds before expenses to us. The information
assumes either no exercise or full exercise by the
U.S.&nbsp;underwriters and the international managers of their
over-allotment options.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="54%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Per Share</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>Without Option</B></FONT></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><FONT size="2"><B>With Option</B></FONT></TD>
</TR>

<TR>
        <TD></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
        <TD></TD>
        <TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Public offering price</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Underwriting discount</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="left" valign="top"><FONT size="2">
        Proceeds, before expenses, to us</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
        <TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The expenses of the offering, not including the underwriting
discount, are estimated at
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
are payable by us.

<P align="left"><B>Over-allotment Option</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted options to the U.S.&nbsp;underwriters to purchase
 up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
 shares at the public offering price less the underwriting
discount. The U.S.&nbsp;underwriters may exercise these options
for 30&nbsp;days from the date of this prospectus solely to cover
 any over-allotments. If the U.S.&nbsp;underwriters exercise
these options, each will be obligated, subject to conditions
contained in the purchase agreements, to purchase a number of
additional shares proportionate to that
U.S.&nbsp;underwriter&#146;s initial amount reflected in the
above table.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also granted options to the international managers,
exercisable for 30&nbsp;days from the date of this prospectus, to
 purchase up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares to cover any
over-allotments on terms similar to those granted to the
U.S.&nbsp;underwriters.

<P align="left"><B>Intersyndicate Agreement</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;underwriters and the international managers have
entered into an intersyndicate agreement that provides for the
coordination of their activities. Under the intersyndicate
agreement, the U.S.&nbsp;underwriters and the international
managers may sell shares to each other for purposes of resale at
the initial public offering price, less an amount not greater
than the selling concession. Under the intersyndicate agreement,
the U.S.&nbsp;underwriters and any dealer to whom they sell
shares will not offer to sell or sell shares to persons who are
non-U.S.&nbsp;or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S.&nbsp;or non-Canadian
 persons, except in the case of transactions under the
intersyndicate agreement. Similarly, the international managers
and any dealer to whom they sell will not offer to sell or sell
shares to U.S.&nbsp;persons or Canadian persons or to persons
they believe intend to resell to U.S.&nbsp;or Canadian persons,
except in the case of transactions under the intersyndicate
agreement.

<P align="left"><B>Reserved Shares</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At our request, the underwriters have reserved for sale, at the
initial public offering price, up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 offered by this prospectus for sale to some of our directors,
officers, employees, distributors, dealers, business associates
and related persons. If these persons purchase reserved shares,
this will reduce the number of shares available for sale to the
general public. Any reserved shares that are not orally confirmed
 for purchase within one day of the pricing of this offering will
 be offered by the underwriters to the general public on the same
 terms as the other shares offered by this prospectus.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are concurrently offering
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 at the initial public offering price directly to some of our
employees pursuant to this prospectus in jurisdictions outside
the U.S.&nbsp;where the underwriters are prohibited by law from
selling the shares. These shares are included in the
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
 being sold pursuant to this prospectus. Since these shares are
being sold directly by us and not through the underwriters, no
underwriting discount or commission will be paid to the
underwriters for these shares.

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<P align="left"><B>No Sales of Similar Securities</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and our executive officers and directors and all existing
stockholders have agreed, with exceptions, not to sell or
transfer any common stock for 180 days after the date of this
prospectus without first obtaining the written consent of Merrill
 Lynch. Specifically, we and these other individuals have agreed
not to directly or indirectly
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	offer, pledge, sell or contract to sell any common stock,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	sell any option or contract to purchase any common stock,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	purchase any option or contract to sell any common stock,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	grant any option, right or warrant for the sale of any common
	stock,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	lend or otherwise dispose of or transfer any common stock,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	request or demand that we file a registration statement related
	to the common stock,&nbsp;or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	enter into any swap or other agreement that transfers, in whole
	or in part, the economic consequence of ownership of any common
	stock whether any such swap or transaction is to be selected by
	delivery of shares or other securities, in cash or otherwise.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable
with common stock. It also applies to common stock owned now or
acquired later by the person executing the agreement or for which
 the person executing the agreement later acquires the power of
disposition.

<P align="left"><B>Quotation on the Nasdaq National Market</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect the shares to be approved for quotation on the Nasdaq
National Market, subject to notice of issuance, under the symbol
&#147;STRB.&#148;

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Before this offering, there has been no public market for our
common stock. The initial public offering price will be
determined through negotiations among us and the
U.S.&nbsp;representatives and the lead manager. In addition to
prevailing market conditions, the factors to be considered in
determining the initial public offering price are
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="1%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the valuation multiples of publicly traded companies that the
	U.S.&nbsp; representatives and the lead manager believe to be
	comparable to us,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	our financial information,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the history of, and the prospects for, our company and the
	industry in which we compete,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	an assessment of our management, its past and present operations,
	 and the prospects for, and timing of, our future revenues,</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the present state of our development,&nbsp;and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;&nbsp;</TD>
	<TD align="left">
	the above factors in relation to market values and various
	valuation measures of other companies engaged in activities
	similar to ours.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An active trading market for the shares may not develop. It is
also possible that after the offering the shares will not trade
in the public market at or above the initial public offering
price.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters do not expect to sell more than 5% of the shares
 in the aggregate to accounts over which they exercise
discretionary authority.

<P align="left"><B>Price Stabilization, Short Positions and Penalty Bids</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until the distribution of the shares is completed, SEC rules may
limit underwriters and selling group members from bidding for and
 purchasing our common stock. However, the
U.S.&nbsp;representatives of the

<P align="center">72

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
underwriters may engage in transactions that stabilize the price
of the common stock, such as bids or purchases to peg, fix or
maintain that price.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the underwriters create a short position in the common stock
in connection with the offering, i.e., if they sell more shares
than are listed on the cover of this prospectus, the
U.S.&nbsp;representatives may reduce that short position by
purchasing shares in the open market. The
U.S.&nbsp;representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option
described above. Purchases of the common stock to stabilize its
price or to reduce a short position may cause the price of the
common stock to be higher than it might be in the absence of such
 purchases.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;representatives may also impose a penalty bid on
underwriters and selling group members. This means that if the
U.S.&nbsp;representatives purchase shares in the open market to
reduce the underwriter&#146;s short position or to stabilize the
price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who
sold those shares. The imposition of a penalty bid may also
affect the price of the shares in that it discourages resales of
those shares.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither we nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that
 the transactions described above may have on the price of the
common stock. In addition, neither we nor any of the underwriters
 makes any representation that the U.S.&nbsp;representatives or
the lead manager will engage in these transactions or that these
transactions, once commenced, will not be discontinued without
notice.

<P align="left"><B>Other Relationships</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of the underwriters and their affiliates have engaged in,
and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us.
They received customary fees and commissions for these
transactions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Furman Selz Investors II L.P., FS Employees Investors L.L.C., FS
Parallel Fund L.P., ING Furman Selz Investors III L.P., ING
Barings U.S.&nbsp;Leveraged Equity Plan L.L.C. and ING Barings
Global Leveraged Plan Ltd., each of which is an affiliate of ING
Barings LLC, are stockholders of StarBand.

<P align="center">73

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<!-- link1 "LEGAL MATTERS" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="center"><B>LEGAL MATTERS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the shares of our common stock under Delaware law
 will be passed upon for us by Clifford Chance Rogers&nbsp;&#38;
Wells LLP. Certain legal matters in connection with this offering
 will be passed upon for the underwriters by Davis
Polk&nbsp;&#38; Wardwell.

<!-- link1 "EXPERTS" -->
<DIV align="left"><A NAME="020"></A></DIV>

<P align="center"><B>EXPERTS</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements of StarBand Communications Inc. at
August&nbsp;31, 2000, and for the period from January&nbsp;11,
2000 (inception)&nbsp;through August&nbsp;31, 2000 appearing in
this Prospectus and Registration Statement have been audited by
Ernst&nbsp;&#38; Young LLP, independent auditors, as set forth in
 their report thereon appearing elsewhere herein, and are
included in reliance upon such report given on the authority of
such firm as experts in auditing and accounting.

<!-- link1 "WHERE YOU CAN FIND ADDITIONAL INFORMATION" -->
<DIV align="left"><A NAME="021"></A></DIV>

<P align="center"><B>WHERE YOU CAN FIND ADDITIONAL INFORMATION</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed a Form&nbsp;S-1 registration statement with the
Securities and Exchange Commission. This prospectus, which is a
part of the registration statement, does not contain all of the
information included in the registration statement. You should
refer to our registration statement and its exhibits if you would
 like to find out more about us and about the common stock. If a
contract or document has been filed as an exhibit to the
registration statement, we refer you to the copy of the contract
or other document that has been filed. Each statement in this
prospectus relating to a contract or document filed as an exhibit
 is qualified in all respects by the filed exhibit.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will be subject to the
periodic reporting and other information-supplying requirements
of the Securities Exchange Act of 1934. In accordance with those
requirements, we will file reports, including annual reports on
Form&nbsp;10-K, quarterly reports on Form&nbsp;10-Q, current
reports on Form&nbsp;8-K, and other information with the
Commission. You may inspect copies of the registration statement,
 its accompanying exhibits, and any other document that we file
with the Commission, without charge. You also may copy or obtain
any of these documents at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
 regional offices of the Commission located at Seven World Trade
Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite&nbsp;1400, Chicago, Illinois 60661. You may
 obtain information on the operation of the Commission Public
Reference Room by calling the Commission at 1-800-SEC-0330. Our
filings with the Commission, including this prospectus, are or
will be available to the public at the Commission&#146;s web site
 at www.sec.gov.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will furnish our stockholders with annual reports. These
reports will include a review of operations and annual audited
financial statements prepared in conformity with accounting
principals generally accepted in the United States. We also will
furnish our stockholders with unaudited financial information
prepared in conformity with accounting principles generally
accepted in the United States for each quarter of each fiscal
year as soon as practicable following the end of each quarter.

<P align="center">74

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="022"></A></DIV>

<P align="center"><B>INDEX TO FINANCIAL STATEMENTS</B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="90%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="2%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Report of Independent Auditors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance Sheet at August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Statement of Operations for the period from January&nbsp;11, 2000
	 (inception) through August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Statement of Mandatorily Redeemable Convertible Preferred Stock
	and Stockholders&#146; Deficit for the period from January&nbsp;
	11, 2000 (inception)&nbsp;through August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Statement of Cash Flows for the period from January&nbsp;11, 2000
	 (inception) through August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Notes to Financial Statements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">F-7</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">F-1

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>REPORT OF INDEPENDENT AUDITORS</B>

<P align="left">Board of Directors

<DIV align="left">
StarBand Communications Inc.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying balance sheet of StarBand
Communications Inc. (the &#147;Company&#148;), a development
stage enterprise, as of August&nbsp;31, 2000 and the related
statements of operations, mandatorily redeemable convertible
preferred stock and stockholders&#146; deficit, and cash flows
for the period from January&nbsp;11, 2000
(inception)&nbsp;through August&nbsp;31, 2000. These financial
statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of StarBand Communications Inc., a development stage enterprise,
at August&nbsp;31, 2000 and the results of its operations and its
 cash flows for the period from January&nbsp;11, 2000 (inception)
 through August&nbsp;31, 2000, in conformity with accounting
principles generally accepted in the United States.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="center">
	/s/ ERNST &#38; YOUNG LLP</TD>
</TR>

</TABLE>

<P align="left">
McLean, Virginia

<DIV align="left">
October&nbsp;5, 2000
</DIV>

<P align="center">F-2

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>STARBAND COMMUNICATIONS INC.</B>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>BALANCE SHEET</B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="54%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Pro Forma</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(Unaudited)</B></FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	<B>ASSETS</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Current assets:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,302,815</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,302,815</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Accounts receivable, net of allowance for doubtful accounts of
	$82,385</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,285,298</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,285,298</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Employee advances</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,556</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,556</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,327,075</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,327,075</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred customer acquisition costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,557,680</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,557,680</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Prepaid expenses and other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">420,105</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">420,105</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Total current assets</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,924,529</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,924,529</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Restricted cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559,295</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,559,295</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Property and equipment, net of accumulated depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,661,359</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,661,359</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Other assets, net of accumulated amortization</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,366,647</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,366,647</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total assets</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,511,830</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,511,830</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	<B>LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
	STOCK, AND STOCKHOLDERS&#146; (DEFICIT) EQUITY</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Current liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,273,282</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,273,282</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Accrued expenses and other liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,631,205</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,631,205</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred revenue</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,671,916</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,671,916</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Due to Gilat Satellite Networks, Ltd. and Spacenet, Inc.&nbsp;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,335,390</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,335,390</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Due to Microsoft Corporation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,250,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,250,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Due to EchoStar</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Due to Employees</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,934</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,934</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Total current liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,322,727</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">49,322,727</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Term loan, net of unamortized discount</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,088,650</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,088,650</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Total liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130,411,377</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130,411,377</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Commitments and contingencies</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Mandatorily redeemable convertible preferred stock:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Series&nbsp;A, A-1, A-2, B, C, and D mandatorily redeemable
	convertible preferred stock, $.05 par value; 12% cumulative
	dividends:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;A; 55 million shares authorized; 49,228,259 actual
	and 0 pro forma shares issued and outstanding, plus accrued
	dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,494,108</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;A-1; 55&nbsp;million shares authorized; 49,228,259
	actual and 0 pro forma shares issued and outstanding, plus
	accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,526,477</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;A-2; 30&nbsp;million shares authorized; 24,686,284
	actual and 0 pro forma shares issued and outstanding, plus
	accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,838,761</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;B; 150&nbsp;million shares authorized; 140,111,199
	actual and 0 pro forma shares issued and outstanding, plus
	accrued dividends</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,011,120</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Series&nbsp;C and D; 10&nbsp;million shares authorized each; 0
	shares issued and outstanding</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Total mandatorily redeemable convertible preferred stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142,870,466</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Stockholders&#146; (deficit) equity:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Common stock; $.05 par value; 110&nbsp;million shares authorized;
	 33,879,757 actual and 88,108,650 pro forma shares issued and
	outstanding</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,693,988</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,405,433</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Additional capital</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,462,758</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">157,621,779</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,951,674</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,951,674</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Deficit accumulated during development stage</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(87,975,085</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(87,975,085</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Total stockholders&#146; (deficit) equity</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,770,013</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66,100,453</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total liabilities, mandatorily redeemable convertible preferred
	stock and stockholders&#146; (deficit) equity</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,511,830</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">196,511,830</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<I>See accompanying notes.</I>

<P align="center">F-3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>STARBAND COMMUNICATIONS INC.</B>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>STATEMENT OF OPERATIONS</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="68%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January 11, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(inception) through</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Revenues:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Internet access</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,264</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Customer premises equipment and installation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,681</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total revenues</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,945</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Costs and expenses:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Network</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,149,048</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Customer premises equipment and installation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,707,245</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Sales and marketing</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,822,427</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	General and administrative (exclusive of non-cash compensation
	shown below)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,862,221</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Non-cash compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">300,601</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">741,962</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total costs and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,583,504</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Loss from operations</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(68,576,559</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Non-operating (expense)&nbsp;income:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Interest expense</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,564,740</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Interest income</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,292,882</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Non-operating income, net</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,728,142</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Loss before provision for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848,417</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Provision for income taxes</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net loss</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848,417</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Preferred stock dividends and accretion</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,245,439</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net loss attributable to common stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(82,093,856</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Basic and diluted loss per share</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4.06</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Shares used in the calculation of basic and diluted loss per
	share</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,232,428</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Unaudited pro forma net loss attributable to common stockholders</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848,417</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Unaudited pro forma basic and diluted loss per share</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1.23</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Shares used in the calculation of unaudited pro forma basic and
	diluted loss per share</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54,456,199</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<I>See accompanying notes.</I>

<P align="center">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>STARBAND COMMUNICATIONS INC.</B>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>STATEMENT OF MANDATORILY REDEEMABLE CONVERTIBLE</B>

<DIV align="center">
<B>PREFERRED STOCK AND STOCKHOLDERS&#146; DEFICIT</B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="32%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deficit</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><FONT size="2"><B>Common Stock</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Accumulated</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="7"><HR size="1"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>During</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Total</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Additional</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deferred</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Development</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Stockholders&#146;</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Par Value</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Capital</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Compensation</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Stage</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Deficit</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock to founders on January&nbsp;11, 2000
	(inception)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock to Spacenet, Inc. on April&nbsp;1, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,999,989</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">499,999</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(499,999</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 140,111,199 shares of mandatorily redeemable
	convertible Preferred Stock to Spacenet,&nbsp;Inc. on
	April&nbsp;1, 2000, including accrued dividends of $7,005,560</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,124,331</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,881,229</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,005,560</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to EchoStar
	Communications Corporation on April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,450,022</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">322,501</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449,240</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">771,741</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to EchoStar
	Communications Corporation on April&nbsp;11, 2000, including
	accrued dividends of $2,298,218</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to ING Furman Selz
	Investments on April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,621,960</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">131,098</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">182,618</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">313,716</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 24,686,284 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to ING Furman Selz
	 Investments on April&nbsp;11, 2000, including accrued dividends
	of $1,152,477</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to Microsoft
	G-Holdings, Inc. on April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,450,022</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">322,501</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">449,240</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">771,741</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to Microsoft
	G-Holdings, Inc. on April&nbsp;13, 2000, including accrued
	dividends of $2,265,849</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to other investors on
	 May&nbsp; 3, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,357,754</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">417,888</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">582,112</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Equity issuance costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(38,889</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(38,889</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of common stock options to employees and non-employee
	consultants</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,580,115</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,580,115</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of warrants to non-employee consultants</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">672,160</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(672,160</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Amortization of deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">300,601</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">300,601</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of warrants in connection with the term loan</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,210,483</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,210,483</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net loss for the period from January&nbsp;11, 2000 (inception) to
	 August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848,417</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848,417</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Preferred stock dividends and accretion</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,245,439</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,245,439</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance at August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,879,757</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,693,988</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,462,758</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,951,674</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(87,975,085</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(76,770,013</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="40%" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="73%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="12%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Mandatorily</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Redeemable</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Convertible</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Preferred</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Stock</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock to founders on January&nbsp;11, 2000
	(inception)</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock to Spacenet, Inc. on April&nbsp;1, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 140,111,199 shares of mandatorily redeemable
	convertible Preferred Stock to Spacenet,&nbsp;Inc. on
	April&nbsp;1, 2000, including accrued dividends of $7,005,560</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,011,120</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to EchoStar
	Communications Corporation on April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to EchoStar
	Communications Corporation on April&nbsp;11, 2000, including
	accrued dividends of $2,298,218</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,526,477</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to ING Furman Selz
	Investments on April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 24,686,284 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to ING Furman Selz
	 Investments on April&nbsp;11, 2000, including accrued dividends
	of $1,152,477</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,838,761</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to Microsoft
	G-Holdings, Inc. on April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to Microsoft
	G-Holdings, Inc. on April&nbsp;13, 2000, including accrued
	dividends of $2,265,849</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,494,108</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of Common Stock at $0.12 per share to other investors on
	 May&nbsp; 3, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Equity issuance costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of common stock options to employees and non-employee
	consultants</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of warrants to non-employee consultants</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Amortization of deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Issuance of warrants in connection with the term loan</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net loss for the period from January&nbsp;11, 2000 (inception) to
	 August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Preferred stock dividends and accretion</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Balance at August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">142,870,466</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>

<P align="center">
<I>See accompanying notes.</I>

<P align="center">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>STARBAND COMMUNICATIONS INC.</B>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>STATEMENT OF CASH FLOWS</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="65%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;11, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(inception) through</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	<B>Operating activities:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Net loss</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(66,848,417</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Adjustments to reconcile net loss to net cash used in operating
	activities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Amortization of deferred compensation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">300,601</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">741,962</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Provision for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">82,385</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Interest earned on restricted cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(959,295</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Amortization of debt discount and issuance costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">374,413</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Changes in operating assets and liabilities:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accounts receivable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,367,683</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Employee advances</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(31,556</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Inventory</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,327,075</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Deferred customer acquisition costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,557,680</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Prepaid expenses and other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(420,105</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accounts payable</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,696,449</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Accrued expenses and other liabilities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,631,205</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Deferred revenue</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,671,916</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Due to Gilat Satellite Networks, Ltd. and Spacenet, Inc.</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,695,971</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Due to EchoStar</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Due to Employees</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,934</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net cash used in operating activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(48,155,975</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	<B>Investing activities:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Increase in restricted cash and cash equivalents</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(89,600,000</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Purchases of property and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(9,541,220</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net cash used in investing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(99,141,220</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	<B>Financing activities:</B></FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Proceeds from issuance of Common Stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,857,208</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Proceeds from issuance of Preferred Stock</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">123,142,802</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Proceeds from issuance of term loan, net of debt issuance costs
	totaling $400,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89,600,000</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Net cash provided by financing activities</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">215,600,010</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Net increase in cash</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,302,815</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cash at beginning of period</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="4" align="left" valign="top"><FONT size="2">
	Cash at end of period</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">68,302,815</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<I>See accompanying notes.</I>

<P align="center">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>STARBAND COMMUNICATIONS INC.</B>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS</B>

<P align="left"><B>1.&nbsp;&nbsp;Organization and Business Activities</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Principal Business</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
StarBand Communications Inc. (the &#147;Company&#148; or
&#147;StarBand&#148;), formerly known as Gilat-to-Home, Inc.,
provides two-way, always-on, high-speed Internet access to
residential and small office/ home office customers available
virtually everywhere in North America via satellite. The StarBand
 network provides high-capacity, high-speed transmission of data,
 audio, and video. The Company offers stand-alone Internet access
 as well as a bundled product with a direct broadcast satellite
(&#147;DBS&#148;) subscription television service. The Company is
 in the development stage and has not commenced full operations
at August&nbsp;31, 2000. The Company believes that it operates in
 one operating segment.

<P align="left"><B>&nbsp;&nbsp;</B><I>Organization and Formation</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company, a Delaware corporation located in McLean, Virginia,
was founded on January&nbsp;11, 2000 by Spacenet, Inc.
(&#147;Spacenet&#148;), a wholly owned subsidiary of Gilat
Satellite Networks (&#147;Gilat&#148;). On February&nbsp;15,
2000, Microsoft Corporation (&#147;Microsoft&#148;), through its
wholly owned subsidiary Microsoft G-Holdings, Inc., entered into
certain investment and operating agreements with the Company. On
March&nbsp;30, 2000, EchoStar Communications Corporation
(&#147;EchoStar&#148;) entered into certain investment and
operating agreements with the Company and ING Furman Selz
Investments (&#147;ING&#148;) entered into an investment
agreement with the Company. Contemporaneously with the investment
 agreements, the Company entered into certain supply and
operating agreements with Gilat, Spacenet, Microsoft, and
EchoStar that provide the Company with access to consumer brand
names, proprietary technology, retail distribution and supply
channels, as more fully described in Note 3.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The network and related technology utilized by the Company to
provide Internet access service was developed by Gilat, a
provider of satellite-based networks. On April&nbsp;1, 2000,
Gilat, through Spacenet, contributed to the Company the exclusive
 North American rights for its high-speed satellite Internet
service for an initial term of five years, for use in the
residential and small office/ home office market segments, as
well as management, employees and technological expertise,
including the operation of corporate satellite networks, in
exchange for mandatorily redeemable convertible Series&nbsp;B
convertible preferred stock and Common Stock. Pursuant to Staff
Accounting Bulletin No.&nbsp;48, <I>Valuation of Assets Acquired
From Promoters and Stockholders,</I> the Company recorded this
transfer at Gilat&#146;s historical cost basis of $0.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company provides transmission-only Internet services and
second-level help desk services to Microsoft. Microsoft markets
an MSN-branded high speed access service through direct customer
solicitation, a RadioShack retail distribution network alliance,
and other retail organizations. The Company&#146;s satellite
based service enables Microsoft to deliver multimedia content and
 e-commerce services to its subscribers. Microsoft invested
$50&nbsp;million on April&nbsp;13, 2000 in exchange for
mandatorily redeemable convertible Series&nbsp;A Preferred Stock
and the Company&#146;s Common Stock, par value $0.05 (the
&#147;Common Stock&#148;).

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company offers its service on both a stand alone basis and
bundled with DISH Network&#146;s DBS service. EchoStar is also an
 international supplier of digital satellite receivers and a
provider of other satellite services. EchoStar invested
$50&nbsp;million on April&nbsp;11, 2000 in exchange for
mandatorily redeemable convertible Series&nbsp;A-1 Preferred
Stock and Common Stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ING invested $25&nbsp;million on April&nbsp;11, 2000 in exchange
for mandatorily redeemable convertible Series&nbsp;A-2 Preferred
Stock and Common Stock. In addition, certain other parties
affiliated with Gilat invested $1&nbsp;million on May&nbsp;3,
2000 in exchange for Common Stock.

<P align="center">F-7
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Significant Risk and Uncertainties</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is in the development stage during which time it has
generated negative cash flows from operations and a net loss. The
 Company expects negative cash flows from operations and net
losses to continue as it builds its subscriber base. The ability
to generate positive cash flow from operations in the future is
dependent upon many factors, including general economic
conditions, the level of market acceptance for the Company&#146;s
 services, and the degree of competition encountered by the
Company. Additional funding may be required to develop
operations; however, there can be no assurance when or if future
operations of the Company will be successful or that further
financing will be available with terms acceptable to the Company,
 or at all.

<P align="left"><B>2.&nbsp;&nbsp;Summary of Significant Accounting Policies</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Use of Estimates</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
 the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.

<P align="left"><B>&nbsp;&nbsp;</B><I>Cash and Cash Equivalents</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be
cash equivalents except for restricted cash and cash equivalents,

<P align="left"><B>&nbsp;&nbsp;</B><I>Inventory</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventory primarily consists of uninstalled customer premises
equipment (&#147;CPE&#148;), including personal computers,
satellite modem cards, and dish antenna units and is stated at
the lower of cost or market value. Substantially all of the
Company&#146;s inventory represents finished goods. Cost is
determined using the moving weighted-average cost method.

<P align="left"><B>&nbsp;&nbsp;</B><I>Restricted Cash and Cash Equivalents</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A lending institution holds restricted cash and cash equivalents
in connection with the $90&nbsp;million term loan, as more fully
described in Note&nbsp;7. The funds are available to the Company
pursuant to specific approval by the lenders&#146; agent after
the Company has exhausted all equity funds raised.

<P align="left"><B>&nbsp;&nbsp;</B><I>Property and Equipment</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment includes computers and electronic
equipment, office furniture and equipment, and leasehold
improvements and are stated at historical cost. The costs of
additions and leasehold improvements are capitalized, while
maintenance and repairs are expensed as incurred. Property and
equipment are depreciated using the straight-line method over
estimated useful lives of three to seven years. Leasehold
improvements are amortized over the shorter of the lease term or
the estimated useful life of the asset.

<P align="left"><B>&nbsp;&nbsp;</B><I>Internal Use Software</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company follows the provisions of Statement of Position 98-1,
 <I>Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use </I>(&#147;SOP&nbsp;98-1&#148;) that
requires the capitalization and amortization of certain costs
incurred in connection with developing or obtaining internal use
software.

<P align="center">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
The Company capitalized approximately $4.1&nbsp;million related
to internal use software that is being amortized over three
years. Accumulated amortization was approximately
$0.4&nbsp;million at August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Impairment of Long Lived Assets</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company assesses the impairment of long-lived assets,
including intangible assets, in accordance with Statement of
Financial Accounting Standards No.&nbsp;121, <I>Accounting for
the Impairment of Long Lived Assets and for Long Lived Assets to
be Disposed of </I>(&#147;SFAS No.&nbsp;121&#148;). SFAS
No.&nbsp;121 requires impairment losses to be recognized for
long-lived assets when indicators of impairment are present and
the undiscounted cash flows are not sufficient to recover the
assets&#146; carrying amounts. Intangibles are also evaluated for
 recoverability by estimating the projected undiscounted cash
flows, excluding interest, of the related business activities.
The impairment loss of these assets is measured by comparing the
carrying amount of the asset to its fair value less disposal
costs with any excess of carrying value over fair value written
off. Fair value is based on market prices where available, an
estimate of market value, or various valuation techniques
including discounted cash flow.

<P align="left"><B>&nbsp;&nbsp;</B><I>Financial Instruments</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying value of the Company&#146;s financial instruments
including cash and cash equivalents, accounts receivable,
restricted cash and cash equivalents, accounts payable, accrued
expenses and other liabilities, and term loan approximate fair
value. Management estimates that the carrying value of the
Company&#146;s Series&nbsp;A, Series&nbsp;A-1, Series&nbsp;A-2,
and Series&nbsp;B mandatorily redeemable convertible Preferred
Stock approximates fair value at August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Concentrations of Credit Risk</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and restricted cash and cash equivalents. The Company
 deposits its cash and cash equivalents and restricted cash and
cash equivalents with high credit quality financial institutions.

<P align="left"><B>&nbsp;&nbsp;</B><I>Revenue and Expense Recognition</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s revenues are derived from fees from customers
for Internet access and the related sale and installation of CPE
necessary to provide such access. These services are primarily
distributed through joint marketing agreements with Microsoft
through its MSN Internet portal and independent retail
distribution network, EchoStar through its direct broadcast
satellite and independent dealer networks, and, to a lesser
extent, through internally generated customers. Substantially all
 customers execute subscription agreements with either the
Company or Microsoft specifying the term of the agreement, fees
payable, if any, for monthly Internet access, CPE necessary to
receive the Internet access service, and installation services.
Revenue derived from services offered to subscribers through the
MSN network are billed to and collected from Microsoft. The
Company does not have direct billing responsibilities or
collection risk for each subscriber serviced through the MSN
network. The Company does have billing responsibilities and
collection risk related to each subscriber executing a
subscription agreement through the EchoStar network or internally
 generated customer.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers the sale and installation of CPE and the
Internet access to be a multi-element, single arrangement with
the subscriber. Total revenue from the arrangement is recognized
as earned on a straight-line basis over the service period that
is defined as the lesser of the contractual term of the
subscription agreement or expected life of the subscriber. The
Company normally commences the recognition of revenue upon
activation of the Internet access. Accordingly, revenue and costs
 of CPE sold

<P align="center">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
are deferred until customer service agreements are entered into
and the CPE is installed and access is provided and is then
recognized over the service period as defined above. Certain
service agreements include clauses whereby the subscriber has the
 right to cancel the service without substantial penalty during
the initial service period. Revenue attributable to service
agreements containing cancellation clauses is deferred and
recognized on a straight-line basis over the service period
remaining subsequent to risk free cancellation period.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The costs of the CPE and installation are generally capitalized
and recognized as cost of sales on a straight-line basis over the
 service period. However, through August&nbsp;31, 2000, such
costs have been expensed to the extent they exceed deferred
access revenue because realization of future cash flows in
amounts sufficient to ensure recoverability of such costs is not
assured. During the development stage, the Company ran a pilot
program in which a significant number of subscribers received CPE
 at no charge.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other subscriber acquisition costs, which consist principally of
commissions payable to the Company&#146;s distribution channels,
are expensed as incurred.

<P align="left"><B>&nbsp;&nbsp;</B><I>Sources of Supplies</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company currently leases transponder space from two
third-party suppliers. These contracts generally provide the
Company with non-preemptible transponder service; however, they
may not provide for alternative service in the event of an
anomaly or failure. Management believes alternative satellite
capacity can be found if such events occur. The Company also
relies on Gilat and Spacenet for a majority of the technology
necessary to operate the network, including certain CPE as well
as research and development activities, as more fully described
in Note&nbsp;3. Any disruption of these services could have a
material adverse effect on the Company&#146;s operating results.

<P align="left"><B>&nbsp;&nbsp;</B><I>Significant Customers and Suppliers</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Substantially all inventory was purchased from its three largest
suppliers, including Gilat, during the period from
January&nbsp;11, 2000 (inception)&nbsp;through August&nbsp;31,
2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Advertising Costs</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All advertising and promotion costs are expensed as incurred. The
 Company considers all direct mail, telephone, print, video,
audio, and similar costs associated with solicitation of new
subscribers and brand awareness as advertising costs. The Company
 expensed approximately $14.8&nbsp;million as advertising and
promotion costs during the period from January&nbsp;11, 2000
(inception)&nbsp;through August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Research and Development Costs</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development costs are expensed as incurred. Research
 and development costs were approximately $1.7&nbsp;million
during the period from January&nbsp;11, 2000
(inception)&nbsp;through August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Stock Based Compensation</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October&nbsp;1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation&#148; (&#147;SFAS
No.&nbsp;123&#148;). SFAS No.&nbsp;123 allows companies to
account for stock-based compensation under the provisions of SFAS
 No.&nbsp;123 or under the provisions of Accounting Principles
Board Opinion No.&nbsp;25 (&#147;APB No.&nbsp;25&#148;), but
requires pro forma disclosures in the footnotes to the financial
statements as if the measurement provisions of SFAS No.&nbsp;123
had been adopted. The Company accounts for its stock-based
compensation in accordance with APB No.&nbsp;25.

<P align="center">F-10

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Basic and Diluted Loss per Share</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic and diluted loss per share is calculated by dividing the
net loss attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the
period. Convertible preferred stock, stock options, warrants, and
 other potentially dilutive securities have been excluded from
the calculation of diluted loss per share for all periods the
Company reports a net loss since their effect is anti-dilutive.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average number of shares of common stock used in the
 calculation of pro forma basic and diluted loss per share
assumes the mandatorily redeemable convertible preferred stock
plus accrued dividends were converted to common stock on the
actual issuance date of the related preferred stock. Mandatorily
redeemable Series&nbsp;C and D Preferred Stock are not included
in the pro forma basic and diluted weighted average number of
shares because its issuance and conversion to common stock is not
 dependent upon an initial public offering.

<P align="left"><B>&nbsp;&nbsp;</B><I>Statement of Cash Flows</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Non-cash investing and financing activities and supplemental cash
 flow information includes the acquisition of property and
equipment financed by accounts payable and due to Gilat of
approximately $4.9&nbsp;million and the issuance of mandatorily
redeemable convertible Series&nbsp;B Preferred Stock and Common
Stock to Spacenet in exchange for intellectual property rights
and non-compete agreements, as more fully described in Note 3.
The Company also issued warrants in connection with the term
loan, as more fully described in Notes&nbsp;7 and 9. In addition,
 the Company recognized 12% cumulative dividends and accretion
attributable to its convertible Series&nbsp;A, A-1, A-2, and B
Preferred Stock.

<P align="left"><B>&nbsp;&nbsp;</B><I>Recent Pronouncements</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December&nbsp;1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No.&nbsp;101, <I>Revenue
Recognition in Financial Statements </I>(&#147;SAB
No.&nbsp;101&#148;). SAB No.&nbsp;101 is effective in the fiscal
quarter commencing October&nbsp;1, 2000 and provides
clarification with regard to existing authoritative guidance with
 regard to the manner and timing under which revenue is
recognized. The Company elected to adopt the guidance provided by
 SAB No.&nbsp;101 effective with its commencement of operations.
Future interpretations of SAB No.&nbsp;101 will be evaluated upon
 issuance and are not expected to have a material effect on
future operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;16, 2000, the Emerging Issues Task Force issued
EITF&nbsp;99-19, <I>Recording Revenue Gross as a Principal versus
 Net as an Agent</I>. The EITF discusses various indicators that
a company would use in determining whether to record revenue on a
 gross versus net basis. The Company considered these indicators
in developing its revenue recognition policies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS No.&nbsp;133, &#147;Accounting for Derivative Instruments
and Hedging Activities&#148; requires companies to record
derivatives on the balance sheet as assets or liabilities,
measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives are accounted for
depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. SFAS
No.&nbsp;133 is effective for fiscal years beginning after
June&nbsp;15, 2000. The Company believes the adoption of SFAS
No.&nbsp;133 will not have a material effect on the financial
statements.

<P align="center">F-11

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left"><B>3.&nbsp;&nbsp;Related Party Transactions</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Broadband Access Services Supply Agreement
</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into a Broadband Access Services Supply
Agreement (&#147;Supply Agreement&#148;) with Gilat, Spacenet,
and Microsoft on February&nbsp;15, 2000 whereby the Company will
provide broadband access via satellite to and from the Microsoft
MSN Portal and the Internet for use by Microsoft customers in
North America with a term of four years. The agreement renews
automatically for additional one-year terms unless terminated by
either the Company or MSN. The agreement requires the Company to
achieve five milestones during the initial term relating
primarily to the Company fulfilling production levels for
StarBand modems, achieving minimum levels of MSN subscribers and
other technical matters set forth in the agreement. MSN&#146;s
commitment to the agreement is contingent upon the Company
meeting these milestones. To date, the Company has not completed
any of the milestones set forth in this agreement. Upon
completion of the milestones, MSN will purchase StarBand
modem-based systems in predetermined quantities and at
predetermined prices for use as part of a high-speed Internet
access offering by MSN. The Company will supply MSN with StarBand
 modems in accordance with a specified production schedule. MSN
will provide a subsidy for a portion of the cost of the customer
premises equipment for MSN subscribers. Pursuant to this
agreement, the Company agreed to pay MSN a one time fee of
$1.25&nbsp;million to offset a portion of MSN&#146;s subscriber
acquisition costs. Such amount was accrued at August&nbsp;31,
2000 and will reduce revenues as MSN provides the CPE subsidies.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement also sets the monthly per subscriber fee the
Company will collect from MSN, and the minimum monthly fees that
MSN will collect from its subscribers. The Company also granted
MSN most favored customer status and agreed, for a limited time,
to refrain from providing its service to a number of Internet
service providers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March&nbsp;2000, Gilat entered into a performance guarantee
agreement pursuant to which Gilat unconditionally and irrevocably
 guaranteed to MSN the Company&#146;s compliance with various
material obligations under the Supply Agreement and related
operative agreements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The parties have also agreed to certain non-compete arrangements
for specific periods of time limiting the counter-parties ability
 to enter into similar arrangements with each other competitors.
Microsoft will also provide marketing to its current customers
with no reimbursements from the Company pursuant to the Supply
Agreement.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company made no payments to and received no payments from
Microsoft attributable to the Supply Agreement during the period
from January&nbsp;11, 2000 (inception)&nbsp;through
August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Gilat Supply Agreements</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into a five year supply agreement with Gilat,
 Spacenet, and Microsoft on February&nbsp;15, 2000 (&#147;Gilat
Supply Agreement&#148;). The Gilat Supply Agreement sets forth
the commercial terms under which the Company offers StarBand
service outside the Company&#146;s arrangement with MSN, and the
terms under which Gilat and Spacenet provide the Company with
licenses, intellectual property and satellite capacity on the GE
Americom GE4 satellite for that purpose. In addition, Spacenet
and Gilat have agreed not to offer services that compete with the
 Company&#146;s service to residential and small office/home
office customers throughout North America.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to this agreement, the Company assumed Spacenet&#146;s
monthly payment obligations for the GE4 satellite capacity and
accrued $7.2&nbsp;million due to Spacenet as reimbursement for a
$7.2&nbsp;million payment made by Spacenet to reserve the GE4
satellite capacity.

<P align="center">F-12

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, Gilat and Spacenet are required to provide certain
services, network equipment and hubs, and CPE at fixed prices
through the term of the Gilat Supply Agreement. Gilat is also
required to provide all additional research and development
necessary to create the next generation of CPE units. The terms
of these commitments will be covered by the Master Supply and
Services Agreement discussed below. In addition, Gilat provided
certain performance guarantees to Microsoft and EchoStar. This
agreement terminates upon termination of the Supply Agreement.

<P align="left"><B>&nbsp;&nbsp;</B><I>Telecommunication Services Agreement</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into a one-year telecommunications services
agreement with Spacenet dated February&nbsp;15, 2000, which is
renewable for up to four years at the option of Microsoft. MSN is
 the third-party beneficiary of this agreement. Under this
agreement, Spacenet provides and operates telecommunications
facilities and services, including access to Spacenet&#146;s
transmission and switching facilities, which the Company needs to
 fulfill its obligations to MSN. The Company is obligated to
reimburse Spacenet for actual direct costs, including employee
costs, without mark-up or profit pursuant to the Services
Agreement. In exchange for these technologies, and certain other
rights, the Company issued 9,999,989&nbsp;shares of its common
stock and 140,111,199&nbsp;shares of its Series&nbsp;B
convertible preferred stock to Spacenet.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company incurred approximately $95.0&nbsp;million of
reimbursable expenses and capital expenditures attributable to
the Gilat Supply Agreements and the Telecommunications Services
Agreement and paid approximately $20.0&nbsp;million to Gilat and
$38.7&nbsp;million to Spacenet attributable to operations
pursuant to these Agreements during the period from
January&nbsp;11, 2000 (inception)&nbsp;through August&nbsp;31,
2000. The Company has accrued the remaining $36.3&nbsp;million as
 due to Gilat and Spacenet at August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Master Supply and Services Agreement</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to enter into a four-year master supply and
services agreement with Gilat and Spacenet that will replace the
existing Gilat Supply Agreements. This agreement will
automatically renew for two-year periods unless terminated by any
 party. Pricing terms, however, will be renegotiated every two
years. Under this agreement, Gilat and Spacenet will provide the
Company with the equipment, software and services needed in its
business, including: customer premises equipment, network
operations equipment, software necessary for the network to
operate, and the multicast system; and consulting and
administrative services, including information technology,
marketing, financial, and legal services for a transition period
until the Company establishes its own systems and processes. The
Company expects the total cost to be approximately
$2.1&nbsp;million per calendar quarter, which the Company
believes approximates the fair value for such services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat will also provide research and development support in
connection with hardware, equipment and software maintenance that
 arises out of this agreement. During the first two years of the
agreement, the Company will pay Gilat $1.0&nbsp;million per
calendar quarter to assist with basic ongoing research and
development expenses which the Company believes approximates fair
 value for such services. Beginning in 2001, the Company will
share with Gilat product development costs focused exclusively on
 reducing the cost to manufacture the next-generation StarBand
modem.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company will purchase most of the equipment and services
necessary for its business exclusively from Gilat and Spacenet,
who have granted the Company an exclusive license to use the
technology required to provide the service to customers in the
United States and Canada. The Company will pay Gilat various
one-time fees in connection with its assistance in the
preparation of our business plan, product plan, and training
program which is expected to be on a cost reimbursement basis.

<P align="center">F-13
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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Spacenet granted the Company a sublicense to use its enterprise
resource planning system and the software for the Company to
perform back-office functions. In the future, the Company will
provide Spacenet with equipment and services that Spacenet may
then re-sell to various enterprise and small office/home office
non-residential customers, subject to Spacenet&#146;s recognition
 of the Company&#146;s exclusive marketing rights and compliance
with the Company&#146;s guidelines.

<P align="left"><B>&nbsp;&nbsp;</B><I>Memorandum of Agreement</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company, Gilat and EchoStar entered into a memorandum of
agreement on February&nbsp;22, 2000 setting forth the terms under
 which the Company will jointly market its high-speed Internet
access service with EchoStar&#146;s DISH DBS television service.
The agreement with EchoStar expires on March&nbsp;31, 2001.
EchoStar will market the Company&#146;s service directly to their
 customers and through their DISH retailers. In exchange, the
Company agreed to market DISH&#146;s satellite television
programming service together with its high-speed Internet access
service. EchoStar has made no commitments and is subject to no
penalties if it ceases to sell the Company&#146;s services.
EchoStar and Gilat are also currently conducting research and
development of a product to provide the Company&#146;s Internet
service through a TV-centric platform in the future.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of this memorandum of agreement, the Company will
 pay EchoStar activation fees and residual commissions for each
StarBand subscriber the Company acquires through the DISH retail
sales channel. The Company will provide all customer premises
equipment and EchoStar will provide the initial point of contact
for service calls. DISH Network Service Corporation, an EchoStar
affiliate, will install the equipment and EchoStar will split any
 associated costs of such installation with the Company. The
Company will pay incentive fees to EchoStar&#146;s independent
installers and DISH retailers who sell its equipment. The Company
 will also market EchoStar&#146;s DISH direct broadcast satellite
 television services to StarBand subscribers not acquired through
 EchoStar for which EchoStar will pay the Company commissions.
This memorandum of agreement contains provisions which restrict
the Company and EchoStar from entering into co-marketing
relationships with competitors of each other for a limited time.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company shipped approximately $1&nbsp;million of CPE to
EchoStar pursuant to this memorandum of agreement during the
period from January&nbsp;11, 2000 (inception)&nbsp;through
August&nbsp;31, 2000. The Company had a net receivable of
approximately $1&nbsp;million from EchoStar at August&nbsp;31,
2000.

<P align="left"><B>4.&nbsp;&nbsp;Accounts Receivable</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s accounts receivable consist of amounts due
from subscribers and its distribution alliance partners
attributable to CPE, installations, and monthly access fees as
follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="74%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Due from EchoStar&nbsp;&#151; CPE</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,028,439</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other CPE</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">154,871</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Installation services</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">59,373</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Other</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,367,683</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Allowance for doubtful accounts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(82,385</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,285,298</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">F-14

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company provides an allowance for accounts receivable amounts
 deemed uncollectible as determined by management. Activity in
the allowance for doubtful accounts was as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="73%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="12%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;11, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(inception)&nbsp;through</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August&nbsp;31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Beginning balance</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Charge-offs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Provision for bad debts</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">82,385</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Ending balance</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">82,385</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>5.&nbsp;&nbsp;Property and Equipment</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment consist of the following:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="74%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Computers and electronic equipment</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,041,548</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Machinery and equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,380,767</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Furniture, fixtures, and office equipment</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">648,072</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Software</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,121,740</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Leasehold improvements</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,211,194</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,403,321</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Less: accumulated depreciation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(741,962</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Net property and equipment</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,661,359</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Repairs and maintenance costs were approximately $66,288 during
the period from January&nbsp;11, 2000 (inception)&nbsp;to
August&nbsp;31, 2000.

<P align="left"><B>6.&nbsp;&nbsp;Other Assets</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other assets include a lease reservation fee of
$7.2&nbsp;million, CPE subsidies advanced to Microsoft of
$1.25&nbsp;million, and debt issuance costs aggregating
$1,991,934 less accumulated amortization of $75,287 at
August&nbsp;31, 2000. Lease reservation fees for satellite
transponder capacity are amortized on a straight-line basis over
the shorter of the life of the lease or upon forfeiture of
transponder space. The CPE subsidies advanced to Microsoft will
be amortized on a dollar for dollar basis as the subsidies are
paid to the Company from Microsoft for such equipment. The debt
issuance costs are amortized over the period of the term loan as
an additional component of interest expense using the effective
interest method.

<P align="left"><B>7.&nbsp;&nbsp;Term Loan</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into a senior debt facility on June&nbsp;26,
2000 with Bank Leumi USA, as agent and lender, under which Bank
Leumi USA made a term loan to us in principal amount of
$90&nbsp;million. The senior debt facility was amended on
September&nbsp;8, 2000, when the First International Bank of
Israel and the Israel Discount Bank Ltd. joined the agreement as
additional lenders and provided loans of $30&nbsp;million each,
bringing the total amount of financing to $150&nbsp;million. All
outstanding amounts are currently held in interest-bearing
accounts. All proceeds raised in the Company&#146;s equity
placements with Microsoft, EchoStar, ING Furman Selz Investments
and the other investors must be expanded to fund our business
operations prior to the proceeds from the senior debt facility
being available to the Company to

<P align="center">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
fund operations or capital expenditures. The initial minimum draw
 of term loan proceeds is $5&nbsp;million and $1&nbsp;million
increments in excess thereof. The Company has also entered into
ancillary security agreements with the lenders to provide them
with collateral for the loan. Under the security agreements, the
Company has granted to Bank Leumi USA, as agent for the lenders,
a security interest in substantially all of its assets, except
for its contractual rights to receive capacity and other services
 under its transponder lease agreements. The term loan will
become due and payable on June&nbsp;26, 2003, with interest
payable quarterly in arrears. As of August&nbsp;31, 2000, the
entire loan amount of $90&nbsp;million was bearing interest at
LIBOR plus 0.75% (7.5625% at August&nbsp;31, 2000). The interest
rate will rise to LIBOR plus 1.5% after June&nbsp;26, 2002.
Subject to certain conditions, the Company is permitted to
convert the LIBOR loan to a base rate loan, which would bear
interest at the higher of the prime rate and the Federal Funds
Rate plus 0.5% (10.0% at August&nbsp;31, 2000). The Company may
prepay the term loan, in whole or in part, without premium or
penalty after June&nbsp;26, 2001. In the event the Company
receives an aggregate amount of proceeds in excess of
$50&nbsp;million in a public offering of capital stock or at
least $10&nbsp;million in insurance proceeds or from the sale of
any asset, the Company is required to prepay the term loan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the term loan, the Company also issued each of
 the lenders warrants to purchase its Series&nbsp;C convertible
preferred stock and a right to acquire Series&nbsp;D convertible
preferred stock in exchange for $10&nbsp;million of the principal
 amount of the loan. This right to acquire Series&nbsp;D
preferred stock expired on September&nbsp;9, 2000. If the
Series&nbsp;C convertible preferred shares were converted into
common stock prior to June&nbsp;26, 2002, the lenders would own
in the aggregate approximately 2% of the Company&#146;s fully
diluted common stock. If the Series&nbsp;C convertible preferred
shares were converted into common stock after August&nbsp;7,
2002, the lenders would own in the aggregate approximately 2.25%
of the Company&#146;s fully diluted common stock. The
Series&nbsp;C convertible preferred stock warrants were estimated
 to have a fair value of $9.2&nbsp;million and was recorded as an
 original issuance debt discount and is being amortized over the
period of the term loan as a component of interest expense. As of
 August&nbsp;31, 2000, if the Series&nbsp;C convertible preferred
 stock was converted into common stock, the lenders would own, in
 the aggregate, approximately 1,873,477&nbsp;shares.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a condition of the term loan, the Company is required to
provide financial reports and other information to the lenders
and maintain insurance, and is not permitted to incur additional
bank loans and certain other types of indebtedness. The Company
is also not permitted to exceed stated limits on aggregate
capital expenditures without the prior written consent of the
lenders.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Events of default include non-payment, breach of obligation,
misrepresentation, invalidity or illegality of documents,
insolvency or insolvency proceedings, change of control, and
breach or termination of material contracts.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Series&nbsp;C and D convertible preferred
stock is more fully described in Note&nbsp;9.

<P align="left"><B>8.&nbsp;&nbsp;Income Taxes</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for taxes under Statement of Financial
Accounting Standards No.&nbsp;109, <I>Accounting for Income Taxes
 </I>(SFAS No.&nbsp;109). Under SFAS No. 109, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and
liabilities using enacted rates expected to be in effect during
the year in which the differences reverse.

<P align="center">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The difference between amounts computed by applying the statutory
 federal income tax rates to the net loss and total income tax
benefit were as follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="74%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="11%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Period from</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>January&nbsp;11, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>(inception) through</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Federal tax benefit at statutory rates</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(23,396,946</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	State income taxes, net of federal benefit</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,607,088</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Change in valuation allowance</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,004,034</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting and the amounts for income
tax purposes. The significant components of the deferred tax
asset is as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="77%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>August 31, 2000</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net operating loss carryforwards</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,004,034</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Less valuation allowance</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(26,004,034</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Net deferred tax assets</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company had net operating losses of approximately
$66.8&nbsp;million at August&nbsp;31, 2000. The timing and manner
 in which the operating loss carryforward may be utilized by the
Company will be limited to the Company&#146;s ability to generate
 future taxable income. Current net operating loss carryforwards
will begin expiring in 2021. As the Company has not generated
earnings and no assurance can be made of future earnings needed
to utilize these net operating losses, a valuation allowance in
the amount of the deferred tax asset has been recorded.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company paid no income taxes during the period from
January&nbsp;11, 2000 (inception)&nbsp;through August&nbsp;31,
2000.

<P align="left"><B>9.&nbsp;&nbsp;Preferred Stock</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;1, 2000, the Company issued 140,111,199 shares of
its mandatorily redeemable convertible Series&nbsp;B Preferred
Stock (&#147;Series&nbsp;B Preferred&#148;) to Spacenet in
exchange for certain assets, intellectual property rights and
licenses. Pursuant to Staff Accounting Bulletin No.&nbsp;48, <I>
Valuation of Assets Acquired From Promoters and Shareholders,</I>
 the Company recorded the transfer at Gilat&#146;s historical
cost basis of $0. The Series&nbsp;B Preferred is convertible into
 common shares at 5:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering. The Series&nbsp;B Preferred has no voting rights other
than matters subject to shareholder votes that would dilute or
reduce the rights or privileges of the Series&nbsp;B Preferred.
Dividends accrue at 12% per annum on a cumulative basis and are
payable in additional shares of Series&nbsp;B Preferred. In
addition, the holder of the Series&nbsp;B Preferred has
liquidation preferences in the event of a dissolution or similar
termination of the Company equal to $1.00 per share of
Series&nbsp;B Preferred plus any accrued and unpaid dividends.
The Series&nbsp;B Preferred holder has the right to require the
Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is payable in cash, at
$1.00 per share of Series&nbsp;B Preferred plus any accrued and
unpaid dividends and expires upon consummation of an initial
public offering of the Company&#146;s common stock with gross
proceeds to the

<P align="center">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
Company of at least $40&nbsp;million. As of August 31, 2000, the
redemption value of the Series&nbsp;B Preferred was approximately
 $147&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;13, 2000, the Company sold 49,228,259 shares of its
 mandatorily redeemable convertible Series&nbsp;A Preferred Stock
 (&#147;Series&nbsp;A Preferred&#148;) to Microsoft and
affiliates for $1.00 per share. The Series&nbsp;A Preferred is
convertible into common shares at 5:1 at the election of the
holder and automatically converts upon consummation of an initial
 public offering. The Series&nbsp;A Preferred has no voting
rights other than matters subject to shareholder votes that would
 dilute or reduce the rights or privileges of the Series&nbsp;A
Preferred. Dividends accrue at 12% per annum on a cumulative
basis and are payable in additional shares of Series&nbsp;A
Preferred. In addition, holder of the Series&nbsp;A Preferred has
 a liquidation preference in the event of a dissolution or
similar termination of the Company equal to $1.00 per share of
Series&nbsp;A Preferred plus any accrued and unpaid dividends.
The Series&nbsp;A Preferred holder has the right to require the
Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is payable in cash, at
$1.00 per share of Series&nbsp;A Preferred plus any accrued and
unpaid dividends and expires upon consummation of an initial
public offering of the Company&#146;s common stock with gross
proceeds to the Company of at least $40&nbsp;million. In the
event the Series&nbsp;A Preferred holder receives a valuation of
the Company equal to or in excess of $2&nbsp;billion by a
nationally recognized investment bank, the holder has the right
to require the Company to repurchase 100% of the Series&nbsp;A
Preferred and any common stock held at its fully diluted pro rata
 portion of such valuation. This valuation put expires upon
consummation of an initial public offering of the Company&#146;s
common stock with gross proceeds to the Company of at least
$40&nbsp;million. In the event the Company has not consummated an
 initial public offering of its common stock prior to
February&nbsp;1, 2003, the Series&nbsp;A Preferred holder has the
 right to require the Company to repurchase 50% of the
Series&nbsp;A Preferred and any common stock held on such date,
35% of the Series&nbsp;A Preferred and Common Stock held 12
months thereafter, and 15% of the Series&nbsp;A Preferred and
common stock held on February&nbsp;1, 2005 at an independently
appraised fair value of the shares on such date as determined by
a nationally recognized investment bank. In addition, upon breach
 by the Company, Spacenet, or Gilat under the Supply Agreement,
Gilat Supply Agreement, or the Services Agreement, the holder has
 the right to require the Company to repurchase 100% of the
Series&nbsp;A Preferred and any Common Stock held at fair market
value based on the closing market price of such securities or
independent appraisal by a nationally recognized investment bank.
 In August 2000, the Company, Microsoft and Spacenet entered into
 an agreement whereby these redemption obligations were assigned
from the Company to Spacenet and Spacenet accepted such
assignment. As the Articles of Incorporation related to the
Series&nbsp;A Preferred contain redemption obligations if an
Event of Default occurs, the Series&nbsp;A Preferred is
classified with the mandatorily redeemable convertible preferred
stock. The redemption value of the Series&nbsp;A Preferred is
approximately $51.5&nbsp;million at August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;11, 2000, the Company sold 49,228,259 shares of its
 mandatorily redeemable convertible Series&nbsp;A-1 Preferred
Stock (&#147;Series&nbsp;A-1 Preferred&#148;) to EchoStar for
$1.00 per share. The Series&nbsp;A-1 Preferred is convertible
into common shares at 5:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering. The Series&nbsp;A-1 Preferred has no voting rights
other than matters subject to shareholder votes that would dilute
 or reduce the rights or privileges of the Series&nbsp;A-1
Preferred. Dividends accrue at 12% per annum on a cumulative
basis and are payable in additional shares of Series&nbsp;A-1
Preferred. In addition, holder of the Series&nbsp;A-1 Preferred
has a liquidation preference in the event of a dissolution or
similar termination of the Company equal to $1.00 per share of
Series&nbsp;A-1 Preferred plus any accrued and unpaid dividends.
The Series&nbsp;A-1 Preferred holder has the right to require the
 Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is to be settled, in
cash, at $1.00 per share of Series&nbsp;A-1 Preferred plus any
accrued and unpaid dividends and expires upon consummation

<P align="center">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
of an initial public offering of the Company&#146;s common stock
with gross proceeds to the Company of at least $40&nbsp;million.
The redemption value of the Series&nbsp;A-1 Preferred is
approximately $51.5&nbsp;million at August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;11, 2000, the Company sold 24,686,284 shares of its
 mandatorily redeemable convertible Series&nbsp;A-2 Preferred
Stock (&#147;Series&nbsp;A-2 Preferred&#148;) to ING for $1.00
per share. The Series&nbsp;A-2 Preferred is convertible into
common shares at 6.15:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering. The Series&nbsp;A-2 Preferred has no voting rights
other than matters subject to shareholder votes that would dilute
 or reduce the rights or privileges of the Series&nbsp;A-2
Preferred. Dividends accrue at 12% per annum on a cumulative
basis and are payable in additional shares of Series&nbsp;A-2
Preferred. In addition, holders of the Series&nbsp;A-2 Preferred
have liquidation preferences in the event of a dissolution or
similar termination of the Company equal to $1.00 per share of
Series&nbsp;A-2 Preferred plus any accrued and unpaid dividends.
The Series&nbsp;A-2 Preferred holders have the right to require
the Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is to be settled, in
cash, at $1.00 per share of Series&nbsp;A-2 Preferred plus any
accrued and unpaid dividends and expires upon consummation of an
initial public offering of the Company&#146;s common stock with
gross proceeds to the Company of at least $40&nbsp;million. The
redemption value of the Series&nbsp;A-1 Preferred is
approximately $25.8&nbsp;million at August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;26, 2000, in connection with the $90&nbsp;million
term loan, the Company issued warrants to purchase mandatorily
redeemable convertible Series&nbsp;C Preferred Stock
(&#147;Series&nbsp;C Preferred&#148;) at an aggregate price of
$4.7&nbsp;million. If the initial measurement date (defined as
the earlier of (1)&nbsp;the date of an initial public offering
whereby the Company receives at least $40&nbsp;million or
(2)&nbsp;June&nbsp;26, 2002) occurs prior to June&nbsp;26, 2002,
the number of warrants issued is sufficient to represent a 1.20%
interest in the Company, assuming full dilution. If the initial
measurement date occurs after June&nbsp;26, 2002, the number of
warrants issued is sufficient to represent a 1.35% interest in
the Company, assuming full dilution. In connection with the term
loan, the Company issued the lenders the right to acquire
Series&nbsp;D convertible preferred stock (&#147;Series&nbsp;D
Preferred&#148;) in exchange for $10&nbsp;million of principal
amount of the term loan. This right expired on September&nbsp;9,
2000. If the right was exercised and the Series&nbsp;D Preferred
was converted into common stock, the Company would have been
required to issue 1,910,947&nbsp;shares of common stock as of
August&nbsp;31, 2000. The Series&nbsp;D Preferred has terms
substantially identical to the Series&nbsp;C Preferred.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;7, 2000, in connection with the $60&nbsp;million
term loan, the Company issued warrants to purchase Series&nbsp;C
Preferred Stock at an aggregate price of $2.3&nbsp;million. If
the initial measurement date (defined as the earlier of
(1)&nbsp;the date of an initial public offering whereby the
Company receives at least $40&nbsp;million or
(2)&nbsp;August&nbsp;7, 2002) occurs prior to August&nbsp;7,
2002, the number of warrants issued is sufficient to represent a
0.80% interest in the Company, assuming full dilution. If the
initial measurement date occurs after August&nbsp;7, 2002, the
number of warrants issued is sufficient to represent a 0.90%
interest in the Company, assuming full dilution.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Series&nbsp;C and D Preferred Stock is convertible into
common shares at 6.15:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering or exercise if after an initial public offering. The
Series&nbsp;C and D have no voting rights other than matters
subject to shareholder votes that would dilute or reduce the
rights or privileges of the Series&nbsp;C and D Preferred.
Dividends accrue at 12% per annum on a cumulative basis and are
payable in additional shares of Series&nbsp;C and D Preferred. In
 addition, holders of the Series&nbsp;C and D Preferred have
liquidation preferences in the event of a dissolution or
termination of the Company equal to $1.00 per share of
Series&nbsp;C and D Preferred plus any accrued and unpaid
dividends. The Series&nbsp;C and D Preferred holders have the
right to require the

<P align="center">F-19
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is to be settled, in
cash, at $1.00 per share of Series&nbsp;C and D Preferred plus
any accrued and unpaid dividends and expires upon consummation of
 an initial public offering and August&nbsp;7, 2005,
respectively. The warrants issued in connection with the
$90&nbsp;million term loan must be exercised on the earlier of
twenty days after an initial public offering or June&nbsp;26,
2005. The warrants issued in connection with the $60&nbsp;million
 term loan must be exercised on the earlier of twenty days after
an initial public offering or August&nbsp;7, 2005. The fair value
 of the warrants was recognized as a reduction in the face value
of the term loan based on the appraised fair value of
approximately $9.2&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Series&nbsp;A, A-1, A-2, C and D Preferred rank equal with
respect to dividends and the liquidation preference and are
senior to all other equity securities issued by the Company. The
Series&nbsp;B Preferred is junior to the Series&nbsp;A, A-1, and
A-2 Preferred but senior to all other equity securities issued by
 the Company. So long as the Series&nbsp;A, A-1, A-2, B, C and D
Preferred are outstanding, no dividends may be declared or paid
on junior securities and no junior securities may be redeemed,
purchased, or otherwise acquired by the Company.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were 54,228,893 shares of the Company&#146;s common stock
issuable to the holders of the Series&nbsp;A, A-1, A-2, and B
Preferred assuming conversion of all outstanding preferred shares
 including conversion of accrued dividends of
2,501,320&nbsp;shares at August&nbsp;31, 2000. In addition,
1,873,477 and 1,910,947 shares of the Company&#146;s Common Stock
 are issuable to the holders of the Series&nbsp;C and D
Preferred, respectively, assuming the warrants or rights were
fully exercised prior to the initial measurement date and the
resulting Series&nbsp;C and D Preferred shares were fully
converted to Common Stock.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Preferred stock dividends and accretion amounting to $15,245,439
at August&nbsp;31, 2000 includes accrued dividends of $12,722,104
 and accretion to the liquidation value for allocated equity
issuance costs of $2,523,335.

<P align="left"><B>10.&nbsp;&nbsp;Stockholders&#146; Equity</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Common Stock</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the organization and initial capitalization,
the Company issued 10 shares of Common Stock to its founder,
Spacenet, on January&nbsp;11, 2000 for $1.00 per share and,
except for the additional shares issued to Spacenet, the
following shares of common stock at $0.12 per share:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="9%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="65%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Date</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="right" valign="top"><FONT size="2">January&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	Spacenet, Inc</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="right" valign="top"><FONT size="2">April&nbsp;1, 2000</FONT></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	Spacenet, Inc</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,999,989</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="right" valign="top"><FONT size="2">April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	EchoStar Communications Corporation</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,450,022</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="right" valign="top"><FONT size="2">April&nbsp;11, 2000</FONT></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	ING Furman Selz Investments and affiliates</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,621,960</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="right" valign="top"><FONT size="2">April&nbsp;13, 2000</FONT></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	Microsoft Corporation and affiliates</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,450,022</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="right" valign="top"><FONT size="2">May&nbsp;3, 2000</FONT></TD>
	<TD></TD>
	<TD align="left" valign="bottom"><FONT size="2">
	Various investors</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,357,754</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;1, 2000 the Company issued 9,999,989 shares of
Common Stock to Spacenet in exchange for the exclusive North
American rights for Spacenet and Gilat&#146;s high-speed
satellite internet service for an initial term of five years for
use in residential and small office/ home office market segment
as well as management, employees, and technical expertise, and
certain assets pursuant to the Services Agreement as discussed in
 Notes 1 and 3. Pursuant to Staff Accounting Bulletin
No.&nbsp;48, <I>Valuation of Assets Acquired</I>

<P align="center">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
<I>From Promoters and Shareholders,</I> the Company recorded the
transfer at Spacenet&#146;s historical cost basis of $0.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Common Stock issued to Spacenet and Microsoft may receive an
annual dividend of $0.12 per share if the Company issues any
equity security other than the Series&nbsp;A, A-1, A-2, and B
Preferred with dividend rights.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has 110 million common shares authorized. As of
August&nbsp;31, 2000, excluding 15&nbsp;million shares of common
stock to be made available for the Company&#146;s stock option
plan on January&nbsp;1, 2001, the Company had 33.9 million shares
 of common stock issued and outstanding and reserved 58.1 million
 shares of common stock for issuance in connection with dividends
 and conversions of Series&nbsp;A, A-1, A-2, B, C and D
convertible preferred stock and 8&nbsp;million shares for stock
options and warrants.

<P align="left"><B>&nbsp;&nbsp;</B><I>Common Stock Warrants</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company issued warrants to purchase approximately 116,000
shares of the Company&#146;s Common Stock with an exercise price
of $2.50 per share to certain third parties during the period
from January&nbsp;11, 2000 (inception)&nbsp;through
August&nbsp;31, 2000. These warrants generally vest over a four
year period with the initial vesting occurring on the first
anniversary of the grant date and on a quarterly basis
thereafter. The Company accounts for such warrants pursuant to
the provisions of SFAS No.&nbsp;123 and recognizes related
compensation expense ratably over the vesting period, as
re-measured on each balance sheet date. The Company recorded
non-cash deferred compensation aggregating $672,160 based on the
fair value of such stock options at August&nbsp;31, 2000 using a
Black-Scholes option valuation model, which is being amortized on
 a straight line basis over the related vesting periods. There
were no warrants exercisable at August&nbsp;31, 2000.

<P align="left"><B>&nbsp;&nbsp;</B><I>Common Stock Options</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase the Company&#146;s Common Stock under its
stock option plan have been granted to employees, directors and
consultants of the Company, generally, at fair market value at
the date of grant. The options generally become exercisable over
periods of up to 4&nbsp;years and expire 10&nbsp;years from the
date of grant. There are 23&nbsp;million shares of common stock
available for issuance pursuant to the stock option plan of which
 approximately 15&nbsp;million shares become available for grant
on January&nbsp;1, 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company determines the fair value of its common stock used in
 its accounting for stock option grants based on both arms length
 equity transactions and independent valuations obtained during
the period from January 11, 2000 (inception)&nbsp;to
August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain employees qualify as common law employees as defined in
FASB Interpretation No.&nbsp;44, <I>Accounting for Certain
Transactions Involving Stock Compensation&nbsp;&#151; An
Interpretation of APB Opinion No.&nbsp;25 </I>(&#147;FIN
No.&nbsp;44&#148;). Stock options issued to these employees are
accounted for under APB 25. Certain stock options were granted to
 employees with an exercise price below the deemed fair value of
the Company&#146;s Common Stock on the measurement date. The
Company has recorded non-cash deferred compensation, based on the
 intrinsic value of such options aggregating $6,923,435, which is
 being amortized on a straight-line basis over the related
vesting periods.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company granted 471,000 stock options to with an exercise
price of $2.50 per share certain leased-employees who continue to
 vest in stock options they received from Gilat for services
performed for Gilat prior to their employment with the Company.
The stock options granted to these employees are accounted for
under SFAS No.&nbsp;123 in accordance FIN No.&nbsp;44. The
Company recorded non-cash deferred compensation aggregating
$656,680 based on the fair value of such stock options at the
measurement date

<P align="center">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">
using a Black-Scholes option valuation model, which is being
amortized on a straight line basis over the related vesting
periods.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Option activity is as follows:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="60%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted-</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Average Exercise</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Price</B></FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Outstanding at January&nbsp;11, 2000 (inception)</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Granted:</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	May&nbsp;2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,545,220</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	June&nbsp;2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">173,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	July&nbsp;2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	August&nbsp;2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,646,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total granted</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,454,720</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Exercised</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD></TD>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Cancelled</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,500</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

<TR>
	<TD colspan="3" align="left" valign="top"><FONT size="2">
	Outstanding at August&nbsp;31, 2000</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,449,220</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information about stock options outstanding at August&nbsp;31,
2000 is as follows:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="10%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="6%">&nbsp;</TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted-</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Range of</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Average</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Average</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Weighted-</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercise</B></FONT></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Remaining</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercise</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Average</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Prices</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options Outstanding</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Contractual Life</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Price</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercise Price</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,449,220</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.6 years</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.50</FONT></TD>
	<TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Black-Scholes option valuation model was developed for use in
 estimating the fair value of traded options that have no vesting
 restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions,<B> </B>including the expected stock price
volatility. Because the Company&#146;s employee stock options
have characteristics significantly different from those of traded
 options, and because changes in the subjective input assumptions
 can materially affect the fair value estimate, in
management&#146;s opinion, the existing models do not necessarily
 provide a reliable single measure of the fair value of its
employee stock options. For purposes of the pro forma disclosure,
 the estimated fair value of the options is amortized to expense
over the options&#146; vesting period.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s net loss attributable to common shareholders
would have been approximately $82.7&nbsp;million, or $(4.09) per
share, during the period from January&nbsp;11, 2000
(inception)&nbsp;to August&nbsp;31, 2000 had compensation expense
 for the Company&#146;s stock option plans been determined based
upon the fair value at the grant dates for awards under the plans
 consistent with the methodology prescribed under SFAS
No.&nbsp;123. The fair value of each option grant is estimated on
 the date of grant using the Black-Scholes option pricing model
with the following assumptions: volatility of 75%; dividend yield
 of 0%; risk-free interest rate of 6.0%; and expected life of the
 option term of 4 years. The effect of applying SFAS No.&nbsp;123
 on the net loss is not necessarily representative of the effects
 on reported net income (loss)&nbsp;for future years due to,
among other things, (1)&nbsp;the vesting period of the stock
options and (2) the fair value of additional stock options in
future years.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gilat issued stock options related to its common stock to certain
 StarBand executives. These stock options are being accounted for
 under EITF Issue No.&nbsp;00-12 &#147;Accounting by an Investor
for Stock Based Compensation Granted to Employees of Equity
Method Investees&#148;.

<P align="center">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Reserve for Issuance</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company had 8&nbsp;million shares of common stock reserved
for issuance pursuant to the stock option plan at August&nbsp;31,
 2000. After giving effect to options granted through
August&nbsp;31, 2000, there were 2,550,780 shares of Common Stock
 reserved and available for future issuances upon exercise of
outstanding and unissued stock options, warrants, and preferred
stock at August&nbsp;31, 2000 before giving effect to the
15&nbsp;million shares of common stock available for grant
commencing January&nbsp;1, 2001 as authorized by the
Company&#146;s Board of Directors on September&nbsp;19, 2000.

<P align="left"><B>11.&nbsp;&nbsp;Employee Benefit Plan</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>401(k) Plan</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s employees participate in a defined
contribution 401(k) retirement plan sponsored by Spacenet. The
plan allows employees of the Company to make pre-tax
contributions to the plan, subject to a statutorily prescribed
annual limit. Each participant is fully vested in his or her
contributions and the investment earnings. The plan also provides
 for the Company to match the employees&#146; contributions up to
 a stated limit. The Company&#146;s contributions vest over
3&nbsp;years. During the period from January&nbsp;11, 2000
(inception)&nbsp;through August&nbsp;31, 2000, the Company
contributed $33,675 to the plan on behalf of employees.

<P align="left"><B>12.&nbsp;&nbsp;Commitments and Contingencies</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>Leases</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into an agreement with Spacenet to assign the
 Company Spacenet&#146;s rights in a non-preemptible transponder
capacity service lease on the GE-4 Satellite (&#147;GE-4&#148;)
in 2000. The terms of service provide that transponders be placed
 in service on January&nbsp;17, 2000 extending through the
earlier of the end-of-life or replacement date, the date the
satellite or transponder becomes a satellite or transponder
failure, or January&nbsp;16, 2005. Significant terms of the
operating lease include that the Company pay a $7.2&nbsp;million
reservation fee and monthly payments of approximately
$0.15&nbsp;million per transponder. Rental expense under the GE-4
 capacity service lease was approximately $3.1&nbsp;million
during the period from January&nbsp;11, 2000
(inception)&nbsp;through August&nbsp;31, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into a non-preemptible transponder capacity
service lease on the Telstar 7 Satellite (&#147;Telstar 7&#148;)
on August&nbsp;31, 2000. The terms of service provide that
transponders be placed in service on September&nbsp;1, 2000,
January&nbsp;1, 2001, and April&nbsp;1, 2001. The Company&#146;s
rights to the exclusive use of the transponders extend through
December&nbsp;31, 2007. The Company has the right to extend the
terms of service for any or all transponders through the
anticipated end-of life of Telstar 7, which is currently
anticipated to be October&nbsp;31, 2013 in incremental two-year
periods or a single extension commencing on January&nbsp;1, 2008
through the end-of life. Significant terms of the operating lease
 include that the Company pay $0.8 million upon contract signing
for three months of service, a reservation fee of
$2.3&nbsp;million on December&nbsp;1, 2000, providing an
irrevocable letter of credit in favor of the lessor or a cash
security deposit of approximately $26.3&nbsp;million on
December&nbsp;1, 2000, and monthly payments per transponder.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases office space and various office and computer
equipment under noncancelable operating lease agreements. Rental
expense during the period from January&nbsp;11, 2000
(inception)&nbsp;to August&nbsp;31, 2000 was approximately
$391,000.

<P align="center">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minimum future lease payments under operating leases, including
transponder capacity service, at August&nbsp;31, 2000 are
summarized as follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="81%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="8%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="7%">&nbsp;</TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Operating</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Leases</B></FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2001</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28,970,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2002</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,638,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2003</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,590,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2004</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,590,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	2005</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,475,000</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top"><FONT size="2">
	Thereafter</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57,190,000</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">227,453,000</FONT></TD>
	<TD></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>&nbsp;&nbsp;</B><I>Contingencies</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On or about July&nbsp;26, 2000, Globecomm Systems, Inc.
(&#147;Globecomm&#148;) commenced a lawsuit against us in the
Eastern District of New York alleging the willful infringement of
 United States Patent No.&nbsp;5,912,883. Globecomm is seeking an
 award for an undisclosed sum of money. The Globecomm patent is
directed through an earth-orbiting satellite. The system claimed
in the patent includes a central hub gateway server including a
plurality of modems. In particular, each of the modems is
assigned to receive and transmit signals in a specified data
channel. There is also a means for modulating the data signals
from all of the modems to a satellite frequency band. The system
claimed in the Globecomm patent employs one data channel per
modem, which is commonly referred to as a single carrier per
channel technology. The Company has not yet filed an answer to
the complaint of Globecomm. The Company intends to answer the
complaint and vigorously contest the claims made by Globecomm in
due course. The outcome of this lawsuit is inherently uncertain
and management is unable to evaluate the chances of the claim or
its effect on the Company.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, on May&nbsp;8, 2000, Hughes Electronics Corporation
(&#147;Hughes&#148;) commenced a lawsuit against Gilat and
Spacenet in the District of Maryland, Southern Division,
concerning U.S. Patent Nos. 5,699,384; 5,995,725; 5,995,726; and
6,016,388. The Company is not a party to the lawsuit, but a
ruling against Gilat or Spacenet could significantly harm the
Company&#146;s business because it uses license technology from
Gilat/ Spacenet that forms part of Hughes claim. In particular,
U.S. Patent No.&nbsp;5,699,384 is related to personal computer
based receiver cards that the Company uses as part of its service
 offering to customers. The Company may not be able to continue
to use the technology if Hughes prevails on its claim regarding
this technology. Gilat and Spacenet have filed motions for
partial summary judgment on the issue of patent claim
construction and the Court has scheduled a hearing on these
motions for November&nbsp;20, 2000. The outcome of this lawsuit
is inherently uncertain and management is unable to evaluate the
chances of the claim or its effect on the Company.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company does not currently have insurance that would
indemnify it for any liability that may be imposed in connection
with the legal actions described above. Accordingly, if the final
 disposition of these lawsuits is in favor of the plaintiff, the
related liability could result in a material adverse effect on
the Company&#146;s financial position and results of operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into employment agreements with certain
members of senior management and other key employees. These
agreements specify minimum annual salaries as well as performance
 bonus amounts and criteria. In addition, these executives have
certain severance benefits, which would have a negative impact on
 the Company&#146;s results of operations if such executives were
 terminated under certain circumstances.

<P align="center">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B>STARBAND COMMUNICATIONS INC.</B>
</DIV>

<DIV align="center">
<B>(A Development Stage Enterprise)</B>
</DIV>

<P align="center">
<B>NOTES TO FINANCIAL STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>

<P align="left"><B>13.&nbsp;&nbsp;Subsequent Events</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During September&nbsp;2000, the Board of Directors approved the
payment of $4 million to Gilat for its assistance in obtaining
debt and equity for the Company. This payment has been allocated
on a pro-rata basis between debt and equity securities issued as
reductions in additional capital and additional deferred debt
issuance costs, respectively, as of August&nbsp;31, 2000. The
deferred debt issuance costs have been recognized as a component
of other assets and are amortized over the period of the term
loan as an additional component of interest expense using the
effective interest method.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Board of Directors authorized the Company to
file an initial registration statement on Form&nbsp;S-1 to
register shares of the Company&#146;s common stock for an initial
 public offering. The ultimate terms and conditions of such
transaction, if and when consummated, will be determined based on
 market conditions and other variables not within the control of
the Company and are not estimable at this time.

<P align="left"><B>14.&nbsp;&nbsp;Pro Forma Adjustments (Unaudited)</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Preferred Stock will automatically convert
into Common Stock at consummation of an initial public offering
resulting in aggregate proceeds to the Company of at least
$40&nbsp;million. The pro forma balance sheet at August&nbsp;31,
2000 reflects the conversion of all classes of the Company&#146;s
 Preferred Stock into common stock as of that date. The pro forma
 loss per share reflects the conversion of all classes of the
Company&#146;s outstanding convertible preferred stock as of the
respective date of issuance.

<P align="center">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<PRE>
INSIDE BACK COVER

TEXT ON STARBAND INDIAN NATIONS PROJECT FOR PROSPECTUS

The promise of StarBand is greater than just high-speed Internet access.
StarBand is already changing the lives of thousands of Native Americans in the
Southwest, impacting education, law enforcement, and quality of life.

"This is a turning point for our community." The Havasupai Indians hope that
some of their tribal members will get online college degrees, remaining on the
reservation to teach the next generation.

Sally Tisoult, Director of the Havasupai Head Start School
[Picture of Head Start School and Kids]

"Yesterday I was thinking that technology was so far into the future, but today
it's right here. We have it. Now, we can be part of the international as well as
the national community."

[Photo of Ben Jones, Director of Communications Services, Navajo Nation
Government]

"These Indian Nations are jumping generations of technology in a couple of hours
and into the 21st century. They have gone from dial-up service that didn't work
very well to StarBand's unique, high-speed service."

Ed Groenhout, Vice President for Strategic Initiatives at Northern Arizona
University

[Photo of install in Grand Canyon]

StarBand connects its subscribers, from the Grand Canyon to Silicon Alley, to
new experiences, communities, and opportunities. Our first-to-market service is
a compelling solution for users nationwide who need a highly reliable,
high-speed connection to the Internet today.
</PRE>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
 <HR size="1" width="100%" align="center">
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through and including
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2000 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

<P align="center">
<B><FONT size="4">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</FONT></B>

<P align="center">
<B><FONT size="5"> <IMG src="w41075stabanl1.gif" alt="(STARBAND LOGO)">
</FONT></B>

<P align="center">
<B><FONT size="4">Common Stock</FONT></B>

<P align="center">
<HR size="1" width="27%" align="center">

<DIV align="center">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center">
<HR size="1" width="27%" align="center">
</DIV>

<P align="center">
<B><FONT size="4">Merrill Lynch&nbsp;&#38; Co.</FONT></B>

<DIV align="center">
<B><FONT size="4">Credit Suisse First Boston</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">Salomon Smith Barney</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">CIBC World Markets</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">ING Barings</FONT></B>
</DIV>

<P align="center">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2000</B>

<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>PART II</B>

<P align="center">
<B>INFORMATION NOT REQUIRED IN THE PROSPECTUS</B>

<P align="left"><B>Item&nbsp; 13.&nbsp;&nbsp;Other Expenses of Issuance and
Distribution</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the estimated expenses in
connection with the issuance and distribution of the securities
being registered under this Registration Statement, other than
the underwriting discount payable by StarBand Communications Inc.
 All amounts shown are estimates except the Securities and
Exchange Commission registration fee and the National Association
 of Securities Dealers, Inc. filing fee. StarBand Communications
Inc. will pay substantially all of the expenses of issuance and
distribution set forth below.

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%">&nbsp;</TD>
	<TD width="84%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="5%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Securities and Exchange Commission registration fee</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">75,900</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	National Association of Securities Dealers, Inc. filing fee</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,500</FONT></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Nasdaq National Market listing fee</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Blue sky qualification fees and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Legal fees and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Accounting fees and expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Transfer agent and registrar fees</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Printing and engraving expenses</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top"><FONT size="2">
	Miscellaneous expenses and administrative costs</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="1"></TD>
	<TD></TD>

</TR>

<TR>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Total</FONT></TD>
	<TD></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD></TD>

</TR>

</TABLE>
</CENTER>

<P align="left"><B>Item&nbsp; 14.&nbsp;&nbsp;Indemnification of Directors and
Officers</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the Delaware General Corporation Law
authorizes a court to award, or a corporation&#146;s Board of
Directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act of 1933, as
amended. Article&nbsp;13 of our amended and restated certificate
of incorporation, exhibit 3.1 hereto, and article 7 or our
by-laws, exhibit 3.2, provide for indemnification of our
directors, officers, employees and other agents to the maximum
extent permitted by Delaware Law.

<P align="left"><B>Item&nbsp; 15.&nbsp;&nbsp;Recent Sales of Unregistered
Securities</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since January&nbsp;11, 2000, our date of inception, we have sold
and issued the following securities:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	1.&nbsp; In connection with our incorporation we issued
	10&nbsp;shares of common stock to Spacenet&nbsp;Inc. in a private
	 placement eligible for the exemption from registration provided
	by Section&nbsp;4(2) of the Securities Act.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2.&nbsp; On April&nbsp;1, 2000, we sold 9,999,989&nbsp;shares of
	our common stock and 140,111,199&nbsp;shares of our Series&nbsp;B
	 Convertible Preferred stock to Spacenet&nbsp;Inc., in exchange
	for certain assets; intellectual property rights and licenses;
	and future services to be rendered to us in a private placement
	pursuant to Section&nbsp;4(2) of the Securities Act.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	3.&nbsp; On April&nbsp;13, 2000, we sold 6,450,022&nbsp;shares of
	 common stock and 49,228,259&nbsp;shares of Series&nbsp;A
	Convertible Preferred stock for a total of $50&nbsp;million in
	cash to Microsoft Corporation in a private placement pursuant to
	Section&nbsp;4(2) of the Securities Act.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	4.&nbsp; On April&nbsp;11, 2000, we sold 49,228,259&nbsp;shares
	of Series&nbsp;A-1 Preferred stock and 6,450,022&nbsp;shares of
	common stock for a total of $50&nbsp;million in cash to EchoStar
	Communications Corporation and a total of 24,686,284&nbsp;shares
	of Series&nbsp;A-2 Convertible Preferred stock and
	2,621,960&nbsp;shares of common stock to four entities affiliated
	 with ING Furman Selz Investments for a total consideration of
	$25&nbsp;million in cash in a private placement pursuant to
	Section&nbsp;4(2) of the Securities Act.</TD>
</TR>

</TABLE>

<P align="center">II-1

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="3%"></TD>
	<TD width="97%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	5.&nbsp; On May&nbsp;3, 2000, we sold a total of
	8,357,754&nbsp;shares of common stock to four investors not
	resident in the United States for a total consideration of
	$1&nbsp;million in a transaction in reliance upon
	Regulation&nbsp;S under the Securities Act.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	6.&nbsp; On June&nbsp;26, 2000, in a private placement pursuant
	to Section&nbsp;4(2) of the Securities Act, we issued warrants to
	 purchase Series&nbsp;C Convertible Preferred stock sufficient to
	 represent a 1.2% interest in our company, assuming full
	dilution, at an aggregate price of approximately
	$4.7&nbsp;million as an inducement to Bank Leumi USA, The First
	International Bank of Israel Ltd. and Israel Discount Bank Ltd.
	to enter into a $90&nbsp;million Term Note.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	7.&nbsp; On August&nbsp;7, 2000, in a private placement pursuant
	to Section&nbsp;4(2) of the Securities Act, we issued warrants to
	 purchase Series&nbsp;C Convertible Preferred stock sufficient to
	 represent a 0.8% interest in our company, assuming full
	dilution, at an aggregate price of approximately
	$2.3&nbsp;million as an inducement to the lenders to enter into
	$60&nbsp;million Term Notes.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	8.&nbsp; We issued warrants to purchase approximately
	116,000&nbsp;shares of our common stock to certain third parties
	in private placements pursuant to Section&nbsp;4(2) of the
	Securities Act during the period from January&nbsp;11, 2000
	(inception) through August&nbsp;31, 2000.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	9.&nbsp; On June&nbsp;26, 2000, in a private placement pursuant
	to Section&nbsp;4(2) of the Securities Act, we issued options to
	convert up to $10&nbsp;million of the Term Notes at an amount
	equal to $500,000,000 divided by the total number of our
	outstanding shares of capital stock, on a fully diluted basis.</TD>
</TR>

</TABLE>

<P align="left"><B>Item&nbsp; 16.&nbsp;&nbsp;Exhibits and Financial Statement
Schedules</B>

<P align="left"><B>&nbsp;&nbsp;</B><I>a)&nbsp; Exhibits</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following Exhibits are filed as a part of this Registration
Statement.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="77%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exhibit Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Description of Exhibits</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">1.1*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Form of Underwriting Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Amended and Restated Certificate of Incorporation.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">3.2</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Amended and Restated Bylaws.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.1*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Specimen Stock Certificate.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.2*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Microsoft Investment Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.3*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Stockholders&#146; Agreement dated as of February&nbsp;15, 2000.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.4*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Registration Rights Agreement dated as of February&nbsp;15, 2000.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.5*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	EchoStar and Furman Selz Investment Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.6*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Effectiveness Agreement dated as of March&nbsp;30, 2000.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.7*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Bank Leumi USA Financing Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.8*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Bank Leumi USA Series C Convertible Preferred Stock Purchase
	Warrant.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.9*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Term Note for $90&nbsp;million by Bank Leumi USA.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.10</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Bank Leumi USA Registration Rights Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.11</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Fee Letter and Debt Conversion Letter.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.12</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	First Amendment and Joinder to the Bank Leumi USA Financing
	Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.13</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	The First International Bank of Israel Series C Convertible
	Preferred Stock Purchase Warrant.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.14</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Israel Discount Bank Ltd. Series C Convertible Preferred Stock
	Purchase Warrant.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.15</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	The First International Bank of Israel Registration Rights
	Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.16</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Israel Discount Bank Ltd. Registration Rights Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.17</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Term Note for $30&nbsp;million by The First International Bank of
	 Israel.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">4.18</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">*</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Term Note for $30&nbsp;million by Israel Discount Bank Ltd.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">5.1*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Opinion of Clifford Chance Rogers &#38; Wells LLP.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.1*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	2000 Stock Incentive Plan.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.2*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	GE-4 Satellite Transponder Service Agreement.</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-2

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="10%">&nbsp;</TD>
	<TD width="1%">&nbsp;</TD>
	<TD width="9%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="77%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exhibit Number</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Description of Exhibits</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap colspan="3"><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.3*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Loral Skynet Transponder Service Agreement.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.4*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Employment Agreement between StarBand and Zur Feldman.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Employment Agreement between StarBand and David Trachtenberg.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.6*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Memorandum of Agreement among StarBand, Gilat and EchoStar.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consent of Ernst &#38; Young LLP.</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">23.2*</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Consent of Clifford Chance Rogers &#38; Wells LLP. (Included in
	Exhibit 5.1)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Powers of Attorney. (Included in the signature page of the
	Registration Statement)</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">27.1</FONT></TD>
	<TD></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Financial Data Schedule.</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left">
</DIV>

<DIV align="left">
*&nbsp; To be filed by amendment.
</DIV>

<P align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>b)&nbsp; Financial
Statement Schedules</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Schedules have been omitted because they are not required or
because the required information is given in the financial
statements or notes thereto.

<P align="left"><B>Item&nbsp; 17.&nbsp;&nbsp;Undertakings</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp; The undersigned registrant hereby undertakes to provide
 to the underwriters at the closing specified in the underwriting
 agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp; The undersigned registrant hereby undertakes that:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="3%"></TD>
	<TD width="91%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(i)&nbsp;</TD>
	<TD align="left">
	For purposes of determining any liability under the Securities
	Act of 1933, the information omitted from the form of prospectus
	filed as part of this registration statement in reliance upon
	Rule&nbsp;430A and contained in a form of prospectus filed by the
	 registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h)
	 under the Securities Act shall be deemed to be part of this
	registration statement as of the time it was declared effective.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>(ii)&nbsp;</TD>
	<TD align="left">
	For the purpose of determining any liability under the Securities
	 Act, each post-effective amendment that contains a form of
	prospectus shall be deemed to be a new registration statement
	relating to the securities offered therein, and the offering of
	such securities at that time shall be deemed to be the initial<I>
	 bona fide</I> offering thereof.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp; Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
or persons controlling the registrant pursuant to the provisions
of Item&nbsp; 14, or otherwise, the registrant has been informed
that in the opinion of the Securities and Exchange Commission
such

<P align="center">II-3
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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in
 the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
 of such issue.
</DIV>

<P align="center">II-4

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><B>SIGNATURES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form&nbsp;S-1 and has duly caused this registration statement on
Form&nbsp;S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in McLean, Virginia, on the 11<SUP>th
</SUP> day of October,&nbsp;2000.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	StarBand Communications Inc.</TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="2%"></TD>
	<TD width="60%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>By:&nbsp;</TD>
	<TD align="center">
</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<HR size="1" align="left"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Name:&nbsp; Zur Feldman</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="5%"></TD>
	<TD width="57%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>Title:</TD>
	<TD align="left">
	Co-Chairman and Chief Executive Officer;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Director</TD>
</TR>

</TABLE>

<P align="center"><B>POWER OF ATTORNEY</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appear below constitutes and appoints Zur Feldman and David
Trachtenberg, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
 resubstitution, for him and in his name, place and stead, in any
 and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this registration
 statement and any additional registration statement filed
pursuant to Rule&nbsp;462(b), and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="46%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="36%">&nbsp;</TD>
	<TD width="3%">&nbsp;</TD>
	<TD width="12%">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Title</B></FONT></TD>
	<TD></TD>
	<TD align="center" nowrap><FONT size="2"><B>Date</B></FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1"></TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">Yoel Gat</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Co-Chairman; Director</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

<TR>
	<TD colspan="5">&nbsp;</TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">Zur Feldman</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Co-Chairman and Chief Executive Officer; Director</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">Jon DeVaan</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Director</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">Mark Jackson</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Director</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">Brian Friedman</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Director</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">David Trachtenberg</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	President and Chief Marketing Officer</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

<TR>
	<TD align="center" valign="top"><FONT size="2">
	<BR>
	<HR size="1">William McMoil</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	Corporate Controller and Treasurer</FONT></TD>
	<TD></TD>
	<TD align="left" valign="top"><FONT size="2">
	October&nbsp;11, 2000</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">II-5
</BODY>
</HTML>
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s-1
Table of Contents
As filed with the Securities and Exchange Commission on
October 11, 2000.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
StarBand Communications Inc.
(Exact Name of Registrant as Specified in its
Charter)
Delaware
4899
54-1977597
(State or Other Jurisdiction of Incorporation or Organization)
(Primary Standard
Industrial Classification Code Number)
(I.R.S. Employer
Identification Number)
1760 Old Meadow Road, McLean, Virginia 22102,
tel.: 703-287-3000
(Address, including zip code, and telephone
number, including area code, of Registrant's principal
executive offices)
Zur Feldman, Chief Executive Officer and
Co-Chairman
1760 Old Meadow Road, McLean, Virginia 22102,
tel.: 703-245-1700
(Name, address, including zip code and
telephone number, including area code, of agent for service)
Copies to:
Anthony J. Renzi, Jr.
Sara Hanks
Clifford Chance Rogers & Wells LLP
607 Fourteenth Street, NW
Washington, DC 20005
Tel: (202) 434-0700
Fax: (202) 434-0800
Winthrop B. Conrad, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Tel: (212) 450-4000
Fax: (212) 450-4800
Approximate date of commencement of proposed
sale to the public:
As soon as
practicable after the registration statement becomes effective.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant
to Rule 415 of the Securities Act of 1933, check the
following box.  [   ]
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the
 Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same
offering.  [   ]
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.  [   ]
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.  [   ]
If delivery of the prospectus is expected to be
made pursuant to Rule 434 under the Securities Act, please
check the following box.  [   ]
CALCULATION OF REGISTRATION FEE
Proposed
Title of Each Class
Maximum Aggregate
Amount of
Securities to be Registered
Offering Price(1)(2)
Registration Fee
Common stock, par value $0.05 per share
$
287,500,000
$
75,900
(1)
Estimated solely for the purpose of calculating
        the registration fee in accordance with Rule 457(o) under
        the Securities Act.
(2)
Includes shares issuable upon the
        underwriters' exercise of their over-allotment option.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this registration
statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
 Commission, acting pursuant to said Section 8(a), may
determine.
Table of Contents
The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is
 effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated October   , 2000
PROSPECTUS
Shares
Common Stock
This is StarBand Communications Inc.'s initial public
offering. StarBand is selling all of the shares offered. The U.S.
 underwriters are offering
          shares
 in the U.S. and Canada and the international managers are
offering
          shares
 outside the U.S. and Canada.
We expect the public offering price to be between
$          and
$          per
share. Currently, no public market exists for the shares. After
pricing of the offering, we expect that the shares will be quoted
 on the Nasdaq National Market under the symbol "STRB."
Investing in the common stock involves risks that are
described in the "Risk Factors" section beginning on
page 6 of this prospectus.
Per Share
Total
Public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to StarBand
$
$
The U.S. underwriters may also purchase up to an additional
          shares
 from StarBand at the public offering price, less the
underwriting discount, within 30 days from the date of this
prospectus to cover over-allotments. The international managers
may similarly purchase up to an additional
          shares
 from StarBand.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The shares will be ready for delivery on or about
            ,
 2000.
Merrill Lynch & Co.
Credit Suisse First Boston
Salomon Smith Barney
CIBC World Markets
ING Barings
The date of this prospectus is
          ,
2000.
Table of Contents
INSIDE FRONT COVER

It's w i d e r than narrowband.

It's BIGGER than broadband.

It's StarBand.

The first

        consumer
        always-on
        two-way
        high-speed
        Internet service
        via satellite

StarBand Communications
[Depiction of StarBand logo]

A joint venture of Gilat Satellite Networks Ltd., EchoStar Communications
Corporation, and Microsoft Corporation [Logos of Gilat Satellite Networks,
Echostar Communications Corporation, and Microsoft Corporation]

FOLD OUT PAGES

The StarBand Solution
[Satellite photo of North America is background]
StarBand Communications is creating a new category in high-speed Internet
access, bundling fast StarBand Internet access with a multi-megabit-speed
content delivery service. Our service is targeted to underserved suburban and
rural markets where terrestrial broadband alternatives are limited.

RELIABLE HIGH-SPEED ACCESS

- Up to 500 kilobits per second downstream speeds
- Proven technology based on Gilat Satellite Networks solution
- Single-hop architecture, independent from terrestrial networks
- Always-on connection

[photo of family using Internet]

UNPARALLELED CONSUMER EXPERIENCE

- Ultra high-speed multicast content delivery
- Exclusive StarBand Carousel(SM) technology for personalized content
applications
- Always-on
- Single-dish solution for high-speed Internet and satellite television

[photo of couple using Internet]

NATIONWIDE AND SCALABLE

- Available to virtually everyone, everywhere
- Over 90% of U.S. single family households have satellite line-of-sight
- Centralized network and redundant operations

[photo of installer]

THE STARBAND CONNECTION

-Small satellite dish
-StarBand modem

[photo of the StarBand CPE]
TABLE OF CONTENTS
SUMMARY
RISK FACTORS
FORWARD-LOOKING STATEMENTS
OTHER RELEVANT INFORMATION
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
PRINCIPAL STOCKHOLDERS
RELATED PARTY TRANSACTIONS
DESCRIPTION OF CAPITAL STOCK
DESCRIPTION OF INDEBTEDNESS
SHARES ELIGIBLE FOR FUTURE SALE
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AMENDED AND RESTATED BYLAWS
CONSENT OF ERNST & YOUNG LLP
Financial Data Schedule
TABLE OF CONTENTS
Page
Summary
1
Risk Factors
6
Forward-Looking Statements
18
Other Relevant Information
18
Use of Proceeds
19
Dividend Policy
19
Capitalization
20
Dilution
22
Selected Financial Information
24
Management's Discussion and Analysis of Financial Condition
	and Results of Operations
25
Business
32
Management
50
Principal Stockholders
56
Related Party Transactions
59
Description of Capital Stock
62
Description of Indebtedness
65
Shares Eligible for Future Sale
66
Material United States Federal Income Tax Considerations for
	Non-U.S. Holders
68
Underwriting
70
Legal Matters
74
Experts
74
Where You Can Find Additional Information
74
Index to Financial Statements
F-1
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in
this prospectus is accurate only as of the date on the front
cover of this prospectus. Our business, financial condition,
results of operations and prospects may have changed since that
date.
StarBand
SM
and the StarBand family of marks are owned
by StarBand Communications Inc. All other brand names, trademarks
 and service marks appearing in the prospectus are the property
of their respective holders.
References in this prospectus to "we," "our,"
 "us," "our company" and "StarBand"
 are to StarBand Communications Inc. On September 29, 2000,
we changed our name to StarBand Communications Inc. from
Gilat-To-Home Inc.
i
Table of Contents
SUMMARY
This summary does not contain all the information that may be
important to you. You should read the entire prospectus
carefully, including the financial statements and related notes
beginning on page F-1, before making an investment decision.
Our Company
StarBand is the first nationwide provider of two-way, always-on,
high-speed Internet access via satellite to residential and small
 office/ home office customers. We have deployed a proven and
scalable network using leased capacity on existing communications
 satellites which we believe can provide our StarBand service
today to any location in the United States with a clear view of
the southern sky. We are targeting our StarBand service primarily
 to rural and suburban households with few or no high-speed
Internet access alternatives. We estimate that approximately
55 million households do not presently have access to cable
modem or digital subscriber line, or DSL, technology. Our basic
service package offers unlimited access time at an affordable
monthly flat rate. We have extensively tested our service
offering at over 9,000 locations and, in combination with our
strategic partners, are launching service nationwide in the
fourth quarter of 2000.
Our high-speed Internet access service benefits from the unique
abilities of our one-hop satellite network architecture. Unlike
terrestrial networks, satellite networks possess the ability to
multicast, or simultaneously send common content, to millions of
subscribers. Our solution is unique because it delivers high
bandwidth content directly to the personal computer or other
storage device at a subscriber's home. We can therefore
expand the edge of the Internet directly to our subscribers and
avoid potential congestion inherent in the terrestrial network.
We intend to use our multicasting services to aggregate and
filter high quality content and create an unparalleled experience
 for our subscribers. We will multicast content such as music,
movies, software and emerging multimedia content at significantly
 higher speeds than existing broadband alternatives and, in 2001,
 we expect to introduce the StarBand Carousel
SM
, a
personalized high-speed digital delivery service, significantly
enhancing our subscribers' experience and generating
additional revenue opportunities.
We have three primary strategic partners and founding investors.
Gilat Satellite Networks Ltd., and its subsidiaries
,
	leaders in satellite communications, are supplying their advanced
	 networking technology and proven customer premises equipment to
	StarBand on an exclusive basis in the United States and Canada.
Microsoft Corporation,
the owner of MSN, a leading
	consumer Internet service provider with over 3 million
	subscribers, has agreed to sell high-speed Internet access using
	our wholesale service offering through over 7,000 RadioShack
	locations.
EchoStar Communications,
one of the two leading
	U.S. direct broadcast satellite television companies with
	over 4.5 million subscribers, has agreed to co-market our
	services to customers of its DISH television service and has
	provided us with access to more than 20,000 DISH retailers. In
	addition to our Internet only access package, we will offer a
	joint StarBand/ EchoStar single-dish solution for direct
	broadcast television and high-speed Internet access in a bundled
	package.
Our strategic partners and founding investors have played key
roles in our development by providing us access to:
•
proprietary proven technology;
•
a large existing customer base;
•
strong consumer brand names; and
•
broad retail and wholesale distribution channels.
1
Table of Contents
We believe that a substantial business opportunity exists for us
as a result of the tremendous growth of the Internet, the
increasing availability of broadband content and applications and
 the growing demand for high-speed Internet connections.
Forrester Research estimates that 36.4 million U.S.
households will have broadband Internet connections by 2004.
Because of the high cost, complexity and physical limitations
involved in providing DSL and cable modem services, the rollout
of these services has been slow or impractical in most rural and
many suburban areas. As illustrated by the recent success of
direct broadcast satellite television, which was one of the most
successful rollouts of a consumer electronics product, we believe
 that consumers in underserved markets will embrace our
satellite-based solution for high-speed Internet access. Pioneer
Consulting estimates that the satellite broadband access market
in the United States will grow to approximately
$13.2 billion by 2005.
The StarBand network consists of sophisticated and proven
equipment at the subscriber's premises, two network
operations centers connected to the Internet and satellite
capacity linking subscriber equipment to the network operations
centers. The customer premises equipment used in the StarBand
network is comprised of a small satellite dish and outdoor
components connected by cables to communications electronics that
 are installed in the subscriber's home. The primary central
 network operations center from which Gilat manages the
telecommunications elements of our network, located in Marietta,
Georgia, has a robust, redundant connection to the Internet and
the requisite equipment to manage the network. The network design
 allows us to manage the amount of satellite capacity allocated
to particular subscribers, and therefore to provide each
subscriber specified minimum performance levels, even during peak
 periods. We continuously develop and optimize our technology to
maintain and enhance network performance and monitor usage.
We are launching our service using existing Ku band satellite
capacity that we and Gilat lease from several owners of
geostationary satellites. By utilizing leased capacity, we
minimize our investments in fixed capital assets and avoid the
risks of deploying our own satellites. In order to further
increase the cost efficiency of our network, we are working with
leading suppliers to implement a next-generation satellite system
 which we expect will significantly increase our overall
satellite capacity and decrease its cost on a per subscriber
basis. The supplier we select will undertake the responsibility
and expense of building and launching these satellites. We will
enter into a long-term lease for capacity on these new
satellites.
Our Strategy
Our mission is to become the leading provider of two-way,
always-on, satellite-based high-speed Internet access. In order
to achieve this goal, we intend to:
•
rapidly expand our subscriber base;
•
implement a targeted marketing plan to attract subscribers;
•
maintain a low cost and capital-efficient business model;
•
develop opportunities to sell higher-margin value-added services;
•
continue to enhance our subscribers' StarBand
	experience; and
•
pursue additional distribution and content partnerships.
To date, we have raised $126 million of equity from our
strategic partners and founding investors. We have recently
renegotiated our existing senior debt facility. We are also
negotiating a bank facility to prefund our satellite capacity
lease with Loral Skynet. We face many risks and uncertainties.
For example, we have a limited operating history and as of
August 31, 2000, we had an accumulated deficit of
approximately $88.0 million. In addition, we operate in a
highly competitive market and we expect to record substantial
losses for at least the next few years.
We are a Delaware corporation. Our principal executive offices
are located at 1760 Old Meadow Road, McLean, Virginia 22102, and
our telephone number is 703-287-3000.
2
Table of Contents
The Offering
Common stock offered by StarBand:
U.S. offering
shares
International offering
shares
Total
shares
Shares outstanding after the offering
shares
Use of proceeds
We estimate that our net proceeds from this offering, without
	exercise of the over-allotment options, will be approximately
	$           million.
	 We intend to use these net proceeds:
•  to fund the continued growth of our business and
	operations and expand our subscriber base; and
•  to the extent remaining, for general corporate and
	working capital purposes.
Risk factors
See "Risk Factors" and other information included in
	this prospectus for a discussion of factors you should carefully
	consider before deciding to invest in shares of our common stock.
Proposed Nasdaq National Market symbol
STRB
Unless otherwise indicated, all information in this prospectus,
including the outstanding share information above, is based on
88,108,650 shares outstanding as of August 31, 2000 on
a pro forma basis to reflect the automatic conversion of all
outstanding preferred stock, and the issuance and conversion of
additional convertible preferred stock, to be issued as dividends
 thereon, into 54,228,893 million shares of common stock
upon completion of this offering. The outstanding share
information excludes:
•
8 million shares of common stock reserved for issuance under
	 our 2000 stock incentive plan, of which 5,449,220 shares of
	 common stock are subject to outstanding options with a weighted
	average exercise price of $2.50;
•
1,873,477 and 1,910,947 shares of common stock issuable upon
	 the exercise of warrants and rights to purchase Series C
	and D mandatorily redeemable convertible preferred stock,
	respectively, and assumed immediate conversion thereof into
	common stock with a weighted average exercise price of $4.49 per
	share;
•
116,000 shares of common stock issuable upon the exercise of
	 warrants issued to various third parties with a weighted average
	 exercise price of $2.50; and
•
shares
	 of common stock issuable if the underwriters exercise their
	over-allotment option in full.
3
Table of Contents
Summary Financial Data
(in thousands, except share and per share data)
In the table below, we provide you with summary historical
financial data of StarBand Communications Inc. We have
prepared this information using the financial statements of
StarBand Communications Inc. for the period from
January 11, 2000 (inception) to August 31, 2000.
When you read this summary historical financial data, it is
important that you read along with it the historical financial
statements and related notes, as well as the section titled
"Management's Discussion and Analysis of Financial
Condition and Results of Operations."
We face many risks and uncertainties. For example, we have a
limited operating history and as of August 31, 2000, we had
an accumulated deficit of approximately $88.0 million. In
addition, we operate in a highly competitive market and we expect
 to record substantial losses for at least the next few years.
Period from
January 11, 2000
(Inception)
through
August 31, 2000
Statement of Operations Data:
Total revenues
$
7
Total cost and expenses
68,584
Loss from operations
(68,577
)
Net loss attributable to common stockholders
$
(82,094
)
Basic and diluted loss per share
$
(4.06
)
Pro forma net loss attributable to common stockholders
	(unaudited)(1)
$
(66,848
)
Pro forma basic and diluted loss per share (unaudited)(2)
$
(1.23
)
Pro forma as adjusted net loss attributable to common
	stockholders (unaudited)(1)
$
Pro forma as adjusted basic and diluted loss per share
	(unaudited)(3)
$
Weighted Average Shares Outstanding:
Basic and diluted
20,232,428
Pro forma basic and diluted (unaudited)(2)
54,456,199
Pro forma as adjusted basic and diluted (unaudited)(3)
As of August 31, 2000
Pro Forma
Pro Forma
As Adjusted
Actual
(unaudited)
(unaudited)
(4)
(5)
Balance Sheet Data:
Cash and cash equivalents
$
68,303
$
68,303
Restricted cash and cash equivalents
90,559
90,559
Total
158,862
158,862
Working capital
32,602
32,602
Total assets
196,512
196,512
Total debt
81,089
81,089
Total mandatorily redeemable convertible preferred stock
142,870
—
Total stockholders' (deficit) equity
(76,770
)
66,100
4
Table of Contents
(1)
The pro forma and pro forma as adjusted net loss attributable to
	common stockholders reflects the elimination of the preferred
	stock dividends and accretion.
(2)
The pro forma statement of operations data gives effect to the
	conversion of all outstanding mandatorily redeemable convertible
	preferred stock and dividends thereon into 32,643,118 and
	1,580,653 shares of common stock, respectively, on a
	weighted average basis, and excludes common shares issuable upon
	exercise of outstanding stock options, issuance of common stock
	and pursuant to Series C and D mandatorily redeemable
	convertible preferred stock, because such shares are not
	automatically issuable upon consummation of this offering.
(3)
The pro forma as adjusted statement of operations data gives
	effect to the pro forma adjustments discussed in (2) above, in
	addition to the sale of
	           
	 shares of common stock offered hereby at an assumed initial
	public offering price of $      per
	 share as if such sale had occurred on January 11, 2000
	(inception).
(4)
The pro forma balance sheet data gives effect to the automatic
	conversion of all outstanding shares of mandatorily redeemable
	convertible preferred stock and dividends thereon into 51,727,573
	 and 2,501,320 shares of common stock, respectively, and
	excludes common shares issuable upon exercise of stock options
	(5,449,220 shares), warrants to purchase common stock
	(116,000 shares), Series C mandatorily redeemable
	convertible preferred stock (1,873,477 common share equivalents),
	 and Series D mandatorily redeemable convertible preferred
	stock (1,910,947 common share equivalents) as such shares are not
	 automatically issuable upon consummation of this offering.
(5)
The pro forma as adjusted balance sheet data gives effect to the
	pro forma adjustments discussed in (4), above, and to the
	sale of
	                     shares
	 of common stock at an assumed initial public offering price of
	$                     
	 per share, after deducting underwriting discounts and
	commissions and estimated offering expenses payable by us as if
	such sale had occurred on August 31, 2000.
5
Table of Contents
RISK FACTORS
This offering and an investment in our common stock involve a
high degree of risk. You should carefully consider the following
risks and the other information in this prospectus before
investing in our common stock. If any of the following risks and
uncertainties develop into actual events, our business, financial
 condition and results of operations could be seriously harmed.
This could cause the trading price of our common stock to
decline, and you may lose all or part of your investment.
Risks Related to Our Business
We have an unproven business model and a limited operating
history in a new and rapidly evolving industry, and we may not be
 able to implement our business plan.
Our business model is still in development. Our limited
historical financial and operating data are not a good indication
 of how our business is doing or how it is evolving and may make
it difficult for you to evaluate our performance. You must
consider our business and prospects in light of the risks and
difficulties typically encountered by companies in new and
rapidly evolving industries such as ours. We may not adequately
address these risks, and if we do not, we may not be able to
implement our business plan as we intend.
We were incorporated in January 2000 and first began service
 operations in April 2000 by initiating a large-scale pilot
program. We expect to initiate nationwide services on our network
 during the fourth quarter of 2000. Our services may not achieve
broad consumer or commercial acceptance. Our business model
contemplates that we will generate revenues from basic
subscription services, value-added services, advertising and
e-commerce. These revenues may not materialize if we fail to
successfully implement our strategy for attracting subscribers.
We have incurred operating and net losses since our inception
and expect to incur future losses for at least the next few
years. Accordingly, we may not be able to achieve profitability
and even if we do become profitable, we may not be able to
sustain profitability.
We have incurred operating and net losses since our inception and
 expect to continue to operate at a loss for at least the next
few years, primarily because we intend to increase capital
expenditures and operating expenses in order to expand our
network and to market and provide our services to a growing
number of potential subscribers. As of August 31, 2000, we
had an accumulated deficit of approximately $88.0 million.
As we build our business to provide our services, we do not
expect our revenues to increase as rapidly and as substantially
as we expect our capital costs and other expenditures to increase
 over the next few years. As a result, we expect to incur
additional operating and net losses for at least the next few
years.
If we fail to manage our potential rapid growth and expansion
effectively, or expand and allocate our resources efficiently, we
 may not be able to retain or grow our subscriber base.
We have grown rapidly and expect to continue to do so by hiring
new employees, adding new subscribers and expanding into new
distribution channels. Our growth has placed, and will continue
to place, a significant strain on our management and our
operating and financial systems, including billing and
information systems. Our employees, outsourcing arrangements,
systems, procedures and controls may be inadequate to support our
 future operations. In particular, we expect that demands on the
network infrastructure and our technical support resources will
increase rapidly as our subscriber base grows. We may therefore
experience difficulties meeting a high demand for services in the
 future. In order to meet this demand, we will need to hire,
train and retain the appropriate personnel, as well as the
third-party service providers we depend on for customer service,
to manage our operations. We will also need to adapt our
financial and management controls, reporting systems, operating
systems and billing and information systems. Our failure to
manage growth and expansion effectively, or the failure by one of
 our service
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providers to adequately perform its services, could harm our
ability to retain or grow our subscriber base which in turn would
 harm our business, financial condition and results of
operations.
If our assumptions regarding the usage patterns of our
subscribers are wrong, or if our subscribers' usage patterns
 change, we could have either too little or too much satellite
capacity, and our business would be harmed.
In our business plan we make critical assumptions about how much
satellite capacity our subscribers will use and at what times of
day their usage will occur. These assumptions are based on our
understanding regarding other Internet and satellite services, as
 well as data gathered from our pilot program. We use these
assumptions to calculate the number of subscribers that can be
supported on a given transponder, or unit of satellite capacity.
If our assumptions are wrong, or if our subscribers' usage
patterns change in the future as broadband applications become
more widely available, we could have either insufficient capacity
 to maintain our expected level of service and lose customers, or
 have excess capacity and suffer inefficiencies in our business.
If we fail to effectively manage our satellite resources, our
business could be harmed, the quality of service we provide to
our subscribers could deteriorate and we could lose existing, or
fail to attract new, subscribers.
If we are unable to attract or retain subscribers, our
business will be harmed.
Our success depends upon our ability to rapidly grow our
subscriber base. Several factors may negatively impact this
ability, including:
•
loss of our existing sales and distribution channels, resulting
	in our lack of access to potential subscribers;
•
failure to obtain additional distribution channels, also
	resulting in our lack of access to potential subscribers;
•
failure to establish and maintain the StarBand brand through
	advertising and marketing, or erosion of our brand due to
	misjudgments in service offerings;
•
failure to obtain content that appeals to the evolving
	preferences of our subscribers; and
•
failure to provide the minimum transmission speeds and quality of
	 service our customers expect.
In addition, our service requires customers to first purchase our
 satellite system equipment and then pay us monthly subscriber
fees. The price of our equipment and our subscription fees are
currently higher than those of many dial-up, DSL and cable modem
Internet access services. In many instances, we expect to
subsidize our subscribers' customer premises equipment to
encourage the purchase of our service and to offset their higher
relative costs. If we are unable to reduce the cost of our
equipment, or if our subsidies are insufficient to attract or
retain new subscribers, our business would be harmed.
If we fail to adequately develop, or consumers fail to accept,
 our high-speed Internet content and applications services, our
business would be harmed.
A key component of our strategy is to provide a more compelling
interactive experience to Internet users than they currently
experience from dial-up and other Internet service providers. We
believe that we must also provide high-quality multimedia
Internet content and applications to our customers. Our success
in obtaining and delivering this content and these applications,
and in charging a premium for our service, is dependent on the
ability of content and applications providers to create and
support high-quality, high-speed multimedia Internet content and
applications that work well with our technology and our ability
to aggregate content and applications offerings in a manner that
subscribers find useful and compelling.
We rely upon new technologies, products and services that we
intend to introduce, such as multicasting, the StarBand Carousel
SM
and our planned next generation StarBand modem. We
may not be able to develop and introduce these new technologies,
products and services quickly or effectively. In addition, our
plans to introduce multicasting and the StarBand Carousel
SM
, planned for 2001, depend upon
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our ability to attract content providers and reach agreements
with them. Our ability to establish these content partnerships
will depend on our ability to build and maintain a subscriber
base large enough to justify investments in the development of
this content and these applications. We currently have no
agreements with any content providers and we cannot assure you
that we will be successful in these endeavors. If the
introduction of our new technologies, products and services is
not successful, we may not be able to successfully implement our
business plan and our results of operations and financial
condition will be significantly harmed.
Intense competition in the Internet services market and
inherent limitations in existing satellite technology may
negatively affect the number of our subscribers and our revenues.
Competition in the market for consumer Internet access services
is intense and we expect the level of competition to intensify in
 the future. We compete with providers of various high-speed
communications technologies for local access connections, such as
 cable modem and DSL. We also may face competition from
traditional telephone companies, competitive local exchange
carriers and wireless communication companies. In many of our
target markets, our service may currently be the only high-speed
service available. As our competitors expand their operations to
offer high speed Internet services, we may no longer be the only
high speed service available in these markets.
We also expect additional competitors with satellite-based
networks to begin operations soon. In particular, some satellite
companies have announced that in the future they may offer
high-speed Internet service at the same price or at a lower price
 than we currently intend to offer our services. If we are forced
 to lower our prices to compete with these satellite companies,
our financial results will suffer. Many of our current and
potential competitors have longer operating histories, greater
brand name recognition, larger subscriber bases and substantially
 greater financial, technical, marketing and other resources than
 we do. Therefore, they may be able to respond more quickly than
we can to new or changing opportunities, technologies, standards
or subscriber requirements.
In addition, as a satellite technology provider, we face inherent
 limitations that our terrestrial competitors do not. For
example, two-way, real-time games and voice over Internet
Protocol telephony, available through cable modem and DSL
broadband providers, do not work optimally on satellite-based
systems such as ours and use significant amounts of our satellite
 capacity. If these Internet applications become popular, our
subscriber base may decline because other access technologies
work better with these applications. Additionally, satellite
signals sometimes suffer from deterioration or interruption
during inclement weather, or rain fade, while terrestrial
connections generally are not so affected. If we are unable to
compete effectively, our business will be harmed.
We are heavily dependent on our strategic partnership with
Gilat for key network technology, hardware and software, and we
may be significantly harmed if Gilat fails to meet our
expectations or if our relationship with Gilat terminates or
changes.
We depend on Gilat and its affiliates and suppliers for the
satellite technology used to deliver our services. We have an
agreement with Gilat pursuant to which they have agreed to
provide us with the equipment, technology and services that we
will use in our business. If we are not able to perform our
obligations under our agreements with Gilat, or if Gilat is
unable or fails to continue to sell us this technology under the
current terms of our agreement, our ability to operate our
network would be harmed.
Our future growth depends on a number of technological advances
Gilat expects to attain over its existing satellite technology
and which Gilat has agreed to license to us. These technological
advances include:
•
the development of software that we expect will enable us to
	optimize the allocation of subscribers across our leased
	satellite capacity and reduce our satellite capacity costs per
	subscriber;
•
efficiency improvements relating to multicasting and future
	StarBand Carousel
SM
service features; and
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•
implementation of a next generation universal serial bus modem
	which we expect will lower our subscriber acquisition costs.
If Gilat does not meet our expectations regarding these
technological advances, our financial condition and results of
operations would be harmed.
We also depend on Gilat as our principal supplier for satellite
networking components and hardware used to build and manage the
network and offer our services. Gilat also depends upon a single
manufacturer for all outdoor electronics. If we successfully
execute our business plan and continue to expand our subscriber
base, we expect to demand a significant quantity of goods over a
short time period from Gilat, including all customer premises
equipment. Gilat may be unable to obtain an adequate supply of
required components from its suppliers, or supply shortages of
particular components may substantially curtail the production of
 any of the equipment that Gilat is obligated to provide under
the supply agreement.
Gilat's principal offices, manufacturing and research and
development facilities are located in the State of Israel. Gilat
is directly affected by the political, economic and military
conditions in Israel. Gilat's production is dependent upon
components imported from outside of Israel and any major
hostilities involving Israel or the interruption or curtailment
of trade between Israel and its present trading partners could
significantly harm Gilat's ability to meet its supply
obligations to us.
If Gilat does not meet our demand for its products, for any
reason, or if the terms of our agreements with Gilat change and
we decide to pursue other strategic partners, it is unlikely that
 we would be able to find a replacement supplier without
significant harm to our business operations. Similarly, our
business model is substantially dependent on the pricing of the
equipment we obtain from Gilat. Our supply agreement with Gilat
provides for reviews of pricing at least every two years. If the
prices of the equipment increase, we may not be able to pass
these increases on to our subscribers and our operating results
would be harmed.
We also depend upon Spacenet and its subsidiaries to provide us
services that we require to run our business and operate the
network we use to provide our service. In addition, we are not a
licensee of the Federal Communications Commission, or FCC, and do
 not hold any authorization to operate satellite communications
facilities. We depend upon licenses held by Spacenet and its
subsidiaries for our satellite communications. If their licenses
are limited or revoked, if the FCC limits the number of their
customer premises earth stations or if they fail to operate the
earth stations providing service to us and our subscribers in a
satisfactory manner, our business could be seriously harmed.
If we are unable to maintain or expand our retail distribution
 relationship with EchoStar, we could lose access to a
substantial subscriber base.
On February 22, 2000, we entered into a memorandum of
agreement with EchoStar, pursuant to which EchoStar has agreed to
 cooperate with us to sell our service directly to consumers
through its retailers. The arrangement terminates on
March 31, 2001. The parties are currently negotiating an
extension of this agreement. If we do not extend this agreement,
EchoStar will not be obligated to make its distribution channel
available to us in the future. Our arrangement with EchoStar is
not exclusive. EchoStar may stop co-marketing with us and begin
marketing services that compete with ours, such as the service
offering WildBlue Communications is developing. EchoStar has
invested $50 million in WildBlue. We could lose our primary
retail distribution channel, which in turn would harm our
business, financial condition and results of operations.
If we are unable to maintain or expand our wholesale
distribution relationship with Microsoft, our business would be
harmed.
Microsoft agreed to purchase our products and network services on
 a wholesale basis as the means to deliver its MSNHigh Speed
Internet portal via satellite, for a period of at least four
years after our
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completion of milestones under our agreement with them. We have
not yet, and may never, complete these milestones. If we do not
complete the milestones, Microsoft will not be required to
purchase our products and network services and we may lose an
important revenue stream, distribution channel and source of
potential subscribers that we depend upon to implement our
strategy. In addition, if we fail to complete the milestones,
Microsoft would be permitted to sell its ownership stake in our
company to Spacenet and we would lose the strategic and
operational benefits associated with our strategic partnership
with Microsoft. We are currently negotiating with Microsoft to
amend this agreement, but there can be no assurance that we will
be able to amend this agreement to our satisfaction, if at all.
We depend on third parties to provide critical satellite
capacity and functionality to us. If we do not have continued
access to sufficient and reliable satellite capacity, we may be
unable to provide our services and our business would be harmed.
We currently lease, either directly or through Gilat, all of our
satellite transponder capacity from third parties, including
Loral Skynet and GE Americom. There is no assurance that these
third parties will continue to provide the capacity and
positioning we need on reasonable terms, or at all. If we are
forced to change our satellite capacity providers, we would be
forced to spend significant time and resources finding
alternative providers and repointing antennas. In addition, while
 Spacenet has applied for the authority to communicate with Loral
 Skynet's Telstar 7 satellite, the Federal
Communications Commission has not yet granted that authority. If
we fail to receive this authority, we will be unable to fully
implement our business plan and our business would be harmed.
If we achieve the substantial subscriber growth that we
anticipate, we will need to procure additional satellite
capacity. If we are unable to procure this capacity, we may be
unable to provide service to our subscribers or the quality of
service we provide may not meet their expectations.
We anticipate leasing satellite capacity on a hybrid Ku/Ka band
satellite to be launched by a third party in the fourth quarter
of 2002 which, if successful, will enable us to significantly
lower our space segment costs on a per subscriber basis. At
present, the satellite has not been built. Although we plan to
operate with our next-generation hybrid StarBand satellite system
 by the fourth quarter of 2002, the launch of the hybrid
satellite may be delayed or fail. If the satellite is not built,
or if it does not work as anticipated, our business plan and
results of operations will be harmed.
In addition, our ability to provide service is entirely dependent
 on the functionality of satellites on which we lease
transponders. These satellites may experience failure, loss,
damage or destruction from a variety of causes, including war,
anti-satellite devices and collision with space debris. If this
occurs, we are likely to suffer:
•
permanent loss of service;
•
temporary gaps in service availability; or
•
decreased quality of service.
As a result, we could lose business and our operating results and
 financial condition would be harmed.
We depend on third parties for key ground equipment, software
and services. If we do not have continued access to sufficient
equipment, software and services, we may be unable to provide our
 services and our business would be harmed.
We rely on Channel Master, a leading manufacturer of satellite
dish antennas in the U.S. marketplace, and other suppliers
that Channel Master uses, to provide us with satellite antennas,
mounts and consolidation services. We purchase all of our antenna
 and mount hardware from Channel Master, which also acts as our
consolidator creating customer premises equipment kits for
shipment to our
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customers. Although we believe that there are alternative
suppliers and consolidators for this equipment if we are not able
 to continue our relationship with Channel Master on terms
attractive to us, it could take significant time and expense to
establish new relationships with alternative suppliers or
consolidators and substitute their technologies or equipment into
 our network and products.
We license software from third parties, including applications
that are integrated with internally developed software and used
in the customer premises equipment and equipment used in the
network operations center. These technology licenses may not
continue to be available to us on commercially reasonable terms,
or at all, and we may not be able to obtain licenses for other
existing or future technologies that we desire to integrate into
our products. As a result, we may not be able to operate our
business.
We rely on third-party independent contractors to install our
customer premises equipment at new subscribers' homes. We
may not have adequate control over the hiring, training,
certification and monitoring of these installers. If growth of
our new subscriber base outpaces growth of our installer base or
if the installers fail to provide the quality of service that our
 customers expect, our business and reputation will be harmed.
If our products contain defects, we may be subject to
significant liability claims from our subscribers and other users
 of our products and incur significant unexpected expenses and
lost sales.
Our products are complex and may contain undetected errors or
failures. If this happens, we may experience delay in or loss of
market acceptance and sales, product returns, diversion of
research and development resources, injury to our reputation or
increased service and warranty costs. We also have exposure to
significant liability claims from our customers because our
products are designed to provide critical communications
services. Although we attempt to limit such exposure through
product liability insurance and through contractual limitations
in our customer agreements, such precautions may not cover all
potential claims resulting from a defect in one or more of our
products.
We may also seek indemnification from manufacturers of defective
products, including Gilat, if we suffer losses as a result of the
 defective products. Our ability to recover our losses from a
manufacturer is uncertain and would typically be limited to the
replacement cost of the defective product. Even if we are able to
 recover these costs, there are additional substantial costs we
will not be able to recover from any third party such as those
associated with visiting each subscriber location to repair
defective equipment or damage to our reputation in the consumer
market. A defect in one or more of our products could
significantly harm our business and financial condition.
Our success depends upon our ability to retain management and
other key personnel and to attract additional skilled employees.
Our success depends in significant part upon the continued
service of our senior management personnel including Yoel Gat,
Zur Feldman and David Trachtenberg and other employees who
possess technical knowledge of our operations. While we do not
maintain any "key person" insurance, we have entered
into employment agreements with some key employees. Our future
success also depends on our ability to attract, train, retain and
 motivate highly skilled personnel. For example, we do not have a
 chief financial officer, but we are currently conducting a
search for one. Competition for qualified, high-level
telecommunications personnel is intense and we cannot assure you
that we will be able to attract and retain such personnel. The
loss of the services of one or more of our key individuals, or
the failure to attract and retain additional key personnel, could
 harm our business.
Our principal stockholders and management own a significant
percentage of our company, will be able to exercise significant
influence over our company and may have interests that conflict
with ours or our other stockholders.
Our executive officers and directors and principal stockholders
together beneficially own 90.5% of our shares, and after
completion of this offering will continue to own a substantial
majority of our shares. Accordingly, these stockholders will be
able to exert significant influence over the composition of our
board
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of directors and all other matters requiring stockholder approval
 and will continue to have significant influence over our
affairs. This concentration of ownership could have the effect of
 delaying or preventing a change in our control or otherwise
discouraging a potential acquirer from attempting to obtain
control of us, which may prevent our stockholders from realizing
an attractive return on their investment.
Gilat, EchoStar and Microsoft have substantial business
operations and opportunities apart from our business. They may
also develop different business objectives than ours. As a
result, situations may arise in which their interests diverge
from ours or our other shareholders. For example, we expect to be
 one of Gilat's largest customers for their technology,
equipment and software. We will seek to purchase those items from
 Gilat at prices favorable to us, but Gilat will seek to sell
those items to us at prices favorable to them. Similarly, we
expect Microsoft and EchoStar to primarily target new customers
for their MSN and DISH businesses by offering our high-speed
Internet access in conjunction with their products, but we may
wish to primarily focus on existing MSN and DISH subscribers as
the greater opportunity to sell our service.
Our relationships with our principal stockholders keep us from
 seeking business opportunities with some of their competitors
and may deter those competitors from doing business with us,
which could harm our development.
To initiate our strategic partnerships and develop our
relationships with Gilat, Microsoft and EchoStar, we agreed to
refrain from dealing with a limited number of their competitors.
We are currently negotiating to reduce the scope of these
restrictions. Competitors of Gilat, Microsoft and EchoStar also
may choose not to engage in commercial relationships with us
because of our close relationship with these principal
stockholders. Our limited ability to do business with some of the
 competitors of our principal stockholders, where that business
might otherwise benefit our company, could reduce our ability to
expand the scope and geographic reach of our services and could
harm our development and profitability.
We may have underestimated our capital requirements for our
continued operations, which may require us to seek substantial
amounts of additional capital. If this additional capital is not
available to us on acceptable terms, our business could be
harmed.
We expect to need additional capital in order to:
•
fund our planned rapid expansion;
•
pursue customer sales;
•
develop or enhance our service offering and implement new
	technologies;
•
respond to competitive pressures; or
•
promote our brand identity.
We may have underestimated the amount of capital that we will
need. We developed our business model based upon a number of
assumptions such as our ability to increase the number of
subscribers per transponder to 20,000 subscribers. If this or any
 material assumption in our business model proves to be wrong, or
 if we failed to account for any material contingencies, our
estimated capital requirements may be inadequate.
We may not be able to raise additional capital on terms
acceptable to us, if at all. Financings may be on terms that are
dilutive or potentially dilutive to our stockholders. If adequate
 capital is not available on acceptable terms, we may be unable
to fund our expansion, or respond to competitive pressures. Any
inability to do so could have an adverse effect on our business,
revenues, financial condition and results of operations.
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The discretion of our management will be limited by covenants
contained in the agreements governing our indebtedness and future
 debt instruments, and management may not be able to take actions
 that would otherwise benefit our company or stockholders.
The current agreements governing our indebtedness contain
provisions that restrict us from doing certain things, including
incurring additional indebtedness, exceeding stated limits on our
 aggregate capital expenditures, creating liens on our assets,
making asset dispositions, conducting other business, and
entering into transactions with affiliates and related persons
without our creditors' consent. These covenants will limit
our ability to finance future operations or capital needs or to
engage in other business activities that our management might
otherwise pursue. If we fail to comply with the obligations
contained in the agreements, we may trigger default under the
agreements, which could permit acceleration of the related debt,
make additional financing unavailable to us and significantly
harm our financial condition and results of operations.
Our dependence on third parties for our intellectual property
puts us at risk if this intellectual property is not properly
protected or infringes upon the rights of others.
Except for a series of StarBand marks, we rely on third parties
including Gilat, Spacenet and Channel Master for most of the
intellectual property employed in our network. If any of our
suppliers fails to adequately protect their intellectual property
 or is found to be infringing on the intellectual property rights
 of other parties, our business may, in turn, be harmed.
Infringement claims could materially harm our business. From time
 to time, we may receive notice of claims of infringement of
third parties' proprietary rights. The fields of
telecommunications and Internet communications are filled with
patents, both pending and issued. We may unknowingly infringe
such a patent. We may be exposed to future litigation based on
claims that the network technology infringes the intellectual
property rights of others, especially patent rights. Someone,
including a competitor, might file a suit with little merit, in
order to harm us commercially, to force us to re-allocate
resources to defending such a claim, or extract a large
settlement. In addition, our employees might utilize proprietary
and trade secret information from their former employers without
our knowledge, even though we prohibit these practices. Any
litigation, with or without merit, could be time consuming to
defend, result in high litigation costs, divert our
management's attention and resources or cause us to delay
deployment of related technology. A jury or judge may decide
against us even if we had not in fact infringed. If we lose or
are forced to settle, we could be required to remove or replace
allegedly infringing technology, to develop non-infringing
technology or to enter into royalty or licensing arrangements.
These royalty or licensing arrangements, if required, may not be
available on terms acceptable to us, or at all.
Globecomm Systems, Inc. commenced a lawsuit against us alleging
the willful infringement of their U.S. patent relating to a
particular means for transferring communications signals between
a remote terminal and a network operations center via satellite.
We have not yet filed an answer to the complaint of Globecomm. We
 will answer the complaint and vigorously contest the claims made
 by Globecomm.
In addition, Hughes Electronics Corporation commenced a lawsuit
against Gilat and Spacenet concerning, among other things, a
patent for personal computer based receiver cards that Gilat
sells to us for use as part of our service offering to consumers.
 Gilat and Spacenet have filed motions for partial summary
judgment on the issue of patent claim construction and the court
has scheduled a hearing on these motions for November 20,
2000. Although we are not a party to this litigation, if Hughes
prevails, we could lose access to equipment and technology that
is critical to our business.
The outcome of these lawsuits is inherently uncertain. Patent
litigation is highly complex, diverts the efforts of management
and can extend for a protracted period of time. Accordingly, the
expense and diversion of resources associated with these matters
could harm our business and financial condition. We do not have
insurance that would indemnify us for any liability that may be
imposed in connection with the legal actions described above.
Accordingly, if any of these events occur, it could result in a
substantial reduction in our revenue and could result in losses
over an extended period of time.
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Risks Related to Our Industry
If we fail to remain competitive with rapid technological
advancements, our business will be harmed.
The high-speed Internet access industry is subject to rapid
technological change, frequent new service introductions and
evolving industry standards. We believe that our future success
will depend largely on our ability to anticipate or adapt to such
 changes and to offer, on a timely basis, services that meet
evolving standards. We cannot predict the extent to which
competitors using existing or currently undeployed methods of
delivery of Internet access services will compete with our
services. Existing, proposed or undeveloped technologies could
render our satellite-based network less profitable or less viable
 than contemplated in our current business plan. In addition, we
may not be able to acquire new technologies or respond to
technological changes in a timely and cost effective manner. If
we cannot keep our technology competitive, we may not be able to
implement our business plan.
A system failure or breach of network security at our ground
facilities could cause delays or interruptions of service to our
subscribers and could result in liability, damage our brand
image, lead to a loss of subscribers and result in a significant
decrease of revenues.
Our operations depend on our ability to support our terrestrial
service infrastructure and avoid damage from fires, earthquakes,
hurricanes, floods, power losses, excessive sustained or peak
user demand and similar events. The occurrence of a natural
disaster or other unanticipated problems at the network
operations centers could cause interruptions in the services we
provide. Any damage or failure that causes interruptions in our
operations could materially and adversely affect our business,
operating results and financial condition.
Our network may be vulnerable to unauthorized access, computer
viruses and other disruptive problems. Providers of Internet
services have in the past experienced, and may in the future
experience, interruptions in service as a result of accidental or
 intentional actions of Internet users, current and former
employees and others. Other technologies similar to our own have
been subject to service outages. The consequence of these
interruptions in service may be that some subscribers terminate
our service and that some potential subscribers reject our
service. Moreover, we may be required to give discounts to
subscribers who experience service interruption. Interruptions of
 service may therefore result in decreased revenues and
subscriber base. Eliminating computer viruses and alleviating
other security problems, including problems created by one of our
 employees or a vendor's employee, may require
interruptions, delays or cessation of service to our subscribers.
Unauthorized access could harm our business, and always-on
Internet services, such as ours, may be subject to additional
security risks which could cause us to lose existing subscribers,
 deter potential subscribers and harm our reputation.
Unauthorized access could potentially jeopardize the security of
confidential information stored in the computer systems of our
subscribers, which might cause our subscribers to bring liability
 claims against us and also might deter potential subscribers
from using our services. Since our services allow subscribers to
be connected to the Internet at all times, unauthorized users may
 have a greater ability to access information stored in our
subscribers' computer systems. Always-on Internet services
may give unauthorized users, or hackers, more and longer
opportunities to break into a subscriber's computer or
access, misappropriate, destroy or otherwise alter data accessed
through the Internet. We are currently working to implement data
security systems that are designed to protect a subscriber's
 computer from unauthorized access through the Internet, but we
cannot ensure that the security risks will be eliminated.
We may be subject to liability for information retrieved and
replicated through our network.
Because subscribers will download and redistribute material and
we may cache or replicate material in connection with our
services, claims may be made against us for defamation, or other
theories based on the nature and content of such materials. These
 types of claims have been brought, and sometimes
14
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successfully litigated, against online service providers in the
past. Although we carry general liability insurance, our
insurance may not cover potential claims of the these types, or
may not be adequate to indemnify us for all liability that may be
 imposed. Any imposition of liability that is not covered by
insurance or is in excess of insurance coverage could have a
material adverse effect on our business, operating results and
financial condition.
We depend on FCC-regulated and other licenses to operate our
network.
We depend upon licenses granted to Spacenet and its subsidiaries
by the FCC. These licenses are subject to renewal as determined
by the FCC. Major changes in operations or facilities require
modifications to the FCC licenses, which must be approved by the
FCC. If the FCC does not renew these licenses as their initial
terms expire or does not approve any modifications needed for
changes in the services provided to support our operations, we
may be unable to operate our system or implement our business
plan.
The FCC granted the licenses for the two smallest remote user
antennas, measuring 0.96 meters and 0.75 meters on a conditional
basis for use in up to 20,000 locations pending the outcome of a
public proceeding concerning the type of network access scheme
used by many satellite data networks. If the outcome of the
proceeding is unfavorable and Spacenet or any of its subsidiaries
 is required to modify the remote user antennas or any new
facilities, our business plan will be harmed.
A subsidiary of Spacenet has filed an application with the FCC to
 increase the number of remote user locations that Spacenet may
operate. That application also seeks authority for communications
 with Telstar 7. The FCC may not approve both or either
parts of this application. If either part of this application is
denied by the FCC, our ability to grow our business will be
significantly harmed because we depend on our ability to increase
 the number of subscribers for our service in order to
successfully implement our business plan.
State and local zoning ordinances restricting the installation of
 satellite antennas might also reduce market demand for our
service. Either the FCC or state or local authorities may
increase regulation regarding the potential radiation hazard
posed by transmitting earth station satellite antennas'
emissions of radio frequency energy.
Additionally, FCC regulations may prevent us from choosing our
business partners or restrict our activities as an Internet
service provider. For example, the FCC may decide that high-speed
 data networks used to provide access to the Internet should be
made available generally to Internet service providers and we may
 therefore be required to provide our wholesale service to any
Internet service providers that request it, including entities
that compete with us and with MSN.
If the FCC imposes additional obligations on us such as these, we
 would be forced to comply with potentially costly requirements
and limitations on our business activities. This could
significantly harm our financial condition and results of
operations.
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Risks Related to the Offering and the Price of Our Shares
There has been no prior market for our shares and an active
trading market for our shares may not develop.
Prior to this offering, there has been no public market for our
shares. We can give no assurance that an active trading market
for our shares will develop or, if developed, be sustained
following the closing of this offering. If an active trading
market is not developed or maintained, the liquidity and trading
price of the shares could be adversely affected. The offer price,
 which may bear no relationship to the price at which the shares
will trade upon completion of this offering, will be determined
by negotiations between the representatives of the underwriters
and us, based upon factors that may not be indicative of future
market performance.
New investors will incur immediate and substantial dilution.
Shares purchased in this offering will incur immediate and
substantial dilution in net tangible book value of
$     per share assuming an initial
public offering price equal to the mid-point of the estimated
offering price range. To the extent that currently outstanding
options or warrants are exercised or converted, there will be
further dilution to your shares. As a result of this offering,
our existing stockholders will enjoy an aggregate unrealized gain
 of
$          .
The trading market price of our stock may decline as a result
of substantial sales of our common stock after the offering.
shares of our common stock held by
our existing stockholders will become freely tradable in the
public market 180 days after this offering. The market price
 of our common stock could fall in response to sales of a large
number of shares of our common stock in the market after this
offering or in response to the perception that sales of a large
number of shares could occur. In addition, such sales could
create the perception to the public of difficulties or problems
with our products and services. As a result, these sales also
might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that
we deem appropriate. For a more detailed discussion of shares
eligible for sale after the offering, see "Shares Eligible
for Future Sale."
In addition, some of our current stockholders have
"demand" and "piggyback" registration rights
in connection with future offerings of our common stock.
"Demand" rights enable the holders to demand that their
 shares be registered and may require us to file a registration
statement under the Securities Act at our expense.
"Piggyback" rights provide for notice to the relevant
holders of our stock if we propose to register any of our
securities under the Securities Act, and grant such holders the
right to include their shares in the registration statement. All
holders with registrable securities have agreed not to exercise
their registration rights until 180 days following the date
of this prospectus without the consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
The market price for our common stock will likely be volatile
and you may suffer a loss on your investment.
The stock market has experienced significant price and trading
volume fluctuations, and the market prices of technology
companies generally, and Internet-related companies particularly,
 have been extremely volatile. Recent initial public offerings by
 technology companies have been accompanied by exceptional share
price and trading volume changes in the first days and weeks
after the securities were released for public trading. Investors
may not be able to resell their shares at or above the initial
public offering price. In the past, following periods of
volatility in the market price of a public company's
securities, securities
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class action litigation has often been instituted against that
company. Such litigation could result in substantial costs to us
and a diversion of our management's attention and resources.
The market price may vary in response to any of the following
factors:
•
changes in financial estimates or investment recommendations
	relating to our stock by securities analysts;
•
changes in market valuations of similar Internet operations and
	services businesses; and
•
fluctuations in the stock market price and volume of traded
	shares generally, especially fluctuations in the traditionally
	volatile technology sector.
In addition, an active public trading market may not develop or
be sustained after this offering. If an active and liquid trading
 market does not develop, you may have difficulty selling your
shares.
Provisions of our charter documents and Delaware law could
deter takeover attempts that may offer you a premium, which could
 adversely affect our stock price.
Provisions of our charter documents and Delaware law make
acquiring control of us without the support of our board of
directors difficult for a third party, even if the change of
control would be beneficial to you. The existence of these
provisions may deprive you of an opportunity to sell your shares
at a premium over the prevailing market price for our common
stock. The potential inability of our stockholders to obtain a
control premium could adversely affect the market price for our
common stock.
Because stockholders do not have the ability to require the
calling of a special meeting of stockholders and are subject to
timing requirements in submitting stockholder proposals for
consideration at any annual meeting, any third party takeover not
 supported by the board of directors would be subject to
significant delays and difficulties.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
forward-looking statements are not historical facts, but rather
are based on our current expectations, estimates and projections
about our industry, our beliefs and assumptions. Words such as
"anticipates," "expects,"
"intends," "plans," "believes,"
"seeks," "estimates," "projects,"
"may," "will," "should,"
"could," "pending," "potential,"
"predicts" and similar expressions are intended to
identify forward-looking statements. These forward-looking
statements include, without limitation, statements about our
market opportunities, strategies, competition, expected
activities and expenditures as we pursue our business plan. These
 statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which
are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or
forecasted in the forward-looking statements. Many factors could
cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements that may be expressed or implied by these
forward-looking statements, including:
•
any failure of the satellite communications network delivering
	our service to perform adequately or claims by customers for
	errors in our products;
•
the loss of one of our strategic partners;
•
the loss of satellite capacity;
•
the loss of the right to use proprietary technology and any
	third-party claims against us for infringement;
•
difficulty in raising additional capital funds;
•
our inability to manage effectively our potential rapid growth;
•
our failure to develop new channels to sell our products or to
	successfully compete in our chosen markets or to expand into new
	markets;
•
unanticipated downturns in the markets for high-speed Internet
	access; and
•
our inability to achieve positive operating results.
These factors are not exhaustive. Factors that could cause our
actual results, performance or achievements to differ include,
but are not limited to, those discussed in "Risk
Factors." Given this level of uncertainty, you should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this prospectus.
OTHER RELEVANT INFORMATION
We use market data and industry forecasts throughout this
prospectus, which we have obtained from internal surveys, market
research, publicly available information and industry
publications. Industry publications generally state that the
information they provide has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such
information is not guaranteed. Similarly, we believe that the
surveys and market research we or others have performed are
reliable, but we have not independently verified this
information. Neither we nor any of the underwriters represents
that this information is accurate.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of
           shares
 in this offering of approximately
$           million,
 based on an assumed offering price of
$           per
 share and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us. If the
 underwriters' over-allotment option is exercised in full,
we estimate that we will receive net proceeds from this offering
of approximately
$           million.
We intend to use these net proceeds:
•
to fund the continued growth of our business and operations and
	expand our subscriber base; and
•
to the extent remaining, for general corporate and working
	capital purposes.
Pending the uses described above, we intend to invest the net
proceeds to us from the offering in short-term, investment-grade,
 interest-bearing securities. We cannot predict whether the
proceeds will be invested to yield a favorable return.
DIVIDEND POLICY
We have not previously paid any cash or other dividends with
respect to our common stock. We do not expect to pay any
dividends on our common stock for the foreseeable future. We
currently intend to retain earnings, if any, to finance the
operations of our business. In addition, our bank credit facility
 limits our ability to pay cash dividends on our common stock.
Our board of directors will decide from year to year whether
dividends will be paid based on factors such as our results of
operations, general business conditions, capital requirements,
overall financial condition and any other factors that the board
considers relevant.
We have accrued non-cash preferred dividends of
$12.7 million on all convertible preferred shares of stock
issued. These dividends will be paid in kind in additional shares
 of convertible preferred stock which will automatically convert
into common stock upon consummation of the offering.
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CAPITALIZATION
The following table sets forth our capitalization as of
August 31, 2000 on:
•
an actual basis;
•
a pro forma basis after giving effect to the automatic conversion
	 of all outstanding shares of convertible preferred stock and
	accrued dividends thereon into 54,228,893 shares of common
	stock; and
•
a pro forma as adjusted basis to reflect our sale of
	      shares of common stock at an
	assumed initial public offering price of
	$     per  share, after deducting
	underwriting discounts and commissions and estimated offering
	expenses payable by us.
The unaudited pro forma and pro forma as adjusted amounts exclude
 the effects of the issuance of 5,449,220 shares of common
stock pursuant to exercise of outstanding stock options;
1,873,477 and 1,910,947 shares of common stock issuable upon the
exercise of warrants or rights to purchase Series C and
Series D mandatorily redeemable convertible preferred stock,
 respectively; and warrants to purchase 116,000 shares of
common stock issued to third parties. Except for rights to
purchase Series D mandatorily redeemable preferred stock,
none of the outstanding stock options or warrants to purchase our
 stock were exercisable at August 31, 2000. You should read
this table in conjunction with "Management's Discussion
 and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes
included elsewhere in this prospectus.
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Table of Contents
As of August 31, 2000
Pro Forma
Actual
Pro Forma
As Adjusted
(in thousands, except share data)
Cash and cash equivalents
$
68,303
$
68,303
$
Restricted cash and cash equivalents
90,559
90,559
Total
$
158,862
$
158,862
$
Term loan at face value
$
90,000
$
90,000
$
Mandatorily redeemable convertible preferred stock:
Series A, A-1, A-2, B, C, and D mandatorily redeemable
	convertible preferred stock, $.05 par value; 12% cumulative
	dividends:
Series A; 55 million shares authorized; 49,228,259,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends
51,494
—
Series A-1; 55 million shares authorized; 49,228,259,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends
51,526
—
Series A-2; 30 million shares authorized; 24,686,284,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends
25,839
—
Series B; 150 million shares authorized; 140,111,199,
	actual and 0 pro forma and pro forma as adjusted shares issued
	and outstanding, plus accrued dividends
14,011
—
Series C and D; 10 million shares authorized each; none
	 issued and outstanding for actual, pro forma or pro forma as
	adjusted shares issued and outstanding
—
—
Total mandatorily redeemable convertible preferred stock
142,870
—
Stockholders' (deficit) equity:
Common stock, $.05 par value; 110 million shares
	authorized; 33,879,757 actual, 88,108,650 pro forma, and
	   pro forma as adjusted shares issued and outstanding,
	 respectively
1,694
4,405
Additional capital
17,463
157,622
Deferred compensation
(7,952
)
(7,952
)
Deficit accumulated during development stage
(87,975
)
(87,975
)
Total stockholders' (deficit) equity
(76,770
)
66,100
Total capitalization
$
156,100
$
156,100
$
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DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the public offering price
 per share of our common stock and the pro forma as adjusted net
tangible book value per share of our common stock after this
offering. Our pro forma net tangible book value as of
August 31, 2000 was $46,822,456, or $0.53 per share of
common stock. Pro forma net tangible book value per share
represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock
outstanding, after giving effect to the conversion of all
outstanding shares of preferred stock and accrued dividends
thereon into 54,228,893 shares of common stock upon
consummation of this offering. Assuming the sale by us of
           shares
 of common stock in this offering at an assumed initial public
offering price of
$           per
 share, our pro forma net tangible book value as of
August 31, 2000 would have been
$          , or

$           per
 share of common stock. This represents an immediate and
substantial increase in net tangible book value of approximately
$           per
 share to existing stockholders and an immediate and substantial
dilution of approximately
$           per
 share to new investors purchasing the shares in this offering.
The following table illustrates the per share dilution:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share as of August 
	31, 2000
$0.53
Increase per share attributable to new investors
Pro forma as adjusted net tangible book value per share after
	this offering
Dilution per share to new investors
$
The following table summarizes, on a pro forma basis as of
August 31, 2000, the number of shares of common stock
(including all shares of convertible preferred stock, which will
be converted into 54,228,893 shares of common stock upon the
 closing of the offering) purchased from us, the total
consideration paid to us and the average price per share paid by
existing stockholders and by new investors. The information
presented is based upon an assumed initial public offering price
of
$           per
 share for shares purchased in this offering, before deducting
the underwriting discounts and commissions and estimated offering
 expenses:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
88,108,650
%
$126,000,000
%
$
1.43
New investors
Total
100.0
%
$
100.0
%
The discussion and tables above exclude:
•
1,873,477 and 1,910,947 shares of common stock issuable upon
	 the exercise of warrants and rights to purchase Series C
	and D mandatorily redeemable convertible preferred stock,
	respectively, and assumed immediate conversion thereof into
	common stock with a weighted average exercise price of $4.49 per
	share;
•
116,000 shares of common stock issuable upon the exercise of
	 warrants issued to various third parties with a weighted average
	 exercise price of $2.50; and
•
shares
	 of common stock issuable if the underwriters exercise their
	over-allotment option in full.
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At August 31, 2000, we had 2,550,780 shares of common
stock available for future issuance under our stock plans through
 December 31, 2000 plus an additional 15,000,000 shares
 of common stock available for issuance effective January 1,
 2001.
To the extent these options and warrants are exercised, there
will be further dilution to the new investors. If the
underwriters' over-allotment option is exercised in full,
the number of shares held by new investors will increase to
   shares, or   % of the total number of
 shares of common stock outstanding after this offering.
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SELECTED FINANCIAL INFORMATION
In the table below, we provide you with selected historical
financial data of StarBand Communications Inc. We have prepared
this information using the financial statements of StarBand
Communications Inc. for the period from January 11, 2000
(inception) to August 31, 2000. These financial
statements have been audited by Ernst & Young LLP,
independent auditors.
When you read this selected historical financial data, it is
important that you read along with it the historical financial
statements and related notes, as well as the section titled
"Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Period from
January 11, 2000
(inception) through
August 31, 2000
(in thousands, except for
share and per share data)
Statement of Operations Data:
Revenues:
Internet access
$
3
Customer premises equipment and installation
4
Total revenues
7
Costs and expenses:
Network
4,149
Customer premises equipment and installation
22,707
Sales and marketing
14,822
General and administrative (exclusive of non-cash compensation
	expense shown below)
25,862
Non-cash compensation
301
Depreciation
742
Total costs and expenses
68,584
Loss from operations
(68,577
)
Non-operating income, net
1,728
Loss before provision for income taxes
(66,848
)
Provision for income taxes
—
Net loss
(66,848
)
Preferred stock dividends and accretion
(15,245
)
Net loss attributable to common stockholders
$
(82,094
)
Basic and diluted loss per share
$
(4.06
)
Shares used in the calculation of basic and diluted loss per
	share
20,232,428
As of
August 31, 2000
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
68,303
Restricted cash and cash equivalents
90,559
Total
158,862
Working capital
32,602
Total assets
196,512
Total debt
81,089
Total mandatorily redeemable convertible preferred stock
142,870
Total stockholders' deficit
(76,770
)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in
conjunction with "Selected Financial Information" and
the financial statements and related notes included elsewhere in
this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. See
"Forward-Looking Statements." Our actual results could
differ materially from those discussed here. Factors that could
cause or contribute to such differences include those discussed
in "Risk Factors" as well as those discussed elsewhere
in this prospectus.
Overview
StarBand is the first nationwide provider of two-way, always-on,
high-speed Internet access via satellite to residential and small
 office/home office customers. We were founded on
January 11, 2000 by Spacenet Inc., a wholly owned subsidiary
 of Gilat, and began offering our services in April 2000.
Since our inception we have:
•
entered into distribution agreements with Microsoft and EchoStar;
•
deployed and tested our scalable nationwide consumer satellite
	network;
•
installed and tested more than 9,000 StarBand systems at test
	locations with pilot program participants and retail
	distributors, including approximately 4,700 residential and home
	office consumer locations, 1,600 DISH retailer locations and
	3,600 RadioShack stores;
•
trained over 8,000 third-party installers;
•
raised $126 million of equity financing and also arranged
	debt financing;
•
leased 23 transponders on existing satellites; and
•
hired over 127 employees.
We have successfully completed pilot testing our network and are
launching our service nationwide in the fourth quarter of 2000.
We will initially offer our branded retail service through
EchoStar, and co-branded wholesale service with Microsoft for
distribution at RadioShack stores.
We have only a limited operating history upon which you can
evaluate our prospects and have experienced net losses of
approximately $66.8 million since our inception in
January 2000. We expect that we will continue to incur net
losses over at least the next few years as we continue to incur
substantial subscriber acquisition costs, develop our sales and
marketing and administrative organizations, expand our product
offerings and experience continued depreciation charges relating
to the network infrastructure. We cannot assure you that we will
achieve or sustain profitability or positive cash flow from
operations.
Our future financial performance and our ability to achieve
positive operating cash flow will depend on a number of factors,
some of which we cannot control. We believe that improvements in
our financial performance depend largely on our ability to:
•
build our subscriber base rapidly and cost-effectively;
•
provide reliable and high-quality services at competitive prices;
•
offer additional high-margin value-added content delivery
	services;
•
develop and implement technology to improve our satellite
	capacity cost per subscriber;
•
attract qualified personnel;
•
reduce cost and increase the volume of subscribers per
	transponder with next-generation technology;
•
minimize subscriber turnover; and
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•
identify and integrate the necessary administrative and
	operations support systems, including installation and customer
	care, to manage our growth effectively.
Revenues
We expect to derive most of our revenues for the foreseeable
future from monthly Internet access fees paid by our subscribers
and from fees paid by MSN or others for our wholesale service. We
 will also receive revenue from the sale of our customer premises
 equipment. In the future, we also expect to derive revenues from
 value-added content delivery services, such as the sale of
music, movies, software and other rich media content through our
multicast service.
We are currently offering our network services through both
retail and wholesale channels to maximize our ability to take
advantage of our first-to-market presence to rapidly acquire
subscribers. The retail channel generates higher revenue streams
per user than the wholesale channel. Our wholesale channel
provides us additional scale for our business while minimizing
the subsidies and other costs of subscriber acquisition.
Retail Channel.
Upon our commercial launch in the fourth
quarter of 2000, we will sell our services directly to retail
subscribers, typically with a minimum one-year contract term.
These subscribers will pay monthly fees for the service,
initially ranging from $59.99 to $69.99, which we anticipate will
 decrease over time as high-speed Internet access alternatives
become more widely available. Typically, retail StarBand
subscribers must purchase the customer premises equipment for an
initial suggested retail price of $399, including the antenna,
the modem and all necessary hardware. This price reflects a
substantial subsidy from us.
Wholesale Channel.
In the wholesale channel, the reseller
purchases the customer premises equipment from us. The wholesale
price is initially lower than our cost for the equipment, though
we expect our cost to decrease due to volume discounts. We also
charge an additional fee for network services, second-level
technical support and other optional services if requested by the
 reseller. Our first wholesale partner, MSN, purchases the
customer premises equipment at a price starting at
$1,100 per unit, which we expect to decline pursuant to our
agreement with them. This agreement provides for pricing of
network services that we will provide to MSN which will generate
losses. We believe these losses will decrease as our network
services costs per subscriber decrease. We view these early stage
 losses as an investment in building a large subscriber base with
 our strategic investor, and we intend to sell value-added
services to these subscribers from which we expect to generate
higher-margin revenues.
Costs and Expenses
Network.
Our network expense is primarily a function of
satellite capacity expenses which consist of satellite
transponder lease payments and network operations costs such as
hardware depreciation, telecommunications costs and personnel
expenses related to our customer support center. We believe that
the type of satellite capacity we use generally ranges in cost
from $150,000 to $200,000 per month per transponder. We are
negotiating the terms of leases for our satellite capacity and
expect to obtain lease rates at or below the bottom of this
range.
We estimate that we can currently support approximately 7,500
subscribers per satellite transponder. Our goal is to increase
the number of subscribers per transponder to approximately 20,000
 through the implementation of software upgrades currently under
development. We will continue to add satellite capacity as
necessary to meet the bandwidth requirements of additional
StarBand network subscribers. As we acquire transponder capacity
to prepare for additional subscribers, we may be forced to lease
capacity some time prior to our need for such capacity. These
leases would be subject to availability in the open market at
potentially less favorable prices.
Customer Premises Equipment and Installation.
In the
retail channel, we are heavily subsidizing the retail consumer
price of the customer premises equipment. We expect that over
time, the customer premises equipment subsidy will decrease
substantially as the cost of the equipment to us decreases due to
 volume discounts and improvements and efficiencies in the
technology. We have negotiated an agreement
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with Gilat to purchase customer premises equipment. Our agreement
 with Gilat contains milestones that reduce the price we pay per
unit as the total number of units we purchase exceeds specified
levels. We therefore expect our costs to decrease over time. In
the wholesale channel, we are presently subsidizing limited
quantities of customer premises equipment to MSN. In the future,
we expect to provide little or no customer premises equipment
subsidy to MSN or any other wholesale channels. Periodically we
may offer free or subsidized installations to new customers as
part of sales promotions or discounts aimed at acquiring new
subscribers.
Sales and Marketing.
These expenses consist primarily of
in-store retailer demonstration units, sales personnel costs,
trade shows, distributor training, advertising, branding, market
research, promotional literature and other public relations
expenses. Much of our sales and marketing expenses for the
current period are due to marketing campaigns to provide in-store
 retailer demonstration units. In late 2000, we will begin to
incur marketing expenses associated with our nationwide service
launch. Marketing, branding-related and sales expenses will rise
for the foreseeable future as we expand our sales and marketing
organization and aggressively pursue our targeted marketing
campaign. We will continue to grow our sales and marketing
infrastructure to improve the rate and efficiency of subscriber
acquisition. We anticipate that the activation fees and/or
commissions that we pay to our retail distribution partners that
generate new subscribers will range from $100 to $300 per
subscriber. In addition to the activation fees, we anticipate
that some retail distributors will receive ongoing royalties of
$1 to $3 per subscriber per month so long as the subscriber
uses our services.
General and Administrative.
These expenses consist of
salaries and benefits for our administration, executive, finance,
 legal, and human resources departments, including their
associated overheads, as well as outside accounting and legal
expenses and depreciation of fixed assets. Many general and
administrative services are provided to us by Gilat and Spacenet,
 including information technology, office space and legal,
finance and human resources services. For operational reasons
during our development stage, all of our employees were leased
from Spacenet. Substantially all of these personnel will be
transferred to our direct payroll and no longer be leased from
Spacenet prior to the end of 2000.
We expect the general and administrative expenses that we pay to
Gilat and Spacenet will decrease over time as we develop our own
internal administration and other resources. We believe our
payments to Gilat and Spacenet for general and administrative
assistance payments approximate the actual costs incurred by
Gilat and Spacenet to provide those services to us. We also
expect that our general and administrative expenses as a whole
will increase over time and possibly exceed revenues for some
time as we establish and expand our administrative infrastructure
 to meet the demands of our personnel and our growing subscriber
base.
Non-Cash Compensation.
These costs are primarily
attributable to stock options granted to employees below fair
market value and the fair value of options and warrants granted
to third parties, including consultants, leased employees and
others. The vesting period for the majority of the options is
four years. We expect non-cash compensation expense to increase
substantially in future periods as options which were granted at
below fair market value continue to vest over the vesting period
of the options granted through August 31, 2000 due to the
large number of options granted in late August for which very
little amortization has been expensed. In the future, StarBand
intends to issue options at fair market value in order to
minimize non-cash compensation expense.
Our Accounting for Revenues, Costs, Expenses and Subscriber
Acquisition Costs
We consider the sale of customer premises equipment, related
installation and monthly Internet access to be a multi-element,
single arrangement with our subscribers. Total revenue from the
subscriber arrangements are recognized as earned on a
straight-line basis over the service period, which is the shorter
 of the contractual term of the subscription period or expected
subscription period. We generally begin recognizing revenues on
subscriber arrangements upon activation of Internet access. Some
service contracts include cancellation clauses which permit the
subscriber to cancel the service without substantial penalty
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during the initial service period. We defer revenue from those
contracts and recognize it on a straight-line basis over the
service period remaining after the risk-fee cancellation period.
The connection of the subscriber to our network requires that
certain equipment, such as customer premises equipment, be
installed at the subscribers' location. The cost of customer
 premises equipment and installation are generally capitalized
and related revenues are deferred. These costs and revenues are
recognized on a straight-line basis over the service period. The
cost of this equipment generally exceeds the amount that is
charged to the subscriber. We are currently expensing the excess
of costs over deferred revenue as the realization of future cash
flows is not assured due to our lack of sufficient operating
history. This accounting policy conforms with Staff Accounting
Bulletin No. 101. See "—Recent Accounting
Pronouncements."
In our industry, subscriber acquisition costs are an important
measure of the efficiency with which subscribers are added to the
 network. Our subscriber acquisition costs will consist of
customer premises equipment subsidies together with activation
fees and sales commissions which we report as part of sales and
marketing. We expect our subscriber acquisition costs will
decrease over time as hardware subsidies decrease. We anticipate
that we will not incur subscriber acquisition costs in the
wholesale channel.
Results of Operations from January 11, 2000 (Inception)
through August 31, 2000
Our inception period operating results set forth in our financial
 statements that appear elsewhere in this prospectus are not
indicative of our future operations, as substantially all
subscribers were participants in our pilot program and were not
required to pay a significant amount, if any, for monthly access,
 customer premises equipment or installation.
Revenues
Our total revenues for the period from inception through
August 31, 2000 were $6,945, attributable to the ratable
recognition of fees associated with customer premises equipment,
installation and monthly access services for installed
subscribers whose cancellation period has expired. During this
period, pursuant to our accounting policies, we deferred revenues
 of $1.7 million, derived almost entirely from the sales of
customer premises equipment to customers purchasing service
through the EchoStar retail channel and a small number of
customers from other pilot groups. The absence of significant
revenues from monthly Internet access fees is a reflection of the
 pilot program currently in place that gives subscribers a number
 of months of free service prior to the start of their commercial
 service and our deferral of revenues. We expect to begin
receiving monthly access fees in the fourth quarter of 2000 or
the first quarter of 2001.
Costs and Expenses
Network.
Our network expense was $4.1 million for the
 period ended August 31, 2000. This amount was attributable
to our satellite capacity expenses, network operations costs
including hardware depreciation, telecommunications costs and
personnel expenses related to our customer support center.
Customer Premises Equipment and Installation.
Customer
premises equipment costs, including subsidies, for the period
ended August 31, 2000 were $19.8 million. These costs
were unusually high on a per subscriber basis due to our
packaging of a personal computer with the antenna for all pilot
subscribers, and due to our inability to achieve volume-related
price discounts for our equipment purchases. We also consider
installation costs as a component of our customer premises
equipment expense. During our pilot program we heavily subsidized
 installation costs for our pilot subscribers. A significant
component of our installation costs was the cost of training
third parties to install our customer premises equipment. The
total costs for installation services were $2.9 million for
the period ended August 31, 2000.
Sales and Marketing.
Our sales and marketing expenses were
 $14.8 million for the period ended August 31, 2000.
These expenses reflect significant personnel-related expenses
such as salaries for sales and marketing personnel and
commissions, recruiting fees and other costs of hiring, as well
as a significant cost to provide and install several thousand
in-store retailer demonstration units.
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General and Administrative.
Our general and administrative
 expenses were $25.9 million for the period ended
August 31, 2000. These expenses primarily consist of
salaries to our executive employees, and payment for services
provided directly to us by Gilat, Spacenet and their employees.
Services provided directly to us by Gilat, Spacenet and their
employees made up approximately $14.3 million, or 51% of the
 total general and administrative costs and included expenses
and/or fees for sales, marketing, engineering, information
systems, logistics and accounting and legal activities performed
for or on our behalf.
Non-Cash Compensation.
Non-cash compensation expense
through August 31, 2000 was $0.3 million, attributable
to the portion of the deferred compensation amortized in the
period. Non-cash compensation expense is accrued for stock
options granted to employees, non-employees and third parties,
and then amortized over the vesting period of the options.
Interest Income
Net interest income for the period was $1.7 million.
Interest expense of $1.6 million was offset by interest
income of $3.3 million. Interest income was due to interest
earned on equity funds and on the proceeds of the funds in a
restricted bank account.
Net Loss
Due to the foregoing, we had a net loss of $66.8 million for
 the period ended August 31, 2000. Our net loss attributable
 to common stockholders was $82.1 million, or $4.06 per
 share. Our pro forma net loss and net loss attributable to
common stockholders was $66.8 million for the period ended
August 31, 2000, or $1.23 per share.
Liquidity and Capital Resources
Our principal capital requirements to date have been to fund:
•
working capital needs;
•
our pilot program testing of our network;
•
sales and marketing;
•
administrative infrastructure; and
•
capital expenditures.
We have funded our liquidity needs during the period from
inception through August 31, 2000 through a combination of
funds provided by private equity placements and revenues
generated from our limited operations to date. Net cash used for
operating activities for the period ended August 31, 2000
was $48.2 million. Our use of cash for operating activities
was primarily associated with the acquisition of customer
premises equipment inventory, deferred charges for customer
premises equipment installed at subscriber sites, prepaid fees
for transponder capacity, sales and marketing, and the purchase
of services from Gilat and Spacenet. For the period from
January 11, 2000 (inception) through August 31, 2000 we
 incurred approximately $95.0 million of reimbursable
expenses and capital expenditures for equipment supplied and
services rendered to us by Gilat and Spacenet. As of
August 31, 2000, we have paid approximately
$38.7 million to Spacenet and approximately
$20.0 million to Gilat for such costs and expenses. We have
accrued the remaining $36.3 million we owe to Spacenet and
Gilat at August 31, 2000 and are required to pay this amount
 in October 2000.
Net cash used in investing activities for the period ended
August 31, 2000 was $99.1 million. This amount includes
 $89.6 million from the proceeds of the issuance of
long-term debt, which was placed in a restricted account pursuant
 to the terms of the debt and is reflected in our financial
statements in "restricted cash and cash equivalents."
The balance of $9.5 million was used in the purchase of
capital assets, including enterprise resource planning software
and customer premises equipment.
Net cash flows from financing activities for the period ended
August 31, 2000 were $215.6 million, consisting of
$126.0 million from sales of common and preferred stock and
$89.6 million from net proceeds
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of bank loans. We have a senior debt facility of
$90.0 million with Bank Leumi USA, maturing in June 2003
with interest at LIBOR plus 75 basis points, equivalent to
7.5625% at August 31, 2000, payable quarterly and with a
principal balloon upon maturity. The funds drawn under this
facility are reflected in our financial statements in
"restricted cash and cash equivalents." On
September 8, 2000, the First International Bank of Israel
and The Israel Discount Bank joined as lenders to the facility
and extended an additional $30.0 million each, bringing the
total amount of financing to $150.0 million. This facility
is secured by substantially all our assets other than our rights
under the transponder leases, and is subject to significant
affirmative and negative covenants including restrictions on
prepayment, restrictions on the incurrence of further debt and a
limitation on aggregate capital expenditures.
We are currently renegotiating these bank credit facilities and
expect to repay the First International Bank of Israel facility
with restricted cash attributable to that facility upon
consummation of this offering. The funds drawn down under these
facilities will appear as "restricted cash and cash
equivalents." We are also currently negotiating an
additional bank facility for approximately $100 million to
prefund our satellite capacity lease with Loral Skynet.
We believe that the net proceeds from this offering, together
with our existing cash, available credit facilities and future
revenue generated from operations, will be sufficient to fund our
 operating losses, capital expenditures, subscriber acquisition
costs and working capital requirements for the next twelve
months. We expect that our business will continue to realize
significant operating losses over the next few years.
We expect that additional financing will be required in the
future. We expect to raise financing through some combination of
commercial bank borrowings, leasing, vendor financing or the
private or public sale of equity or debt securities. Our capital
requirements may vary based upon the timing and success of the
commercial launch of our network and as a result of regulatory,
technological and competitive developments or if:
•
demand for our services or our anticipated cash flow from
	operations is less or more than expected;
•
our development plans or projections change or prove to be
	inaccurate; or
•
we engage in any acquisitions.
Equity or debt financing may not be available to us on favorable
terms or at all. See "Risk Factors — Our continued
 operations may require us to seek substantial amounts of
additional capital, which may not be available to us."
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No. 101,
Revenue
Recognition in Financial Statements
. SAB No. 101 is
effective in the fiscal quarter commencing October 1, 2000
and provides clarification of existing authoritative guidance
with regard to the manner and timing of revenue recognition. We
elected to adopt the guidance provided by SAB No. 101
effective upon our commencement of operations. Future
interpretations of SAB No. 101 will be evaluated upon
issuance but are not expected to have a material effect on future
 operations.
On March 16, 2000, the Emerging Issues Task Force issued
EITF 99-19,
Recording Revenue Gross as a Principal versus Net
as an Agent
. The EITF discusses various indicators that a
company would use in determining whether to record revenue on a
gross versus net basis. We considered these indicators in
developing our revenue recognition policies.
SFAS No.133, "Accounting for Derivative Instruments and
Hedging Activities," requires companies to record
derivatives on the balance sheet as assets or liabilities,
measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives are accounted for
depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows.
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SFAS No.133 is effective for fiscal years beginning after
June 15, 2000. We believe that the adoption of SFAS No.133
will have no material effect on our financial statements.
Quantitative and Qualitative Disclosures about Market Risk
Our major market risk exposure is to changing interest rates. Our
 policy is to manage interest rates through the use of a
combination of fixed and floating rate debt. We have evaluated
the use of interest rate swap contracts to manage our exposure to
 fluctuations in interest rates on our floating-rate debt,
substantially all of which is based on LIBOR. At August 31,
2000, we have determined that the current variable rate debt is
the most effective form of debt, and we have not sought to cap
such interest rate exposure.
We do not believe that we currently have any other material
exposure to any market risks.
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BUSINESS
Overview
StarBand is the first nationwide provider of two-way, always-on,
high-speed Internet access via satellite to residential and small
 office/ home office customers. We have deployed a proven and
scalable network using leased capacity on existing communications
 satellites which we believe can provide our StarBand service
today to any location in the United States with a clear view of
the southern sky. We are targeting our StarBand service primarily
 to rural and suburban households with few or no high-speed
Internet access alternatives. We estimate that approximately
55 million households do not presently have access to cable
modem or digital subscriber line, or DSL, technology. Our basic
service package offers unlimited access time at an affordable
monthly flat rate and can be bundled with EchoStar's DISH
direct broadcast satellite television service. We have
extensively tested our service offering at over 9,000 locations
and, in combination with our strategic partners, are launching
service nationwide in the fourth quarter of 2000.
Our high-speed Internet access service benefits from the unique
abilities of our one-hop satellite network architecture. Unlike
terrestrial networks, satellite networks possess the ability to
multicast, or simultaneously send common content, to millions of
subscribers. Our solution is unique because it delivers high
bandwidth content directly to the personal computer or other
storage device at a subscriber's home. We can therefore
expand the edge of the Internet directly to our subscribers and
avoid potential congestion inherent in the terrestrial network.
We intend to use our multicasting services to aggregate and
filter high quality content and create an unparalleled experience
 for our subscribers. We will multicast content such as music,
movies, software and emerging multimedia content at significantly
 higher speeds than existing broadband alternatives and, in 2001,
 we expect to introduce the StarBand Carousel
SM
, a
personalized high-speed digital delivery service, significantly
enhancing our subscribers' experience and generating
additional revenue opportunities.
Our strategic partners and founding investors, Gilat Satellite
Networks, Microsoft Corporation and EchoStar Communications have
played key roles in our development by providing us access to:
•
proprietary proven technology;
•
a large existing customer base;
•
strong consumer brand names; and
•
broad retail and wholesale distribution channels.
To date, we have raised $126 million of equity from our
strategic partners and founding investors.
Market Opportunity
We believe that we have a substantial business opportunity as a
result of the following four factors:
•
growing use of the Internet;
•
large and growing demand for high-speed Internet services;
•
limitations of existing broadband alternatives; and
•
acceptance of satellite services by consumers.
Growing Use of the
Internet
The Internet has grown rapidly since the early 1990s to become a
global medium that enables millions of people to obtain and share
 information, programming, products and services as well as
communicate and conduct business electronically. Yankee Group
projects that the number of Internet-connected households in the
United States will grow at a compound annual growth rate of 17%
from
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approximately 33 million in 1999 to approximately
71 million in 2004. An industry source projects that
U.S. Internet service provider revenues will grow from
$17.7 billion in 1999 to $60.5 billion in 2004.
Large and Growing Demand
for High-Speed Internet Services
While the vast majority of consumers still access the Internet
through dial-up connections, there is a growing demand for
high-speed alternatives. According to Yankee Group, the number of
 broadband subscribers in the United States grew from
1.6 million at the end of 1999 to just over 3.0 million
 in July 2000. Pioneer Consulting estimates the number of
broadband residential subscribers in the United States will grow
from 6.2 million in 2000 to 44.2 million by the end of
2005, a compound annual growth rate of 48%.
We believe this growing demand is driven by consumers who are
frustrated by dial-up connections or are used to the benefits of
always-on, high-speed connectivity in the workplace and are now
demanding comparable services in the home. According to Yankee
Group, consumers interested in high-speed Internet access rank
high-speed and an always-on connection as the two most important
characteristics of Internet access. In addition, consumers
increasingly want access to rich Internet content that requires
higher-speed connections than dial-up provides, including audio,
video, multimedia and interactive services. Many companies are
developing specific content to exploit the characteristics of
high-speed access and several broadband-only portals have emerged
 that require high-speed connections to access the full range of
their available rich content.
Limitations of Existing
Broadband Alternatives
Currently, no broadband Internet access providers serve consumers
 on a fully nationwide basis. Despite the high profile rollouts
of DSL and cable modem services, Yankee Group estimates that
approximately 55 million U.S. households currently have
 no terrestrial broadband access services available to them and
in 2004, cable modem and DSL will be unavailable to
29 million and 33 million homes, respectively. These
technologies require the large-scale upgrade of facilities at
every central office or cable point-of-presence that serves a
particular neighborhood, making it complex and costly for them to
 build out their networks and provision their services.
Existing terrestrial networks also suffer from the cost and
congestion associated with the multiple connections necessary to
deliver content from the source to the user. When Internet
connection points, such as servers or routers, receive data that
exceed their capacity, portions of the data may be lost and
quality of service may deteriorate. For example, rich media
streams will often stop and restart while waiting for the lost
data to arrive. As a result, other content distribution networks
provide solutions that push common content to thousands of
storage servers spread throughout the existing Internet
infrastructure. While helping to improve the performance of
terrestrial access networks, these solutions are still vulnerable
 to congestion in the network created by multiple connections
between the closest storage server and the Internet user.
Acceptance of Satellite
Services by Consumers
The introduction of direct broadcast satellite television in 1994
 was one of the most successful rollouts of a consumer
electronics product. According to The Satellite Broadcasting and
Communication Association, the number of direct broadcast
satellite television subscribers grew from 0.6 million in
1994 to 11.4 million in 1999 in the United States. The
success of direct broadcast satellite television demonstrates
U.S. consumers' acceptance of satellite technology for
home use as a mainstream alternative to terrestrial services such
 as cable, particularly in regions outside the largest urban
centers, where direct broadcast satellite television has seen its
 most significant market penetration.
High-speed Internet access using satellite technology is a
compelling alternative to DSL, cable modem and dial-up services
in many areas. Pioneer Consulting estimates that the
U.S. satellite high-speed access market will grow from
$170 million in 1999 to $13.2 billion in 2005, a
compound annual growth rate of 107%. Pioneer further projects
that $7.8 billion, almost 60% of the market in 2005, will be
 generated from consumer access fees.
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The StarBand Solution
Our nationwide network is designed to provide high-speed Internet
 access to meet the demands of underserved, rural and suburban
markets where broadband alternatives are limited. We provide our
service through a small satellite dish installed at the
subscriber's home and connected to communications
electronics located either in the subscriber's personal
computer or in a stand-alone StarBand modem. Our solution offers:
•
reliable high-speed, always-on access;
•
an unparalleled subscriber experience; and
•
nationwide and scalable infrastructure.
Reliable High-Speed,
Always-On Access
We believe our offering represents a significant improvement over
 alternatives available in our target markets. Our service
offering is designed to maximize the speed available to
subscribers while maintaining an affordable price. We are
initially offering our standard high-speed access at downstream
speeds from the Internet to the subscriber of up to 500 kilobits
per second, with a peak-hour service goal of at least 150
kilobits per second downstream, and upstream speeds from the
subscriber to the Internet of up to 150 kilobits per second. In
the future, we will also offer Internet access at higher speeds
to subscribers who choose our premium services. Subscribers will
also have access to multicast content, initially at speeds of one
 megabit per second or more, which we expect to increase to 40
megabits per second upon introduction of our second-generation
network architecture. We also plan to offer our subscribers
flat-rate pricing regardless of the amount of time they spend
on-line, subject to our standard subscriber agreement.
Our always-on service provides our subscribers with immediate
access to the Internet and the content that they wish to view,
without the need for a phone line. Because our network is
independent of terrestrial infrastructure, there is no need to
dedicate a phone line to Internet use, to wait for a dial-up
connection to be established or to qualify customers based upon
the quality and condition of their telephone or cable lines.
We have based our solution upon the proven technology of our
founding partner, Gilat, which is a leading provider of reliable
satellite-based networks for hundreds of corporations and
enterprises worldwide and has extensive experience in designing
and operating satellite networks. Gilat's technology enables
 an effective and highly reliable data networking environment
that is easy to install at the subscriber's home or office
and allows for quick service activation.
Unparalleled Subscriber
Experience
We believe we will deliver an unparalleled subscriber experience
by offering multicast content and the StarBand Carousel
SM
features with our two-way, always-on, high-speed Internet
access. Our platform enables high-speed broadcast, or multicast,
of music, movies, software and emerging multimedia content
simultaneously to multiple subscribers, utilizing the same
downstream bandwidth, a feature not currently available on a
nationwide basis from terrestrial services. Popular live Internet
 events such as fashion shows, sporting events and concerts
create significant backbone congestion or even crash services, as
 many users simultaneously seek to connect individually to the
source of the content. While terrestrial companies may use
satellite technology to relieve backbone congestion by
multicasting and caching content at their local offices, our
solution extends the multicast all the way to the subscriber,
avoiding last-mile bottlenecks and providing our subscribers with
 high-performance access to the desired content.
In 2001, we intend to introduce the StarBand Carousel
SM
, the first high-speed digital content delivery service for
 consumers, which will allow subscribers to order and schedule
the delivery of a wide array of programming, products and
services over our network. The StarBand Carousel
SM
will deliver ultra-high-speed multicast content and e-commerce
products for use by subscribers immediately or on a scheduled or
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subscription basis. Our subscribers will be able to receive and
store that Internet content on their personal computers according
 to predefined personal preferences.
Subscribers who purchase our Internet access service bundled with
 EchoStar's DISH direct broadcast satellite television
service will also enjoy a single satellite dish solution to meet
their high-speed Internet and television entertainment demands.
This bundled offer provides a viable alternative to local cable
monopolies and provides subscribers with the convenience of a
single monthly invoice for their Internet access and television
services. For subscribers who purchase bundled service,
installers will position the satellite antenna to receive signals
 from multiple satellites with one set of cables connected to a
DISH television set-top box and a second set of cables connected
to the subscriber's StarBand system.
Nationwide and Scalable
Infrastructure
Upon our nationwide market launch in the fourth quarter of 2000,
we will offer high-speed Internet access to any customer at any
location with a clear view of the southern sky, which we estimate
 includes approximately 90% of all households in the United
States. We believe we can introduce our service easily and cost
efficiently across the United States even in sparsely populated
areas and without extensive capital expenditures. The nationwide
availability of our service also will allow potential customers,
including large corporations with employees in locations across
the country, to subscribe to residential high-speed Internet
access from a single provider.
The network can be scaled centrally without any visits to our
subscribers to upgrade their hardware or software. Unlike
terrestrial services, we do not need to manage, equip or
interconnect hundreds of local office switching centers across
the country. In addition, we benefit from end-to-end control of
the network from a central location and do not depend upon a
terrestrial infrastructure that is operated and controlled by
third parties. As a result, we believe we have a better ability
to manage quality of service and provide our network services
than our terrestrial competitors. Because our system delivers
communications from a central network operations center via
satellite, we can increase the overall network capacity by simply
 adding equipment to the network operations facility, increasing
the capacity of its connection to the Internet backbone and
increasing our space segment capacity. We lease satellite
capacity and can therefore increase that amount incrementally
when our subscriber base grows.
Our Strategy
Our mission is to become the leading nationwide provider of
two-way high-speed Internet access via satellite and to create a
new category of Internet service which combines high-speed access
 with our multicast content delivery service. We intend to
implement the following strategies to achieve this goal:
Rapidly Expand Our
Subscriber Base
As the first national provider of two-way, always-on, high-speed
Internet access via satellite to residential, small office, and
home office users, we intend to rapidly build a nationwide
subscriber base. We are leveraging our powerful existing
wholesale and retail distribution channels, including
approximately 7,000 RadioShack stores and 20,000 DISH retailers,
to build this subscriber base. While these channels will
initially focus on attracting new customers, we also intend to
market our services to MSN's and DISH's existing base
of approximately 3 million and 4.5 million subscribers,
 respectively. We intend to leverage the installed base and
marketing activities of our affiliate, Spacenet, to identify and
capture corporate-sponsored home worker and Internet access
employee benefit opportunities. Our emphasis on quickly building
a substantial and growing subscriber base will help lower our
cost to serve each incremental subscriber as we spread our fixed
network costs over a larger base of subscribers. A large base of
subscribers will also provide us with significant additional
opportunities to sell higher-margin value-added services and an
enhanced ability to attract premium content providers to our
network.
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Implement a Targeted
Marketing Plan to Attract Subscribers
We are initially implementing an aggressive and targeted
marketing campaign directed primarily at promoting our service to
 potential users in underserved, rural and suburban markets where
 access to flat-rate Internet service providers and other
broadband alternatives is limited. We plan to build nationwide
brand presence, especially through the expected media coverage of
 StarBand's launch as the first available nationwide two-way
 high-speed satellite Internet service. The majority of our
marketing budget will be reserved for media that directly target
prospective subscribers in local markets. We expect that our
initial focus will primarily include local print, radio and
billboard advertisements that support our retailers by driving
potential subscribers to their stores. In addition, we have
planned an aggressive direct marketing program aimed at the
approximately 4.5 million existing DISH direct broadcast
satellite television subscribers. We are also targeting the
estimated 4 million households in states with local
regulations that require metered service charges for every phone
call, including local calls, causing dial-up customers to pay
per-minute telephone charges for their Internet use.
Maintain a Low-Cost and
Capital-Efficient Business Model
We have designed and are operating the network around a low-cost
and capital-efficient business model. For example, by leasing
satellite capacity on existing communications satellites for our
network rather than investing the significant time and capital
necessary to design, launch and operate a proprietary fleet of
satellites, we have significantly limited our capital costs
without the risk associated with deploying new satellites. By
utilizing Gilat's network solution, we benefit from
Gilat's significant investment of time and resources to
develop this technology. We have partnered with companies like
MSN and EchoStar to efficiently reach potential customers at a
lower cost than we could on our own. As we grow our subscriber
base, we will further lower our costs by working with Gilat and
other partners to develop next-generation equipment and satellite
 capacity. We believe that our low-cost and capital-efficient
business model will ultimately provide for higher returns on
investment and continue to be a key competitive advantage by
allowing us to allocate the majority of our resources to acquire
subscribers rather than build network infrastructure.
Develop Opportunities to
Sell Higher-Margin Value-Added Services
We intend to generate high-margin revenues by providing optional
value-added services that take advantage of our multicast and
other advanced service features. We believe our subscribers will
pay for the delivery of content such as music, movies and
software multicast to their homes. We will also target
communities of interest, composed of large groups of subscribers
with common interests, such as ethnic and religious groups,
regional sports fans and music enthusiasts that who will pay
premium rates to receive customized video and interactive
content. While our base service offering will be adequate for
many users, we believe that some subscribers, including many
small office/home office users, will pay to upgrade their service
 to higher bandwidth offerings at a premium price.
Continue to Enhance our
Subscribers' StarBand Experience
We intend to continuously improve our subscribers' StarBand
experience by maintaining our technological leadership. To
improve the subscriber's Internet browsing experience, we
are taking advantage of Gilat's proprietary software that
increases the rate at which web pages display on the user's
personal computer screen and other network features, like the
StarBand Carousel
SM
, that take advantage of our
multicasting capabilities. We are currently working with Gilat on
 our next-generation StarBand modem that will feature smaller
subscriber electronics and improved interfaces. We are also
collaborating with Gilat and EchoStar to develop a single modem
with built-in storage that will provide for two-way interactive
television combined with Internet access. By constantly improving
 the subscriber experience through technological leadership, we
intend to continue growing the size and loyalty of our subscriber
 base.
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Pursue Additional
Distribution and Content Partnerships
We intend to strengthen our position in the high-speed Internet
access market by aggressively pursuing new partnerships to expand
 our distribution channels and increase our access to rich media
content. We are currently in discussions with several additional
high-volume retailers to broaden distribution of both the
Internet-only and bundled Internet/ DISH entertainment services.
We also intend to pursue relationships with other Internet
service providers that will provide either a wholesale or
co-branded retail service offering. Simultaneously, we are
engaged in discussions with a number of established content
providers who are interested in offering rich media content
initially through our multicasting service and eventually through
 our StarBand Carousel
SM
service. By emphasizing
additional distribution channels and content partners, we intend
to increase the availability of our service offerings,
substantially differentiate our service, further accelerate
subscriber growth and improve the subscriber experience.
Our Strategic Partners
We began operations in April 2000 upon the consummation of
equity investments in our company by our three founding
investment and strategic partners: Gilat Satellite Networks,
Microsoft Corporation and EchoStar Communications. These
strategic partners provide us with proprietary proven technology,
 access to a large existing customer base, strong consumer brand
names and broad retail and wholesale distribution channels.
Gilat
Gilat, an Israel-based company listed on Nasdaq, is a leading
provider of telecommunications solutions based on satellite
network technology and delivers satellite-based, end-to-end
enterprise networking and rural telephony solutions to customers
across six continents. In addition, Gilat markets interactive
broadband data services to its enterprise customers through
Spacenet Inc., its wholly-owned subsidiary. Gilat is an
industry leader in the development of high-speed satellite-based
Internet technology, and has a reputation for highly reliable,
low-cost satellite hardware.
Gilat was early to recognize the substantial business opportunity
 available by targeting the large, underserved consumer and small
 office/home office high-speed Internet access market. As a
result, Gilat founded our company to pursue this opportunity, and
 our service is based upon satellite networking technology it
developed, and hardware and software it manufactures. We believe
our partnership with Gilat has allowed us to be first to market
and will help us to maintain our competitive advantage as we
scale the business and introduce new services and technologies.
Our business represents a significant opportunity for Gilat to
expand its market for satellite networking solutions and we
expect to become one of its largest customers.
In February 2000, we entered into a five-year supply
agreement with Gilat and Spacenet. The Gilat supply agreement
sets forth the commercial terms under which we will offer
StarBand service outside our arrangement with MSN, and the terms
under which Gilat and Spacenet provide us with licenses,
intellectual property and satellite capacity on the GE Americom
GE4 satellite for that purpose. In addition, Spacenet and Gilat
have agreed not to offer services that compete with our service
to residential and small office/home office customers throughout
North America.
We expect to enter into a four-year master supply and services
agreement with Gilat and Spacenet that will amend the terms under
 which they supply products and services to us. This agreement
will automatically renew for two-year periods unless terminated
by one of these parties. Under this agreement, Gilat and Spacenet
 will provide equipment, technology and systems that we will use
in our business and operations. Gilat and Spacenet will also
provide us with technical and administrative services and
research and development support. Gilat and Spacenet will grant
us exclusive rights throughout the United States and Canada to
the technology required to provide our services, and we will
purchase most of the equipment and services necessary for our
business exclusively from Gilat and Spacenet. In exchange, Gilat
has committed to deliver our consumer modems in quantities
specified by us in rolling quarterly forecasts. Gilat and
Spacenet also granted us the right to provide service in Mexico.
We are currently considering
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contributing these rights to an affiliate which has the rights to
 provide similar services throughout the rest of Latin America in
 exchange for a minority equity interest in this affiliate.
In addition to operating our network operations center and
leasing facilities to us, Spacenet will grant us a sublicense to
use its enterprise resource planning system and the software with
 which we perform back-office functions. In the future, we may
provide Spacenet with equipment and services for re-sale to
enterprise and small office/home office customers.
Microsoft
Microsoft, a Redmond, Washington-based public company, develops,
manufactures, licenses and supports a wide range of software
products for a multitude of computing devices. Microsoft's
online efforts, which serve approximately 3 million
subscribers, include The Microsoft Network L.L.C., or MSN,
network of Internet products and services, e-commerce platforms
and alliances with companies involved with high-speed Internet
access and various forms of digital interactivity. We believe our
 relationship with Microsoft will give us immediate access to a
large number of potential subscribers upon the nationwide
commercial launch of our service.
As a nationwide Internet service provider, MSN established a
strategy to offer high-speed Internet access to its subscribers,
regardless of their location. MSN has partnered with other
broadband service providers to bundle the MSN service with their
high-speed access. Microsoft selected us as its satellite-based
high-speed Internet access provider for MSN sales due to our
ability to offer service on a nationwide basis, particularly in
areas where other high-speed alternatives are not available. MSN
has an agreement with RadioShack to market and sell its Internet
services in RadioShack stores. Microsoft is currently rolling out
 its MSN satellite-based product offering, MSN powered by
StarBand, in RadioShack stores using the Internet access we
provide to them under our wholesale agreement. Microsoft may
offer our service in the future through many of its other retail
distribution channels.
In March 2000, we and Gilat entered into a broadband supply
agreement with MSN governing the commercial terms pursuant to
which we will provide MSN with wholesale broadband access. The
term of the agreement is four years and renews automatically for
additional one year terms unless terminated earlier by one of the
 parties. This agreement establishes the material terms and
conditions of this relationship, such as MSN's purchase of
consumer premises equipment, the rates MSN pays us for wholesale
monthly Internet access and exclusivity arrangements. We and MSN
have recently agreed in principle to amend this agreement and we
are currently negotiating a definitive agreement. We expect that
the revised agreement will provide that MSN must purchase minimum
 quantities of consumer premises equipment once we achieve a
single production related milestone and amend the exclusivity
arrangements.
EchoStar/ DISH
EchoStar, a Denver, Colorado-based public company, is the second
largest provider of direct broadcast satellite television
services in the United States through its DISH network. EchoStar
is also an international manufacturer of digital satellite
receiver systems and a provider of other satellite services. We
will specifically target EchoStar's DISH customer base,
which, we believe, already appreciates the benefits of other
satellite-based services and is likely to consider purchasing our
 satellite-based Internet access. In addition, this relationship
provides us with access to the over 20,000 DISH retailers which
we have authorized to sell our service. As a result of our
partnership, we believe we will benefit from EchoStar's
substantial experience in launching, marketing and installing a
satellite-based service for customers nationwide.
Through its partnership with us, EchoStar will be able to offer
our high-speed Internet access services to DISH's over
4.5 million U.S. direct broadcast satellite television
subscribers. DISH's subscriber base has been growing at a
rate of approximately 150,000 subscribers per month. The ability
to offer high-speed Internet service is a key part of DISH's
 strategy and protects it against encroachment by other direct
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broadcast satellite television and broadband providers on
DISH's subscriber base. In addition, our partnership with
DISH offers both parties the opportunity to realize incremental
revenues from cross-selling services to each other's
subscribers.
We, Gilat and EchoStar entered into a memorandum of agreement on
February 22, 2000 setting forth the terms under which the
parties agreed, pending execution of definitive agreements, to
cooperate in providing high-speed Internet access to DISH's
direct broadcast satellite television customers through the
StarBand network. This arrangement with EchoStar expires on
March 31, 2001. We are currently negotiating with EchoStar
for an extension of this agreement. Pursuant to this arrangement,
 EchoStar is marketing our service to their customers and DISH
retailers and we will market DISH's satellite television
programming service together with our high-speed Internet access
service. EchoStar has made no commitments to us and is subject to
 no penalties if it ceases to sell our service. EchoStar and
Gilat are also currently conducting research and development of a
 product to provide our Internet service through a TV-centric
platform in the future. This memorandum of agreement contains
provisions which restrict us and EchoStar from entering into
co-marketing relationships with competitors of each other for a
limited time.
The StarBand Experience
Service Features
We believe we offer consumers a new category of Internet service
which combines high-speed Internet access with our multicast
content delivery service. We utilize proven satellite technology
to provide reliable and cost-effective service to subscribers
nationwide under the StarBand brand and through our partners,
including MSN and EchoStar.
Our StarBand services include:
•
reliable, always-on, high-speed Internet access nationwide via
	satellite at downstream speeds of up to 500 kilobits per second,
	with a peak-hour service goal of at least a 150 kilobits per
	second downstream, and upstream speeds of up to 150 kilobits per
	second;
•
customized rich media content multicast at high speeds directly
	to our subscribers' computers;
•
a personalized home page and customized Internet
	browser; and
•
tiered bandwidth and premium service packages.
Our service offering includes all equipment and software
necessary to establish and maintain an always-on, high-speed
Internet connection. Our retail customers will be able to access
the Internet through our home page, which the subscriber can
personalize to include stock quotes, weather, news and other
content of interest. Our homepage will also enable our
subscribers to order service upgrades or content subscriptions,
add e-mail accounts, create personal web pages and make billing
inquiries. Other subscribers will have access to the StarBand
homepage by a single click from their homepage portal. We are
currently developing a customized browser that will enable our
subscribers to navigate the Internet and simultaneously access
multicast content, including media streams, using an electronic
programming guide.
Next year, we plan to introduce StarBand Biz, a premium service
package targeted primarily toward small office/home office
subscribers. In addition, we expect to offer a specially packaged
 home local area network solution with additional bandwidth and
shared access to the StarBand modem to provide enhanced service
to subscribers with multiple personal computers.
Multicast and StarBand
Carousel
SM
Our service is significantly enhanced by the unique abilities of
our one-hop satellite network architecture. Unlike terrestrial
networks, satellite networks have the ability to multicast, or
simultaneously send common content, to any number of designated
subscribers. Our solution is unique in its ability to
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distribute high-bandwidth content directly to a subscriber's
 personal computer or other home storage device independent of
the terrestrial infrastructure. Our model allows us to expand the
 edge of the Internet all the way to our subscribers' homes
and avoid the congestion inherent in the terrestrial networks.
Experiments on terrestrial networks similar to multicast, known
as push technologies, have failed until now because they require
additional bandwidth for each user and drain the operating
resources of the user's personal computer, dramatically
slowing down Internet browsing. In contrast, our multicast
capabilities create an unparalleled experience by providing a
high-speed overlay network that does not limit bandwidth
available for Internet browsing.
We intend to aggregate and filter high quality content for our
subscribers through our multicasting capabilities. Internet users
 often find it difficult to identify the best sources of
broadband content and services. Though individual Internet users
generally seek content personalized to his or her individual
interests, Internet users as a group often seek common content
from popular web sites that are visited by many users each day.
We plan to offer a menu of multicast services that will feature
high quality content at ultra-high speeds that appeal to broad
groups of subscribers. As a result, we expect to significantly
enhance the perceived value of our services and distinguish
ourselves from other Internet access services by delivering
personalized, yet commonly requested, high quality content to our
 subscribers.
We are actively working with Gilat to complete the development of
 the StarBand Carousel
SM
in 2001. Building upon the
multicast content delivery system, the StarBand Carousel
SM
will offer our subscribers a menu of high quality content
and rich data files that can be simultaneously delivered at
specified times to all subscribers who have placed a request. We
will offer the available content to subscribers at significantly
higher speeds than our basic Internet access service. In addition
 to large data files such as software applications, we expect to
offer some of the most popular and bandwidth-intensive content on
 the Internet which will be ordered via an electronic programming
 guide. After delivery of the content to the subscribers, they
may store it on their personal computer or other local storage
device. Multimedia offerings such as the recent presidential
debates, popular movies, best selling books or leading audio
files might be among the available choices.
Multicast and StarBand
Carousel
SM
Applications
Our initial plan is to use our multicasting and StarBand Carousel
SM
capabilities to deliver the following services:
•
media streaming;
•
reliable distribution of large data files; and
•
distribution of common content for local caching.
Media streaming is a distribution process that allows
simultaneous broadcasting and playback of video and audio
content. The terrestrial Internet infrastructure was not designed
 to support the traffic load created by broadcasting full motion
video or high-fidelity audio. By contrast, we believe our
multicasting capabilities ideally position us to offer popular
audio and video streams to our subscribers. For example,
multicasting enables the network to simultaneously transmit a
live web event, such as a fashion show or fast-breaking news
story, to any number of designated subscribers at a superior
quality to what they would receive through a broadband
terrestrial Internet connection. Replays of the web event could
also be sent to subscribers. In many instances, we believe our
subscribers may pay additional fees for access to this and other
premium content.
We believe our multicast and StarBand Carousel
SM
features provide our subscribers quicker, more reliable and more
efficient access to large data files, including software and
multimedia games, when compared to other electronic or
traditional content delivery methods. For example, software
applications and games featuring realistic three-dimensional
graphics can often consist of files that are 100MB or more in
size. This size often causes transmission difficulties over
dial-up or broadband Internet connections, and a customer might
otherwise have no alternative for receiving the file except for
physical delivery of a CD-ROM or other physical storage media.
Through the multicast and StarBand Carousel
SM
content
delivery
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systems, however, our subscribers would be able to enjoy the
convenience of high-speed electronic access to the large data
file without the significant costs of packaging and mailing
physical storage media. Software companies, such as Microsoft,
and our subscribers may also see significant value in our ability
 to reliably deliver large data files to any number of
geographically dispersed locations at once.
Using our multicast and StarBand Carousel
SM
capabilities, we can deliver the most popular content to our
subscribers for storage in their personal computer or other local
 storage device. By learning from the common usage patterns of
our subscribers, we may regularly multicast the most often
requested web content such as news, popular web services and
other content to further enhance the subscriber experience and
reduce unnecessary demands on our two-way capacity. In this way,
our subscribers may avoid potential congestion over the
terrestrial network as we expand the edge of the Internet
directly to them. We intend to use these capabilities to, among
other things, enable the high-speed delivery of specific content
targeted to select interest groups who may be dispersed across
the entire United States but united by a common interest or sense
 of community, such as regional sports team fans, religious
groups or ethnic groups.
Marketing, Sales and Distribution
We initially intend to market, sell and distribute our wholesale
and retail offerings through existing channels with our strategic
 partners that currently provide a nationwide network of over
27,000 outlets covering our core rural and suburban target
markets. We also expect to add additional retail channels such as
 consumer electronic chains, direct-to-consumer distribution and
major account sales.
Wholesale Service
Offering
We offer our services on a wholesale basis to large Internet
service providers or other access providers to complement their
existing offerings. The basic components of our wholesale
offering are customer premises equipment, satellite network
transmission services and second-level help desk services. We
also have the ability to provide additional services to our
wholesale customers, such as Internet access, billing and
first-level help desk services for an additional fee. Under our
typical wholesale arrangements, our wholesale customer will buy
our customer premises equipment and pay us a monthly fee per
subscriber for our high speed satellite transmission services. In
 the wholesale model, we would not typically fund subscriber
acquisition costs, market the service or provide first-level
customer support or pay for tier one access from our hub to the
Internet. Because we provide fewer services than in the retail
channel, we charge a substantially reduced monthly subscriber
fee. We currently allow our wholesale customers to offer private
label or co-branded services.
MSN is our first wholesale customer which will package, price and
 promote the offering under its MSN brand to the marketplace
through RadioShack and other retail organizations. RadioShack
will initially market MSNHigh Speed Internet, powered by
StarBand, a service/hardware package comprised of a Compaq PC
required to be purchased from RadioShack for approximately $899,
a StarBand satellite system costing approximately $299, and a
one-year MSN service contract of approximately $59.95/month. MSN,
 as the Internet service provider, will provide first-level help
desk assistance and all billing services to subscribers. We will
provide the high-speed transmission for MSN from our hub via our
satellite network to the MSN subscriber.
On September 27, 2000, MSN and RadioShack jointly announced
the nationwide launch of the MSN high-speed Internet service
through RadioShack. In late October 2000, we will begin
delivery of our service through this channel. At present, we have
 installed satellite demonstration capabilities at over 3,500
RadioShack locations. We have also completed training of over 75%
 of sales management, including the important RadioShack
franchisee group, which we believe reaches the core demographic
of our targeted suburban and rural Internet customers. By
year-end, we expect nearly 5,000 RadioShack locations to be
outfitted with satellite-ready Microsoft Internet Centers
featuring self-paced and sales-assisted tutorials on MSN's
high-speed Internet access.
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Retail Service Offering
We also offer our services through our retail channel in which we
 sell our branded services directly to consumers. Our retail
arrangements are structured so that our per subscriber revenues
are higher than the wholesale channel although, we are required
to subsidize more of the associated subscriber acquisition costs.
 Typically, our distribution arrangements in this channel are
with consumer electronics stores and other direct-to-consumer
retailers. Components of our retail service include high-speed
Internet access, customer premises equipment and features we
offer as an Internet service provider.
EchoStar is our first retail distribution channel. Beginning in
late fall 2000, we intend to sell our services through 20,000
DISH retailers nationwide. Together with DISH, we also will offer
 bundled direct broadcast satellite television and Internet
services. Initially, we expect DISH retailers to sell complete
StarBand systems at a suggested retail price of $399. Our monthly
 Internet-only service fee will be approximately $69.95. Our
price levels initially reflect the large unmet demand that we
believe exists for two-way high-speed Internet access, though we
expect that we will lower our prices to retail customers in the
future as market conditions change. We expect that additional
promotional and discounted rates will be available for
subscribers receiving bundled services. Professional installation
 is required and is paid directly to the installers at a
suggested retail price of $175.
We and DISH have already jointly installed over 1,500 dealer
locations with operational demonstration systems and plan to
continue installing StarBand demonstration systems in additional
retail locations. Currently, we are training DISH retailers to
sell our services and to install the subscriber hardware. DISH
retailers have the option to stock inventory, which could allow
same-day installation and activation of our service.
We also plan to sell our services through other retail channels.
Beginning in 2001, we expect our customers to be able to order
our services directly over the Internet. Our on-line sales
capability will enable all of our retail subscribers to order
subscription services and other individualized or premium
services. Additionally, we are currently pursuing relationships
with large, high-volume consumer electronics chain stores and we
are recruiting and training a direct sales force.
Provisioning and Customer Support
Logistics
We will maintain inventory levels consistent with our forecasts
and intend to minimize inventory levels while at the same time
maintaining our ability to quickly fill subscriber orders.
Channel Master, a leading manufacturer of satellite dishes in the
 U.S. marketplace, provides us with the antennas, mounts,
and warehousing and consolidation services. Gilat ships StarBand
customer electronics directly to Channel Master, where they are
packaged with the satellite dish antenna and mount, creating a
customer premises kit. Channel Master's facility currently
serves as our primary U.S. warehouse, from which the customer
premises kits are shipped to our customers at our direction.
Both Echostar and MSN will keep limited inventory of our product
at their warehouses, and we will ensure that additional product
is available at the Channel Master warehouse to react to
variations in demand.
Installation and
Maintenance
We outsource installations to third parties using over 8,000
experienced satellite installation professionals. Installation of
 all equipment and software necessary to begin using our service
generally takes less than three hours, and we intend to shorten
that time period. We have trained and qualified several
nationwide and regional installation companies, including
EchoStar's DISH Network Service Corp. and RadioShack's
Amerilink subsidiary, as well as many of the individual DISH
retailers to ensure high-quality nationwide coverage and depth in
 key markets. The RadioShack Amerilink organization will provide
installation services for the MSN service offering. StarBand
quality control teams are responsible for the overall company
goal of single-visit, error-free installation and these teams
spot check actual
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subscriber installations. In the future, we expect to offer a
self-installation option as an alternative to third party
installation.
We intend to deliver an Internet access service that is virtually
 trouble free for our subscribers. In order to reduce costly and
frustrating on-site visits, we intend to provide self-healing
diagnostic software but will deploy a qualified technician when
an on-site maintenance visit is required. We will offer warranty
plans to cover all of our customer premises equipment.
Customer Support and
Billing
We provide customer support through the Marietta, Georgia central
 network operations center. This facility provides both
first-level and second-level customer support. We staff our
customer call center with highly trained customer service
representatives 24 hours a day, seven days a week. Our
customer service representatives have the capability to access
the network management system, which gives them real-time access
to network performance and subscriber information. We recently
installed resource management software from Siebel Systems that
maintains all maintenance and call activity data for each of our
subscribers individually. We will contract with an outsourced
customer service center to address pre-sale and non-network
related issues, improve sales support, administer email addresses
 and provide billing support when applicable.
Billing of StarBand subscribers will be performed by either our
partners or StarBand, according to our distribution agreements.
In our initial distribution channels, EchoStar will generate a
co-branded bill for our subscribers, and MSN will bill its
subscribers directly. In other future channels, such as our
on-line channel, StarBand will directly bill and collect from its
 subscribers using our SAP enterprise resource planning and other
 related systems.
Network Overview
The network, based upon a proven design developed by Gilat and
currently operated by Spacenet pursuant to a telecommunications
services agreement, is composed of three main components:
satellite capacity, network operations centers and the customer
premises equipment.
Satellite Capacity
Satellite capacity provides the transmission medium for the
network and provides the bandwidth over which our subscribers
communicate with the Internet through the network operations
center. We introduced our service by leasing, directly and
through Spacenet, capacity on existing satellites that provide
service coverage throughout North America. In the future, we also
 intend to offer our service via leased next-generation
satellites that will increase our network capacity and the
bandwidth available to our subscribers.
We lease satellite capacity in large increments known as
transponders. A transponder serves as a reflector by receiving a
signal, amplifying the signal and retransmitting it to or from
the subscriber and the network operations center. Our satellite
capacity currently operates in the Ku band frequency. The Ku band
 frequency is more resistant to weather interference and
therefore limits satellite service interruption known as
"rain fade." Satellite companies are developing
next-generation satellites that will operate in a higher
frequency known as Ka band. There is currently more unused
frequently in the Ka band. However, it is less resistant to
weather interference than Ku band. Gilat is designing a
next-generation hybrid satellite that will use both Ku band and
Ka band frequencies to take advantage of the benefits of each.
Allocation of Transponder Space.
We transmit
communications across our network using satellite transponders
that allow multiple users to share the same bandwidth. Our
network loading assumptions take into account a number of
factors. Based on the experience of our partners in providing
Internet access and satellite Internet protocol networks, we
anticipate that only a subset of our user base will be actively
online at any time. Because Internet traffic is bursty, or
intermittent, with users ordering and then reading delivered
content, a number of users can share bandwidth without perceiving
 any reduction in speed. As
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the number of users increases and becomes more geographically
dispersed, we are able to achieve statistical gains on our
loading assumptions. Our centralized network architecture permits
 us to optimize each subscriber's experience and our
satellite capacity planning by aggregating users of different
characteristics, such as time zone location or day versus evening
 users, onto the same transponder.
Our business model is based on achieving an economical satellite
capacity cost per subscriber that reflects the number of
subscribers sharing bandwidth and our cost of satellite capacity.
 Over the next two years we intend to implement a series of
software and hardware improvements for the network developed by
Gilat. One of Gilat's software improvements reduces network
traffic by reducing repetitive administrative network
acknowledgements required by Internet protocols and instead
transmits only the actual content. We expect that this and other
improvements will enable us to increase the number of subscribers
 that we allocate to a transponder from 7,500 to a target of
approximately 20,000 over time, thus decreasing our space segment
 cost per subscriber.
Current Satellite Capacity.
Our network currently operates
 on existing Ku band frequency transponders leased by Spacenet
from GE Americom on the GE4 satellite located at the 105(LOGO)
West longitude orbital location. Spacenet has a five-year lease
for up to six Ku band transponders on this satellite. In
addition, we recently signed an agreement with Loral Skynet to
lease up to 17 Ku band transponders on the Telstar 7 satellite
located at the 129(LOGO) West longitude orbital location. This
lease has a seven-year term with options to extend the lease for
the life of the satellite, which generally will be approximately
an additional six years. Subject to market availability, pricing
and other considerations, we intend to lease additional Ku
capacity as necessary.
Next-Generation Satellite Capacity.
In the future we
intend to use next-generation satellites engineered as a hybrid
system that incorporates the strengths of both Ku band and Ka
band frequencies in order to increase the capacity of our system
and lower the cost of our network. This hybrid satellite system
features a design that utilizes the Ka band frequency between the
 hubs and the satellite and the Ku band frequency between the
satellite and the subscriber's customer premises equipment.
Use of Ka band between the hubs and the satellite gives us the
ability to increase the amount of bandwidth that we provide to
our subscribers. Use of Ku band technology for transmissions
between subscriber locations and the satellite allows us to
overcome most weather-related interference and use existing
low-cost, highly reliable Ku band equipment at our
subscribers' homes.
Each hybrid satellite will communicate to six zones with four Ku
beams each, enabling the reuse of frequency over 24 beams. Our
two initial hybrid satellites will have a combined total capacity
 of up to 6.2 Gigabits per second downstream from the Internet to
 our subscribers and up to 2.5 Gigabits per second upstream from
the subscribers to the satellite. These satellites also will have
 six Ka spot beams from the satellite to separate hubs, each
connected to the Internet. Our hybrid satellites will also have
nationwide beams for multicast transmissions of over 40 megabits
per second. Because both satellites will be in a single orbital
location, we will be able to provide a backup system for our
subscribers. However, in the case of a failure of either
satellite, subscribers may temporarily experience a lower data
rate until full service is restored.
We intend these hybrid satellites, tentatively called StarBand 1
and StarBand 2, to be built, launched, and operated by an
established satellite industry partner. We intend to lease
capacity on these satellites under pre-established terms that are
 presently being negotiated. We currently anticipate that these
satellites will be in service by late 2002.
Network Operations
Centers
The main network operations center, located in Marietta, Georgia,
 serves as the central point from which we manage the nationwide
network. The network operations center includes the earth station
 satellite networking equipment and engineering and operations
staff which continuously monitors and optimizes the network
performance. The satellite networking equipment receives and
processes the data sent to us by our users via the satellite. We
use sophisticated, high-capacity satellite data networking
switches to direct traffic over our network, which are connected
from the network operations center via a pair of high-speed
redundant links to the Internet.
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Some of our early subscribers will be served from a Spacenet
managed network operations center located in McLean, Virginia.
Backbone connectivity at this facility features a dual, fully
redundant connection. We expect this network operations center to
 transition to the Marietta, Georgia facility in early 2001. Our
network operations centers are presently staffed by
Spacenet's highly experienced satellite network engineers.
In the future, when we begin to use the hybrid satellites, each
of the six Ka band spot beams will require a separate earth
station and network switching equipment. These six facilities
will be connected terrestrially to the Marietta network
operations center. High-capacity fiber optic cables will connect
each of the facilities to the Internet backbone.
Customer Premises
Equipment
Our customer premises equipment enables our subscribers to send
and receive data from and to the Internet via satellite
transponders. This equipment consists of an external satellite
modem or a pair of internal personal computer cards, connected to
 a satellite dish antenna by two coaxial cables.
We are introducing our nationwide service by offering two
distinct personal computer connection devices. All subscribers
other than those acquiring our service through RadioShack will
require a StarBand modem, which is an external box with an
industry standard universal serial bus interface to allow for
plug-and-play functionality with the subscriber's personal
computer. Subscribers who acquire our service through the
RadioShack channel will be required to purchase a personal
computer from RadioShack with the StarBand personal computer
cards already integrated into the computer.
We plan to introduce a second-generation StarBand modem with a
universal serial bus connection in 2001. Gilat is simplifying the
 components of its current StarBand modem into a smaller and
aesthetically pleasing package and we are working with Gilat to
reduce the cost as low as possible.
We are working with EchoStar to jointly introduce a
satellite-based home networking gateway that will provide both
direct broadcast satellite television and high-speed Internet
access. We expect this single box design to connect to the
consumer's television, personal computer and other Internet
appliances and include a large hard drive for downloading and
storing large files such as feature-length films.
Our dish antenna unit is installed outdoors, typically on a roof
or ground pole mount. The antenna requires a clear view of the
southern sky in order to have line-of-sight to the satellites
carrying our services. The antenna unit will initially measure
0.75m in diameter, although we expect this size to be reduced
eventually to 0.6m.
Competition
Although we believe we currently face no direct competition from
any other nationwide, two-way satellite high-speed Internet
access provider in the consumer marketplace, the overall market
for consumer Internet access is highly competitive. While our
current strategy is to focus on customers in those areas
underserved by terrestrial networks, we expect that our target
markets will become more competitive in the future. Our basis for
 competition includes:
•
availability of service;
•
no pre-qualifications to receive the service;
•
the user's Internet experience;
•
bundling of Internet service with television services; and
•
reliability and consistency of service from installation
	throughout the service life.
We face competition from traditional telephone companies, cable
modem service providers, competitive local exchange carriers,
wireless communication companies and satellite service providers.
 Many of our competitors have longer operating histories and
greater financial, technical, marketing and
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other resources than we do and thus may be able to respond more
quickly to new or changing opportunities and customer
requirements.
Traditional Telephone
Companies
The traditional telephone companies represent strong competition
in all of our target market areas as providers of dial-up
Internet access. In particular, the traditional telephone
companies have an established brand name in their service areas
and own their copper lines. As they continue rolling out DSL
services, they will increasingly be able to bundle their DSL
services with voice services provided to their existing
customers.
Cable Modem Service
Providers
Cable modem service providers such as Roadrunner, Excite@Home
Network and MediaOne, and their respective cable partners, are
deploying high-speed Internet access services over hybrid fiber
coaxial cable networks. These networks have become the primary
architecture utilized by cable operators in recent and ongoing
upgrades of their systems. Where deployed, these networks provide
 higher-speed Internet access than we provide. We believe the
cable modem service providers face a number of challenges, such
as the inability to offer service on a nationwide basis. Also,
much of the current cable infrastructure in the United States
must be upgraded to support cable modems, a process that we
believe will be expensive and time-consuming.
Competitive Local
Exchange Carriers
Many competitive local exchange carriers such as Covad
Communications, Rhythms NetConnections and NorthPoint
Communications offer high-speed digital services. Their ability
to provide service requires interconnection agreements with the
traditional telephone companies, pursuant to which they must
acquire central office space and install DSL hardware. We believe
 this requirement will result in competitive local exchange
carriers focusing primarily on areas of high density.
Wireless Providers
We may face competition from terrestrial wireless services,
including 2 GHz and 28 GHz wireless cable services, Multi-channel
 Microwave Distribution System, or MMDS, and Local Multi-channel
Distribution System, or LMDS, and 18 GHz and 39 GHz
point-to-point microwave systems. The FCC is currently
considering new rules to permit MMDS licensees to use their
systems to offer two-way services, including high-speed data,
rather than solely to provide one-way video services. The FCC has
 also recently auctioned spectrum for LMDS services in all
markets. This spectrum is expected to be used for wireless cable
and telephony services, including high-speed digital services. We
 believe it is unlikely that a nationwide wireless provider will
emerge in the near future because these licenses are awarded on a
 region-to-region basis.
Satellite-Based Systems
We may face competition from other providers of satellite
services, including Hughes Communications and WildBlue. We
believe our competitors will have data networking expertise.
Hughes has significant experience in running satellite data
networking services, and may enter the market soon with a two-way
 Ku band-based consumer offering. WildBlue has announced plans to
 launch a satellite-based Internet service in 2002, but has not
yet developed its satellite networking infrastructure. Other
potential satellite-based competitors could include Teledesic,
Cyberstar, Skybridge, Tachyon and Astrolink.
Government Regulation
Our satellite network uses earth stations that transmit and
receive radio signals (the earth segment) and satellite space
stations that relay these signals between earth stations (the
space segment). Pursuant to the Communications Act of 1934, as
amended, the FCC regulates the use of radio spectrum in the
United States, including satellite communications. Space stations
 and transmitting earth stations, as distinguished
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from receive-only stations, must be authorized by the FCC.
Installation of satellite antennas may also be subject to state
and local regulations such as zoning ordinances.
We are not an FCC licensee and do not hold any authorizations to
operate earth stations or satellites. We obtain the satellite
communications links used to provide our services pursuant to a
services agreement with Gilat and Spacenet Inc., a wholly owned
subsidiary of Gilat. Spacenet and its subsidiaries hold licenses
for the earth stations used for our service and Spacenet provides
 some of our satellite capacity pursuant to contracts with owners
 of U.S.-licensed satellites.
Earth station licenses are granted for ten-year terms. The FCC
generally renews these licenses routinely, but there is no
guarantee that they will be renewed or that renewals will be for
full terms. Major changes in operations and earth station
facilities require preapproval by the FCC and a modification to
the applicable FCC licenses.
Subsidiaries of Spacenet hold licenses for several network
operations center stations, which exchange data with many users,
connect the users to the Internet backbone and control the
communications equipment at subscriber locations. Subsidiaries of
 Spacenet also hold blanket domestic licenses issued by the FCC
for several types of customer premises equipment that we use to
provide our service, including 0.75m and 0.96m dish antennas.
Customer premises equipment is located on each customer's
premises and communicates with only one of the network operations
 centers via satellite. Each blanket license covers many
subscriber remote antennas installed within the continental U.S.,
 Alaska, Hawaii, Puerto Rico and the Virgin Islands.
Very small aperture terminal, or VSAT, remote stations use small
dish antennas that are suited for residential and other
non-industrial areas. The type of VSAT dish antenna that each
customer needs is determined by geographic location. The FCC
routinely approves dish antennas that conform to rules specifying
 beamwidth requirements or, alternatively, that do not conform to
 the rules but which the licensee demonstrates are compatible
with the FCC's satellite spacing policy. The larger VSAT
remote dish antennas used for our service conform to the
beamwidth rules. The FCC approved the two smallest VSAT remote
dish antennas used for our service, 0.96m and 0.75m designs, on
the required showing. The FCC granted blanket licenses for these
two VSAT dish antennas in June and July 2000 for use in up
to 20,000 locations, conditioned upon the outcome of a public
proceeding concerning the type of network access scheme used by
many satellite data networks. A subsidiary of Spacenet currently
has an application on file with the FCC to seek authority for
communications with Telstar 7 and increase the number of
0.75m remote user locations Spacenet may operate to 100,000.
The FCC requires satellite communications systems to operate in a
 way that does not cause harmful interference with the operation
of other satellites. Earlier this year, the FCC staff raised a
question whether a provision of the FCC rules could be read to
prohibit a longstanding industry practice regarding network
access schemes (the conventions that determine when and how
remote stations communicate with the satellite). In granting the
licenses for the 0.96m and 0.75m VSAT remote dish antennas, the
FCC waived the rule to the extent that it might be construed to
prohibit the use of industry-standard network access schemes and
conditioned the licenses on the outcome of the pending
proceeding. At the staff's request, Spacenet petitioned the
FCC for a declaratory ruling interpreting the rules to permit the
 longstanding industry practice. The public comment period ended
on June 14, 2000, and the satellite industry supported
granting the type of relief sought by Spacenet. We expect FCC
action before the end of the year. It is not possible to predict
precisely the manner in which the FCC will resolve this issue.
The FCC has established guidelines for human exposure to radio
frequency energy. Between the feed horn and the reflector of our
VSAT dish antennas, the radio frequency exposure exceeds the
acceptable level established by the FCC. There is a risk of
injury to anyone who places part of their body in this area of
the VSAT dish antenna for a prolonged period of time. Spacenet
has provided the FCC with information concerning the typical
installation and placement of the dish antennas used for our
service and the technical safeguards and warnings that we will
use to minimize the risk of injury. We believe that these methods
 will satisfy the FCC or that we, together with Gilat, can
develop procedures to satisfy the FCC's concerns.
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Some localities attempt to impose restrictions on the
installation of satellite dish antennas, usually in the form of
zoning ordinances. While not directly regulating us, those
restrictions might reduce market demand for the our service. The
FCC has adopted rules limiting the circumstances under which
restrictions can be imposed and has preempted many types of
restrictions entirely. The FCC is also considering further action
 to prevent localities from interfering with the federal interest
 in widespread and competitive availability of broadband
services.
On September 28, 2000, the FCC instituted a public
proceeding inquiring as to whether companies offering high-speed
data networks should be required to make their networks available
 generally to any Internet service provider that would like to
use them to reach customers or whether this access will be
available on the open market without regulation. There is no way
to determine how the FCC will decide this issue. It may, after
receiving public comment, elect not to impose any regulatory
requirements. If, however, the FCC decides that high-speed data
networks used to provide access to the Internet should be made
available generally to Internet service providers, we may be
required to provide our wholesale service to any Internet service
 provider that requests it, including entities that compete with
us and with MSN. At this point, however, it is not possible to
predict whether or when such regulations will be adopted or the
precise obligations they may impose on us.
The FCC also regulates telecommunications common carriers under
Title II of the Communications Act of 1934, as amended.
Providers of Internet access services, such as the service we
offer, are not subject to regulation under Title II. The FCC
 does, however, have the power to impose some forms of regulation
 on providers of Internet access services under Title I of
the Communications Act, which gives the FCC the power to regulate
 interstate communications by wire or radio. As an Internet
service provider, we are potentially subject to such regulation.
To date, the FCC has avoided regulation of Internet service
providers, but there is no guarantee that the FCC will continue
to refrain from regulating them or some of their services in the
future.
Currently, one legitimate ground for local regulation is safety.
While localities have generally not regulated the emission of
radio frequency energy, the possibility exists that local
jurisdictions may restrict the installation of transmitting earth
 stations to achieve legitimate safety goals. We believe it is
unlikely that such a restriction could be used to prevent
installation of the VSAT remote stations used for our service
because of the very low safety risk posed by the antennas.
Technology and Licensing
Gilat is our primary technology partner and will continue
research and development projects with us and on our behalf.
Gilat research and development teams are located in both Israel
and the United States, and include satellite experts in the field
 of hardware development, satellite access software and
application protocols such as Internet Protocol. They are working
 with us to ensure continued technological leadership. Gilat has
agreed to continue research and development of our current
products and we have agreed to pay a portion of the research and
development costs. One major research and development effort is
the multicast software, including the future StarBand Carousel
SM
through which content will be multicast on a
scheduled basis.
Employees
As of August 31, 2000 we had 127 full-time employees and a
total of 40 consultants and other individuals working for us
pursuant to management services agreements. For operational
reasons, during our development stage, all of our employees were
leased from Spacenet. Substantially all of these personnel will
be transferred to our direct payroll prior to the end of 2000.
Our agreement with Spacenet requires us to make timely payment of
 the full cost incurred by Spacenet including salary, bonuses,
benefits, taxes, processing costs and related items. Of that
number, 70 are based in our offices in McLean, Virginia, and 95
are based in Marietta, Georgia. We have 12 employees in our sales
 force and 22 in research and engineering. None of our employees
is a party to a collective bargaining agreement, and we
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have never experienced a work stoppage. We consider our
relationship with our employees to be good and have not
experienced any interruptions of operations due to labor
disagreements.
Properties
Our corporate headquarters facility of approximately 42,000
square feet is located in McLean, Virginia. Spacenet leases the
McLean facility from a third party and we occupy the premises
pursuant to a sublease with Spacenet under which we pay Spacenet
the same price that they pay under their lease. The lease for
this facility expires in April 2005 with an option for
renewal. In addition, we occupy a facility of approximately
58,000 square feet in Marietta, Georgia, where the network
operations center is located. Spacenet leases the Marietta
facility from a third party and we occupy the premises pursuant
to a sublease with Spacenet under which we pay same price to
Spacenet as they pay under their lease. The lease for this
facility expires in September 2001.
Legal Proceedings
On or about July 26, 2000, Globecomm Systems, Inc. commenced
 a lawsuit against us in the Eastern District of New York
alleging the willful infringement of their U.S. patent
relating to a particular means for transferring and receiving
communications signals between a remote terminal and a network
operations center via satellite. This proceeding is at an early
stage. We will respond appropriately to Globecomm's
complaint and vigorously defend our rights in this matter.
In addition, on May 8, 2000, Hughes Electronics Corporation
commenced a lawsuit against Gilat and Spacenet in the District of
 Maryland, alleging willful infringement of four patents. We are
not a party to the lawsuit and only one of the infringement
claims may be relevant to the equipment we purchase from Gilat. A
 ruling against Gilat or Spacenet would significantly harm our
business because we license technology from them that forms part
of Hughes' claim. In particular, the single potentially
relevant claim is related to personal computer based receiver
cards that we use as part of our service offering to consumers.
We may not be able to continue to use the technology if Hughes
prevails on its claim regarding this technology. Gilat and
Spacenet have filed motions for partial summary judgment on the
issue of patent claim construction and the Court has scheduled a
hearing on these motions for November 20, 2000.
Based upon our analysis of the information available to us at
these preliminary stages and the technology we use to operate our
 network, we believe that these suits represent minimal risk to
our business and financial condition.
We do not have insurance that would indemnify us for any
liability that may be imposed in connection with the legal
actions described above. Accordingly, if any of these events
occur, it could result in a substantial reduction in our revenue
and could result in losses over an extended period of time.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information with respect to our
executive officers and directors:
Name
Age
Position
Yoel Gat
48
Co-Chairman and Director(1)
Zur Feldman
42
Co-Chairman, Chief Executive Officer and Director(1)
David Trachtenberg
38
President and Chief Marketing Officer
William McMoil
36
Corporate Controller, Secretary and Treasurer
Orey Gilliam
40
Vice President Engineering and Operations and Chief Information
	Officer
Richard De Shong
53
Vice President Logistics
Donna Tanenbaum
40
Vice President Human Resources and Administration
Sandy Colony
55
Vice President Corporate Communications
Amit Dembsky
41
Vice President Product Integration
Jon DeVaan
40
Director(2)
Brian Friedman
44
Director(3)
Mark Jackson
39
Director(4)
(1)
Nominated to our board of directors by Spacenet. See
	"Principal Stockholders — Stockholders
	Agreement."
(2)
Nominated to our board of directors by Microsoft. See
	"Principal Stockholders — Stockholders
	Agreement."
(3)
Nominated to our board of directors by ING Furman Selz
	Investments. See "Principal Stockholders —
	Stockholders Agreement."
(4)
Nominated to our board of directors by EchoStar. See
	"Principal Stockholders — Stockholders
	Agreement."
Yoel Gat
served as Chairman of our board of directors
since our inception in January 2000 and became Co-Chairman
in August 2000. Mr. Gat co-founded Gilat Satellite
Networks Ltd. in 1987 and since that time has served as Chairman
of the board of directors and Chief Executive Officer of that
company. Mr. Gat is also the Chairman of the board of
directors of KSAT, and serves on the board of ILAN-GAT
Engineering Ltd. Mr. Gat holds a B.S. in Electrical
Engineering and Electronics from the Technion-Israel Institute of
 Technology and an M.M.S. from the Recanati Graduate School of
Business Administration of Tel Aviv University. Mr. Gat is a
 two-time winner of the Israel Defense Award, Israel's most
prestigious research and development award.
Zur Feldman
has been our Chief Executive Officer since
February 2000 and was named Co-Chairman of our board of
directors in August 2000. Mr. Feldman served as the
Executive Vice President of Packard Bell Electronics from 1995 to
 1999 and as Vice President of Operations from 1989 to 1995.
Mr. Feldman holds a B.A. in Photo Journalism, Television
Broadcasting and Communications. Mr. Feldman has also
completed a two-year program at the University of California, Los
 Angeles professional Business and Management school. In
addition, Mr. Feldman graduated from the Stanford University
 Graduate School of Business and Management for Executives.
David Trachtenberg
has served as our President and Chief
Marketing Officer since August 2000. Mr. Trachtenberg
served as President and Chief Operating Officer of Prodigy
Communications Corporation from November 1998 to
June 2000. In addition, from 1990 to 1998, he was employed
at MCI Communications, where he was Executive Director of
Marketing from 1996 to 1998. Mr. Trachtenberg
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holds a B.A. in International Relations from Tufts University, an
 M.A. from the University of Pennsylvania and an M.B.A. from The
Wharton Business School of the University of Pennsylvania.
William McMoil
has served as our Corporate Controller,
Secretary and Treasurer since May 2000. Prior to joining our
 company, Mr. McMoil served as Controller and Secretary
Treasurer for OnePoint Communications Corp., a residential CLEC,
from 1998 to 2000. In addition, he served as Controller for
IoWave, Inc., a wireless telecommunications equipment
manufacturer from 1997 to 1998. From 1995 to 1997,
Mr. McMoil was Director of Finance of Martin's Herend
Imports, Inc. Mr. McMoil holds a B.A. degree from Furman
University and an M.B.A. from George Mason University.
Orey Gilliam
has served as our Vice President of
Engineering and Operations and Chief Information Officer since
January 2000. Mr. Gilliam joined Gilat in 1992 and served in
 various operation and marketing positions until 1998 when he was
 appointed Vice President and General Manager of Gilat, Inc.,
then the U.S. subsidiary of Gilat. In 1999, after leading
the U.S. integration team for the acquisition of the company
 by Gilat, Mr. Gilliam was appointed Chief Information
Officer of Spacenet Inc. and continues to hold that position.
Prior to joining Gilat, Mr. Gilliam worked for Intel
Corporation in technical and marketing positions.
Mr. Gilliam graduated with honors from the Technion-Israel
Institute of Technology with a degree in Computer Engineering.
Richard De Shong
has been our Vice President of Logistics
since he joined us in March 2000. Prior to joining us,
Mr. De Shong worked for Packard Bell NEC, Inc. where he
served as Director of Materials from 1997 to 2000 and Director of
 Planning and Scheduling from 1993 to 1997. From 1992 to 1993,
Mr. De Shong served as Project Manager at Western Data
Systems and from 1989 to 1990 he was Senior Manager of
Manufacturing Systems Consulting with Price Waterhouse.
Mr. De Shong earned a B.S. in business administration from
Arizona State University.
Donna Tanenbaum
has been our Vice President of Human
Resources and Administration since February 2000. Prior to
her employment with us, Ms. Tanenbaum was Vice President of
Human Resources with Teleglobe Communications Corporation from
1996 to 2000. Prior to her position with Teleglobe,
Ms. Tanenbaum held various positions in human resources with
 Science Applications International Corporation from 1994 to
1996, and also with MCI Communications Corporation, Freddie Mac
and Metropolitan Life Insurance. Ms. Tanenbaum earned an
M.E. with an emphasis in Organizational Development from the
Harvard Graduate School of Education and her B.S. in Human
Development from Cornell University.
Sandy Colony
has been our Vice President of Corporate
Communications since August 2000. Prior to joining us,
Ms. Colony served as the Vice President of Corporate
Communications for Road Runner, the first high-speed online
service over cable in the United States, from 1998 to 2000.
Before working at Road Runner, Ms. Colony served as the Vice
 President of Corporate Communications at Time Warner Cable of
New York City from 1996 to 1998. She also worked with TV Food
Network from 1994 to 1996 as the Vice President of Public
Relations. Ms. Colony earned a B.A. in history from Skidmore
 College and holds an M.A. in psychology from The New School of
Social Research.
Amit Dembsky
has served as our Vice President of Product
Integration since May 2000. Prior to joining us,
Mr. Dembsky was Vice President of Product Development at
Synthonics Inc. from January 2000 until joining us. Prior to
 working at Synthonics, Mr. Dembsky was with Packard Bell
NEC Inc. from 1992 to 1999, where he served in various capacities
 including Director of the Advanced Technology Group.
Mr. Dembsky attended the Israel Air Force Electronics
Officers' Academy, earned a B.Sc. in Architecture from
Technion-Israel Institute of Technology and studied computer
science at UCLA and Pierce College.
Jon DeVaan
has served as a director of our company since
February 2000. Mr. DeVaan is a Senior Vice President of
 Microsoft Corporation's Personal Services and Devices
Group. Prior to his current position, Mr. DeVaan was vice
president of development and director of development of Microsoft
 Office 95 and 97. From 1985 to 1994 Mr. DeVaan served in
various capacities at Microsoft, from software design
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engineer to development manager of various versions of Microsoft
Excel. Mr. DeVaan earned B.S. degrees in mathematics and
computer science from Oregon State University.
Brian Friedman
has served as a director of our company
since April 2000. Mr. Friedman has been the President
of ING Furman Selz Investments, a private equity investment firm,
 since 1994. Mr. Friedman also serves on the boards of
directors of Acapulco Restaurants, Inc., Au Bon Pain Corporation,
 BricsNet N.V., California Pizza Kitchen, Inc., Cognitive Arts,
Inc. and IDB Carries B.V. Mr. Friedman also serves on the
boards of managers of Apartment Media Works LLC, Beacon
Industrial Group LLC and Stagebill LLC.
Mark Jackson
has served as a director of our company since
 April 2000. Mr. Jackson also serves as Senior Vice
President of EchoStar Technologies Corporation, a division of
EchoStar Communications Corporation, where he has been employed
since he began as Director of Engineering in April of 1993. Prior
 to joining EchoStar, Mr. Jackson was Director of
Engineering at Tandon Corporation, Inc. for seven years.
Mr. Jackson attended Texas Tech University.
Committees of the Board of Directors
Our board of directors has established an audit committee and a
compensation committee and may also establish additional
committees to assist it in its duties. The functions of the audit
 committee include:
•
recommending to the board of directors the retention of
	independent auditors;
•
reviewing the scope of the annual audit undertaken by our
	company's independent auditors and the progress and results
	of their work; and
•
reviewing our company's financial statements, internal
	accounting and auditing procedures and corporate program to
	ensure compliance with applicable laws.
The functions of the compensation committee include:
•
reviewing and approving executive compensation policies and
	practices;
•
reviewing salaries and bonuses for some of our officers; and
•
considering other matters as may from time to time be referred to
	 the committee by our board of directors.
We intend to expand our board of directors to include three
independent directors, who will serve on our audit committee.
Election of Directors and Officers
Our board of directors consists of five directors, all of whom
are elected by our shareholders for one-year terms. Our executive
 officers are elected by the board of directors and may be
removed at any time by the board of directors. Our executive
officers do not serve fixed terms of office. Our principal
stockholders have entered into a stockholders agreement to vote
to ensure that a specified number of directors nominated by these
 principal stockholders are appointed to the board. See
"Principal Stockholders — Stockholders
Agreement."
Board Compensation
No director will receive cash compensation for services as a
director. All directors will, however, be reimbursed for their
expenses incurred in attending meetings. Zur Feldman, our
Co-Chairman, currently has been granted options to acquire a
total of 2,568,220 shares of our common stock.
Executive Compensation
The following table sets forth all compensation awarded to,
earned by or paid to our Chief Executive Officer and the next
four most highly compensated executive officers of our company
whose annual salary
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and bonus is expected to exceed $100,000 in 2000 for services
rendered in all capacities. In accordance with the rules of the
SEC, other compensation in the form of perquisites and other
personal benefits has been omitted for the named executive
officers because the aggregate amount of perquisites and other
personal benefits is expected to be less than the lesser of
$50,000 or 10% of the total of annual salary and bonuses for each
 of the named executive officers in 2000.
Summary Compensation Table
Annual Compensation
All Other
Name and Principal Position
Salary(1)
Bonus(2)
Compensation
Zur Feldman, Chief Executive Officer
$
250,000
$
150,000
$500,000(3)
David Trachtenberg, President and Chief Marketing Officer
200,000
150,000
100,000(3)
Orey Gilliam, Chief Information Officer and Vice President,
	Engineering and Operations
180,000
63,000
—
Richard De Shong, Vice President, Logistics
160,000
48,000
—
Sandy Colony, Vice President, Corporate Communications
160,000
48,000
75,000(3)
(1)
Full calendar year.
(2)
Annualized target.
(3)
Transition bonus.
Option Grants and August 31, 2000 Option Values
The following table sets forth information regarding options
granted to the named executive officers listed above during the
period from our inception through August 31, 2000 pursuant
to our 2000 Stock Incentive Plan.
Option Grants
Individual Grants
Percent of
Number of
Total
Potential Realizable Value
Securities
Options
Exercise
at Assumed Annual Rates
Underlying
Granted to
or Base
of Stock Price Appreciation
Options
Employees
Price
Expiration
for Option Term(5)
Granted
in 2000
($/Share)
Date
Name
(1)
(2)
(3)
(4)
0%
5%
10%
Zur Feldman
2,568,220
47.1
%
$
2.50
5/26/10
$
10,144,000
$
20,562,000
$
36,545,000
David Trachtenberg
1,500,000
27.5
6.45
8/23/10
5,925,000
12,010,000
21,344,000
Orey Gilliam
125,000
2.3
2.50
5/26/10
494,000
1,001,000
1,779,000
Richard DeShong
50,000
0.9
2.50
5/26/10
198,000
400,000
711,000
Sandy Colony
60,000
1.1
6.45
8/7/10
237,000
480,000
854,000
(1)
All options were granted under our 2000 Stock Incentive Plan.
	These options are subject to vesting in the event of a change in
	control of our company.
(2)
Based on options to purchase 5,449,220 shares of our common
	stock granted to employees in 2000.
(3)
The exercise or base price per share reflects the fair value of
	the common stock if the options are issued with exercise prices
	below that amount. The actual exercise prices of each of
	Mr. Trachtenberg's and Ms. Colony's options
	granted in August 2000 were $2.50 per share which resulted
	in an unrealized gain on the date of grant of approximately
	$5.9 million and $0.2  million, respectively.
(4)
The options have ten year terms, subject to earlier termination
	upon death, disability or termination of employment.
(5)
Potential realizable value based on actual exercise price of
	$2.50 per share and the estimated market value of $6.45 per
	share at August 31, 2000.
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Aggregate Option Exercises in 2000 and Option Values
The following table sets forth, for the named executive officers
listed above, the shares acquired and the value realized on each
exercise of stock options during the current year, and the number
 and value of securities underlying unexercised options held by
these executive officers at August 31, 2000. The value of
unexercised in-the-money options at August 31, 2000 has been
 calculated using $6.45 per share.
Number of Securities
Value of
Underlying Unexercised
Unexercised In-The-
Shares
Options
Money Options ($)
Acquired
Value
Name
on Exercise
Realized
Exercisable
Unexercisable
Exercisable
Unexercisable
Zur Feldman
—
—
—
2,568,220
—
$
10,144,000
David Trachtenberg
—
—
—
1,500,000
—
5,925,000
Orey Gilliam
—
—
—
125,000
—
494,000
Richard De Shong
—
—
—
50,000
—
198,000
Sandy Colony
—
—
—
60,000
—
237,000
2000 Stock Incentive Plan
We may issue up to 23.0 million shares of common stock
pursuant to the StarBand Communications Inc. 2000 Stock Incentive
 Plan, which has been adopted by our Board of Directors and
approved by our stockholders. No more than 8.0 million
shares may be issued pursuant to awards under this plan prior to
January 1, 2001. The plan provides for the granting to
employees and directors of incentive stock option and
nonqualified options to purchase shares of our common stock. The
plan also provides for the granting of shares of restricted stock
 and stock appreciation rights (SARs). As of August 31,
2000, we have granted options to purchase an aggregate of
5.4 million shares of common stock, and 2.6 million
shares of common stock remain available for grants until
January 1, 2001. As of August 31, 2000, none of the
options granted are exercisable.
The plan is administered by our Board of Directors. The
administrator of the plan has the power to determine the persons
to whom, the times at which, and the prices at which awards shall
 be granted, and to determine the type of option or award to be
granted and the number of shares subject to options and awards.
If we merge with or into another corporation or sell all or
substantially all of our assets and we are not the surviving
corporation, the options and SARs will become immediately
exercisable unless the successor company agrees to assume or
provide equivalent options or SARs. If we are the surviving
corporation in such an event, any option granted under the plan
will apply to the securities that the holders of shares of our
company would have been entitled to immediately following such
transaction had the holder of such option exercised the option in
 full immediately prior to such transaction.
In the event that the outstanding shares are modified by reason
of a recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or
other distribution payable in capital stock, the administrator of
 the plan will adjust the number and kind of shares available
under the plan, the number of shares outstanding and the price
per share of outstanding awards made under the plan.
The administrator of the plan determines the option price for
options. For an incentive stock option, the option price shall be
 100% of the fair market value of a share of company stock on the
 date the option is granted. If the recipient of an incentive
stock option owns more than 10% of our outstanding securities,
the option price shall be at least 110% of the fair market value
of a share of company stock on the date of grant. Options granted
 pursuant to the plan generally vest at a rate of 25% at the end
of the first year and 6.25% at the end of each quarter
thereafter, and generally expire ten years from the date on which
 they are granted. All of the options granted will become
exercisable according to the terms of each specific agreement.
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Employment Agreements
We have employment agreements with Zur Feldman, our Chief
Executive Officer and David Trachtenberg, our President and Chief
 Marketing Officer.
Mr. Feldman entered into an employment agreement with us on
March 9, 2000. Under the agreement, Mr. Feldman will be
 employed for a period of three years from February 7, 2000,
 at an annual salary of $250,000, subject to an annual review and
 possible upward adjustment of his salary at the discretion of
our board of directors. The agreement also provides for an annual
 performance bonus of up to $150,000 upon achieving mutually
agreed targets. The agreement contains non-compete provisions
prohibiting Mr. Feldman from competing with us during his
term of employment and for twelve months following the term. If
we terminate the agreement without cause, or if Mr. Feldman
terminates the agreement for cause, we are obligated to pay him
$1.5 million as severance.
Mr. Trachtenberg entered into an employment agreement with
us on August 15, 2000. Under the agreement,
Mr. Trachtenberg will be employed for a period of three
years from the date of the agreement, at an annual salary of
$200,000, subject to an annual review and possible upward
adjustment of his salary at the discretion of our board of
directors. The agreement also provides for an annual performance
bonus of up to $150,000 upon achieving mutually agreed targets.
The agreement contains non-compete provisions prohibiting
Mr. Trachtenberg from competing with us during the term of
his employment and for twelve months following the term. If we
terminate the agreement without cause, or if
Mr. Trachtenberg terminates the agreement for cause, we are
obligated to pay him his remaining base salary over the original
employment term.
Each of these agreements contains confidentiality restrictions,
as well as provisions recognizing that we own or license all
intellectual property rights to any products, hardware, software,
 or services that the named executive officer may work on during
the term of his employment agreement.
Limitation of Liability and Indemnification Matters
We have adopted provisions in our amended and restated
certificate of incorporation that limit the liability of our
directors for monetary damages for breach of their fiduciary duty
 as directors, except for liability that cannot be eliminated
under the Delaware General Corporation Law, or DGCL. In addition,
 we have taken out directors and officers insurance with a
maximum coverage of $5 million per claim. The DGCL provides
that directors of a company will not be personally liable for
monetary damages for breach of their fiduciary duty as directors,
 except liability associated with any of the following:
•
any breach of their duty of loyalty to the company or its
	stockholders;
•
acts or omissions not in good faith or which involve intentional
	misconduct or a knowing violation of law;
•
unlawful payment of dividends or unlawful stock repurchases or
	redemptions;  or
•
any transaction from which the director derived an improper
	personal benefit.
Our amended and restated certificate of incorporation and bylaws
also provide for indemnification of our directors and officers to
 the fullest extent permitted by the DGCL. We intend to enter
into separate indemnification agreements with our directors and
some of our officers that could require us, among other things,
to indemnify these persons against liabilities that may arise by
reason of their status or service as directors or officers and to
 advance their expenses as a result of any proceeding against
them as to which they could be indemnified. We believe that the
limitation of liability provision in our amended and restated
certificate of incorporation and the indemnification agreements
will facilitate our ability to continue to attract and retain
qualified individuals to serve as directors and officers.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial
ownership of our common stock as of August 31, 2000, and as
adjusted to reflect the sale of common stock offered in this
offering, as to:
•
each person (or group of affiliated persons) who is known by us
	to beneficially own five percent or more of the outstanding
	shares of our common stock;
•
each of our directors;
•
each of our executive officers named in the summary compensation
	table; and
•
all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes
voting and/or investment power with respect to securities. Unless
 otherwise noted, we believe that all persons named in the table
have sole voting and sole investment power with respect to all
shares shown as beneficially owned by them. Shares of common
stock subject to options currently exercisable or exercisable, or
 subject to conversion, within 60 days of August 31,
2000 are deemed outstanding for purposes of computing the
percentage beneficially owned by the person holding options but
are not deemed outstanding for purposes of computing the
percentages beneficially owned by any other person.
Beneficial Ownership
Beneficial Ownership
Prior to Offering
After Offering(1)
Number of
Number of
Name or Group of Beneficial Owner
Shares
Percent
Shares
Percent
Executive Officers and Directors
Yoel Gat(2)(3)(4)
3,345,338
3.8
%
Zur Feldman(3)
—
—
David Trachtenberg
—
—
Orey Gilliam(3)
—
—
Richard De Shong
—
—
Sandy Colony
—
—
Jon DeVaan
—
—
Mark Jackson
—
—
Brian Friedman(5)
6,823,385
—
All executive officers and directors as a group (13 
	persons)(2)
10,168,723
11.5
%
Five Percent or Greater Stockholders
Spacenet Inc.(4)(6)
39,423,351
44.7
%
Microsoft G-Holdings, Inc.(7)
16,748,844
19.0
EchoStar Communications Corporation(8)
16,755,317
19.0
ING Furman Selz Investments(5)(9)
6,823,385
7.7
(1)
Assumes the issuance of
	          common
	 shares offered by this prospectus and that the
	underwriters' over-allotment option is not exercised.
(2)
Represents shares held by an irrevocable trust, the beneficiaries
	 of which include the children and other family members of
	Mr.  Gat. Mr. Gat expressly disclaims beneficial
	ownership of the shares held by the trust, and the filing of this
	 registration statement is not an admission that Mr.  Gat is
	 the beneficial owner of these shares.
(3)
Mr. Feldman beneficially owns 3,125 shares of common stock
	of Gilat, issuable upon the exercise of options exercisable
	currently or within 60 days of August 31, 2000.
	Mr. Gilliam beneficially owns 26,683 shares of Gilat, 17,375
	 of which are issuable upon the exercise of options held by
	Mr. Gilliam and exercisable currently or within 60 
	days of August 31, 2000. The beneficial ownership of these
	shares represents less than 1% of the outstanding shares of
	Gilat. Mr. Gat is the beneficial owner of
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325,336 shares of common stock of Gilat, of which 146,871
	are subject to the exercise of options exercisable currently or
	within 60 days of August 31, 2000, and representing
	approximately 1% of the outstanding shares of common stock of
	Gilat.
(4)
Includes 306,155 shares of common stock issuable upon conversion
	of a note issued by Spacenet Inc. to the trust described in note
	(2), based upon the capitalization of StarBand as of
	August 31, 2000, including warrants issued as of that date,
	pursuant to the terms of the note. Currently, and until the note
	is converted by the trust, the shares issuable upon conversion of
	 the note are deemed to be beneficially owned by both the trust
	and Spacenet Inc.
(5)
Mr. Friedman is deemed a control person of the manager
	making the investment decisions for these entities, and as such
	may be deemed, for purposes of determining the beneficial
	ownership of these shares, to have shared voting and investment
	power with respect to these shares. Accordingly, the beneficial
	ownership of these shares has been attributed to both
	Mr. Friedman and ING  Furman Selz Investments.
(6)
Includes 28,022,240 shares issuable upon conversion of
	140,111,199 shares of Series B convertible preferred stock
	and 1,401,112 shares issuable upon conversion of accrued
	dividends. The address for Spacenet Inc. is 1750 Old Meadow Road,
	 McLean, VA 22102.
(7)
Includes 9,845,652 shares issuable upon conversion of 49,228,259
	shares of Series A convertible preferred stock and 453,170
	shares issuable upon conversion of accrued dividends. The address
	 for Microsoft G-Holdings, Inc. is c/o Microsoft Corporation, One
	 Microsoft Way, Redmond, WA 98052.
(8)
Includes 9,845,652 shares issuable upon conversion of 49,228,259
	shares of Series A-1 convertible preferred stock and 459,643
	 shares issuable upon conversion of accrued dividends. The
	address for EchoStar Communications Corporation is 5701
	S. Santa Fe Drive, Littleton, CO 80120.
(9)
Includes 4,014,030 shares issuable upon conversion of 24,686,284
	shares of Series A-2 convertible preferred stock and 187,394
	 shares issuable upon conversion of accrued dividends, consisting
	 of 3,007,596, 257,772, 146,324, 2,584,139, 578,357, and
	249,197 shares held by Furman Selz Investors II L.P., FS
	Employees Investors L.L.C., FS Parallel Fund L.P., ING Furman
	Selz Investors III L.P., ING Barings U.S. Leveraged Equity Plan
	L.L.C. and ING Barings Global Leveraged Plan, Ltd., respectively,
	 all affiliates of ING Furman Selz Investments. The address for
	the ING Furman Selz Investments entities is c/o ING Furman Selz
	Investments, 55 East 52nd Street, New York, NY 10055.
Investment Agreements
Spacenet, EchoStar, Microsoft and ING Furman Selz Investment
entities purchased shares of our preferred stock pursuant to
investment agreements with us in February and April 2000. Under
the investment agreement with Microsoft, we have the obligation
to repurchase all of our shares held by Microsoft if we, Gilat or
 Spacenet breach any of the material terms of the MSN satellite
broadband access supply agreement and related ancillary
agreements. In August 2000, we assigned this contingent
obligation to Spacenet.
Stockholders Agreement
Spacenet, EchoStar, Microsoft and the ING Furman Selz Investments
 entities have entered into a stockholders agreement with us
relating to their ownership, transfer and voting of our common
and preferred shares. Under the stockholders agreement, all
shares owned by these principal stockholders are subject to
resale restrictions. Each of EchoStar, Microsoft and the ING
Furman Selz Investments entities are restricted from selling or
otherwise transferring their shares, except in limited
circumstances, until April 2001. Spacenet is similarly
restricted until April 2003. Gilat is required to hold
sufficient shares of Spacenet so that Gilat will remain our
affiliate at all times. Each principal stockholder has a right of
 first
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refusal to purchase when another principal stockholder wishes to
transfer its shares to an unaffiliated third party in a
transaction that is not conducted on Nasdaq.
In accordance with the stockholders agreement, our principal
stockholders may appoint and remove a controlling majority of our
 board of directors. Our board currently consists of five
directors. Our principal stockholders have agreed that they will
vote to ensure that the board of our company will include:
•
two directors nominated by Spacenet, currently Yoel Gat and Zur
	Feldman;
•
one director nominated by Microsoft, currently Jon DeVaan;
•
one director nominated by EchoStar, currently Mark
	Jackson; and
•
one director nominated by the ING Furman Selz Investments
	entities, currently Brian Friedman.
The presence of the Microsoft-nominated director and either the
EchoStar-nominated director or the ING Furman Selz
Investments-nominated director is required in order to constitute
 a quorum at a meeting of the board of directors. The
stockholders agreement will be amended to provide for the
election of three independent directors. In addition, EchoStar
and Microsoft each have the right to appoint one observer to our
board. The observers are entitled to attend all meetings of the
board of directors but do not have voting rights.
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RELATED PARTY TRANSACTIONS
We have engaged in transactions with our principal stockholders.
We describe these transactions in further detail in Note 3
to our financial statements contained elsewhere in this
prospectus. We provide details of the material transactions with
our principal stockholders below. We believe that each of the
transactions described below were on terms no less favorable than
 we could have obtained from unaffiliated third parties.
Gilat Satellite Networks and Spacenet
Since we began operations, Gilat and Spacenet have provided us
with:
•
technology, research and development;
•
customer premises equipment;
•
network operations technology, facilities and services;
•
office space;
•
management services; and
•
administrative services encompassing information technology,
	marketing, legal, finance and human resources.
On January 11, 2000, we issued 10 shares of our common stock
 to Spacenet for $10, in connection with our organization and
initial capitalization. From our inception until August 31,
2000, in addition to issuing shares of our common stock to
Spacenet, we paid a total of approximately $20.0 million to
Gilat and approximately $38.7 million to Spacenet as payment
 for services rendered to us under our various agreements and
arrangements with them.
Gilat Supply Agreements
In February 2000, we entered into a five-year supply
agreement with Gilat and Spacenet. The Gilat supply agreement
sets forth the commercial terms under which we will offer
StarBand service outside our arrangement with MSN, and the terms
under which Gilat and Spacenet provide us with licenses,
intellectual property and satellite capacity on the GE Americom
GE4 satellite for that purpose. In addition, Spacenet and Gilat
have agreed not to offer services that compete with our service
to residential and small office/home office customers throughout
North America.
Pursuant to this agreement we are obligated to pay
$7.2 million to Spacenet, which has been accrued as part of
our payable to Gilat, as reimbursement for a payment made by
Spacenet to reserve the GE4 satellite capacity. GE Americom owns
approximately 19% of the outstanding shares of common stock of
Gilat.
Master Supply and
Services Agreement
We expect to enter into a four-year master supply and services
agreement with Gilat and Spacenet that will replace the existing
Gilat supply agreements. This agreement will automatically renew
for two-year periods. Pricing terms, however, will be
renegotiated every two years. Under this agreement, Gilat and
Spacenet will provide us with the facilities, equipment, software
 and services that we will use in our business, including:
•
customer premises equipment, network operations equipment,
	software necessary for the network to operate, and our multicast
	system;
•
consulting and administrative services, including information
	technology, marketing, financial, and legal services for a
	transition period while we establish our own systems and
	processes, for which we expect the total cost to be approximately
	 $2.1 million per calendar quarter. While we will pay for
	these administrative and management services for up to two years,
	 we may terminate these services
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at any time without penalty or payment obligation, with some
	exceptions, with ninety days written notice. In this event, the
	termination will take effect as of the last day of the next
	calendar quarter;
•
facilities in Virginia and Georgia; and
•
research and development support in connection with hardware,
	equipment and software maintenance that arises out of this
	agreement. During the first two years of the agreement, we will
	pay Gilat $1.0 million per calendar quarter to assist with
	basic ongoing research and development expenses associated with
	the products provided under the agreement. Beginning in 2001, we
	will share with Gilat product development costs focused
	exclusively on reducing the cost to manufacture the
	next-generation StarBand modem.
Each month we will submit to Gilat order forecasts that specify
the equipment we will need in the following twelve months. The
forecast for the first three months is a firm order. The
forecasts for the second and third three-month periods are
binding, subject to an adjustment within predetermined limits
established in the forecasts. The forecast for the final three
months is non-binding. Gilat will allocate up to 70% of its
manufacturing capacity for the production and delivery of
products that we order from Gilat.
We will purchase most of the equipment and services necessary for
 our business exclusively from Gilat and Spacenet, and they will
grant us exclusive rights to use the technology that we require
to provide our service to customers in the United States, Canada
and Mexico. Upon establishment of StarBand Latin America, which
will be our affiliate, we are considering contributing exclusive
rights in Mexico in return for a minority equity stake in
StarBand Latin America. We will pay Gilat various one-time fees
in connection with its assistance in the preparation of our
business plan, product plan, and training program.
Spacenet will grant us rights to use its enterprise resource
planning system and the software with which we perform
back-office functions. We will in the future provide Spacenet
with equipment and services that Spacenet may then re-sell to
various enterprise and small office/home office non-residential
customers, subject to Spacenet's recognition of our
exclusive marketing rights and compliance with guidelines that we
 establish.
Telecommunications
Service Agreement
We entered into a one-year telecommunications services agreement
with Spacenet dated February 15, 2000, which is renewable
for up to four years at the option of Microsoft. MSN is the
third-party beneficiary of this agreement. Under this agreement,
Spacenet operates telecommunications facilities and provides
services, including access to Spacenet's transmission and
switching facilities necessary for us to fulfill our obligations
to MSN, for which we reimburse Spacenet at their cost. In
addition, in exchange for technologies and equipment provided to
us by Spacenet, we issued 9,999,989 shares of our common
stock and 140,111,199 shares of our Series B
convertible preferred stock to Spacenet.
Yoel Gat, Co-Chairman of our board of directors, also serves as
Chairman of the board of directors and Chief Executive Officer of
 Gilat. Orey Gilliam, our Vice President of Engineering and
Operations and Chief Information Officer, also serves as Chief
Information Officer of Spacenet.
Microsoft/ MSN
In March 2000, in connection with Microsoft's
investment in our company, we entered into a four-year agreement
to supply wholesale satellite broadband Internet access to MSN.
The agreement renews automatically for additional one-year terms
unless terminated by either us or MSN. The agreement requires us
to achieve five milestones during the initial term relating
primarily to our fulfilling production levels for our StarBand
modem, achieving minimum levels of MSN subscribers and other
technical matters set forth in the agreement. MSN's
commitment to the agreement is contingent upon our meeting these
milestones. To date, we have not completed any of the milestones
set forth in this agreement. Upon our completion of the
milestones, MSN will purchase StarBand modem-based systems in
predetermined quantities and at predetermined prices for use as
part of a high-speed Internet access offering by MSN. We agreed
to supply MSN with StarBand modems in accordance with a specified
 production schedule. MSN will provide a subsidy for a portion of
 the cost of the customer premises equipment for MSN
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subscribers. Pursuant to this agreement, we agreed to pay MSN a
one time fee of $1.25 million to offset a portion of
MSN's subscriber acquisition costs.
The agreement also sets the monthly per subscriber fee we will
collect from MSN, and the minimum monthly fees that MSN will
collect from its subscribers. We also granted MSN most favored
customer status and agreed, for a limited time, to refrain from
providing our service to a number of Internet service providers.
We have entered into a series of other operative agreements with
MSN, Gilat and Spacenet in order to carry out the objectives and
meet the obligations set forth in the MSN agreement.
In March 2000, Gilat entered into a performance guarantee
agreement pursuant to which Gilat unconditionally and irrevocably
 guaranteed to MSN our compliance with various material
obligations under the MSN broadband supply agreement and related
operative agreements.
We and MSN recently agreed in principle to amend the agreement
and we are currently negotiating a definitive agreement which if
approved would:
•
replace the five production related milestones currently in the
	agreement with a single milestone that requires us to produce a
	specified quantity of our next generation StarBand modems in
	compliance with mutually agreed upon technical specifications;
•
amend the exclusivity provisions in the current agreement;
•
eliminate Gilat's guarantee to MSN of our performance of
	obligations under various operating agreements;
•
cancel the $1.25 million fee we owe MSN as reimbursement for
	 a portion of MSN's subscriber acquisition cost
	subsidy; and
•
establish revised minimum equipment purchase commitments for MSN.
Jon DeVaan, a member of our board of directors, also serves as
Senior Vice President of Microsoft's Personnel Services and
Devices Group.
EchoStar/ DISH
We, Gilat and EchoStar entered into a memorandum of agreement on
February 22, 2000 setting forth the terms under which we
will jointly market our high-speed Internet access service with
EchoStar's DISH direct broadcast satellite television
service. The agreement with EchoStar expires on March 31,
2001. EchoStar will market our service to their customers and
DISH retailers. In exchange, we have agreed to market DISH's
 satellite television programming service together with our
high-speed Internet access service. EchoStar has made no
commitments to us and is subject to no penalties if it ceases to
sell our service. EchoStar and Gilat are also currently
conducting research and development of a product to provide our
Internet service through a TV-centric platform in the future.
Under the terms of this memorandum of agreement, we will pay
EchoStar activation fees and residual commissions for each
StarBand subscriber we acquire through the DISH retail sales
channel. We will provide all customer premises equipment and
EchoStar will provide the initial point of contact for service
calls. DISH Network Service Corporation, an EchoStar affiliate,
will install the equipment and EchoStar will split any associated
 costs of such installation with us. We will pay incentive fees
to EchoStar's independent installers and DISH retailers who
sell our equipment. We will also market EchoStar's DISH
direct broadcast satellite television services to StarBand
subscribers not acquired through EchoStar for which EchoStar will
 pay us commissions. This memorandum of agreement contains
provisions which restrict us and EchoStar from entering into
co-marketing relationships with competitors of each other for a
limited time.
Mark Jackson, a member of our board of directors, also serves as
Senior Vice President of EchoStar Technologies Corporation, a
division of EchoStar.
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DESCRIPTION OF CAPITAL STOCK
The following statements summarize several provisions of our
amended and restated certificate of incorporation and by-laws and
 Delaware law. These summaries do not purport to be complete and
are qualified in their entirety by reference to our amended and
restated certificate of incorporation and by-laws which have been
 filed as exhibits to this registration statement, of which this
prospectus forms a part, and to the provisions of applicable law.
General
Our authorized capital stock consists of:
•
110,000,000 shares of common stock, $0.05 par value per
	 share; and
•
310,000,000 shares of preferred stock, par value
	$0.05 per share, as follows:
—
55,000,000 shares of Series A convertible preferred
	stock, $0.05 par value per share;
—
55,000,000 shares of Series A-1 convertible preferred
	stock, $0.05 par value per share;
—
30,000,000 shares of Series A-2 convertible preferred
	stock, $0.05 par value per share;
—
150,000,000 shares of Series B convertible preferred
	stock, $0.05 par value per share;
—
10,000,000 shares of Series C convertible preferred
	stock, $0.05 par value per share; and
—
10,000,000 shares of Series D convertible preferred
	stock, $0.05 par value per share.
Upon completion of this offering, there will be
           shares
 of common stock outstanding and no shares of preferred stock
outstanding.
As of August 31, 2000, we had:
•
33,879,757 shares of common stock outstanding;
•
263,254,001 shares of convertible preferred stock
	outstanding; and
•
outstanding options and warrants to purchase
	9,349,644 shares of common stock.
Common Stock
The holders of our common stock are entitled to one vote for each
 share on all matters to be voted on by stockholders. Our amended
 and restated certificate of incorporation does not provide for
cumulative voting in connection with the election of directors,
and accordingly, holders of more than 50% of the shares voting
will be able to elect all of the directors.
Holders of shares of common stock are entitled to share ratably
in dividends, if any, as may be declared from time to time by the
 board of directors in its discretion, from available funds. Upon
 any voluntary or involuntary liquidation, dissolution, or
winding up of our affairs, the holders of shares of our common
stock are entitled to share ratably in all assets remaining after
 payment in full of creditors and holders of preferred stock. All
 of the outstanding shares of common stock are, and the shares
offered by us will be, fully paid and non-assessable.
Preferred Stock
Under our amended and restated certificate of incorporation, our
board of directors is authorized to issue additional shares of
preferred stock from time to time without stockholder approval.
Our board of directors will also be authorized to establish the
number of shares to be included in such series and to fix the
terms, limitations, relative rights and preferences and
variations to each series. Although we have no present plans to
issue additional shares of preferred stock, the issuance of
shares of preferred stock, or the issuance of rights to purchase
such shares, could decrease the amount of earnings and assets
available for distribution to the holders of common stock, could
adversely affect the rights and powers, including voting rights,
of the common stock, and could have the effect of delaying,
deterring or preventing a change in control of StarBand or an
unsolicited acquisition proposal.
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Warrants
In connection with the June 2000 senior debt facility
between us and Bank Leumi USA, for itself and in its capacity as
agent for the additional lenders, we entered into a Series C
 convertible preferred stock purchase warrant agreement with each
 of Bank Leumi USA, The First International Bank of Israel Ltd.
and the Israel Discount Bank Ltd. As discussed in detail below,
the lenders have the right to purchase the number of
Series C shares that, assuming conversion to common stock on
 the exercise date, equals an aggregate of either 2.0% of our
fully diluted outstanding common stock, if exercised on the date
of our initial public offering, or up to 2.25% of our fully
diluted outstanding common stock, if exercised after
June 26, 2002. The Bank Leumi USA warrants are exercisable
on the earlier of (i) the date of our initial public
offering or (ii) June 26, 2002 and automatically expire
 on June 26, 2005. The First International Bank of Israel
and the Israel Discount Bank Ltd. warrants are exercisable on the
 earlier of (i) the date of this offering or
(ii) August 7, 2002 and automatically expire on
August 7, 2005.
The lenders were issued warrants to purchase shares of
Series C convertible preferred stock based on its respective
 funding commitment to the financing. We issued Bank Leumi USA
warrants to purchase the number of Series C preferred shares
 convertible into 1.2% of the fully diluted outstanding common
stock if exercised prior to June 26, 2002 or 1.35% of the
fully diluted outstanding common stock if exercised after
June 26, 2002. We issued each of The First International
Bank of Israel and the Israel Discount Bank Ltd. warrants to
purchase the number of Series C preferred shares convertible
 into 0.4% of the fully diluted outstanding common stock if
exercised prior to August 7, 2002 or 0.45% of the fully
diluted outstanding common stock if exercised after
August 7, 2002. Currently, these warrants have an exercise
price of $3.74 per Series C preferred share, and the
lenders are entitled to purchase, for an aggregate purchase price
 of approximately $7.0 million, 11,521,886 shares of
Series C convertible preferred stock, which may be converted
 into 1,873,477 shares of common stock upon the this
offering. The lenders also received the right to purchase
1,910,947 shares of common stock, issuable upon the
conversion of Series D convertible preferred stock with a
weighted average price of $4.49. Pursuant to this right the
lenders had the ability to use $10 million in principal
amount of the term loan for the purchase. This right expired in
September 2000.
Authorized But Unissued Capital Stock
We estimate that following this offering we will have
          (or
          if
the underwriters' over-allotment option is exercised in
full) shares of authorized but unissued stock. Delaware law does
not require stockholder approval for the issuance of authorized
shares. However, the listing requirements of the Nasdaq National
Market, which apply so long as the common stock remains included
in that inter-dealer quotation system, require prior stockholder
approval of specific issuances, including issuances of shares
bearing voting power equal to or exceeding 20% of the
pre-issuance outstanding voting power or pre-issuance outstanding
 number of shares of common stock. These additional shares could
be used for a variety of corporate purposes, including future
public offerings to raise additional capital or to facilitate
corporate acquisitions. We currently do not have any plans to
issue additional shares of common stock other than in connection
with employee stock option plans or warrants already issued. One
of the effects of the existence of issued and unreserved common
stock may be to enable the Board to issue shares to persons who
may agree or be inclined to vote in concert with current
management on issues put to consideration of stockholders, which
issuance could render more difficult or discourage an attempt to
obtain control of us by means of a merger, tender offer, proxy
contest or otherwise, and protect the continuity of our
management and possibly deprive the stockholders of the
opportunity to sell their shares of common stock at prices higher
 than prevailing market prices.
Section 203 of the Delaware General Corporation Law
Section 203 of the Delaware General Corporation Law could
make the acquisition of StarBand Communications and the removal
of its officers and directors difficult. The statute is expected
to discourage specific types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to
acquire control of StarBand Communications to negotiate with us
first. We believe that
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the benefits of increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited
proposal to acquire or restructure StarBand Communications
outweigh the disadvantages of discouraging proposals, because,
among other things, negotiation of proposals could result in an
improvement in their terms.
We are subject to the provisions of Section 203 of the
Delaware General Corporation Law. In general, this statute
prohibits a publicly-held Delaware corporation from engaging in a
 "business combination" with an "interested
stockholder" for a period of three years after the date that
 the person became an interested stockholder unless (with some
exceptions) the business combination the transaction in which the
 person became an interested stockholder is approved in a
prescribed manner. Generally, a "business combination"
includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally,
an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years
prior, did own) 15% or more of the corporation's voting
stock. These provisions may have the effect of delaying,
deferring or preventing a change of control of us without further
 action by our stockholders.
Registration Rights Agreements
We and our principal stockholders are party to an agreement that
grants our principal stockholders registration rights. Each of
our principal stockholders has an option to cause us to effect up
 to three registrations of the shares owned by it and its
affiliates and transferees. If one party exercises its
registration rights, the other parties having registration rights
 may elect to include their shares in the registered offering.
Our principal stockholders have agreed not to exercise their
registration rights until after the transfer restriction dates
set forth in the registration rights agreement. The transfer
restriction dates are April 2001 for Microsoft, EchoStar and
 ING Furman Selz Investments, and April 2003 for Spacenet.
The registration rights agreement also provides that if we
register any equity securities for an offering after the transfer
 restriction dates set forth in the agreement, we must permit
each of our principal stockholders, and anyone to whom they have
transferred shares in a private placement, to include their
shares in the offering. We have agreed to bear a portion of the
expenses related to any of these registered offerings.
We are also party to registration rights agreements with each of
Bank Leumi USA, The First International Bank of Israel Ltd. and
Israel Discount Bank Ltd. We entered into each of these
registration rights agreements as part of debt financing we
consummated with these three banks. Each of these registration
rights agreements contains substantially the same provisions.
Each bank has an option to cause us to effect up to three
registrations of the shares it may own in the future issued by us
 pursuant to the conversion of preferred shares they may obtain
by exercising warrants or converting debt instruments. If any
securityholder exercises its registration rights, each bank may
elect to include their shares in the registered offering. Each of
 the banks has agreed not to exercise any of their registration
rights until after the completion of this offering. The
registration rights agreements also provide that if we register
any equity securities in a subsequent public offering, we must
permit each bank, and anyone to whom they have transferred shares
 in a private placement, to include their shares in the offering.
 We have agreed to bear a portion of the expenses related to any
of these registered offerings.
We have agreed to comply with other covenants set forth in the
registration rights agreements. Among other things, we have
agreed to indemnify, hold harmless against and pay on behalf of
or reimburse any losses which our principal stockholders or third
 parties may suffer or become subject to as a result of untrue
statements, misrepresentations or material omissions we may make
in the registration of our shares.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the common shares is
American Stock Transfer & Trust Company.
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DESCRIPTION OF INDEBTEDNESS
We entered into a senior debt facility on June 26, 2000 with
 Bank Leumi USA, as agent and lender, under which Bank Leumi USA
made a term loan to us in principal amount of $90 million.
The senior debt facility was amended on September 8, 2000,
when The First International Bank of Israel Ltd. and the Israel
Discount Bank Ltd. joined the agreement as additional lenders and
 provided loans of $30 million each, bringing the total
amount of financing to $150 million. All $150 million
is currently held in interest-bearing accounts. Once we have
expended the $126 million raised in our earlier equity
placements with Microsoft, EchoStar, ING Furman Selz Investments
and the other investors, we may use all or a portion of the loan
funds deposited in the accounts to fund our business operations.
We have also entered into ancillary security agreements with the
lenders to provide them with collateral for the loan. Under the
security agreements, we have granted to Bank Leumi USA, as agent
for the lenders, a security interest in substantially all of our
assets except our contractual rights to receive capacity and
other services under our transponder lease agreements. The term
loan will become due and payable on June 26, 2003, with
interest payable quarterly in arrears. As of August 31,
2000, the entire loan amount of $90 million was bearing
interest at LIBOR plus 0.75%. The interest rate will rise to
LIBOR plus 1.5% after June 26, 2002. Subject to certain
conditions, we are permitted to convert the LIBOR loan to a base
rate loan, which would bear interest at the higher of the prime
rate and the Federal Funds Rate plus 0.5%. We may prepay the term
 loan, in whole or in part, without premium or penalty after
June 26, 2001. In the event that we receive an aggregate
amount of proceeds in excess of $50 million in a public
offering of capital stock or if we receive at least
$10 million in insurance proceeds or from the sale of any
asset, we are required to prepay the term loan. We are
negotiating with the lenders to obtain a waiver of the prepayment
 requirement for this offering. We expect that the First
International Bank of Israel will require prepayment of its
portion of the loan, but the other lenders will waive prepayment.
In connection with the term loan we also issued each of the
lenders warrants to purchase our Series C convertible
preferred stock, and granted a right to acquire Series D
convertible preferred stock in exchange for $10 million of
the principal amount of the loan. This right to acquire
Series D convertible preferred stock expired in September
2000. If the preferred shares were converted into shares of our
common stock prior to June 26, 2002, the lenders would own
in the aggregate approximately 3.9% of our fully diluted common
stock. If the preferred shares were converted into shares of our
common stock after August 7, 2002, the lenders would own in
the aggregate approximately 4.12% of our fully diluted common
stock.
As a condition of the term loan, we are required to provide
financial reports and other information to the lenders and
maintain insurance, and we are not permitted to incur additional
bank loans and certain other types of indebtedness. We are also
not permitted to exceed stated limits on aggregate capital
expenditures without the prior written consent of the lenders.
Events of default under the term loan include, among others:
•
non-payment;
•
breach of obligation;
•
misrepresentation;
•
invalidity or illegality of documents;
•
insolvency or insolvency proceedings;
•
change of control; and
•
breach or termination of material contracts.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common
stock. Future sales of substantial amounts of our common stock in
 the public market could adversely affect prevailing market
prices. Furthermore, because only a limited number of shares of
our common stock will be available for resale after this offering
 due to existing contractual and legal restrictions on sale as
described below, there may be sales of substantial amounts of our
 common stock in the public market after these restrictions
lapse. Such sales may adversely affect the then prevailing market
 price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have
           shares
 of common stock outstanding, assuming no exercise of options
outstanding as of
          ,
2000. Of these shares, the
          shares
 sold in this offering will be freely transferable without
restrictions or further registration under the Securities Act,
except for any shares purchased by one of our existing
"affiliates," as that term is defined in Rule 144
under the Securities Act. The remaining
           shares
 of common stock outstanding are "restricted shares" as
 defined in Rule 144. Restricted shares may be sold in the
public market only if their offering is registered or qualifies
for an exemption from registration under Rules 144 or 701
under the Securities Act. As a result of the contractual 180-day
lock-up period described below and the provisions of
Rules 144 and 701, these shares will be available for sale
in public market as follows:
Number of Shares
Date
On the date of this prospectus
After    (subject, in some cases, to volume
	limitations)
At various times after    (subject, in some cases, to
	volume limitations)
Lock-Up Agreements
We, our directors and executive officers and our existing
stockholders have each agreed not to offer, pledge, sell,
contract to sell, lend, or otherwise transfer or dispose of any
shares of common stock for a period of 180 days after the date of
 the U.S. purchase agreement, subject to limited exceptions. See
"Underwriting." Merrill Lynch, Pierce,
Fenner & Smith Incorporated, however, may in its sole
discretion, at any time without notice, release all or any
portion of the shares subject to lock-up agreements. See
"Underwriting."
Rule 144
In general, under Rule 144, beginning 90 days after the
 date of this offering, a person, or persons whose shares are
aggregated, who has owned shares that were purchased from us, or
any affiliate, for at least one year, is entitled to sell within
any three-month period a number of shares that does not exceed
the greater of:
•
1% of our then outstanding shares of common stock which will
	equal approximately
	          shares
	 immediately after this offering; or
•
the average weekly trading volume of our common stock on the
	Nasdaq National Market during the four calendar weeks preceding
	the filing of the notice of the sale on Form 144.
Sales under Rule 144 are also subject to manner of sale
provisions, notice requirements and the availability of current
public information about us. Any person, or persons whose shares
are aggregated, who is not deemed to have been one of our
affiliates at any time during the three months preceding a sale,
and who has owned shares within the definition of
"restricted securities" under Rule 144 that were
purchased from us, or any affiliate, for at least at least two
years, would be entitled to sell shares under Rule 144(k)
without regard to the volume limitations, manner of sale
provisions, public information requirements or notice
requirements.
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Rule 701
Subject to limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied
upon for the resale of securities originally purchased from us by
 our employees, directors or officers prior to the date we became
 subject to the reporting requirements of the Securities Exchange
 Act of 1934, or the Exchange Act. Those purchases must have been
 made pursuant to written compensatory benefit plans or written
contracts relating to the compensation of these persons. In
addition, the Securities and Exchange Commission has indicated
that Rule 701 will apply to typical stock options granted by
 an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired
upon exercise of the options. This would include exercises after
the date of this prospectus. Securities issued in reliance on
Rule 701 are restricted securities and, subject to the
contractual restrictions described above, may be sold by persons
other than affiliates subject only to the manner of sale
provisions of Rule 144 and by affiliates under Rule 144
 without compliance with its maximum holding period requirements.
Stock Options
As of August 31, 2000, options to purchase a total of
5.4 million shares of common stock under our 2000 Stock
Incentive Plan have been granted. Substantially all shares
issuable pursuant to outstanding options are subject to lock-up
agreements until
          . An
additional 2.6 million shares of common stock are currently
available for future grants under the plan. As of
January 2001, options for an additional 15 million
shares will be available for future grants under our stock plans.
Upon completion of this offering, we intend to file a
registration statement under the Securities Act covering all
shares of common stock subject to outstanding options or issuable
 under our stock option plans. Subject to Rule 144 volume
limitations applicable to affiliates, shares registered under any
 registration statements will be available for sale in the open
market beginning 180 days after the date of the prospectus,
except to the extent that the shares are subject to vesting
restrictions with us or the contractual restrictions described
above.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS
The following is a general discussion of the material
U.S. federal income and estate tax consequences of the
ownership and disposition of our common stock by a beneficial
owner that is a "Non-U.S. Holder." A
"Non-U.S. Holder" is a person or entity that, for
U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a
foreign estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as
 amended (the "Code"), and administrative
interpretations as of the date of this prospectus, all of which
are subject to change, including changes with retroactive effect.
 This discussion does not address all aspects of
U.S. federal income and estate taxation that may be relevant
 to Non-U.S. Holders in light of their particular
circumstances and does not address any tax consequences arising
under the laws of any state, local or foreign jurisdiction.
Prospective holders should consult their tax advisors with
respect to the particular tax consequences to them of owning and
disposing our common stock, including the consequences under the
laws of any state, local or foreign jurisdiction.
Dividends
Dividends paid to a Non-U.S. Holder of our common stock
generally will be subject to withholding tax at a 30% rate or a
reduced rate specified by an applicable income tax treaty. For
purposes of determining whether tax is to be withheld at a
reduced rate under an income tax treaty, we will presume that
dividends paid on or before December 31, 2000 to an address
in a foreign country are paid to a resident of that country
unless we have knowledge that the presumption is not warranted.
In order to obtain a reduced rate of withholding for dividends
paid after December 31, 2000, a Non-U.S. Holder will be
 required to provide us with an Internal Revenue Service
Form W-8BEN certifying its entitlement to benefits under a
treaty. In addition, in some cases where dividends are paid to a
Non-U.S. Holder that is a partnership or other pass-through
entity, persons holding an interest in the entity may need to
provide us with the required certification.
The withholding tax does not apply to dividends paid to a
Non-U.S. Holder that provides a Form W-8ECI, certifying
 that the dividends are effectively connected with the
Non-U.S. Holder's conduct of a trade or business within
 the United States. Instead, the effectively connected dividends
will be subject to regular U.S. income tax as if the
Non-U.S. Holder were a U.S. resident. A
non-U.S. corporation receiving effectively connected
dividends may also be subject to an additional "branch
profits tax" imposed at a rate of 30% (or a lower treaty
rate) on an earnings amount that is net of the regular tax.
Gain on Disposition of Common Stock
A Non-U.S. Holder generally will not be subject to
U.S. federal income tax on gain realized on a sale or other
disposition of our common stock unless:
•
the gain is effectively connected with a trade or business of the
	 Non-U.S.  Holder in the United States;
•
in the case of some Non-U.S. Holders who are non-resident
	alien individuals and hold our common stock as a capital asset,
	the individuals are present in the United States for 183 or more
	days in the taxable year of the disposition;
•
the Non-U.S. Holder is subject to tax under the provisions
	of the Code regarding the taxation of
	U.S. expatriates; or
•
the Non-U.S. Holder beneficially owns or has owned 5% or
	more of our common stock and at any time within the five-year
	period preceding the disposition or the
	Non-U.S. Holder's holding period, whichever period is
	shorter, we are or were a U.S. real property holding
	corporation at any time within such period.
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We believe that we are not, and do not anticipate becoming, a
U.S. real property holding corporation.
Information Reporting Requirements and Backup Withholding
We must report to the IRS the amount of dividends paid, the name
and address of the recipient, and the amount of any tax withheld.
 A similar report is sent to the Non-U.S. Holder. Under tax
treaties or other agreements, the IRS may make its reports
available to tax authorities in the recipient's country of
residence. Dividends paid on or before December 31, 2000 at
an address outside the United States are not subject to backup
withholding, unless we have knowledge that the payee is a
U.S. person. However, a Non-U.S. Holder may need to
certify its non-U.S. status in order to avoid backup
withholding at a 31% rate on dividends paid after
December 31, 2000 or dividends paid on or before that date
at an address inside the United States.
U.S. information reporting and backup withholding generally
will not apply to a payment of proceeds of a disposition of our
common stock where the transaction is effected outside the United
 States through a non-U.S. office of a non-U.S. broker.
 However, a Non-U.S. Holder may need to certify its
non-U.S. status in order to avoid information reporting and
backup withholding at a 31% rate on disposition proceeds where
the transaction is effected by or through a U.S. office of a
 broker. In addition, U.S. information reporting
requirements may apply to the proceeds of a disposition effected
by or through a non-U.S. office of a U.S. broker, or by
 a non-U.S. broker with specified connections to the United
States.
Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. When withholding results
in an overpayment of taxes, a refund may be obtained if the
required information is furnished to the IRS.
Federal Estate Tax
An individual Non-U.S. Holder who is treated as the owner
of, or has made particular lifetime transfers of, an interest in
our common stock will be required to include the value of the
stock in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
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UNDERWRITING
We intend to offer the shares in the U.S. and Canada through
 the U.S. underwriters and elsewhere through the
international managers. Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Credit Suisse First Boston Corporation,
Salomon Smith Barney Inc., CIBC World Markets Corp. and ING
Barings LLC are acting as U.S. representatives of the
U.S. underwriters named below. Subject to the terms and
conditions described in a U.S. purchase agreement among us
and the U.S. underwriters, and concurrently with the sale of

          shares
 to the international managers, we have agreed to sell to the
U.S. underwriters, and the U.S. underwriters severally
have agreed to purchase from us, the number of shares listed
opposite their names below.
Number
U.S. Underwriter
of Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Credit Suisse First Boston Corporation
Salomon Smith Barney Inc.
CIBC World Markets Corp.
ING Barings LLC
Total
We have also entered into an international purchase agreement
with the international managers for sale of the shares outside
the U.S. and Canada for whom Merrill Lynch International,
Credit Suisse First Boston (Europe) Limited, Salomon Brothers
International Limited, CIBC World Markets plc and ING Barings
Limited are acting as lead managers. Subject to the terms and
conditions in the international purchase agreement, and
concurrently with the sale of
          shares
 to the U.S. underwriters pursuant to the U.S. purchase
 agreement, we have agreed to sell to the international managers,
 and the international managers severally have agreed to purchase

          shares
 from us. The initial public offering price per share and the
total underwriting discount per share are identical under the
U.S. purchase agreement and the international purchase
agreement.
The U.S. underwriters and the international managers have
agreed to purchase all of the shares sold under the U.S. and
 international purchase agreements if any of these shares are
purchased. If an underwriter defaults, the U.S. and
international purchase agreements provide that the purchase
commitments of the nondefaulting underwriters may be increased or
 the purchase agreements may be terminated. The closings for the
sale of shares to be purchased by the U.S. underwriters and
the international managers are conditioned on one another.
We have agreed to indemnify the U.S. underwriters and the
international managers against certain liabilities, including
liabilities under the Securities Act, or to contribute to
payments the U.S. underwriters and international managers
may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the
purchase agreements, such as the receipt by the underwriters of
officers' certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.
Commissions and Discounts
The U.S. representatives have advised us that the
U.S. underwriters propose initially to offer the shares to
the public at the initial public offering price on the cover page
 of this prospectus and to dealers at that price less a
concession not in excess of
$          per
share. The U.S. underwriters may allow, and
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the dealers may reallow, a discount not in excess of
$          per
share to other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting
 discount and proceeds before expenses to us. The information
assumes either no exercise or full exercise by the
U.S. underwriters and the international managers of their
over-allotment options.
Per Share
Without Option
With Option
Public offering price
$
$
$
Underwriting discount
$
$
$
Proceeds, before expenses, to us
$
$
$
The expenses of the offering, not including the underwriting
discount, are estimated at
$          and
are payable by us.
Over-allotment Option
We have granted options to the U.S. underwriters to purchase
 up to
          additional
 shares at the public offering price less the underwriting
discount. The U.S. underwriters may exercise these options
for 30 days from the date of this prospectus solely to cover
 any over-allotments. If the U.S. underwriters exercise
these options, each will be obligated, subject to conditions
contained in the purchase agreements, to purchase a number of
additional shares proportionate to that
U.S. underwriter's initial amount reflected in the
above table.
We have also granted options to the international managers,
exercisable for 30 days from the date of this prospectus, to
 purchase up to          additional
shares to cover any
over-allotments on terms similar to those granted to the
U.S. underwriters.
Intersyndicate Agreement
The U.S. underwriters and the international managers have
entered into an intersyndicate agreement that provides for the
coordination of their activities. Under the intersyndicate
agreement, the U.S. underwriters and the international
managers may sell shares to each other for purposes of resale at
the initial public offering price, less an amount not greater
than the selling concession. Under the intersyndicate agreement,
the U.S. underwriters and any dealer to whom they sell
shares will not offer to sell or sell shares to persons who are
non-U.S. or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S. or non-Canadian
 persons, except in the case of transactions under the
intersyndicate agreement. Similarly, the international managers
and any dealer to whom they sell will not offer to sell or sell
shares to U.S. persons or Canadian persons or to persons
they believe intend to resell to U.S. or Canadian persons,
except in the case of transactions under the intersyndicate
agreement.
Reserved Shares
At our request, the underwriters have reserved for sale, at the
initial public offering price, up to
          shares
 offered by this prospectus for sale to some of our directors,
officers, employees, distributors, dealers, business associates
and related persons. If these persons purchase reserved shares,
this will reduce the number of shares available for sale to the
general public. Any reserved shares that are not orally confirmed
 for purchase within one day of the pricing of this offering will
 be offered by the underwriters to the general public on the same
 terms as the other shares offered by this prospectus.
We are concurrently offering
          shares
 at the initial public offering price directly to some of our
employees pursuant to this prospectus in jurisdictions outside
the U.S. where the underwriters are prohibited by law from
selling the shares. These shares are included in the
          shares
 being sold pursuant to this prospectus. Since these shares are
being sold directly by us and not through the underwriters, no
underwriting discount or commission will be paid to the
underwriters for these shares.
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No Sales of Similar Securities
We and our executive officers and directors and all existing
stockholders have agreed, with exceptions, not to sell or
transfer any common stock for 180 days after the date of this
prospectus without first obtaining the written consent of Merrill
 Lynch. Specifically, we and these other individuals have agreed
not to directly or indirectly
•
offer, pledge, sell or contract to sell any common stock,
•
sell any option or contract to purchase any common stock,
•
purchase any option or contract to sell any common stock,
•
grant any option, right or warrant for the sale of any common
	stock,
•
lend or otherwise dispose of or transfer any common stock,
•
request or demand that we file a registration statement related
	to the common stock, or
•
enter into any swap or other agreement that transfers, in whole
	or in part, the economic consequence of ownership of any common
	stock whether any such swap or transaction is to be selected by
	delivery of shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable
with common stock. It also applies to common stock owned now or
acquired later by the person executing the agreement or for which
 the person executing the agreement later acquires the power of
disposition.
Quotation on the Nasdaq National Market
We expect the shares to be approved for quotation on the Nasdaq
National Market, subject to notice of issuance, under the symbol
"STRB."
Before this offering, there has been no public market for our
common stock. The initial public offering price will be
determined through negotiations among us and the
U.S. representatives and the lead manager. In addition to
prevailing market conditions, the factors to be considered in
determining the initial public offering price are
•
the valuation multiples of publicly traded companies that the
	U.S.  representatives and the lead manager believe to be
	comparable to us,
•
our financial information,
•
the history of, and the prospects for, our company and the
	industry in which we compete,
•
an assessment of our management, its past and present operations,
	 and the prospects for, and timing of, our future revenues,
•
the present state of our development, and
•
the above factors in relation to market values and various
	valuation measures of other companies engaged in activities
	similar to ours.
An active trading market for the shares may not develop. It is
also possible that after the offering the shares will not trade
in the public market at or above the initial public offering
price.
The underwriters do not expect to sell more than 5% of the shares
 in the aggregate to accounts over which they exercise
discretionary authority.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may
limit underwriters and selling group members from bidding for and
 purchasing our common stock. However, the
U.S. representatives of the
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underwriters may engage in transactions that stabilize the price
of the common stock, such as bids or purchases to peg, fix or
maintain that price.
If the underwriters create a short position in the common stock
in connection with the offering, i.e., if they sell more shares
than are listed on the cover of this prospectus, the
U.S. representatives may reduce that short position by
purchasing shares in the open market. The
U.S. representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option
described above. Purchases of the common stock to stabilize its
price or to reduce a short position may cause the price of the
common stock to be higher than it might be in the absence of such
 purchases.
The U.S. representatives may also impose a penalty bid on
underwriters and selling group members. This means that if the
U.S. representatives purchase shares in the open market to
reduce the underwriter's short position or to stabilize the
price of such shares, they may reclaim the amount of the selling
concession from the underwriters and selling group members who
sold those shares. The imposition of a penalty bid may also
affect the price of the shares in that it discourages resales of
those shares.
Neither we nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that
 the transactions described above may have on the price of the
common stock. In addition, neither we nor any of the underwriters
 makes any representation that the U.S. representatives or
the lead manager will engage in these transactions or that these
transactions, once commenced, will not be discontinued without
notice.
Other Relationships
Some of the underwriters and their affiliates have engaged in,
and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us.
They received customary fees and commissions for these
transactions.
Furman Selz Investors II L.P., FS Employees Investors L.L.C., FS
Parallel Fund L.P., ING Furman Selz Investors III L.P., ING
Barings U.S. Leveraged Equity Plan L.L.C. and ING Barings
Global Leveraged Plan Ltd., each of which is an affiliate of ING
Barings LLC, are stockholders of StarBand.
73
Table of Contents
LEGAL MATTERS
The validity of the shares of our common stock under Delaware law
 will be passed upon for us by Clifford Chance Rogers &
Wells LLP. Certain legal matters in connection with this offering
 will be passed upon for the underwriters by Davis
Polk & Wardwell.
EXPERTS
The financial statements of StarBand Communications Inc. at
August 31, 2000, and for the period from January 11,
2000 (inception) through August 31, 2000 appearing in
this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in
 their report thereon appearing elsewhere herein, and are
included in reliance upon such report given on the authority of
such firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a Form S-1 registration statement with the
Securities and Exchange Commission. This prospectus, which is a
part of the registration statement, does not contain all of the
information included in the registration statement. You should
refer to our registration statement and its exhibits if you would
 like to find out more about us and about the common stock. If a
contract or document has been filed as an exhibit to the
registration statement, we refer you to the copy of the contract
or other document that has been filed. Each statement in this
prospectus relating to a contract or document filed as an exhibit
 is qualified in all respects by the filed exhibit.
Upon completion of this offering, we will be subject to the
periodic reporting and other information-supplying requirements
of the Securities Exchange Act of 1934. In accordance with those
requirements, we will file reports, including annual reports on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and other information with the
Commission. You may inspect copies of the registration statement,
 its accompanying exhibits, and any other document that we file
with the Commission, without charge. You also may copy or obtain
any of these documents at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
 regional offices of the Commission located at Seven World Trade
Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may
 obtain information on the operation of the Commission Public
Reference Room by calling the Commission at 1-800-SEC-0330. Our
filings with the Commission, including this prospectus, are or
will be available to the public at the Commission's web site
 at www.sec.gov.
We will furnish our stockholders with annual reports. These
reports will include a review of operations and annual audited
financial statements prepared in conformity with accounting
principals generally accepted in the United States. We also will
furnish our stockholders with unaudited financial information
prepared in conformity with accounting principles generally
accepted in the United States for each quarter of each fiscal
year as soon as practicable following the end of each quarter.
74
Table of Contents
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Auditors
F-2
Balance Sheet at August 31, 2000
F-3
Statement of Operations for the period from January 11, 2000
	 (inception) through August 31, 2000
F-4
Statement of Mandatorily Redeemable Convertible Preferred Stock
	and Stockholders' Deficit for the period from January 
	11, 2000 (inception) through August 31, 2000
F-5
Statement of Cash Flows for the period from January 11, 2000
	 (inception) through August 31, 2000
F-6
Notes to Financial Statements
F-7
F-1
Table of Contents
REPORT OF INDEPENDENT AUDITORS
Board of Directors
StarBand Communications Inc.
We have audited the accompanying balance sheet of StarBand
Communications Inc. (the "Company"), a development
stage enterprise, as of August 31, 2000 and the related
statements of operations, mandatorily redeemable convertible
preferred stock and stockholders' deficit, and cash flows
for the period from January 11, 2000
(inception) through August 31, 2000. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
 about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of StarBand Communications Inc., a development stage enterprise,
at August 31, 2000 and the results of its operations and its
 cash flows for the period from January 11, 2000 (inception)
 through August 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
McLean, Virginia
October 5, 2000
F-2
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
BALANCE SHEET
Pro Forma
August 31, 2000
August 31, 2000
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
68,302,815
$
68,302,815
Accounts receivable, net of allowance for doubtful accounts of
	$82,385
1,285,298
1,285,298
Employee advances
31,556
31,556
Inventory
10,327,075
10,327,075
Deferred customer acquisition costs
1,557,680
1,557,680
Prepaid expenses and other
420,105
420,105
Total current assets
81,924,529
81,924,529
Restricted cash and cash equivalents
90,559,295
90,559,295
Property and equipment, net of accumulated depreciation
13,661,359
13,661,359
Other assets, net of accumulated amortization
10,366,647
10,366,647
Total assets
$
196,511,830
$
196,511,830
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
	STOCK, AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable
$
3,273,282
$
3,273,282
Accrued expenses and other liabilities
6,631,205
6,631,205
Deferred revenue
1,671,916
1,671,916
Due to Gilat Satellite Networks, Ltd. and Spacenet, Inc.
36,335,390
36,335,390
Due to Microsoft Corporation
1,250,000
1,250,000
Due to EchoStar
50,000
50,000
Due to Employees
110,934
110,934
Total current liabilities
49,322,727
49,322,727
Term loan, net of unamortized discount
81,088,650
81,088,650
Total liabilities
130,411,377
130,411,377
Commitments and contingencies
Mandatorily redeemable convertible preferred stock:
Series A, A-1, A-2, B, C, and D mandatorily redeemable
	convertible preferred stock, $.05 par value; 12% cumulative
	dividends:
Series A; 55 million shares authorized; 49,228,259 actual
	and 0 pro forma shares issued and outstanding, plus accrued
	dividends
51,494,108
—
Series A-1; 55 million shares authorized; 49,228,259
	actual and 0 pro forma shares issued and outstanding, plus
	accrued dividends
51,526,477
—
Series A-2; 30 million shares authorized; 24,686,284
	actual and 0 pro forma shares issued and outstanding, plus
	accrued dividends
25,838,761
—
Series B; 150 million shares authorized; 140,111,199
	actual and 0 pro forma shares issued and outstanding, plus
	accrued dividends
14,011,120
—
Series C and D; 10 million shares authorized each; 0
	shares issued and outstanding
—
—
Total mandatorily redeemable convertible preferred stock
142,870,466
—
Stockholders' (deficit) equity:
Common stock; $.05 par value; 110 million shares authorized;
	 33,879,757 actual and 88,108,650 pro forma shares issued and
	outstanding
1,693,988
4,405,433
Additional capital
17,462,758
157,621,779
Deferred compensation
(7,951,674
)
(7,951,674
)
Deficit accumulated during development stage
(87,975,085
)
(87,975,085
)
Total stockholders' (deficit) equity
(76,770,013
)
66,100,453
Total liabilities, mandatorily redeemable convertible preferred
	stock and stockholders' (deficit) equity
$
196,511,830
$
196,511,830
See accompanying notes.
F-3
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
Period from
January 11, 2000
(inception) through
August 31, 2000
Revenues:
Internet access
$
3,264
Customer premises equipment and installation
3,681
Total revenues
6,945
Costs and expenses:
Network
4,149,048
Customer premises equipment and installation
22,707,245
Sales and marketing
14,822,427
General and administrative (exclusive of non-cash compensation
	shown below)
25,862,221
Non-cash compensation
300,601
Depreciation
741,962
Total costs and expenses
68,583,504
Loss from operations
(68,576,559
)
Non-operating (expense) income:
Interest expense
(1,564,740
)
Interest income
3,292,882
Non-operating income, net
1,728,142
Loss before provision for income taxes
(66,848,417
)
Provision for income taxes
—
Net loss
(66,848,417
)
Preferred stock dividends and accretion
(15,245,439
)
Net loss attributable to common stockholders
$
(82,093,856
)
Basic and diluted loss per share
$
(4.06
)
Shares used in the calculation of basic and diluted loss per
	share
20,232,428
Unaudited pro forma net loss attributable to common stockholders
$
(66,848,417
)
Unaudited pro forma basic and diluted loss per share
$
(1.23
)
Shares used in the calculation of unaudited pro forma basic and
	diluted loss per share
54,456,199
See accompanying notes.
F-4
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
STATEMENT OF MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Deficit
Common Stock
Accumulated
During
Total
Additional
Deferred
Development
Stockholders'
Shares
Par Value
Capital
Compensation
Stage
Deficit
Issuance of Common Stock to founders on January 11, 2000
	(inception)
10
$
1
$
9
$
—
$
—
$
10
Issuance of Common Stock to Spacenet, Inc. on April 1, 2000
9,999,989
499,999
(499,999
)
—
—
—
Issuance of 140,111,199 shares of mandatorily redeemable
	convertible Preferred Stock to Spacenet, Inc. on
	April 1, 2000, including accrued dividends of $7,005,560
—
—
(1,124,331
)
—
(5,881,229
)
(7,005,560
)
Issuance of Common Stock at $0.12 per share to EchoStar
	Communications Corporation on April 11, 2000
6,450,022
322,501
449,240
—
—
771,741
Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to EchoStar
	Communications Corporation on April 11, 2000, including
	accrued dividends of $2,298,218
—
—
—
—
—
—
Issuance of Common Stock at $0.12 per share to ING Furman Selz
	Investments on April 11, 2000
2,621,960
131,098
182,618
—
—
313,716
Issuance of 24,686,284 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to ING Furman Selz
	 Investments on April 11, 2000, including accrued dividends
	of $1,152,477
—
—
—
—
—
—
Issuance of Common Stock at $0.12 per share to Microsoft
	G-Holdings, Inc. on April 11, 2000
6,450,022
322,501
449,240
—
—
771,741
Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to Microsoft
	G-Holdings, Inc. on April 13, 2000, including accrued
	dividends of $2,265,849
—
—
—
—
—
—
Issuance of Common Stock at $0.12 per share to other investors on
	 May  3, 2000
8,357,754
417,888
582,112
—
—
1,000,000
Equity issuance costs
—
—
(38,889
)
—
—
(38,889
)
Issuance of common stock options to employees and non-employee
	consultants
—
—
7,580,115
(7,580,115
)
—
—
Issuance of warrants to non-employee consultants
—
—
672,160
(672,160
)
—
—
Amortization of deferred compensation
—
—
—
300,601
—
300,601
Issuance of warrants in connection with the term loan
—
—
9,210,483
—
—
9,210,483
Net loss for the period from January 11, 2000 (inception) to
	 August 31, 2000
—
—
—
—
(66,848,417
)
(66,848,417
)
Preferred stock dividends and accretion
—
—
—
—
(15,245,439
)
(15,245,439
)
Balance at August 31, 2000
33,879,757
$
1,693,988
$
17,462,758
$
(7,951,674
)
$
(87,975,085
)
$
(76,770,013
)
[Additional columns below]
[Continued from above table, first column(s) repeated]
Mandatorily
Redeemable
Convertible
Preferred
Stock
Issuance of Common Stock to founders on January 11, 2000
	(inception)
$
—
Issuance of Common Stock to Spacenet, Inc. on April 1, 2000
—
Issuance of 140,111,199 shares of mandatorily redeemable
	convertible Preferred Stock to Spacenet, Inc. on
	April 1, 2000, including accrued dividends of $7,005,560
14,011,120
Issuance of Common Stock at $0.12 per share to EchoStar
	Communications Corporation on April 11, 2000
—
Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to EchoStar
	Communications Corporation on April 11, 2000, including
	accrued dividends of $2,298,218
51,526,477
Issuance of Common Stock at $0.12 per share to ING Furman Selz
	Investments on April 11, 2000
—
Issuance of 24,686,284 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to ING Furman Selz
	 Investments on April 11, 2000, including accrued dividends
	of $1,152,477
25,838,761
Issuance of Common Stock at $0.12 per share to Microsoft
	G-Holdings, Inc. on April 11, 2000
—
Issuance of 49,228,259 shares of mandatorily redeemable
	convertible Preferred Stock at $1.00 per share to Microsoft
	G-Holdings, Inc. on April 13, 2000, including accrued
	dividends of $2,265,849
51,494,108
Issuance of Common Stock at $0.12 per share to other investors on
	 May  3, 2000
—
Equity issuance costs
—
Issuance of common stock options to employees and non-employee
	consultants
—
Issuance of warrants to non-employee consultants
—
Amortization of deferred compensation
—
Issuance of warrants in connection with the term loan
—
Net loss for the period from January 11, 2000 (inception) to
	 August 31, 2000
—
Preferred stock dividends and accretion
—
Balance at August 31, 2000
$
142,870,466
See accompanying notes.
F-5
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
Period from
January 11, 2000
(inception) through
August 31, 2000
Operating activities:
Net loss
$
(66,848,417
)
Adjustments to reconcile net loss to net cash used in operating
	activities:
Amortization of deferred compensation
300,601
Depreciation
741,962
Provision for bad debts
82,385
Interest earned on restricted cash and cash equivalents
(959,295
)
Amortization of debt discount and issuance costs
374,413
Changes in operating assets and liabilities:
Accounts receivable
(1,367,683
)
Employee advances
(31,556
)
Inventory
(10,327,075
)
Deferred customer acquisition costs
(1,557,680
)
Prepaid expenses and other
(420,105
)
Accounts payable
2,696,449
Accrued expenses and other liabilities
6,631,205
Deferred revenue
1,671,916
Due to Gilat Satellite Networks, Ltd. and Spacenet, Inc.
20,695,971
Due to EchoStar
50,000
Due to Employees
110,934
Net cash used in operating activities
(48,155,975
)
Investing activities:
Increase in restricted cash and cash equivalents
(89,600,000
)
Purchases of property and equipment
(9,541,220
)
Net cash used in investing activities
(99,141,220
)
Financing activities:
Proceeds from issuance of Common Stock
2,857,208
Proceeds from issuance of Preferred Stock
123,142,802
Proceeds from issuance of term loan, net of debt issuance costs
	totaling $400,000
89,600,000
Net cash provided by financing activities
215,600,010
Net increase in cash
68,302,815
Cash at beginning of period
—
Cash at end of period
$
68,302,815
See accompanying notes.
F-6
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
1.  Organization and Business Activities
Principal Business
StarBand Communications Inc. (the "Company" or
"StarBand"), formerly known as Gilat-to-Home, Inc.,
provides two-way, always-on, high-speed Internet access to
residential and small office/ home office customers available
virtually everywhere in North America via satellite. The StarBand
 network provides high-capacity, high-speed transmission of data,
 audio, and video. The Company offers stand-alone Internet access
 as well as a bundled product with a direct broadcast satellite
("DBS") subscription television service. The Company is
 in the development stage and has not commenced full operations
at August 31, 2000. The Company believes that it operates in
 one operating segment.
Organization and Formation
The Company, a Delaware corporation located in McLean, Virginia,
was founded on January 11, 2000 by Spacenet, Inc.
("Spacenet"), a wholly owned subsidiary of Gilat
Satellite Networks ("Gilat"). On February 15,
2000, Microsoft Corporation ("Microsoft"), through its
wholly owned subsidiary Microsoft G-Holdings, Inc., entered into
certain investment and operating agreements with the Company. On
March 30, 2000, EchoStar Communications Corporation
("EchoStar") entered into certain investment and
operating agreements with the Company and ING Furman Selz
Investments ("ING") entered into an investment
agreement with the Company. Contemporaneously with the investment
 agreements, the Company entered into certain supply and
operating agreements with Gilat, Spacenet, Microsoft, and
EchoStar that provide the Company with access to consumer brand
names, proprietary technology, retail distribution and supply
channels, as more fully described in Note 3.
The network and related technology utilized by the Company to
provide Internet access service was developed by Gilat, a
provider of satellite-based networks. On April 1, 2000,
Gilat, through Spacenet, contributed to the Company the exclusive
 North American rights for its high-speed satellite Internet
service for an initial term of five years, for use in the
residential and small office/ home office market segments, as
well as management, employees and technological expertise,
including the operation of corporate satellite networks, in
exchange for mandatorily redeemable convertible Series B
convertible preferred stock and Common Stock. Pursuant to Staff
Accounting Bulletin No. 48,
Valuation of Assets Acquired
From Promoters and Stockholders,
the Company recorded this
transfer at Gilat's historical cost basis of $0.
The Company provides transmission-only Internet services and
second-level help desk services to Microsoft. Microsoft markets
an MSN-branded high speed access service through direct customer
solicitation, a RadioShack retail distribution network alliance,
and other retail organizations. The Company's satellite
based service enables Microsoft to deliver multimedia content and
 e-commerce services to its subscribers. Microsoft invested
$50 million on April 13, 2000 in exchange for
mandatorily redeemable convertible Series A Preferred Stock
and the Company's Common Stock, par value $0.05 (the
"Common Stock").
The Company offers its service on both a stand alone basis and
bundled with DISH Network's DBS service. EchoStar is also an
 international supplier of digital satellite receivers and a
provider of other satellite services. EchoStar invested
$50 million on April 11, 2000 in exchange for
mandatorily redeemable convertible Series A-1 Preferred
Stock and Common Stock.
ING invested $25 million on April 11, 2000 in exchange
for mandatorily redeemable convertible Series A-2 Preferred
Stock and Common Stock. In addition, certain other parties
affiliated with Gilat invested $1 million on May 3,
2000 in exchange for Common Stock.
F-7
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Significant Risk and Uncertainties
The Company is in the development stage during which time it has
generated negative cash flows from operations and a net loss. The
 Company expects negative cash flows from operations and net
losses to continue as it builds its subscriber base. The ability
to generate positive cash flow from operations in the future is
dependent upon many factors, including general economic
conditions, the level of market acceptance for the Company's
 services, and the degree of competition encountered by the
Company. Additional funding may be required to develop
operations; however, there can be no assurance when or if future
operations of the Company will be successful or that further
financing will be available with terms acceptable to the Company,
 or at all.
2.  Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
 the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be
cash equivalents except for restricted cash and cash equivalents,
Inventory
Inventory primarily consists of uninstalled customer premises
equipment ("CPE"), including personal computers,
satellite modem cards, and dish antenna units and is stated at
the lower of cost or market value. Substantially all of the
Company's inventory represents finished goods. Cost is
determined using the moving weighted-average cost method.
Restricted Cash and Cash Equivalents
A lending institution holds restricted cash and cash equivalents
in connection with the $90 million term loan, as more fully
described in Note 7. The funds are available to the Company
pursuant to specific approval by the lenders' agent after
the Company has exhausted all equity funds raised.
Property and Equipment
Property and equipment includes computers and electronic
equipment, office furniture and equipment, and leasehold
improvements and are stated at historical cost. The costs of
additions and leasehold improvements are capitalized, while
maintenance and repairs are expensed as incurred. Property and
equipment are depreciated using the straight-line method over
estimated useful lives of three to seven years. Leasehold
improvements are amortized over the shorter of the lease term or
the estimated useful life of the asset.
Internal Use Software
The Company follows the provisions of Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use
("SOP 98-1") that
requires the capitalization and amortization of certain costs
incurred in connection with developing or obtaining internal use
software.
F-8
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
The Company capitalized approximately $4.1 million related
to internal use software that is being amortized over three
years. Accumulated amortization was approximately
$0.4 million at August 31, 2000.
Impairment of Long Lived Assets
The Company assesses the impairment of long-lived assets,
including intangible assets, in accordance with Statement of
Financial Accounting Standards No. 121,
Accounting for
the Impairment of Long Lived Assets and for Long Lived Assets to
be Disposed of
("SFAS No. 121"). SFAS
No. 121 requires impairment losses to be recognized for
long-lived assets when indicators of impairment are present and
the undiscounted cash flows are not sufficient to recover the
assets' carrying amounts. Intangibles are also evaluated for
 recoverability by estimating the projected undiscounted cash
flows, excluding interest, of the related business activities.
The impairment loss of these assets is measured by comparing the
carrying amount of the asset to its fair value less disposal
costs with any excess of carrying value over fair value written
off. Fair value is based on market prices where available, an
estimate of market value, or various valuation techniques
including discounted cash flow.
Financial Instruments
The carrying value of the Company's financial instruments
including cash and cash equivalents, accounts receivable,
restricted cash and cash equivalents, accounts payable, accrued
expenses and other liabilities, and term loan approximate fair
value. Management estimates that the carrying value of the
Company's Series A, Series A-1, Series A-2,
and Series B mandatorily redeemable convertible Preferred
Stock approximates fair value at August 31, 2000.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and restricted cash and cash equivalents. The Company
 deposits its cash and cash equivalents and restricted cash and
cash equivalents with high credit quality financial institutions.
Revenue and Expense Recognition
The Company's revenues are derived from fees from customers
for Internet access and the related sale and installation of CPE
necessary to provide such access. These services are primarily
distributed through joint marketing agreements with Microsoft
through its MSN Internet portal and independent retail
distribution network, EchoStar through its direct broadcast
satellite and independent dealer networks, and, to a lesser
extent, through internally generated customers. Substantially all
 customers execute subscription agreements with either the
Company or Microsoft specifying the term of the agreement, fees
payable, if any, for monthly Internet access, CPE necessary to
receive the Internet access service, and installation services.
Revenue derived from services offered to subscribers through the
MSN network are billed to and collected from Microsoft. The
Company does not have direct billing responsibilities or
collection risk for each subscriber serviced through the MSN
network. The Company does have billing responsibilities and
collection risk related to each subscriber executing a
subscription agreement through the EchoStar network or internally
 generated customer.
The Company considers the sale and installation of CPE and the
Internet access to be a multi-element, single arrangement with
the subscriber. Total revenue from the arrangement is recognized
as earned on a straight-line basis over the service period that
is defined as the lesser of the contractual term of the
subscription agreement or expected life of the subscriber. The
Company normally commences the recognition of revenue upon
activation of the Internet access. Accordingly, revenue and costs
 of CPE sold
F-9
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
are deferred until customer service agreements are entered into
and the CPE is installed and access is provided and is then
recognized over the service period as defined above. Certain
service agreements include clauses whereby the subscriber has the
 right to cancel the service without substantial penalty during
the initial service period. Revenue attributable to service
agreements containing cancellation clauses is deferred and
recognized on a straight-line basis over the service period
remaining subsequent to risk free cancellation period.
The costs of the CPE and installation are generally capitalized
and recognized as cost of sales on a straight-line basis over the
 service period. However, through August 31, 2000, such
costs have been expensed to the extent they exceed deferred
access revenue because realization of future cash flows in
amounts sufficient to ensure recoverability of such costs is not
assured. During the development stage, the Company ran a pilot
program in which a significant number of subscribers received CPE
 at no charge.
Other subscriber acquisition costs, which consist principally of
commissions payable to the Company's distribution channels,
are expensed as incurred.
Sources of Supplies
The Company currently leases transponder space from two
third-party suppliers. These contracts generally provide the
Company with non-preemptible transponder service; however, they
may not provide for alternative service in the event of an
anomaly or failure. Management believes alternative satellite
capacity can be found if such events occur. The Company also
relies on Gilat and Spacenet for a majority of the technology
necessary to operate the network, including certain CPE as well
as research and development activities, as more fully described
in Note 3. Any disruption of these services could have a
material adverse effect on the Company's operating results.
Significant Customers and Suppliers
Substantially all inventory was purchased from its three largest
suppliers, including Gilat, during the period from
January 11, 2000 (inception) through August 31,
2000.
Advertising Costs
All advertising and promotion costs are expensed as incurred. The
 Company considers all direct mail, telephone, print, video,
audio, and similar costs associated with solicitation of new
subscribers and brand awareness as advertising costs. The Company
 expensed approximately $14.8 million as advertising and
promotion costs during the period from January 11, 2000
(inception) through August 31, 2000.
Research and Development Costs
Research and development costs are expensed as incurred. Research
 and development costs were approximately $1.7 million
during the period from January 11, 2000
(inception) through August 31, 2000.
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123 allows companies to
account for stock-based compensation under the provisions of SFAS
 No. 123 or under the provisions of Accounting Principles
Board Opinion No. 25 ("APB No. 25"), but
requires pro forma disclosures in the footnotes to the financial
statements as if the measurement provisions of SFAS No. 123
had been adopted. The Company accounts for its stock-based
compensation in accordance with APB No. 25.
F-10
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Basic and Diluted Loss per Share
Basic and diluted loss per share is calculated by dividing the
net loss attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the
period. Convertible preferred stock, stock options, warrants, and
 other potentially dilutive securities have been excluded from
the calculation of diluted loss per share for all periods the
Company reports a net loss since their effect is anti-dilutive.
The weighted average number of shares of common stock used in the
 calculation of pro forma basic and diluted loss per share
assumes the mandatorily redeemable convertible preferred stock
plus accrued dividends were converted to common stock on the
actual issuance date of the related preferred stock. Mandatorily
redeemable Series C and D Preferred Stock are not included
in the pro forma basic and diluted weighted average number of
shares because its issuance and conversion to common stock is not
 dependent upon an initial public offering.
Statement of Cash Flows
Non-cash investing and financing activities and supplemental cash
 flow information includes the acquisition of property and
equipment financed by accounts payable and due to Gilat of
approximately $4.9 million and the issuance of mandatorily
redeemable convertible Series B Preferred Stock and Common
Stock to Spacenet in exchange for intellectual property rights
and non-compete agreements, as more fully described in Note 3.
The Company also issued warrants in connection with the term
loan, as more fully described in Notes 7 and 9. In addition,
 the Company recognized 12% cumulative dividends and accretion
attributable to its convertible Series A, A-1, A-2, and B
Preferred Stock.
Recent Pronouncements
In December 1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No. 101,
Revenue
Recognition in Financial Statements
("SAB
No. 101"). SAB No. 101 is effective in the fiscal
quarter commencing October 1, 2000 and provides
clarification with regard to existing authoritative guidance with
 regard to the manner and timing under which revenue is
recognized. The Company elected to adopt the guidance provided by
 SAB No. 101 effective with its commencement of operations.
Future interpretations of SAB No. 101 will be evaluated upon
 issuance and are not expected to have a material effect on
future operations.
On March 16, 2000, the Emerging Issues Task Force issued
EITF 99-19,
Recording Revenue Gross as a Principal versus
 Net as an Agent
. The EITF discusses various indicators that
a company would use in determining whether to record revenue on a
 gross versus net basis. The Company considered these indicators
in developing its revenue recognition policies.
SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" requires companies to record
derivatives on the balance sheet as assets or liabilities,
measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives are accounted for
depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. SFAS
No. 133 is effective for fiscal years beginning after
June 15, 2000. The Company believes the adoption of SFAS
No. 133 will not have a material effect on the financial
statements.
F-11
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
3.  Related Party Transactions
Broadband Access Services Supply Agreement
The Company entered into a Broadband Access Services Supply
Agreement ("Supply Agreement") with Gilat, Spacenet,
and Microsoft on February 15, 2000 whereby the Company will
provide broadband access via satellite to and from the Microsoft
MSN Portal and the Internet for use by Microsoft customers in
North America with a term of four years. The agreement renews
automatically for additional one-year terms unless terminated by
either the Company or MSN. The agreement requires the Company to
achieve five milestones during the initial term relating
primarily to the Company fulfilling production levels for
StarBand modems, achieving minimum levels of MSN subscribers and
other technical matters set forth in the agreement. MSN's
commitment to the agreement is contingent upon the Company
meeting these milestones. To date, the Company has not completed
any of the milestones set forth in this agreement. Upon
completion of the milestones, MSN will purchase StarBand
modem-based systems in predetermined quantities and at
predetermined prices for use as part of a high-speed Internet
access offering by MSN. The Company will supply MSN with StarBand
 modems in accordance with a specified production schedule. MSN
will provide a subsidy for a portion of the cost of the customer
premises equipment for MSN subscribers. Pursuant to this
agreement, the Company agreed to pay MSN a one time fee of
$1.25 million to offset a portion of MSN's subscriber
acquisition costs. Such amount was accrued at August 31,
2000 and will reduce revenues as MSN provides the CPE subsidies.
The agreement also sets the monthly per subscriber fee the
Company will collect from MSN, and the minimum monthly fees that
MSN will collect from its subscribers. The Company also granted
MSN most favored customer status and agreed, for a limited time,
to refrain from providing its service to a number of Internet
service providers.
In March 2000, Gilat entered into a performance guarantee
agreement pursuant to which Gilat unconditionally and irrevocably
 guaranteed to MSN the Company's compliance with various
material obligations under the Supply Agreement and related
operative agreements.
The parties have also agreed to certain non-compete arrangements
for specific periods of time limiting the counter-parties ability
 to enter into similar arrangements with each other competitors.
Microsoft will also provide marketing to its current customers
with no reimbursements from the Company pursuant to the Supply
Agreement.
The Company made no payments to and received no payments from
Microsoft attributable to the Supply Agreement during the period
from January 11, 2000 (inception) through
August 31, 2000.
Gilat Supply Agreements
The Company entered into a five year supply agreement with Gilat,
 Spacenet, and Microsoft on February 15, 2000 ("Gilat
Supply Agreement"). The Gilat Supply Agreement sets forth
the commercial terms under which the Company offers StarBand
service outside the Company's arrangement with MSN, and the
terms under which Gilat and Spacenet provide the Company with
licenses, intellectual property and satellite capacity on the GE
Americom GE4 satellite for that purpose. In addition, Spacenet
and Gilat have agreed not to offer services that compete with the
 Company's service to residential and small office/home
office customers throughout North America.
Pursuant to this agreement, the Company assumed Spacenet's
monthly payment obligations for the GE4 satellite capacity and
accrued $7.2 million due to Spacenet as reimbursement for a
$7.2 million payment made by Spacenet to reserve the GE4
satellite capacity.
F-12
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
In addition, Gilat and Spacenet are required to provide certain
services, network equipment and hubs, and CPE at fixed prices
through the term of the Gilat Supply Agreement. Gilat is also
required to provide all additional research and development
necessary to create the next generation of CPE units. The terms
of these commitments will be covered by the Master Supply and
Services Agreement discussed below. In addition, Gilat provided
certain performance guarantees to Microsoft and EchoStar. This
agreement terminates upon termination of the Supply Agreement.
Telecommunication Services Agreement
The Company entered into a one-year telecommunications services
agreement with Spacenet dated February 15, 2000, which is
renewable for up to four years at the option of Microsoft. MSN is
 the third-party beneficiary of this agreement. Under this
agreement, Spacenet provides and operates telecommunications
facilities and services, including access to Spacenet's
transmission and switching facilities, which the Company needs to
 fulfill its obligations to MSN. The Company is obligated to
reimburse Spacenet for actual direct costs, including employee
costs, without mark-up or profit pursuant to the Services
Agreement. In exchange for these technologies, and certain other
rights, the Company issued 9,999,989 shares of its common
stock and 140,111,199 shares of its Series B
convertible preferred stock to Spacenet.
The Company incurred approximately $95.0 million of
reimbursable expenses and capital expenditures attributable to
the Gilat Supply Agreements and the Telecommunications Services
Agreement and paid approximately $20.0 million to Gilat and
$38.7 million to Spacenet attributable to operations
pursuant to these Agreements during the period from
January 11, 2000 (inception) through August 31,
2000. The Company has accrued the remaining $36.3 million as
 due to Gilat and Spacenet at August 31, 2000.
Master Supply and Services Agreement
The Company expects to enter into a four-year master supply and
services agreement with Gilat and Spacenet that will replace the
existing Gilat Supply Agreements. This agreement will
automatically renew for two-year periods unless terminated by any
 party. Pricing terms, however, will be renegotiated every two
years. Under this agreement, Gilat and Spacenet will provide the
Company with the equipment, software and services needed in its
business, including: customer premises equipment, network
operations equipment, software necessary for the network to
operate, and the multicast system; and consulting and
administrative services, including information technology,
marketing, financial, and legal services for a transition period
until the Company establishes its own systems and processes. The
Company expects the total cost to be approximately
$2.1 million per calendar quarter, which the Company
believes approximates the fair value for such services.
Gilat will also provide research and development support in
connection with hardware, equipment and software maintenance that
 arises out of this agreement. During the first two years of the
agreement, the Company will pay Gilat $1.0 million per
calendar quarter to assist with basic ongoing research and
development expenses which the Company believes approximates fair
 value for such services. Beginning in 2001, the Company will
share with Gilat product development costs focused exclusively on
 reducing the cost to manufacture the next-generation StarBand
modem.
The Company will purchase most of the equipment and services
necessary for its business exclusively from Gilat and Spacenet,
who have granted the Company an exclusive license to use the
technology required to provide the service to customers in the
United States and Canada. The Company will pay Gilat various
one-time fees in connection with its assistance in the
preparation of our business plan, product plan, and training
program which is expected to be on a cost reimbursement basis.
F-13
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Spacenet granted the Company a sublicense to use its enterprise
resource planning system and the software for the Company to
perform back-office functions. In the future, the Company will
provide Spacenet with equipment and services that Spacenet may
then re-sell to various enterprise and small office/home office
non-residential customers, subject to Spacenet's recognition
 of the Company's exclusive marketing rights and compliance
with the Company's guidelines.
Memorandum of Agreement
The Company, Gilat and EchoStar entered into a memorandum of
agreement on February 22, 2000 setting forth the terms under
 which the Company will jointly market its high-speed Internet
access service with EchoStar's DISH DBS television service.
The agreement with EchoStar expires on March 31, 2001.
EchoStar will market the Company's service directly to their
 customers and through their DISH retailers. In exchange, the
Company agreed to market DISH's satellite television
programming service together with its high-speed Internet access
service. EchoStar has made no commitments and is subject to no
penalties if it ceases to sell the Company's services.
EchoStar and Gilat are also currently conducting research and
development of a product to provide the Company's Internet
service through a TV-centric platform in the future.
Under the terms of this memorandum of agreement, the Company will
 pay EchoStar activation fees and residual commissions for each
StarBand subscriber the Company acquires through the DISH retail
sales channel. The Company will provide all customer premises
equipment and EchoStar will provide the initial point of contact
for service calls. DISH Network Service Corporation, an EchoStar
affiliate, will install the equipment and EchoStar will split any
 associated costs of such installation with the Company. The
Company will pay incentive fees to EchoStar's independent
installers and DISH retailers who sell its equipment. The Company
 will also market EchoStar's DISH direct broadcast satellite
 television services to StarBand subscribers not acquired through
 EchoStar for which EchoStar will pay the Company commissions.
This memorandum of agreement contains provisions which restrict
the Company and EchoStar from entering into co-marketing
relationships with competitors of each other for a limited time.
The Company shipped approximately $1 million of CPE to
EchoStar pursuant to this memorandum of agreement during the
period from January 11, 2000 (inception) through
August 31, 2000. The Company had a net receivable of
approximately $1 million from EchoStar at August 31,
2000.
4.  Accounts Receivable
The Company's accounts receivable consist of amounts due
from subscribers and its distribution alliance partners
attributable to CPE, installations, and monthly access fees as
follows:
August 31, 2000
Due from EchoStar — CPE
$
1,028,439
Other CPE
154,871
Installation services
59,373
Other
125,000
1,367,683
Allowance for doubtful accounts
(82,385
)
Total
$
1,285,298
F-14
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
The Company provides an allowance for accounts receivable amounts
 deemed uncollectible as determined by management. Activity in
the allowance for doubtful accounts was as follows:
Period from
January 11, 2000
(inception) through
August 31, 2000
Beginning balance
$
—
Charge-offs
—
Provision for bad debts
82,385
Ending balance
$
82,385
5.  Property and Equipment
Property and equipment consist of the following:
August 31, 2000
Computers and electronic equipment
$
1,041,548
Machinery and equipment
5,380,767
Furniture, fixtures, and office equipment
648,072
Software
4,121,740
Leasehold improvements
3,211,194
14,403,321
Less: accumulated depreciation
(741,962
)
Net property and equipment
$
13,661,359
Repairs and maintenance costs were approximately $66,288 during
the period from January 11, 2000 (inception) to
August 31, 2000.
6.  Other Assets
Other assets include a lease reservation fee of
$7.2 million, CPE subsidies advanced to Microsoft of
$1.25 million, and debt issuance costs aggregating
$1,991,934 less accumulated amortization of $75,287 at
August 31, 2000. Lease reservation fees for satellite
transponder capacity are amortized on a straight-line basis over
the shorter of the life of the lease or upon forfeiture of
transponder space. The CPE subsidies advanced to Microsoft will
be amortized on a dollar for dollar basis as the subsidies are
paid to the Company from Microsoft for such equipment. The debt
issuance costs are amortized over the period of the term loan as
an additional component of interest expense using the effective
interest method.
7.  Term Loan
The Company entered into a senior debt facility on June 26,
2000 with Bank Leumi USA, as agent and lender, under which Bank
Leumi USA made a term loan to us in principal amount of
$90 million. The senior debt facility was amended on
September 8, 2000, when the First International Bank of
Israel and the Israel Discount Bank Ltd. joined the agreement as
additional lenders and provided loans of $30 million each,
bringing the total amount of financing to $150 million. All
outstanding amounts are currently held in interest-bearing
accounts. All proceeds raised in the Company's equity
placements with Microsoft, EchoStar, ING Furman Selz Investments
and the other investors must be expanded to fund our business
operations prior to the proceeds from the senior debt facility
being available to the Company to
F-15
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
fund operations or capital expenditures. The initial minimum draw
 of term loan proceeds is $5 million and $1 million
increments in excess thereof. The Company has also entered into
ancillary security agreements with the lenders to provide them
with collateral for the loan. Under the security agreements, the
Company has granted to Bank Leumi USA, as agent for the lenders,
a security interest in substantially all of its assets, except
for its contractual rights to receive capacity and other services
 under its transponder lease agreements. The term loan will
become due and payable on June 26, 2003, with interest
payable quarterly in arrears. As of August 31, 2000, the
entire loan amount of $90 million was bearing interest at
LIBOR plus 0.75% (7.5625% at August 31, 2000). The interest
rate will rise to LIBOR plus 1.5% after June 26, 2002.
Subject to certain conditions, the Company is permitted to
convert the LIBOR loan to a base rate loan, which would bear
interest at the higher of the prime rate and the Federal Funds
Rate plus 0.5% (10.0% at August 31, 2000). The Company may
prepay the term loan, in whole or in part, without premium or
penalty after June 26, 2001. In the event the Company
receives an aggregate amount of proceeds in excess of
$50 million in a public offering of capital stock or at
least $10 million in insurance proceeds or from the sale of
any asset, the Company is required to prepay the term loan.
In connection with the term loan, the Company also issued each of
 the lenders warrants to purchase its Series C convertible
preferred stock and a right to acquire Series D convertible
preferred stock in exchange for $10 million of the principal
 amount of the loan. This right to acquire Series D
preferred stock expired on September 9, 2000. If the
Series C convertible preferred shares were converted into
common stock prior to June 26, 2002, the lenders would own
in the aggregate approximately 2% of the Company's fully
diluted common stock. If the Series C convertible preferred
shares were converted into common stock after August 7,
2002, the lenders would own in the aggregate approximately 2.25%
of the Company's fully diluted common stock. The
Series C convertible preferred stock warrants were estimated
 to have a fair value of $9.2 million and was recorded as an
 original issuance debt discount and is being amortized over the
period of the term loan as a component of interest expense. As of
 August 31, 2000, if the Series C convertible preferred
 stock was converted into common stock, the lenders would own, in
 the aggregate, approximately 1,873,477 shares.
As a condition of the term loan, the Company is required to
provide financial reports and other information to the lenders
and maintain insurance, and is not permitted to incur additional
bank loans and certain other types of indebtedness. The Company
is also not permitted to exceed stated limits on aggregate
capital expenditures without the prior written consent of the
lenders.
Events of default include non-payment, breach of obligation,
misrepresentation, invalidity or illegality of documents,
insolvency or insolvency proceedings, change of control, and
breach or termination of material contracts.
The Company's Series C and D convertible preferred
stock is more fully described in Note 9.
8.  Income Taxes
The Company accounts for taxes under Statement of Financial
Accounting Standards No. 109,
Accounting for Income Taxes
(SFAS No. 109). Under SFAS No. 109, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and
liabilities using enacted rates expected to be in effect during
the year in which the differences reverse.
F-16
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
The difference between amounts computed by applying the statutory
 federal income tax rates to the net loss and total income tax
benefit were as follows:
Period from
January 11, 2000
(inception) through
August 31, 2000
Federal tax benefit at statutory rates
$
(23,396,946
)
State income taxes, net of federal benefit
(2,607,088
)
Change in valuation allowance
26,004,034
$
—
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting and the amounts for income
tax purposes. The significant components of the deferred tax
asset is as follows:
August 31, 2000
Net operating loss carryforwards
$
26,004,034
Less valuation allowance
(26,004,034
)
Net deferred tax assets
$
—
The Company had net operating losses of approximately
$66.8 million at August 31, 2000. The timing and manner
 in which the operating loss carryforward may be utilized by the
Company will be limited to the Company's ability to generate
 future taxable income. Current net operating loss carryforwards
will begin expiring in 2021. As the Company has not generated
earnings and no assurance can be made of future earnings needed
to utilize these net operating losses, a valuation allowance in
the amount of the deferred tax asset has been recorded.
The Company paid no income taxes during the period from
January 11, 2000 (inception) through August 31,
2000.
9.  Preferred Stock
On April 1, 2000, the Company issued 140,111,199 shares of
its mandatorily redeemable convertible Series B Preferred
Stock ("Series B Preferred") to Spacenet in
exchange for certain assets, intellectual property rights and
licenses. Pursuant to Staff Accounting Bulletin No. 48,
Valuation of Assets Acquired From Promoters and Shareholders,
the Company recorded the transfer at Gilat's historical
cost basis of $0. The Series B Preferred is convertible into
 common shares at 5:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering. The Series B Preferred has no voting rights other
than matters subject to shareholder votes that would dilute or
reduce the rights or privileges of the Series B Preferred.
Dividends accrue at 12% per annum on a cumulative basis and are
payable in additional shares of Series B Preferred. In
addition, the holder of the Series B Preferred has
liquidation preferences in the event of a dissolution or similar
termination of the Company equal to $1.00 per share of
Series B Preferred plus any accrued and unpaid dividends.
The Series B Preferred holder has the right to require the
Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is payable in cash, at
$1.00 per share of Series B Preferred plus any accrued and
unpaid dividends and expires upon consummation of an initial
public offering of the Company's common stock with gross
proceeds to the
F-17
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Company of at least $40 million. As of August 31, 2000, the
redemption value of the Series B Preferred was approximately
 $147 million.
On April 13, 2000, the Company sold 49,228,259 shares of its
 mandatorily redeemable convertible Series A Preferred Stock
 ("Series A Preferred") to Microsoft and
affiliates for $1.00 per share. The Series A Preferred is
convertible into common shares at 5:1 at the election of the
holder and automatically converts upon consummation of an initial
 public offering. The Series A Preferred has no voting
rights other than matters subject to shareholder votes that would
 dilute or reduce the rights or privileges of the Series A
Preferred. Dividends accrue at 12% per annum on a cumulative
basis and are payable in additional shares of Series A
Preferred. In addition, holder of the Series A Preferred has
 a liquidation preference in the event of a dissolution or
similar termination of the Company equal to $1.00 per share of
Series A Preferred plus any accrued and unpaid dividends.
The Series A Preferred holder has the right to require the
Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is payable in cash, at
$1.00 per share of Series A Preferred plus any accrued and
unpaid dividends and expires upon consummation of an initial
public offering of the Company's common stock with gross
proceeds to the Company of at least $40 million. In the
event the Series A Preferred holder receives a valuation of
the Company equal to or in excess of $2 billion by a
nationally recognized investment bank, the holder has the right
to require the Company to repurchase 100% of the Series A
Preferred and any common stock held at its fully diluted pro rata
 portion of such valuation. This valuation put expires upon
consummation of an initial public offering of the Company's
common stock with gross proceeds to the Company of at least
$40 million. In the event the Company has not consummated an
 initial public offering of its common stock prior to
February 1, 2003, the Series A Preferred holder has the
 right to require the Company to repurchase 50% of the
Series A Preferred and any common stock held on such date,
35% of the Series A Preferred and Common Stock held 12
months thereafter, and 15% of the Series A Preferred and
common stock held on February 1, 2005 at an independently
appraised fair value of the shares on such date as determined by
a nationally recognized investment bank. In addition, upon breach
 by the Company, Spacenet, or Gilat under the Supply Agreement,
Gilat Supply Agreement, or the Services Agreement, the holder has
 the right to require the Company to repurchase 100% of the
Series A Preferred and any Common Stock held at fair market
value based on the closing market price of such securities or
independent appraisal by a nationally recognized investment bank.
 In August 2000, the Company, Microsoft and Spacenet entered into
 an agreement whereby these redemption obligations were assigned
from the Company to Spacenet and Spacenet accepted such
assignment. As the Articles of Incorporation related to the
Series A Preferred contain redemption obligations if an
Event of Default occurs, the Series A Preferred is
classified with the mandatorily redeemable convertible preferred
stock. The redemption value of the Series A Preferred is
approximately $51.5 million at August 31, 2000.
On April 11, 2000, the Company sold 49,228,259 shares of its
 mandatorily redeemable convertible Series A-1 Preferred
Stock ("Series A-1 Preferred") to EchoStar for
$1.00 per share. The Series A-1 Preferred is convertible
into common shares at 5:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering. The Series A-1 Preferred has no voting rights
other than matters subject to shareholder votes that would dilute
 or reduce the rights or privileges of the Series A-1
Preferred. Dividends accrue at 12% per annum on a cumulative
basis and are payable in additional shares of Series A-1
Preferred. In addition, holder of the Series A-1 Preferred
has a liquidation preference in the event of a dissolution or
similar termination of the Company equal to $1.00 per share of
Series A-1 Preferred plus any accrued and unpaid dividends.
The Series A-1 Preferred holder has the right to require the
 Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is to be settled, in
cash, at $1.00 per share of Series A-1 Preferred plus any
accrued and unpaid dividends and expires upon consummation
F-18
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
of an initial public offering of the Company's common stock
with gross proceeds to the Company of at least $40 million.
The redemption value of the Series A-1 Preferred is
approximately $51.5 million at August 31, 2000.
On April 11, 2000, the Company sold 24,686,284 shares of its
 mandatorily redeemable convertible Series A-2 Preferred
Stock ("Series A-2 Preferred") to ING for $1.00
per share. The Series A-2 Preferred is convertible into
common shares at 6.15:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering. The Series A-2 Preferred has no voting rights
other than matters subject to shareholder votes that would dilute
 or reduce the rights or privileges of the Series A-2
Preferred. Dividends accrue at 12% per annum on a cumulative
basis and are payable in additional shares of Series A-2
Preferred. In addition, holders of the Series A-2 Preferred
have liquidation preferences in the event of a dissolution or
similar termination of the Company equal to $1.00 per share of
Series A-2 Preferred plus any accrued and unpaid dividends.
The Series A-2 Preferred holders have the right to require
the Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is to be settled, in
cash, at $1.00 per share of Series A-2 Preferred plus any
accrued and unpaid dividends and expires upon consummation of an
initial public offering of the Company's common stock with
gross proceeds to the Company of at least $40 million. The
redemption value of the Series A-1 Preferred is
approximately $25.8 million at August 31, 2000.
On June 26, 2000, in connection with the $90 million
term loan, the Company issued warrants to purchase mandatorily
redeemable convertible Series C Preferred Stock
("Series C Preferred") at an aggregate price of
$4.7 million. If the initial measurement date (defined as
the earlier of (1) the date of an initial public offering
whereby the Company receives at least $40 million or
(2) June 26, 2002) occurs prior to June 26, 2002,
the number of warrants issued is sufficient to represent a 1.20%
interest in the Company, assuming full dilution. If the initial
measurement date occurs after June 26, 2002, the number of
warrants issued is sufficient to represent a 1.35% interest in
the Company, assuming full dilution. In connection with the term
loan, the Company issued the lenders the right to acquire
Series D convertible preferred stock ("Series D
Preferred") in exchange for $10 million of principal
amount of the term loan. This right expired on September 9,
2000. If the right was exercised and the Series D Preferred
was converted into common stock, the Company would have been
required to issue 1,910,947 shares of common stock as of
August 31, 2000. The Series D Preferred has terms
substantially identical to the Series C Preferred.
On August 7, 2000, in connection with the $60 million
term loan, the Company issued warrants to purchase Series C
Preferred Stock at an aggregate price of $2.3 million. If
the initial measurement date (defined as the earlier of
(1) the date of an initial public offering whereby the
Company receives at least $40 million or
(2) August 7, 2002) occurs prior to August 7,
2002, the number of warrants issued is sufficient to represent a
0.80% interest in the Company, assuming full dilution. If the
initial measurement date occurs after August 7, 2002, the
number of warrants issued is sufficient to represent a 0.90%
interest in the Company, assuming full dilution.
The Series C and D Preferred Stock is convertible into
common shares at 6.15:1 at the election of the holder and
automatically converts upon consummation of an initial public
offering or exercise if after an initial public offering. The
Series C and D have no voting rights other than matters
subject to shareholder votes that would dilute or reduce the
rights or privileges of the Series C and D Preferred.
Dividends accrue at 12% per annum on a cumulative basis and are
payable in additional shares of Series C and D Preferred. In
 addition, holders of the Series C and D Preferred have
liquidation preferences in the event of a dissolution or
termination of the Company equal to $1.00 per share of
Series C and D Preferred plus any accrued and unpaid
dividends. The Series C and D Preferred holders have the
right to require the
F-19
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Company to repurchase such shares if an Event of Default, as
defined, occurs and is continuing subsequent to notice of such
default. This mandatory redemption right is to be settled, in
cash, at $1.00 per share of Series C and D Preferred plus
any accrued and unpaid dividends and expires upon consummation of
 an initial public offering and August 7, 2005,
respectively. The warrants issued in connection with the
$90 million term loan must be exercised on the earlier of
twenty days after an initial public offering or June 26,
2005. The warrants issued in connection with the $60 million
 term loan must be exercised on the earlier of twenty days after
an initial public offering or August 7, 2005. The fair value
 of the warrants was recognized as a reduction in the face value
of the term loan based on the appraised fair value of
approximately $9.2 million.
The Series A, A-1, A-2, C and D Preferred rank equal with
respect to dividends and the liquidation preference and are
senior to all other equity securities issued by the Company. The
Series B Preferred is junior to the Series A, A-1, and
A-2 Preferred but senior to all other equity securities issued by
 the Company. So long as the Series A, A-1, A-2, B, C and D
Preferred are outstanding, no dividends may be declared or paid
on junior securities and no junior securities may be redeemed,
purchased, or otherwise acquired by the Company.
There were 54,228,893 shares of the Company's common stock
issuable to the holders of the Series A, A-1, A-2, and B
Preferred assuming conversion of all outstanding preferred shares
 including conversion of accrued dividends of
2,501,320 shares at August 31, 2000. In addition,
1,873,477 and 1,910,947 shares of the Company's Common Stock
 are issuable to the holders of the Series C and D
Preferred, respectively, assuming the warrants or rights were
fully exercised prior to the initial measurement date and the
resulting Series C and D Preferred shares were fully
converted to Common Stock.
Preferred stock dividends and accretion amounting to $15,245,439
at August 31, 2000 includes accrued dividends of $12,722,104
 and accretion to the liquidation value for allocated equity
issuance costs of $2,523,335.
10.  Stockholders' Equity
Common Stock
In connection with the organization and initial capitalization,
the Company issued 10 shares of Common Stock to its founder,
Spacenet, on January 11, 2000 for $1.00 per share and,
except for the additional shares issued to Spacenet, the
following shares of common stock at $0.12 per share:
Date
Name
Shares
January 11, 2000
Spacenet, Inc
10
April 1, 2000
Spacenet, Inc
9,999,989
April 11, 2000
EchoStar Communications Corporation
6,450,022
April 11, 2000
ING Furman Selz Investments and affiliates
2,621,960
April 13, 2000
Microsoft Corporation and affiliates
6,450,022
May 3, 2000
Various investors
8,357,754
On April 1, 2000 the Company issued 9,999,989 shares of
Common Stock to Spacenet in exchange for the exclusive North
American rights for Spacenet and Gilat's high-speed
satellite internet service for an initial term of five years for
use in residential and small office/ home office market segment
as well as management, employees, and technical expertise, and
certain assets pursuant to the Services Agreement as discussed in
 Notes 1 and 3. Pursuant to Staff Accounting Bulletin
No. 48,
Valuation of Assets Acquired
F-20
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
From Promoters and Shareholders,
the Company recorded the
transfer at Spacenet's historical cost basis of $0.
The Common Stock issued to Spacenet and Microsoft may receive an
annual dividend of $0.12 per share if the Company issues any
equity security other than the Series A, A-1, A-2, and B
Preferred with dividend rights.
The Company has 110 million common shares authorized. As of
August 31, 2000, excluding 15 million shares of common
stock to be made available for the Company's stock option
plan on January 1, 2001, the Company had 33.9 million shares
 of common stock issued and outstanding and reserved 58.1 million
 shares of common stock for issuance in connection with dividends
 and conversions of Series A, A-1, A-2, B, C and D
convertible preferred stock and 8 million shares for stock
options and warrants.
Common Stock Warrants
The Company issued warrants to purchase approximately 116,000
shares of the Company's Common Stock with an exercise price
of $2.50 per share to certain third parties during the period
from January 11, 2000 (inception) through
August 31, 2000. These warrants generally vest over a four
year period with the initial vesting occurring on the first
anniversary of the grant date and on a quarterly basis
thereafter. The Company accounts for such warrants pursuant to
the provisions of SFAS No. 123 and recognizes related
compensation expense ratably over the vesting period, as
re-measured on each balance sheet date. The Company recorded
non-cash deferred compensation aggregating $672,160 based on the
fair value of such stock options at August 31, 2000 using a
Black-Scholes option valuation model, which is being amortized on
 a straight line basis over the related vesting periods. There
were no warrants exercisable at August 31, 2000.
Common Stock Options
Options to purchase the Company's Common Stock under its
stock option plan have been granted to employees, directors and
consultants of the Company, generally, at fair market value at
the date of grant. The options generally become exercisable over
periods of up to 4 years and expire 10 years from the
date of grant. There are 23 million shares of common stock
available for issuance pursuant to the stock option plan of which
 approximately 15 million shares become available for grant
on January 1, 2001.
The Company determines the fair value of its common stock used in
 its accounting for stock option grants based on both arms length
 equity transactions and independent valuations obtained during
the period from January 11, 2000 (inception) to
August 31, 2000.
Certain employees qualify as common law employees as defined in
FASB Interpretation No. 44,
Accounting for Certain
Transactions Involving Stock Compensation — An
Interpretation of APB Opinion No. 25
("FIN
No. 44"). Stock options issued to these employees are
accounted for under APB 25. Certain stock options were granted to
 employees with an exercise price below the deemed fair value of
the Company's Common Stock on the measurement date. The
Company has recorded non-cash deferred compensation, based on the
 intrinsic value of such options aggregating $6,923,435, which is
 being amortized on a straight-line basis over the related
vesting periods.
The Company granted 471,000 stock options to with an exercise
price of $2.50 per share certain leased-employees who continue to
 vest in stock options they received from Gilat for services
performed for Gilat prior to their employment with the Company.
The stock options granted to these employees are accounted for
under SFAS No. 123 in accordance FIN No. 44. The
Company recorded non-cash deferred compensation aggregating
$656,680 based on the fair value of such stock options at the
measurement date
F-21
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STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
using a Black-Scholes option valuation model, which is being
amortized on a straight line basis over the related vesting
periods.
Option activity is as follows:
Weighted-
Average Exercise
Shares
Price
Outstanding at January 11, 2000 (inception)
—
$
—
Granted:
May 2000
3,545,220
2.50
June 2000
173,000
2.50
July 2000
90,000
2.50
August 2000
1,646,500
2.50
Total granted
5,454,720
Exercised
—
—
Cancelled
5,500
—
Outstanding at August 31, 2000
5,449,220
2.50
Information about stock options outstanding at August 31,
2000 is as follows:
Weighted-
Weighted
Range of
Average
Average
Weighted-
Exercise
Remaining
Exercise
Options
Average
Prices
Options Outstanding
Contractual Life
Price
Exercisable
Exercise Price
2.50
5,449,220
3.6 years
2.50
—
2.50
The Black-Scholes option valuation model was developed for use in
 estimating the fair value of traded options that have no vesting
 restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions,
including the expected stock price
volatility. Because the Company's employee stock options
have characteristics significantly different from those of traded
 options, and because changes in the subjective input assumptions
 can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
 provide a reliable single measure of the fair value of its
employee stock options. For purposes of the pro forma disclosure,
 the estimated fair value of the options is amortized to expense
over the options' vesting period.
The Company's net loss attributable to common shareholders
would have been approximately $82.7 million, or $(4.09) per
share, during the period from January 11, 2000
(inception) to August 31, 2000 had compensation expense
 for the Company's stock option plans been determined based
upon the fair value at the grant dates for awards under the plans
 consistent with the methodology prescribed under SFAS
No. 123. The fair value of each option grant is estimated on
 the date of grant using the Black-Scholes option pricing model
with the following assumptions: volatility of 75%; dividend yield
 of 0%; risk-free interest rate of 6.0%; and expected life of the
 option term of 4 years. The effect of applying SFAS No. 123
 on the net loss is not necessarily representative of the effects
 on reported net income (loss) for future years due to,
among other things, (1) the vesting period of the stock
options and (2) the fair value of additional stock options in
future years.
Gilat issued stock options related to its common stock to certain
 StarBand executives. These stock options are being accounted for
 under EITF Issue No. 00-12 "Accounting by an Investor
for Stock Based Compensation Granted to Employees of Equity
Method Investees".
F-22
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Reserve for Issuance
The Company had 8 million shares of common stock reserved
for issuance pursuant to the stock option plan at August 31,
 2000. After giving effect to options granted through
August 31, 2000, there were 2,550,780 shares of Common Stock
 reserved and available for future issuances upon exercise of
outstanding and unissued stock options, warrants, and preferred
stock at August 31, 2000 before giving effect to the
15 million shares of common stock available for grant
commencing January 1, 2001 as authorized by the
Company's Board of Directors on September 19, 2000.
11.  Employee Benefit Plan
401(k) Plan
The Company's employees participate in a defined
contribution 401(k) retirement plan sponsored by Spacenet. The
plan allows employees of the Company to make pre-tax
contributions to the plan, subject to a statutorily prescribed
annual limit. Each participant is fully vested in his or her
contributions and the investment earnings. The plan also provides
 for the Company to match the employees' contributions up to
 a stated limit. The Company's contributions vest over
3 years. During the period from January 11, 2000
(inception) through August 31, 2000, the Company
contributed $33,675 to the plan on behalf of employees.
12.  Commitments and Contingencies
Leases
The Company entered into an agreement with Spacenet to assign the
 Company Spacenet's rights in a non-preemptible transponder
capacity service lease on the GE-4 Satellite ("GE-4")
in 2000. The terms of service provide that transponders be placed
 in service on January 17, 2000 extending through the
earlier of the end-of-life or replacement date, the date the
satellite or transponder becomes a satellite or transponder
failure, or January 16, 2005. Significant terms of the
operating lease include that the Company pay a $7.2 million
reservation fee and monthly payments of approximately
$0.15 million per transponder. Rental expense under the GE-4
 capacity service lease was approximately $3.1 million
during the period from January 11, 2000
(inception) through August 31, 2000.
The Company entered into a non-preemptible transponder capacity
service lease on the Telstar 7 Satellite ("Telstar 7")
on August 31, 2000. The terms of service provide that
transponders be placed in service on September 1, 2000,
January 1, 2001, and April 1, 2001. The Company's
rights to the exclusive use of the transponders extend through
December 31, 2007. The Company has the right to extend the
terms of service for any or all transponders through the
anticipated end-of life of Telstar 7, which is currently
anticipated to be October 31, 2013 in incremental two-year
periods or a single extension commencing on January 1, 2008
through the end-of life. Significant terms of the operating lease
 include that the Company pay $0.8 million upon contract signing
for three months of service, a reservation fee of
$2.3 million on December 1, 2000, providing an
irrevocable letter of credit in favor of the lessor or a cash
security deposit of approximately $26.3 million on
December 1, 2000, and monthly payments per transponder.
The Company leases office space and various office and computer
equipment under noncancelable operating lease agreements. Rental
expense during the period from January 11, 2000
(inception) to August 31, 2000 was approximately
$391,000.
F-23
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
Minimum future lease payments under operating leases, including
transponder capacity service, at August 31, 2000 are
summarized as follows:
Operating
Leases
2001
$
28,970,000
2002
36,638,000
2003
36,590,000
2004
36,590,000
2005
31,475,000
Thereafter
57,190,000
$
227,453,000
Contingencies
On or about July 26, 2000, Globecomm Systems, Inc.
("Globecomm") commenced a lawsuit against us in the
Eastern District of New York alleging the willful infringement of
 United States Patent No. 5,912,883. Globecomm is seeking an
 award for an undisclosed sum of money. The Globecomm patent is
directed through an earth-orbiting satellite. The system claimed
in the patent includes a central hub gateway server including a
plurality of modems. In particular, each of the modems is
assigned to receive and transmit signals in a specified data
channel. There is also a means for modulating the data signals
from all of the modems to a satellite frequency band. The system
claimed in the Globecomm patent employs one data channel per
modem, which is commonly referred to as a single carrier per
channel technology. The Company has not yet filed an answer to
the complaint of Globecomm. The Company intends to answer the
complaint and vigorously contest the claims made by Globecomm in
due course. The outcome of this lawsuit is inherently uncertain
and management is unable to evaluate the chances of the claim or
its effect on the Company.
In addition, on May 8, 2000, Hughes Electronics Corporation
("Hughes") commenced a lawsuit against Gilat and
Spacenet in the District of Maryland, Southern Division,
concerning U.S. Patent Nos. 5,699,384; 5,995,725; 5,995,726; and
6,016,388. The Company is not a party to the lawsuit, but a
ruling against Gilat or Spacenet could significantly harm the
Company's business because it uses license technology from
Gilat/ Spacenet that forms part of Hughes claim. In particular,
U.S. Patent No. 5,699,384 is related to personal computer
based receiver cards that the Company uses as part of its service
 offering to customers. The Company may not be able to continue
to use the technology if Hughes prevails on its claim regarding
this technology. Gilat and Spacenet have filed motions for
partial summary judgment on the issue of patent claim
construction and the Court has scheduled a hearing on these
motions for November 20, 2000. The outcome of this lawsuit
is inherently uncertain and management is unable to evaluate the
chances of the claim or its effect on the Company.
The Company does not currently have insurance that would
indemnify it for any liability that may be imposed in connection
with the legal actions described above. Accordingly, if the final
 disposition of these lawsuits is in favor of the plaintiff, the
related liability could result in a material adverse effect on
the Company's financial position and results of operations.
The Company has entered into employment agreements with certain
members of senior management and other key employees. These
agreements specify minimum annual salaries as well as performance
 bonus amounts and criteria. In addition, these executives have
certain severance benefits, which would have a negative impact on
 the Company's results of operations if such executives were
 terminated under certain circumstances.
F-24
Table of Contents
STARBAND COMMUNICATIONS INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS — (Continued)
13.  Subsequent Events
During September 2000, the Board of Directors approved the
payment of $4 million to Gilat for its assistance in obtaining
debt and equity for the Company. This payment has been allocated
on a pro-rata basis between debt and equity securities issued as
reductions in additional capital and additional deferred debt
issuance costs, respectively, as of August 31, 2000. The
deferred debt issuance costs have been recognized as a component
of other assets and are amortized over the period of the term
loan as an additional component of interest expense using the
effective interest method.
The Company's Board of Directors authorized the Company to
file an initial registration statement on Form S-1 to
register shares of the Company's common stock for an initial
 public offering. The ultimate terms and conditions of such
transaction, if and when consummated, will be determined based on
 market conditions and other variables not within the control of
the Company and are not estimable at this time.
14.  Pro Forma Adjustments (Unaudited)
The Company's Preferred Stock will automatically convert
into Common Stock at consummation of an initial public offering
resulting in aggregate proceeds to the Company of at least
$40 million. The pro forma balance sheet at August 31,
2000 reflects the conversion of all classes of the Company's
 Preferred Stock into common stock as of that date. The pro forma
 loss per share reflects the conversion of all classes of the
Company's outstanding convertible preferred stock as of the
respective date of issuance.
F-25
Table of Contents
INSIDE BACK COVER

TEXT ON STARBAND INDIAN NATIONS PROJECT FOR PROSPECTUS

The promise of StarBand is greater than just high-speed Internet access.
StarBand is already changing the lives of thousands of Native Americans in the
Southwest, impacting education, law enforcement, and quality of life.

"This is a turning point for our community." The Havasupai Indians hope that
some of their tribal members will get online college degrees, remaining on the
reservation to teach the next generation.

Sally Tisoult, Director of the Havasupai Head Start School
[Picture of Head Start School and Kids]

"Yesterday I was thinking that technology was so far into the future, but today
it's right here. We have it. Now, we can be part of the international as well as
the national community."

[Photo of Ben Jones, Director of Communications Services, Navajo Nation
Government]

"These Indian Nations are jumping generations of technology in a couple of hours
and into the 21st century. They have gone from dial-up service that didn't work
very well to StarBand's unique, high-speed service."

Ed Groenhout, Vice President for Strategic Initiatives at Northern Arizona
University

[Photo of install in Grand Canyon]

StarBand connects its subscribers, from the Grand Canyon to Silicon Alley, to
new experiences, communities, and opportunities. Our first-to-market service is
a compelling solution for users nationwide who need a highly reliable,
high-speed connection to the Internet today.
Table of Contents
Through and including
          ,
2000 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
Shares
Common Stock
PROSPECTUS
Merrill Lynch & Co.
Credit Suisse First Boston
Salomon Smith Barney
CIBC World Markets
ING Barings
,
2000
Table of Contents
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item  13.  Other Expenses of Issuance and
Distribution
The following table sets forth the estimated expenses in
connection with the issuance and distribution of the securities
being registered under this Registration Statement, other than
the underwriting discount payable by StarBand Communications Inc.
 All amounts shown are estimates except the Securities and
Exchange Commission registration fee and the National Association
 of Securities Dealers, Inc. filing fee. StarBand Communications
Inc. will pay substantially all of the expenses of issuance and
distribution set forth below.
Securities and Exchange Commission registration fee
$
75,900
National Association of Securities Dealers, Inc. filing fee
30,500
Nasdaq National Market listing fee
Blue sky qualification fees and expenses
Legal fees and expenses
Accounting fees and expenses
Transfer agent and registrar fees
Printing and engraving expenses
Miscellaneous expenses and administrative costs
Total
$
Item  14.  Indemnification of Directors and
Officers
Section 145 of the Delaware General Corporation Law
authorizes a court to award, or a corporation's Board of
Directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act of 1933, as
amended. Article 13 of our amended and restated certificate
of incorporation, exhibit 3.1 hereto, and article 7 or our
by-laws, exhibit 3.2, provide for indemnification of our
directors, officers, employees and other agents to the maximum
extent permitted by Delaware Law.
Item  15.  Recent Sales of Unregistered
Securities
Since January 11, 2000, our date of inception, we have sold
and issued the following securities:
1.  In connection with our incorporation we issued
	10 shares of common stock to Spacenet Inc. in a private
	 placement eligible for the exemption from registration provided
	by Section 4(2) of the Securities Act.
2.  On April 1, 2000, we sold 9,999,989 shares of
	our common stock and 140,111,199 shares of our Series B
	 Convertible Preferred stock to Spacenet Inc., in exchange
	for certain assets; intellectual property rights and licenses;
	and future services to be rendered to us in a private placement
	pursuant to Section 4(2) of the Securities Act.
3.  On April 13, 2000, we sold 6,450,022 shares of
	 common stock and 49,228,259 shares of Series A
	Convertible Preferred stock for a total of $50 million in
	cash to Microsoft Corporation in a private placement pursuant to
	Section 4(2) of the Securities Act.
4.  On April 11, 2000, we sold 49,228,259 shares
	of Series A-1 Preferred stock and 6,450,022 shares of
	common stock for a total of $50 million in cash to EchoStar
	Communications Corporation and a total of 24,686,284 shares
	of Series A-2 Convertible Preferred stock and
	2,621,960 shares of common stock to four entities affiliated
	 with ING Furman Selz Investments for a total consideration of
	$25 million in cash in a private placement pursuant to
	Section 4(2) of the Securities Act.
II-1
Table of Contents
5.  On May 3, 2000, we sold a total of
	8,357,754 shares of common stock to four investors not
	resident in the United States for a total consideration of
	$1 million in a transaction in reliance upon
	Regulation S under the Securities Act.
6.  On June 26, 2000, in a private placement pursuant
	to Section 4(2) of the Securities Act, we issued warrants to
	 purchase Series C Convertible Preferred stock sufficient to
	 represent a 1.2% interest in our company, assuming full
	dilution, at an aggregate price of approximately
	$4.7 million as an inducement to Bank Leumi USA, The First
	International Bank of Israel Ltd. and Israel Discount Bank Ltd.
	to enter into a $90 million Term Note.
7.  On August 7, 2000, in a private placement pursuant
	to Section 4(2) of the Securities Act, we issued warrants to
	 purchase Series C Convertible Preferred stock sufficient to
	 represent a 0.8% interest in our company, assuming full
	dilution, at an aggregate price of approximately
	$2.3 million as an inducement to the lenders to enter into
	$60 million Term Notes.
8.  We issued warrants to purchase approximately
	116,000 shares of our common stock to certain third parties
	in private placements pursuant to Section 4(2) of the
	Securities Act during the period from January 11, 2000
	(inception) through August 31, 2000.
9.  On June 26, 2000, in a private placement pursuant
	to Section 4(2) of the Securities Act, we issued options to
	convert up to $10 million of the Term Notes at an amount
	equal to $500,000,000 divided by the total number of our
	outstanding shares of capital stock, on a fully diluted basis.
Item  16.  Exhibits and Financial Statement
Schedules
a)  Exhibits
The following Exhibits are filed as a part of this Registration
Statement.
Exhibit Number
Description of Exhibits
1.1*
Form of Underwriting Agreement.
3.1
Amended and Restated Certificate of Incorporation.
3.2
Amended and Restated Bylaws.
4.1*
Specimen Stock Certificate.
4.2*
Microsoft Investment Agreement.
4.3*
Stockholders' Agreement dated as of February 15, 2000.
4.4*
Registration Rights Agreement dated as of February 15, 2000.
4.5*
EchoStar and Furman Selz Investment Agreement.
4.6*
Effectiveness Agreement dated as of March 30, 2000.
4.7*
Bank Leumi USA Financing Agreement.
4.8*
Bank Leumi USA Series C Convertible Preferred Stock Purchase
	Warrant.
4.9*
Term Note for $90 million by Bank Leumi USA.
4.10
*
Bank Leumi USA Registration Rights Agreement.
4.11
*
Fee Letter and Debt Conversion Letter.
4.12
*
First Amendment and Joinder to the Bank Leumi USA Financing
	Agreement.
4.13
*
The First International Bank of Israel Series C Convertible
	Preferred Stock Purchase Warrant.
4.14
*
Israel Discount Bank Ltd. Series C Convertible Preferred Stock
	Purchase Warrant.
4.15
*
The First International Bank of Israel Registration Rights
	Agreement.
4.16
*
Israel Discount Bank Ltd. Registration Rights Agreement.
4.17
*
Term Note for $30 million by The First International Bank of
	 Israel.
4.18
*
Term Note for $30 million by Israel Discount Bank Ltd.
5.1*
Opinion of Clifford Chance Rogers & Wells LLP.
10.1*
2000 Stock Incentive Plan.
10.2*
GE-4 Satellite Transponder Service Agreement.
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Table of Contents
Exhibit Number
Description of Exhibits
10.3*
Loral Skynet Transponder Service Agreement.
10.4*
Employment Agreement between StarBand and Zur Feldman.
10.5*
Employment Agreement between StarBand and David Trachtenberg.
10.6*
Memorandum of Agreement among StarBand, Gilat and EchoStar.
23.1
Consent of Ernst & Young LLP.
23.2*
Consent of Clifford Chance Rogers & Wells LLP. (Included in
	Exhibit 5.1)
24.1
Powers of Attorney. (Included in the signature page of the
	Registration Statement)
27.1
Financial Data Schedule.
*  To be filed by amendment.
b)  Financial
Statement Schedules
Schedules have been omitted because they are not required or
because the required information is given in the financial
statements or notes thereto.
Item  17.  Undertakings
(a)  The undersigned registrant hereby undertakes to provide
 to the underwriters at the closing specified in the underwriting
 agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
(b)  The undersigned registrant hereby undertakes that:
(i)
For purposes of determining any liability under the Securities
	Act of 1933, the information omitted from the form of prospectus
	filed as part of this registration statement in reliance upon
	Rule 430A and contained in a form of prospectus filed by the
	 registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
	 under the Securities Act shall be deemed to be part of this
	registration statement as of the time it was declared effective.
(ii)
For the purpose of determining any liability under the Securities
	 Act, each post-effective amendment that contains a form of
	prospectus shall be deemed to be a new registration statement
	relating to the securities offered therein, and the offering of
	such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(c)  Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
or persons controlling the registrant pursuant to the provisions
of Item  14, or otherwise, the registrant has been informed
that in the opinion of the Securities and Exchange Commission
such
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Table of Contents
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in
 the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
 of such issue.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-1 and has duly caused this registration statement on
Form S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in McLean, Virginia, on the 11
th
day of October, 2000.
StarBand Communications Inc.
By:
Name:  Zur Feldman
Title:
Co-Chairman and Chief Executive Officer;
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appear below constitutes and appoints Zur Feldman and David
Trachtenberg, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
 resubstitution, for him and in his name, place and stead, in any
 and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this registration
 statement and any additional registration statement filed
pursuant to Rule 462(b), and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Name
Title
Date
Yoel Gat
Co-Chairman; Director
October 11, 2000
Zur Feldman
Co-Chairman and Chief Executive Officer; Director
October 11, 2000
Jon DeVaan
Director
October 11, 2000
Mark Jackson
Director
October 11, 2000
Brian Friedman
Director
October 11, 2000
David Trachtenberg
President and Chief Marketing Officer
October 11, 2000
William McMoil
Corporate Controller and Treasurer
October 11, 2000
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