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

      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 June 30, 1999 there were 16,099,103 shares
               of the Company's common stock outstanding.


<PAGE>

                          PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S>                                                                            <C>
ITEM 1.  FINANCIAL STATEMENTS:

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

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

Condensed Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1999 and June 30, 1998 (Unaudited)..............................

Notes to Condensed Consolidated Financial Statements...........................
</TABLE>


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






<PAGE>





                          NORTHEAST OPTIC NETWORK, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                             JUNE 30,          DECEMBER 31,
                                                                              1999                1998
                                                                            (unaudited)
<S>                                                                         <C>                   <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                $ 14,209,109          $ 57,737,792
   Short-term restricted cash and investments                                 22,514,120            23,149,975
   Short-term investments                                                     73,202,947            48,581,949
   Accounts receivable, Net                                                      813,189               111,915
   Prepaid expenses and other current assets                                     887,131               506,947
   Refundable taxes from related party                                                 -               755,838
                                                                            ------------          ------------

         Total current assets                                                111,626,496           130,844,416
                                                                            ------------          ------------

PROPERTY & EQUIPMENT, NET                                                     78,768,826            52,922,677
                                                                            ------------          ------------

LONG TERM RESTRICTED CASH & INVESTMENTS                                       41,680,136            51,371,859

INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $2,826,000
AND $1,460,000, RESPECTIVELY                                                  58,269,890            56,773,282
                                                                            ------------          ------------

                                                                            $290,345,348          $291,912,234
                                                                            ------------          ------------
                                                                            ------------          ------------

CURRENT LIABILITIES:
   Current maturities of long-term obligations                              $     10,760           $   127,619
   Accounts payable                                                            1,043,220               322,285
   Accounts payable construction-in-progress                                   8,884,866             2,647,719
   Accrued expenses                                                           12,970,972            13,526,702
   Accrued right-of-way fees, related party                                      886,322             1,084,325
   Deferred revenue                                                            1,139,706             1,168,900
                                                                            ------------          ------------

         Total current liabilities                                            24,935,846            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 & CONTINGENCIES (NOTE 3)

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value-
     Authorized--30,000,000 shares; 16,099,103 and 16,066,333
       shares issued and outstanding at June 30, 1999 and
       December 31, 1998, respectively                                           160,991               160,663
   WARRENTS                                                                        8,595                 8,595
   ADDITIONAL PAID-IN CAPITAL                                                108,361,044           108,105,684
   ACCUMULATED DEFICIT                                                       (27,414,616)          (15,240,258)
                                                                            ------------          ------------

         TOTAL STOCKHOLDERS' EQUITY                                           81,116,014            93,034,684
                                                                            ------------          ------------

                                                                            $290,345,348          $291,912,234
                                                                            ------------          ------------
                                                                            ------------          ------------
</TABLE>

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


<PAGE>


                          NORTHEAST OPTIC NETWORK, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED                       SIX MONTHS ENDED
                                                JUNE 30,                                JUNE 30,
                                        1999                  1998              1999              1998
<S>                                  <C>                    <C>               <C>               <C>
REVENUES:
   Contract                          $   737,461            $  179,661        $  1,158,942      $  325,918
   Other service                         305,384                 2,751             404,859           7,857
                                     -----------            ----------        ------------      -----------

          Total revenues               1,042,845               182,412           1,563,801         333,775
                                     -----------            ----------        ------------      -----------
EXPENSES:
   Cost of sales                       1,448,543               810,892           2,377,531       1,058,278
   Selling, general and
     administrative                    2,111,799               867,637           3,433,172       1,092,759
   Depreciation and amortization       1,205,873               313,645           2,000,851         615,658
                                     -----------            ----------        ------------      -----------

         Total expenses                4,766,215             1,992,174           7,811,554       2,766,695
                                     -----------            ----------        ------------      -----------

          Loss from operations        (3,723,370)           (1,809,762)         (6,247,753)     (2,432,920)
                                     -----------            ----------        ------------      -----------
Other Income (Expense):
   Interest income and other, net      2,001,901                56,550           4,242,665          86,872
   Interest expense                   (5,189,609)             (365,223)        (10,169,270)       (457,039)
                                     -----------            ----------        ------------      -----------

          Total other income
          (expense)                   (3,187,708)             (308,673)         (5,926,605)       (370,167)
                                     -----------            ----------        ------------      -----------

           Loss before minority
           interest in subsidiaries'
           earnings and benefit from
           income taxes               (6,911,078)           (2,118,435)        (12,174,358)     (2,803,087)

MINORITY INTEREST                              -               794,435                   -       1,108,933

BENEFIT FROM INCOME TAXES                      -              (487,480)                  -        (564,480)
                                     -----------            ----------        ------------      -----------

NET LOSS                             $(6,911,078)           $ (836,520)       $(12,174,358)     $(1,129,674)
                                     -----------            ----------        ------------      -----------
                                     -----------            ----------        ------------      -----------

BASIC AND DILUTED LOSS PER SHARE          $ (.43)              $ (2.91)             $ (.76)         $ (3.95)
                                     -----------            ----------        ------------      -----------

BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING            16,082,142               287,835          16,076,085          286,340
                                     -----------            ----------        ------------      -----------
                                     -----------            ----------        ------------      -----------
</TABLE>

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


<PAGE>


                          NORTHEAST OPTIC NETWORK, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED JUNE 30,
                                                                 1999              1998
<S>                                                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                               $    (12,174,358)   $    (1,129,674)
   Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities-
     Accretion of long-term obligations                                 -              26,642
     Depreciation and amortization                               2,000,851            615,658
     Amortization of deferred financing costs                      313,322                  -
     Changes in assets and liabilities-
       Accounts receivable                                        (701,274)           937,307
       Refundable taxes from related party                         755,838           (387,104)
       Prepaid expenses and other current assets                  (380,184)           (85,334)
       Accounts payable                                            720,935            834,064
       Accrued expenses                                           (753,733)           670,354
       Deferred revenue                                            (29,194)           220,133
       Deferred tax liability                                            -             25,000
                                                          ----------------     --------------
         Net cash (used in) provided by operating
         activities                                            (10,247,797)         1,727,046
                                                          ----------------     --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of short-term investments, net                    (24,620,998)                 -
   Purchases of property and equipment                         (29,076,818)       (14,710,954)
   Increase in intangible assets                                  (580,112)        (1,135,495)
                                                          ----------------     --------------

         Net cash used in investing activities                 (54,277,928)       (15,846,449)
                                                          ----------------     --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in construction and long-term accounts
     payable                                                    10,530,635          2,224,223
   Proceeds from note payable to related party                           -         15,775,000
   Payments on long-term obligations                              (116,859)          (274,446)
   Decrease (increase) in restricted cash and investments       10,327,578            (29,983)
   Proceeds from exercise of stock options and warrants            255,688             32,153
   Minority interest in subsidiary                                       -         (1,108,933)
                                                          ----------------     --------------
         Net cash provided by financing activities              20,997,042         16,618,014
                                                          ----------------     --------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS           (43,528,683)         2,498,611

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

CASH AND CASH EQUIVALENTS, END OF PERIOD                  $     14,209,109     $    3,597,063
                                                          ----------------     --------------
                                                          ----------------     --------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the year for-
     Interest                                             $     12,244,324     $      467,502
                                                          ----------------     --------------
                                                          ----------------     --------------
     Taxes                                                $              -     $       34,883
                                                          ----------------     --------------
                                                          ----------------     --------------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
   Exercise of CMP warrant                                $              -     $      532,836
                                                          ----------------     --------------
                                                          ----------------     --------------
</TABLE>

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


<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 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.


<PAGE>



       (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 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 six months of 1999 and 1998. Diluted loss per share excludes
              shares issuable from the assumed exercise of stock options, as
              their effect would be antidilutive.

       (E)    COMPREHENSIVE INCOME

              In June 1997, the 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. SFAS No. 130 is effective for fiscal years beginning
              after December 15, 1997. This new standard does not have any
              impact on the Company's financial statements based on the current
              structure and operations.

       (F)    RECLASSIFICATIONS

              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:
<PAGE>

       PERIOD                              REDEMPTION PRICE
       2003                                   106.375%
       2004                                   104.250
       2005                                   102.125
       Thereafter                             100.000

       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 June 30, 1999,
              no such shares are issued and outstanding.




<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)    SEGMENT DISCLOSURE AND SIGNIFICANT CUSTOMERS

       In July 1997, the FASB issued 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. SFAS No. 131
       is effective for fiscal years beginning after December 15, 1997. Unless
       impracticable, companies would be required to restate prior period
       information upon adoption. The Company analyzes segment reporting based
       on dark fiber and lit fiber facilities revenue only.

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED JUNE 30,             SIX MONTHS ENDED JUNE, 30
                                              1999                  1998                1999                1998
<S>                                         <C>                   <C>              <C>                   <C>
Dark fiber revenues                         $453,707              $179,661         $  840,387            $ 325,918
Lit fiber revenues                           283,754                     -            318,553                    -
                                            --------              --------         ----------            ---------
Total contract revenues                     $737,460              $179,661         $1,158,942            $ 325,918
                                            --------              --------         ----------            ---------
                                            --------              --------         ----------            ---------
</TABLE>

As of December 31, 1998 three customers represented 93% of the accounts
receivable total. They were (59%), (19%) and (15%), respectively.

As of June 30, 1999 four customers represented 70% of the accounts receivable
total. They were (28%), (22%), (10%) and (10%), respectively.

As of June 30, 1998 two customers represented 75% of the recorded revenues.
They were (65%) and (10%), respectively.

As of June 30, 1999 three customers represented 60% of the recorded revenues.
They were (32%), (14%) and (14%), respectively.

<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 900
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 June 30, 1999 amounted to $1,042,845 an
increase of $860,433 or 472% compared to $182,412 in the same quarter in
1998. The increase in revenues reflects the Company's continuing expansion of
lit services on the NEON system, coupled with recurring and non-recurring
collocation revenues and the leased dark fibers to existing customers that
came on line during the years 1998 and 1997. Revenues for the first half
ended June 30, 1999 amounted to $1,563,801 compared to $333,775 an increase
of $1,230,026 or 369%. The increase in revenues reflects the Company's
continuing penetration into the Northeast territory.

Cost of sales for the three months ended June 30, 1999 amounted to $1,448,543
an increase of $637,651 or 79% compared to $810,892 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 six
months ended June 30, 1999 amounted to $2,377,531 compared to $1,058,278 an
increase of $1,319,253 or 125% in the same six-month periods last year. The
increased costs reflect the continuing build-out and expansion of the
communication network into the Northeast territory.

Selling, general and administrative expenses amounted to $2,111,799 for the
quarter ending June 30, 1999 compared to $867,637 an increase of $1,244,162
or 143% in the same quarter in 1998. Selling, general and administrative
expenses in the six months ended June 30,1999 amounted to $3,433,172, an
increase of $2,340,413 or 214%. Increased personnel and related costs
continue to grow as the Company expands its efforts to meet customer
requirements. The Company's headcount has increased to 37 from 13

<PAGE>

or approximately 185% since June 30, 1998.

Depreciation and amortization expense was $1,205,873 for the quarter ended
June 30, 1999 compared to $313,645 for the quarter ended June 30, 1998.
Depreciation and amortization expense amounted to $2,000,851 for the six
months ended June 30, 1999 compared to $615,658 for the same six month period
as of June 30,1998. The increase resulted from placing into service
additional segments of the NEON system and the amortization of goodwill
resulting from the reorganization that occurred on July 8, 1998 referred to
below.

Net interest expense totaled $3,187,708 and $308,673 for the quarters ending
June 30,1999 and June 30,1998, respectively. For the six month periods ending
June 30,1999 and June 30, 1998 net interest expense amounted to $5,926,605
and $370,167. 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 to the Condensed Consolidated Financial
Statements).

The Company's net loss for the quarter ended June 30, 1999 amounted to
$6,911,078 or $0.43 per share loss. This compares to a net loss of $836,520
or $2.91 per share 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 loss for the quarter ended June 30, 1998 would have amounted to $0.05.
The Company's net loss for the six months ended June 30, 1999 amounted to
$12,174,358 or $0.76 per share loss. This compares to a net loss of
$1,129,674 or $3.95 per share loss in the same six-month period last year. If
the reorganization had occurred on January 1, 1998 instead of July 8,1998,the
pro forma per share loss for the six months ended June 30, 1998 would have
amounted to $0.07.

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 ($10,247,797) and
$1,727,046 for the quarters ended June 30, 1999 and 1998, respectively. Net
cash used by operating activities for the quarter ended June 30, 1999 was
related primarily to net operating loss of the Company.

Cash used in investing activities totaled $54,277,928 and $15,846,449 for the
six months ended June 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 $20,997,042 and $16,618,014 for
the six months ended June 30, 1999 and 1998, respectively. Cash flow from
financing activities during the six months ended June 30, 1999 was due to a
decrease in restricted cash and investments associated with the payment of
interest amounting to $12,240,000 on the 12 3/4% Senior Notes offset by an
increase in construction and long-term accounts payable. Cash flow from
financing activities during the six months ended June 30, 1998 was due
primarily to 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 Offerings
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 that relies on
computer systems. The Company has assessed its exposure to the 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, has obtained
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, 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 June 30, 1999 has not incurred nor does it expect to
incur any material 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.



<PAGE>


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 still in the process 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 1999. 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 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


<PAGE>

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 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.

<PAGE>

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 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 communications" 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
litigations 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

<PAGE>

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, 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 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.

<PAGE>

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.


<PAGE>


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 market interest
rates increase. If market interest rates were to increase immediately and
uniformly by 10% from levels that existed at June 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ON MAY 26,1999
THE COMPANY HELD ITS ANNUAL MEETING OF STOCKHOLDERS. TWO MATTERS WERE
SUBMITTED TO A VOTE OF SECURITY HOLDERS:

         THE ELECTION OF SEVEN DIRECTORS TO SERVE FOR A TERM OF ONE YEAR AND
UNTIL HIS OR HER SUCCESSOR IS ELECTED AND QUALIFIED. THE RESULTS OF THE
VOTING WERE AS FOLLOWS:

         NOMINEE                   VOTES FOR                   VOTES WITHHELD
         VINCENT C. BISCEGLIA      15,800,697                      900
         VICTOR COLANTONIO         15,800,697                      900
         CATHERINE COURAGE         15,800,647                      950
         JOHN H. FORSGREN          15,772,397                      29,200
         DAVID E. MARSH            15,772,397                      29,200
         F. MICHAEL MCCLAIN        15,772,397                      29,200
         GARY D. SIMON             15,772,397                      29,200

TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE CURRENT YEAR. THE RESULTS OF THE VOTING WERE AS
FOLLOWS:

         FOR                  AGAINST          ABSTAIN           NON-VOTES
         15,778,337           22,500           760               -0-


         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.

<PAGE>

                                   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: May 13, 1999            By: /s/ Vincent C. Bisceglia
                              -------------------------------------
                              Vincent C. Bisceglia
                              Chairman & Chief Executive Officer

Date: May 13, 1999            By: /s/ William F. Fennell
                              -------------------------------------
                              William F. Fennell
                              Chief Financial Officer


<PAGE>





                                  EXHIBIT INDEX


        EXHIBIT
          NO.                    DESCRIPTION

          27                Financial Data Schedule