<PAGE>

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

                                    FORM 10-Q

    /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

                    FOR THE QUARTER ENDED September 30, 1999

                                       OR

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

                      For the transition period from  -to  -

                                                    ----   ----

                        COMMISSION FILE NUMBER 000-24653

                          NORTHEAST OPTIC NETWORK, INC.
             (Exact name of registrant as specified in its charter)

                DELAWARE                                     04-3056279
(State or other jurisdiction of incorporation       (I.R.S. Identification No.)
            or organization)

            2200 West Park Drive
           Westborough, MASSACHUSETTS                               01851
   (Address of principal executive offices)                      (Zip Code)

               Registrant's telephone number, including area code:
                                 (508) 616-7800

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

At September 30, 1999 there were 16,284,317 shares of the Company's common stock
outstanding.

                                                                    Page 1 of 20
                                                        Exhibit Index at Page 20


<PAGE>





                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS:

Condensed Consolidated Balance Sheets at September 30, 1999 (Unaudited)
and December 31, 1998.........................................................3

Condensed Consolidated Statements of Operations for the three month and the nine
month periods ended September 30, 1999 and September 30, 1998
(Unaudited)...................................................................4

Condensed Consolidated Statements of Cash Flows for the nine month periods ended
September 30, 1999 and September 30, 1998
(Unaudited)..................................................................5

Notes to Condensed Consolidated Financial Statements.........................6

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


                                                                    Page 2 of 20


<PAGE>




                          NORTHEAST OPTIC NETWORK, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                    September 30,   December 31,
                                                                        1999              1998
                                                                    (unaudited)

<S>                                                                <C>              <C>
CURRENT ASSETS:
   Cash and cash equivalents                                       $   5,786,381    $  57,737,792

   Short-term restricted cash and investments                         22,229,773       23,149,975

   Short-term investments                                             73,527,466       48,581,949

   Accounts receivable, net of allowances of $(280,927) and
   $(212,727) at September 30, 1999 and December 31,1998,
   respectively                                                        1,292,295          111,915

   Prepaid expenses and other current assets                             800,823          506,947

   Refundable taxes from related party                                      --            755,838
                                                                    -------------    -------------
         Total current assets                                        103,636,738      130,844,416
                                                                    -------------    -------------
PROPERTY AND EQUIPMENT, NET                                           87,806,020       52,922,677

LONG-TERM RESTRICTED CASH AND INVESTMENTS                             31,272,307       51,371,859

INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $3,576,464
AND $1,460,191, RESPECTIVELY                                          57,558,538       56,773,282
                                                                    -------------    -------------
                                                                   $ 280,273,603    $ 291,912,234
                                                                    -------------    -------------
                                                                    -------------    -------------
CURRENT LIABILITIES:
   Current maturities of long-term obligations                     $        --      $     127,619
   Accounts payable                                                    1,124,963          322,285
   Accounts payable - network                                         11,667,220        2,647,719
   Accrued expenses                                                    6,745,085       13,526,702
   Accrued right-of-way fees, related party                              886,322        1,084,325
   Deferred revenue                                                    1,053,927        1,168,900
                                                                    -------------    -------------

         Total current liabilities                                    21,477,517       18,877,550
                                                                    -------------    -------------

LONG-TERM ACCOUNTS PAYABLE                                             4,293,488             --
                                                                    -------------    -------------

LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES (Note 4)            180,000,000      180,000,000
                                                                    -------------    -------------

COMMITMENTS AND CONTINGENCIES (Note 3)

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value-
     Authorized--30,000,000 shares; 16,284,317 and 16,066,333
       shares issued and outstanding at September 30, 1999 and
       December 31, 1998, respectively                                   162,843          160,663
   Warrants                                                                 --              8,595
   Additional paid-in capital                                        109,037,405      108,105,684
   Accumulated deficit                                               (34,697,650)     (15,240,258)
                                                                    -------------    -------------
         Total stockholders' equity                                   74,502,598       93,034,684
                                                                    -------------    -------------
                                                                   $ 280,273,603    $ 291,912,234
                                                                    -------------    -------------
                                                                    -------------    -------------
</TABLE>


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS.

                                                                   Page 3 of 20

<PAGE>


                          NORTHEAST OPTIC NETWORK, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED                         NINE MONTHS ENDED
                                            SEPTEMBER 30,                              SEPTEMBER 30,
                                      1999                1998                   1999                   1998
<S>                                  <C>             <C>                      <C>                  <C>
REVENUES:
   Contract                         $ 1,023,977      $   155,766              $  2,182,918     $    481,684

   Other service                        595,440           16,395                 1,000,300           24,253
                                     -----------      -----------              ------------      -----------

          Total revenues              1,619,417          172,161                 3,183,218          505,937
                                     -----------      -----------              ------------      -----------
EXPENSES:

   Cost of sales                      1,843,655          546,504                 4,221,186        1,604,782
   Selling, general and
     administrative                   1,614,575        2,272,808                 5,047,747        3,365,567
   Depreciation and
     amortization                     1,904,083          491,633                 3,904,934        1,107,291
                                     -----------      -----------              ------------      -----------
         Total expenses               5,362,313        3,310,945                13,173,867        6,077,640
                                     -----------      -----------              ------------      -----------
Loss from operations                 (3,742,896)      (3,138,784)               (9,990,649)      (5,571,703)
                                     -----------      -----------              ------------      -----------
OTHER INCOME (EXPENSE):
   Interest income and other,
     net                              1,816,213        1,615,895                 6,058,878        1,702,767

   Interest expense                  (5,356,351)      (3,275,400)              (15,525,621)      (3,732,439)
                                     -----------      -----------              ------------      -----------
Total other income
(expense)                            (3,540,138)      (1,659,505)               (9,466,743)      (2,029,672)
                                     -----------      -----------              ------------      -----------
Loss before minority interest
in subsidiaries' earnings and
benefit from income taxes            (7,283,034)      (4,798,289)              (19,457,392)      (7,601,375)

MINORITY INTEREST                             -                -                         -        1,108,933

(BENEFIT FROM) INCOME
TAXES                                         -                -                         -         (564,480)

LOSS BEFORE EXTRAORDINARY
ITEM                                 (7,283,034)      (4,798,289)              (19,457,392)      (5,927,962)

EXTRAORDINARY ITEM                            -       (1,335,004)                        -       (1,335,004)
                                     -----------      -----------              ------------      -----------
NET LOSS                            $(7,283,034)     $(6,133,293)             $(19,457,392)    $ (7,262,966)
                                     -----------      -----------              ------------      -----------
                                     -----------      -----------              ------------      -----------
BASIC AND DILUTED NET LOSS PER
SHARE BEFORE EXTRAORDINARY ITEM
                                        $ (0.45)          $(0.48)                   $(1.21)          $(1.66)
                                     -----------      -----------              ------------      -----------
                                     -----------      -----------              ------------      -----------
BASIC AND DILUTED NET LOSS PER
SHARE AFTER EXTRAORDINARY ITEM
                                         $(0.45)          $(0.61)                   $(1.21)          $(2.03)
                                     -----------      -----------              ------------      -----------
                                     -----------      -----------              ------------      -----------

BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING           16,222,425       10,063,870                16,124,868        3,581,332
                                     -----------      -----------              ------------      -----------
                                     -----------      -----------              ------------      -----------

</TABLE>


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                   CONSOLIDATED FINANCIAL STATEMENTS.

                                                                   Page 4 of 20

<PAGE>


                          NORTHEAST OPTIC NETWORK, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                                                        1999              1998

<S>                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                       $ (19,457,392)   $  (7,262,966)
   Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities-
     Extraordinary item - write-off of deferred financing costs            --          1,335,004
     Compensation expense related to the issuance of stock
       options to non-employees                                         293,441             --
     Loss on disposal of property and equipment                            --              8,953
     Accretion of long-term obligations                                    --             62,165
     Amortization of deferred financing costs                           469,983          104,365
     Depreciation and amortization                                    3,904,934        1,107,291
     Changes in assets and liabilities-
       Accounts receivable                                           (1,180,380)         901,311
       Refundable taxes from related party                              755,838         (387,104)
       Prepaid expenses and other current assets                       (293,876)        (369,368)
       Accounts payable                                                 802,678          402,280
       Accrued expenses                                              (6,979,620)       4,455,326
       Deferred revenue                                                (114,973)         205,538
       Deferred tax liability                                              --             25,000
                                                                  -------------    -------------
         Net cash (used in) provided by operating activities        (21,799,367)         587,795
                                                                  -------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of short-term investments, net                         (24,945,517)     (47,939,097)
   Purchases of property and equipment                              (39,594,012)     (26,087,605)
   Increase in intangible assets                                       (449,504)      (6,348,484)
                                                                  -------------    -------------
         Net cash used in investing activities                      (64,989,033)     (80,375,186)
                                                                  -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in accounts payable - network and long-term
     accounts payable                                                13,312,989          370,457
   Proceeds from issuance of long-term obligations                         --        180,000,000
   Proceeds from note payable to related party                             --         15,775,000
   Payments on long-term obligations                                   (127,619)     (19,785,098)
   Decrease (increase) in restricted cash and investments            21,019,754      (72,698,790)
   Proceeds from exercise of stock options and warrants                 631,865           32,153
   Proceeds from initial public offering                                   --         43,782,528
   Minority interest in subsidiary                                         --         (1,108,933)
                                                                  -------------    -------------

         Net cash provided by financing activities                   34,836,989      146,367,317
                                                                  -------------    -------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                (51,951,411)      66,579,926

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                       57,737,792        1,098,452
                                                                  -------------    -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                          $   5,786,381    $  67,678,378
                                                                  -------------    -------------
                                                                  -------------    -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the year for-
     Interest                                                     $  23,943,837    $     636,861
                                                                  -------------    -------------
                                                                  -------------    -------------
     Taxes                                                        $        --      $      34,883
                                                                  -------------    -------------
                                                                  -------------    -------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
   Goodwill recorded in connection with the Reorganization        $        --      $  47,871,068
                                                                  -------------    -------------
                                                                  -------------    -------------
   Conversion of Minority Interest into Series A convertible
     preferred stock in connection with the Reorganization        $        --      $   4,229,853
                                                                  -------------    -------------
                                                                  -------------    -------------
   Exercise of CMP warrant                                        $        --      $     532,836
                                                                  -------------    -------------
                                                                  -------------    -------------

</TABLE>


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                  CONSOLIDATED FINANCIAL STATEMENTS.

                                                                   Page 5 of 20

<PAGE>


(1)    OPERATIONS AND REORGANIZATION

       NorthEast Optic Network, Inc. (the Company or NEON) (formerly FiveCom,
       Inc.) and its subsidiaries are engaged in the ownership, management,
       operation and construction of fiber optic telecommunication networks in
       the Northeast, consisting of New England and New York.

       On August 5, 1998, the Company completed an initial public offering (IPO)
       of 4,500,000 shares of its common stock at $12.00 per share, and sold
       $180 million of 12-3/4% Senior Notes due 2008 (the Senior Notes) to the
       public in a debt offering.

       To date, the Company has recorded limited revenues principally from
       contract and other services and has incurred cumulative operating losses.
       The Company is dependent upon a single or limited source of suppliers for
       a number of components and parts. Shortages resulting from a change in
       arrangements with these suppliers and manufacturers could cause
       significant delays in the expansion of the NEON systems and could have a
       material adverse effect on the Company.

       The market for fiber optic telecommunications in which the Company
       operates can be characterized as rapidly changing due to technological
       advancements, the introduction of new products and services and the
       increasing demands placed on equipment in worldwide telecommunications
       networks.

(2)    SIGNIFICANT ACCOUNTING POLICIES

       The accompanying consolidated financial statements reflect the
       application of certain accounting policies as described below and
       elsewhere in these notes to consolidated financial statements.

       (a)    BASIS OF PRESENTATION

              The accompanying unaudited consolidated financial statements have
              been prepared by the Company pursuant to the rules and regulations
              of the Securities and Exchange Commission, and reflect all
              adjustments, consisting of only normal recurring adjustments,
              which, in the opinion of management, are necessary for a fair
              statement of the results of the interim periods presented. These
              financial statements do not include disclosures associated with
              the annual financial statements and, accordingly, should be read
              in conjunction with the attached Management's Discussion and
              Analysis of Financial Condition and Results of Operation and the
              financial statements and footnotes for the year ended December 31,
              1998 included in the Company's Form 10-K.

       (b)    MANAGEMENT ESTIMATES

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

       (c)    REVENUE RECOGNITION

              Revenues on telecommunications network services are recognized
              ratably over the term of the applicable agreements with customers,
              which range from 1 to 20 years. Other service revenue, which
              consists primarily of design and installation work, is recognized
              as services are performed.

       (d)    EARNINGS PER SHARE

              In accordance with SFAS No. 128, EARNINGS PER SHARE, basic and
              diluted loss per share were computed by dividing net loss by the
              weighted average number of common shares outstanding during the
              first nine months of 1999 and 1998. Diluted net loss per share
              excludes shares issuable from the assumed exercise of stock
              options, as their effect would be antidilutive.

       (e)    COMPREHENSIVE INCOME

              Effective January 1, 1998, the Company adopted Financial
              Accounting Standards Board (FASB) issued SFAS No. 130, REPORTING
              COMPREHENSIVE INCOME. SFAS No. 130 requires disclosure of all
              components of comprehensive income on an annual and interim basis.
              Comprehensive income is defined as the change in equity of a
              business enterprise during a period from transactions and other
              events and circumstances from nonowner sources. The comprehensive
              net loss is the same as reported net loss for all periods
              presented.

       (f)    RECLASSIFICATIONS

                                                                   Page 6 of 20

<PAGE>

              Certain prior period amounts have been reclassified to conform
with current period presentation.

(3)    CONTINGENCIES

       Certain claims arising in the ordinary course of business are pending
       against the Company. In the opinion of management, these claims are
       without merit and they believe there is no potential liability.

(4)    12-3/4% SENIOR NOTES

       In August 1998, the Company sold $180 million of 12-3/4% Senior Notes due
       2008 to the public in the debt offering. The Senior Notes are due on
       August 15, 2008 and scheduled interest payments are due on February 15
       and August 15 of each year, commencing February 15, 1999. Upon closing of
       the Senior Notes, the Company purchased approximately $72 million in U.S.
       government obligations, with an average maturity of 645 days, to provide
       for payment in full of the first seven scheduled interest payments on the
       Senior Notes. Such securities are pledged as security for the benefit of
       the holders of the Senior Notes, are classified as held-to-maturity and
       reported at amortized cost and are included as restricted cash and
       investments in the accompanying consolidated balance sheet. The Senior
       Notes are redeemable in whole or in part at the option of the Company at
       any time on or after August 15, 2003 at the following redemption prices
       expressed as a percentage of principal plus accrued interest through the
       date of redemption:

<TABLE>
<CAPTION>
                  PERIOD                              REDEMPTION
                                                        PRICE
                  <S>                                 <C>
                  2003                                   106.375%
                  2004                                   104.250
                  2005                                   102.125
                  Thereafter                             100.000

</TABLE>


       In the event of a change in control, as defined, each holder of the notes
       will be entitled to require the Company to purchase all or a portion of
       such holder's Senior Notes at a purchase price equal to 101% of the
       principal amount thereof, plus accrued and unpaid interest, if any, to
       the date of purchase. The Senior Notes are unsecured obligations and rank
       PARI PASSU in right of payment with all existing and future indebtedness
       of the Company that is not by its terms in right of payment and priority
       to the Senior Notes and is senior in right of payment to all future
       subordinated indebtedness of the Company.

       In connection with this financing, the Company incurred approximately
       $6.3 million of issuance costs. These costs have been classified as
       intangible assets in the accompanying condensed consolidated balance
       sheets and are being amortized, as interest expense, over the term of the
       Notes.

 (5)   STOCKHOLDERS' EQUITY

       (a)    PREFERRED STOCK

              The Restated Certificate of Incorporation authorizes the issuance
              of up to 2,000,000 shares of preferred stock, $.01 par value per
              share. Under the terms of the Certificate of Incorporation, the
              Board of Directors is authorized, subject to any limitations
              prescribed by law, without stockholder approval, to issue such
              shares of preferred stock in one or more series. Each series of
              preferred stock shall have rights, preferences, privileges and
              restrictions, including voting rights, dividend rights, conversion
              rights, redemption privileges and liquidation preferences, as
              shall be determined by the Board of Directors. At September 30,
              1999, no such shares are issued and outstanding.

                                                                   Page 7 of 20

<PAGE>


       (b)    COMMON STOCK

              In June 1998, the Company's Board of Directors authorized the
              issuance of up to 30,000,000 shares of common stock.

              In July 1998, the Company's Board of Directors voted to effect a
              2.5 - to -1 common stock split. Series A and B convertible
              preferred stock will convert at a rate equal to the common stock
              split. All share and per share amounts have been retroactively
              restated to reflect the stock split.

              On August 5, 1998, the Company completed the sale of 4,500,000
              shares of its Common Stock at a price of $12.00 per share. Of the
              aggregate shares of Common Stock sold, 4,000,000 were sold for the
              account of the Company generating net proceeds to the Company of
              approximately $44,640,000 and 500,000 shares were sold for account
              of certain stockholders of the Company.

(6)    DISCLOSURE ABOUT SEGMENTS OF THE ENTERPRISE AND SIGNIFICANT CUSTOMERS

       In fiscal year ended December 31, 1998 the Company adopted SFAS No. 131,
       DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS
       No. 131, requires certain financial and supplementary information to be
       disclosed on an annual and interim basis for each reportable segment of
       an enterprise. The Company analyzes segment reporting based on dark fiber
       and lit fiber facilities revenue only.

<TABLE>
<CAPTION>
                           THREE MONTHS ENDED         NINE MONTHS ENDED
                             SEPTEMBER 30,             SEPTEMBER, 30
                           1999           1998       1999          1998
<S>                       <C>          <C>          <C>          <C>
Dark fiber revenues       $  540,866   $   86,166   $1,381,253   $  412,084

Lit fiber revenues           483,111       69,600      801,665       69,600
                           ---------    ---------    ---------    ---------
Total contract revenues   $1,023,977   $  155,766   $2,182,918   $  481,684
                           ---------    ---------    ---------    ---------
                           ---------    ---------    ---------    ---------
</TABLE>


       SFAS No. 105, Disclosure of information about financial instruments with
       off balance sheet risk and financial instruments with concentration of
       credit risk requires disclosure of any significant off-balance sheet and
       credit risk concentration. Financial instruments that potentially expose
       the Company to concentrations of credit risk consist primarily of cash
       and cash equivalents, short-term investments and accounts receivable. The
       Company has not experienced significant losses related to receivables
       from any individual or groups of customers or any specific industry or
       geographic region. Due to these factors, no additional credit risk is
       believed by management to be inherent in the Company's accounts
       receivable. For the nine months ended September 30, 1999 and September
       30, 1998, 6 and 2 customers represented 76% and 78% of revenues,
       respectively. At September 30, 1999 and December 31, 1998, 4 and 2
       customers represented 66% and 78% of accounts receivable, respectively.

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

                                                                   Page 9 of 20

<PAGE>





         ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         CAUTIONARY STATEMENT

         In addition to historical information contained herein, this report
         contains certain "forward looking statements" within the meaning of
         section 27A of the Securities Act of 1933, as amended, and Section 21E
         of the Securities and Exchange Act of 1934, as amended, and are subject
         to the safe harbors created thereby. All statements included in this
         report regarding the Company's financial position, business strategy
         and plans, objectives for the future operations, technical
         developments, Year 2000 compliance and industry conditions--other than
         statements of historical facts--are forward looking statements. While
         these statements reflect the Company's reasonable assumptions, based
         upon management's beliefs and information currently available to it,
         the company can give no assurance that such expectations will prove to
         be correct.

         These forward looking statements are subject to certain risks,
         uncertainties and assumptions related to certain factors including
         without limitation, the factors described under the heading "Certain
         Factors That May Affect Future Results" below.

         OVERVIEW

         The Company is a facilities-based provider of technologically advanced,
         high bandwidth, fiber optic transmission capacity for communications
         carriers on local loop, inter-city and interstate facilities. The
         Company is currently expanding its fiber optic network, the NEON
         system, to encompass over 1000 route miles, or approximately 65,000
         fiber miles, in New York and New England ("the Northeast").

         The Company generates revenue primarily through leasing of capacity on
         its network and also through the provision of services consisting
         principally of design and installation work. The Company generally
         receives fixed monthly payments from its customers for the leasing of
         capacity on its network and recognizes revenues ratably over the term
         of the applicable customer agreement. Other service revenues are
         recognized when services are performed.

         RESULTS OF OPERATIONS

         Revenues for the quarter ended September 30, 1999 were $1,619,417,
         an increase of $1,447,256 or 841% compared to $172,161 in the same
         quarter in 1998. The increase in revenues reflects the Company's
         continuing expansion of lit services on the system, coupled with
         recurring collocation revenues as well as the leased dark fibers to
         existing customers that came on line during 1998 and 1997. Other
         service revenue during the quarter consists of design, engineering
         and installation work associated with the build-out of our
         facilities.

         Revenues for the nine months ended September 30, 1999 were
         $3,183,218 compared to $505,937 for the nine months ended September
         30,1998 which represents an increase of $2,677,281 or 529%. The
         increase in revenue reflects the Company's continued penetration
         into the Northeast service territory.

         Cost of sales for the three months ended September 30, 1999 were
         $1,843,655 an increase of $1,297,151 compared to $546,504 in the
         same period last year. The increased costs reflect the addition of
         lease expenses, right of way fees and property taxes resulting from
         the Company's continuing network expansion into the Northeast
         service territory.

         Cost of sales for the nine months ended September 30, 1999 amounted
         to $4,221,186 compared to $1,604,782 in the same period last year,
         an increase of $2,616,404 or 163%. The increased costs reflect the
         continuing build-out and expansion of the communications network
         into the Northeast service territory.

         Selling, general and administrative expenses were $1,614,575 for
         the quarter ending September 30, 1999 compared to $2,272,808 for
         the same quarter in 1998, which represents a decrease of $658,233
         or 29% . The decrease in expenses primarily reflects the one time
         bonus payment of $1.0 million made in September 1998.


<PAGE>

       Selling, general and administrative expenses for the nine months ended
       September 30,1999 were $5,047,747, an increase of $1,682,180 or 50%.
       Increased personnel and related costs to develop management and sales
       activities continue to grow as the Company expands its efforts to meet
       customer requirements. The Company's headcount has increased to 40 at
       September 30, 1999 from 14 or approximately 186% since September 30,
       1998.

       Depreciation and amortization expense was $1,904,083 for the quarter
       ended September 30, 1999 compared to $491,633 for the quarter ended
       September 30, 1998.

       Depreciation and amortization expense was $3,904,934 for the nine months
       ended September 30, 1999 compared to $1,107,291 for the same nine month
       period as of September 30,1998. The increase resulted from putting into
       service

                                                                   Page 10 of 20


<PAGE>





       additional portions of the NEON System and the amortization of goodwill
       resulting from the reorganization on July 8, 1998 referred to below.

       Net interest expense totaled $3,540,138 and $1,659,505 for the quarters
       ending September 30,1999 and September 30,1998, respectively. For the
       nine month periods ending September 30,1999 and September 30, 1998 net
       interest expense was $9,466,743 and $2,029,672 respectively. The
       increased interest expense reflects the sale of $180.0 million of 12 3/4%
       Senior Notes partially offset by the higher cash and investment balances
       resulting from the public offerings of debt and equity on August 5, 1998.
       (See Note 1).

       The Company's net loss for the quarter ended September 30, 1999 was
       $7,283,034 or $0.45 per share loss. This compares to a net loss before
       extraordinary item of $4,798,298 or $.48 per share net loss in the same
       period last year. If the reorganization had occurred on January 1, 1998
       instead of July 8,1998,the pro forma per share net loss before
       extraordinary item for the quarter ended September 30, 1998 would have
       been $0.30. The Company's net loss for the nine months ended
       September 30, 1999 was $19,457,392 or $1.21 per share net loss. This
       compares to a net loss before extraordinary item of $5,927,962 or $1.66
       per share net loss in the same nine month period last year. If the
       reorganization had occurred on January 1, 1998 instead of July 8,1998,the
       pro forma per share net loss before extraordinary item for the nine
       months ended September 30, 1998 would have been $0.37. The
       extraordinary item in the third quarter ending September 30, 1998
       amounted to $1,335,004 and would have been a per share net loss of
       $0.08. The extraordinary item represented the write off of deferred
       financing costs associated with two construction loans repaid in the
       third quarter with the proceeds from the Company's public offerings.

       On July 8, 1998, the Company's entered into a Restructuring and
       Contribution Agreement (the "Reorganization") with major shareholders
       Central Maine Power Company ("CMP"), Maine Com Services, a wholly owned
       subsidiary of CMP, and Mode 1, an affiliate of Northeast Utilities ("NU")
       (see Note 1 to the Consolidated Financial Statements included in the
       Company's Form 10K for the year ended December 31, 1998).

       LIQUIDITY AND CAPITAL RESOURCES

       Net cash (used in) provided by operating activities was $(21,799,367)and
       $587,795 for the quarters ended September 30, 1999 and 1998,
       respectively. Net cash used by operating activities for the quarter ended
       September 30, 1999 was due primarily to the net operating loss of the
       Company.

       Cash used in investing activities totaled $64,989,033 and $80,375,186 for
       the nine months ended September 30, 1999 and 1998, respectively. Cash
       requirements consisted primarily of the cost of network construction and
       equipment, and purchases of short-term investments.

       Cash flow from financing activities totaled $34,836,989 and $146,367,317
       for the nine months ended September 30, 1999 and 1998, respectively. Cash
       flow from financing activities during the nine months ended September 30,
       1999 was due to a decrease in restricted cash and investments associated
       with the payment of interest amounting to $22,950,000 on the 12 3/4%
       Senior Notes and an increase in network and long-term accounts payable.
       Cash flow from financing activities during the nine months ended
       September 30,1998 was due primarily to the completed initial public
       offerings of 4,000,000 common shares at $12.00 and sold $180.0 million of
       12 3/4% Senior Notes and an advance on a construction loan from CMP.

       The Company anticipates that it will continue to experience negative cash
       flow as it expands the NEON fiber optic network, constructs additional
       networks and markets its services to an expanding customer base. Cash
       provided by operations will not be sufficient to fund the expansion and
       development of the NEON system as currently planned, and, as a result,
       the Company intends to use the proceeds from the August 5, 1998 Public
       Offering to fund this expansion and development. Management believes it
       has sufficient funds to substantially complete the NEON system as
       currently planned as well as fund the Company's other working capital
       requirements. The expectations of future capital expenditures are based
       on the Company's current estimates. There can be no assurance that actual
       expenditures will not significantly exceed current estimates or that the
       Company will not accelerate its capital expenditures program.



<PAGE>

       YEAR 2000 READINESS

       The Year 2000 issue is faced by substantially every company in the
       computer or information technology industries, as well as every company
       which relies on computer systems. The Company has assessed its exposure
       to the

                                                                   Page 11 of 20


<PAGE>


       Year 2000 problem in the following major areas: (i) Year 2000 problems
       relating to the Company's internal systems; (ii) Year 2000 problems of
       the Company's critical vendors, namely those that could have a material
       adverse effect on the Company's business, results of operations or
       financial condition; and (iii) Year 2000 problems of the Company's
       customers that could result in a reduction in demand for the Company's
       fiber optic products and services.

       INTERNAL SYSTEMS. The Company has determined the nature and extent of the
       work required to make its internal information technology ("IT") and
       non-IT systems Year 2000 compliant and has used a third party consultant
       to assist it in this effort. The Company's internal information systems
       consist of accounting and project management software. The licensors of
       the software have advised the Company that their products are Year 2000
       compliant. The Company is also evaluating its non-IT systems such as
       micro-controllers. The Company has yet to determine whether these systems
       will be remedied or replaced. However, all current hardware and software
       used by the Company is less than two years old, and the Company does not
       foresee a material adverse effect on the Company's business, operating
       results and financial condition from Year 2000 issues related to its
       internal software or hardware. The Company's costs of addressing its Year
       2000 issues amounted to less than $10,000.

       CRITICAL VENDORS. The Company relies on third party vendors of products
       and services in the conduct of its business and as a result, received
       assurances from its critical vendors that there will not be a material
       interruption in their supply of those products and services as a result
       of the Year 2000 problem. Failure of a critical supplier to solve a Year
       2000 problem in its accounting systems, production control and/or
       shipping systems could have a material adverse effect on the Company's
       business, operating results and financial condition. From the responses
       the Company has received to date, the Company's critical vendors are
       either Year 2000 compliant or have developed or put in place an
       aggressive and comprehensive readiness strategy. The Company's fiber
       optic network system (the "NEON" system) is also dependent upon the
       transmission and distribution infrastructure of electric utilities in the
       Northeast. Should one or more of these utilities experience disruption in
       providing electricity to their customers as a result of a Year 2000
       problem, the utility has the right under its agreements with the Company
       to take the necessary action to restore electrical service to their
       customers, which could in turn disrupt the operation of the NEON system.
       However, these electric utilities are committed to minimizing risks to
       the NEON system and to providing adequate resources to implement any
       changes necessary to be Year 2000 compliant. See "Certain Factors That
       May Affect Future Results C ROWS AND IRUS" below).

       CUSTOMERS. The Company is also conducting a survey of its major customers
       to determine their Year 2000 readiness. Although responses to date
       indicate that they are either Year 2000 compliant or have put in place a
       comprehensive readiness strategy, there can be no assurance that the
       Company's customers will not delay scheduled projects as a result of
       their own Year 2000 problems. Any such delays could have a material
       adverse effect on the Company's business, operating results and financial
       condition. To date the Company has not experienced any lack of demand for
       its services related to the Year 2000 problem.

       The Company through September 30, 1999 has not incurred nor does it
       expect to incur any material

                                                                   Page 12 of 20


<PAGE>





       costs directly related to the Year 2000 computer problem. Pending
       continuing investigation of its exposure to the Year 2000 problem the
       Company is unable to determine the costs of solving any Year 2000 problem
       that may occur in the future.

       CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

       The future financial and operating results of the Company remain
       difficult to predict and are subject to various risks and uncertainties
       described below as well as elsewhere in this Report.

       LIMITED OPERATING HISTORY; CASH FLOW. The Company's current business has
       only a very limited history. As a facilities-based provider of fiber
       optic transmission capacity, the Company is in the early stages of
       constructing the NEON system throughout the Northeast. Although portions
       of the NEON system are currently operational, the Company does not expect
       to begin to realize any substantial revenue until the NEON system is
       substantially completed. The Company does not expect to achieve
       substantial completion of the NEON system as currently planned until the
       end of the first quarter in the year 2000. The Company has incurred net
       losses from inception. The Company's future operating results will
       fluctuate annually and quarterly due to several factors, some of which
       are outside the control of the Company. These factors include the cost of
       construction of the NEON system (including any unanticipated costs
       associated therewith), the availability of rights-of-way ("ROWs"), the
       cost and timely availability of equipment and construction contractors,
       pricing strategies for its services, changes in the regulatory
       environment, changes in telecommunications technology and changes in
       general and local economic conditions. In addition, the extent of the
       demand for the Company's services cannot be estimated with any degree of
       certainty.

       COMPLETION OF THE NEON SYSTEM. The development of the Company's business,
       the completion of the NEON system and the development of the Company's
       services and customer base will require significant expenditures, most of
       which will need to be made before the Company is able to offer services
       over substantially all of the NEON system. These expenditures, together
       with associated operating expenses, will adversely impact cash flow and
       profitability until an adequate customer base is established. To date,
       the Company has expended substantial amounts on construction of the NEON
       system. Such cash expenditures have been funded by proceeds from the
       Company's financing activities. Accordingly, the Company has generated
       negative cash flow. There can be no assurance that the Company will not
       need to obtain additional capital to complete the NEON system, that
       additional financing will be available to the Company or, if available,
       that it can be obtained on a timely basis and on acceptable terms.

       The Company's ability to achieve its strategic objectives will depend in
       large part upon the successful, timely and cost-effective completion of
       the NEON system. Factors that could affect such completion include, among
       other things, (i) obtaining adequate ROWs on acceptable terms in and
       between major cities in the Northeast not covered by utility ROWs
       currently available to the Company,(ii) obtaining required governmental
       permits and certifications where necessary and (iii) delays or
       disruptions resulting from physical damage, power loss, defective
       equipment or the failure of third-party suppliers or contractors to meet
       their obligations in a timely and cost-effective manner.

       In order to complete the NEON system, the Company must obtain additional
       rights-of-way and other permits to install fiber optic cables from third
       parties, including electric utilities, transit

                                                                   Page 13 of 20


<PAGE>





       authorities and others. The Company has not yet obtained the necessary
       ROWs to expand the NEON system to encompass the planned New York local
       loop. The Company may be required to pay cash or provide in-kind
       facilities for these ROWs or other ROWs to accommodate extensions to the
       NEON system. The Company is unable to predict with certainty the cost of
       obtaining necessary ROWs, and there can be no assurance that it will be
       able to obtain such ROWs on acceptable terms, if at all. In addition, if
       CMP or NU or any other entity with whom the Company has an agreement
       seeks bankruptcy or other protection from its creditors, the Company's
       ability to exercise rights to obtain route extensions or other rights
       under its agreement with such entity may be adversely affected.

       CUSTOMERS; MARKET DEMAND. The Company's ability to implement its business
       strategy is also dependent upon the Company's ability to secure a market
       for its leased dark and lit fiber optic capacity and obtain service
       contracts with communications carriers. Many of the Company's targeted
       customers are companies that may also be the Company's potential
       competitors. If the Company's services are not satisfactory or cost
       competitive, the Company's potential customers may elect to develop other
       alternatives in the Company's markets. The Company has incurred and will
       continue to incur significant operating expenses and has made and will
       continue to make significant capital investments, in each case based upon
       certain expectations as to the anticipated customer demand for the
       Company's services in its markets.

       The Company's business strategy assumes that its current and future
       service revenues will come from a limited number of communications
       carriers. Therefore, dissatisfaction with the Company's services by a
       relatively few number of customers could have a material adverse effect
       on the Company's business, financial condition and results of operations.
       The Company is aware that certain inter-exchange carriers are
       constructing or considering the construction of new networks, or buying
       companies with local networks, which could reduce their need for the
       Company's services.

       DEPENDENCE ON MANAGEMENT. The Company's future performance will depend to
       a significant extent upon the efforts and abilities of its senior
       executives. There can be no assurance that the Company will be able to
       attract and retain qualified executives to achieve its business
       operations.

       ROWS AND IRUS. The construction and operation of the NEON system by the
       Company is dependent upon indefeasible rights of use ("IRUs") granted to
       the Company in ROWs and in fiber optic filaments. IRUs, which are created
       by contract, have been used extensively in the telecommunications
       industry. Although IRUs confer upon the holder certain indicia of
       ownership, legal title and the right to control the ROW or the fiber
       optic filaments, as the case may be, remain in the hands of the grantor.
       Therefore, while IRUs might be construed as conferring a significant
       equitable right in the ROW or the fiber optic filaments, as the case may
       be, the legal status of IRUs remains uncertain, and there can be no
       assurance that a trustee in bankruptcy would not void an IRU in the event
       of the bankruptcy of the grantor of such IRU. In addition, the IRUs
       granted by CMP and NU are subject to pre-existing, system-wide mortgages
       used to secure utility bonds issued by those companies. The Company has
       sought acknowledgments from the NU companies' indenture trustees that the
       Company's rights under the agreements with NU would be recognized in the
       event of the foreclosure of the related mortgage. Although agreements
       have been obtained from certain of the indenture trustees, if such an
       agreement is not obtained from the trustees for one or more of the NU
       companies, a default by any such company under its mortgage that resulted
       in the foreclosure of the mortgage

                                                                   Page 14 of 20


<PAGE>





       could result in the Company losing its rights under the NU Agreements in
       the state in which such company operates. The Company has not sought such
       acknowledgments from CMP's indenture trustee because, unlike the NU
       agreements, under the terms of the agreement with CMP, the Company is not
       entitled to such acknowledgments. A default by CMP under its mortgage
       that results in the foreclosure of the mortgage could result in the
       Company losing its rights under the CMP Agreement.

       The Company's IRUs are derivative of the grantor's interest in the real
       property on which the NEON system is located. To the extent that the
       grantor has a limited easement in such property, the IRUs granted to the
       Company may be alleged to be insufficient for the Company's uses. Certain
       landowners have asserted claims against the Company on this basis, and,
       to date, rather than electing to contest the landowner's interpretation
       of the scope of the easement, the Company has made a payment to such
       landowner to acquire a ROW meeting the Company's requirements. The
       Company believes that the easements granted by a substantial number of
       landowners to grantors of the Company's IRUs are similar in scope to
       those with respect to which claims have been asserted, and there can be
       no assurance that additional claims will not be made in the future.

       The agreements with NU and CMP contain provisions which acknowledge the
       right of NU and CMP, respectively, to make the provision of electrical
       services to their own customers their top priority; NU and CMP are
       required only to exercise "reasonable care" with respect to the Company's
       facilities and are otherwise free to take whatever actions they deem
       appropriate with respect to ensuring or restoring service to their
       electricity customers, any of which actions could impair the operation of
       the NEON system. In addition, certain of the Company's construction
       efforts are constrained by the ability of NU and CMP to de-energize
       segments of their transmission and distribution facilities in order to
       permit construction crews to work safely. The Company has experienced
       construction delays in the past as a result of the inability to timely
       de-energize certain segments and may experience such delays in the
       future.

       COMPETITION. The telecommunications industry is highly competitive. The
       Company faces substantial competition from incumbent local exchange
       carriers ("ILECs"), which currently dominate their local
       telecommunications markets, and competitive local exchange carriers
       ("CLECs"), most of which have greater financial and other resources than
       the Company. In addition to ILECs and CLECs, potential competitors
       capable of offering services similar to those offered by the Company
       include interchange carriers ("IXCs"), other facilities-based
       communications service providers, cable television companies, electric
       utilities, microwave carriers, satellite carriers, wireless telephone
       system operators and end-users with private communications networks. NU
       and CMP each own or have an IRU in certain fibers in the cable that
       includes the NEON system, which permit NU and CMP to compete directly
       with the Company in the future if they are not using these fibers for
       their own corporate requirements. The Company's ROWs are nonexclusive in
       that other service providers (including the utilities themselves) could
       install competing networks using the same ROWs.

       In the future, the Company may be subject to more intense competition due
       to the development of new technologies, an increased supply of domestic
       and international transmission capacity, the consolidation in the
       industry among local and long distance service providers and the effects
       of deregulation resulting from the Telecommunications Act of 1996 (the
       "1996 Act"). The introduction of new products or emergence of new
       technologies may reduce the cost or increase

                                                                   Page 15 of 20


<PAGE>





       the supply of certain services similar to those provided by the Company.
       The Company cannot predict which of many possible future product and
       service offerings will be crucial to maintain its competitive position or
       what expenditures will be required to develop profitably and provide such
       products and services.

       REGULATORY RISKS. Regulation of the telecommunications industry is
       changing rapidly. Existing and future federal, state, and local
       governmental regulations will greatly influence the viability of the
       Company. Consequently, undesirable regulatory changes could adversely
       affect the Company's business, financial conditions and results of
       operations. For instance, while the Company does not believe that its
       fiber are subject to common carrier regulation by the Federal
       Communications Commission ("FCC") or under the common carrier provisions
       of the Communications Act of 1934, as amended (the "COMMUNICATIONS ACT"),
       except to the extent its subsidiaries in New York and Connecticut offer
       telecommunications services on a common carrier basis, the Company cannot
       predict the future regulatory status of its business. The FCC has
       recognized a class of private, non-common carriers whose practice it is
       to make individualized decisions on what terms and with whom to deal.
       These carriers may be subject to FCC jurisdiction, but are not currently
       extensively regulated. Such private carriers include entities providing
       "telecommunications" for a fee as defined in the 1996 Act, which may
       include certain of the Company's offerings. In the event that the Company
       becomes subject to the FCC's jurisdiction, it will be required to comply
       with a number of regulatory requirements, including, but not limited to
       rate regulation, reporting requirements, special payments, including
       universal service assessments and access charges. Compliance with these
       regulatory requirements may impose substantial administrative burdens on
       the Company. In addition, ILECs, CLECs and IXCs are subject to various
       federal telecommunications laws. Accordingly, changes in federal
       telecommunications law may affect the Company's business by virtue of the
       interrelationships that exist among the Company and many of these
       regulated telecommunications entities. It is difficult for the Company to
       forecast at this time how these changes will affect the Company in light
       of the complex interrelationships that exist in the industry and the
       different levels of regulation.

       The Company is subject to state regulation, which can vary substantially
       from state to state. The Company's subsidiaries in New York and
       Connecticut have obtained authority to provide telecommunications
       services on a certificated common carrier basis. Therefore, such
       subsidiaries are subject to the obligations that applicable law places on
       all similarly certificated common carriers including: the filling of
       tariffs, state regulation of certain service offerings and pricing,
       requirements for interconnection with, and resale to, other carriers,
       payment of regulatory fees and assessments, and reporting requirements.
       At present, the Company does not anticipate that the costs of compliance
       with these regulatory requirements, or any of the regulatory requirements
       of other states to which it might become subject, will have a material
       adverse effect on its operations, and expects its direct competitors to
       be subject to similar regulatory requirements to the extent they operate
       within these states. In some jurisdictions, the Company's pricing
       flexibility for intrastate services may be limited because of regulation,
       although the Company's direct competitors are expected to be subject to
       similar restrictions.

       RELIANCE ON THIRD PARTIES; SOURCES OF SUPPLY. The Company has contracted
       to NU and CMP substantially all of the engineering, routine maintenance
       and construction supervision activities associated with the construction
       of that portion of the NEON system located on NU and CMP properties and
       the Company has contracted to various third party contractors, as well as
       CMP,

                                                                   Page 16 of 20


<PAGE>





       the construction of the NEON system. As a result, the Company may have
       less control over the timeliness and quality of the work performed by
       such parties than if such work were to be performed by the Company's own
       employees. In addition, as a result of their activities on behalf of the
       Company, NU, CMP and such contractors may from time to time have access
       to certain proprietary information about the Company.

       The Company is dependent upon third-party suppliers for a number of
       components and parts used in the NEON system. In particular, the Company
       purchases cable that includes fiber optic glass manufactured by Lucent
       Technologies, Inc. ("Lucent"). The Company believes that there are
       alternative suppliers or alternative components for all of the components
       contained in the NEON system. However, any delay or extended interruption
       in the supply of any of the key components, changes in the pricing
       arrangements with its suppliers and manufacturers or delay in
       transitioning a replacement supplier's product into the NEON system could
       disrupt the Company's operations.

       TECHNOLOGICAL CHANGES. The telecommunications industry is subject to
       rapid and significant changes in technology. For instance, recent
       technological advances permit substantial increases in transmission
       capacity of both new and existing fiber and the introduction of new
       products or emergence of new technologies may reduce the cost or increase
       the supply of certain services similar to those provided by the Company.

       OTHER FACTORS. Implementation of the Company's business strategy also
       will require substantial growth in the Company's management staff,
       support systems and other operations and may be affected by factors such
       as (i) the availability of financing and regulatory approvals; (ii) the
       existence of strategic alliances or relationships; (iii) technological,
       regulatory or other developments in the Company's business; (iv) changes
       in the competitive climate in which the Company operates; and (v) the
       emergence of future opportunities.

       The Company anticipates that prices for its services to carriers
       specifically, and interstate services in general, will continue to
       decline over the next several years due primarily to (i) price
       competition as various network providers continue to install networks
       that compete with the NEON system, (ii) technological advances that
       permit substantial increases in the transmission capacity of both new and
       existing fiber and (iii) strategic alliances or similar transactions,
       such as long distance capacity purchasing alliances among certain ILECs,
       that increase customer purchasing power.

       The Company is not currently engaged in the transmission of voice, data
       or video services and does not provide switched voice and data services.
       Accordingly, the Company, unlike some telecommunications companies,
       derives and expects to continue to derive substantially all of its
       revenues from the leasing of fiber optic capacity to its customers, many
       of whom transmit voice, data or video information or provide switched
       voice and data services. The limited nature of the Company's current
       services could limit potential revenues and result in the Company having
       lower revenues than competitors which provide a wider array of services.

       The Company's success in marketing its services to its customers requires
       that the Company provide competitive reliability, capacity and security
       via its network. The Company's network and the infrastructures upon which
       it depends are subject to physical damage, power loss, capacity
       limitations, software defects, breaches of security and other disruptions
       beyond the

                                                                   Page 17 of 20


<PAGE>





       control of the Company that may cause interruptions in service or reduced
       capacity for customers. The Company's agreements with its customers
       typically provide for the payment of outage related credits (a
       predetermined reduction or offset against the Company's lease rate when a
       customer's leased facility is non-operational or otherwise does not meet
       certain operating parameters) or damages in the event of a disruption in
       service, which credits or damages could be substantial.

       The Company is highly leveraged. The Company's high degree of leverage
       could have adverse consequences to the holders of the Company's
       securities, including, among other things: (i) commencing on August 15,
       2002, a substantial portion of the Company's cash flow will be dedicated
       to the payment of the Company's interest expense with respect to the
       Company's 12 3/4% Senior Notes (the Notes) and such cash flow may be
       insufficient to meet its payment obligations on the Notes in addition to
       paying other obligations of the Company as they become due; (ii) the
       Company's ability to obtain any necessary financing in the future for
       completion of the NEON system or other purposes may be impaired; (iii)
       certain of the future borrowings by the Company may be at variable rates
       of interest that could cause the Company to be vulnerable to increases in
       interest rates; (iv) the Company may be more leveraged than its
       competitors, which may place the Company at a competitive disadvantage;
       and (v) the Company may be vulnerable to a downturn in its business or
       the economy generally or to delays in or increases in the cost of
       constructing the NEON system. There can be no assurance that the Company
       will be able to generate sufficient cash flow to pay its indebtedness and
       its other obligations as they become due.

       The indenture under which the Notes were issued imposes significant
       operating and financing restrictions on the Company and its present and
       future subsidiaries. These restrictions affect, and in certain cases
       significantly limit or prohibit, among other things, the ability of the
       Company and its subsidiaries to incur certain indebtedness, pay dividends
       and make certain other restricted payments, create liens, issue and sell
       capital stock or subsidiaries, guarantee certain indebtedness, sell
       assets or consolidate, merge or transfer all or substantially all of
       their assets.

       CONTROLLING STOCKHOLDERS. CMP and NU beneficially own or control a
       majority of the outstanding Common Stock of the Company. As a result of
       their stock ownership, these stockholders acting together will be able to
       continue to elect the members of the Board of Directors and decide all
       matters requiring stockholder approval and certain conflicts may arise
       between the interests of CMP and NU and the security holders of the
       Company.

       ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

       The Company is exposed to market risk related to changes in interest
       rates, but does not believe that this exposure is material. The Company
       does not use derivative financial instruments for speculative or trading
       purposes.

       INTEREST RATE SENSITIVITY

       The Company maintains a short-term investment portfolio consisting mainly
       of corporate debt securities and U.S. government agency discount notes
       with an average maturity of less than six months. These held-to-maturity
       securities are subject to interest rate risk and will fall in value if

                                                                   Page 18 of 20


<PAGE>


       market interest rates increase. If market interest rates were to increase
       immediately and uniformly by 10% from levels that existed at September
       30, 1999, the fair value of the portfolio would decline by an immaterial
       amount. Since the Company has the ability to hold its fixed income
       investments until maturity, the Company would not expect its operating
       results or cash flows to be materially affected.

       PART II - OTHER INFORMATION

       ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

       (a)    EXHIBITS

              Exhibit 27 - Financial Data Schedule (EDGAR filing only)

       (b)    REPORTS ON FORM 8-K

              No Reports on Form 8-K were filed during the quarter covered by
              this Report.

                                   SIGNATURES

       Pursuant to the requirements of the Securities Exchange Act of 1934, the
       registrant has duly caused this report to be signed on its behalf by the
       undersigned thereunto duly authorized.

                                       NORTHEAST OPTIC NETWORK, INC.
                                       (Registrant)

       Date: Nov. 15, 1999              By: /s/ Vincent C. Bisceglia
                                          -------------------------------------
                                          Vincent C. Bisceglia
                                          Chairman & Chief Executive Officer

       Date: Nov. 15, 1999              By: /s/ William F. Fennell
                                          -------------------------------------
                                          William F. Fennell
                                          Chief Financial Officer

                                                                   Page 19 of 20


<PAGE>





                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                    DESCRIPTION
          <S>               <C>
          27                Financial Data Schedule

</TABLE>


                                                                   Page 20 of 20