<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 MARCH 31, 1999

                                       OR

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

                      For the transition period from  -  to  -
                                                    ----   ----

                        COMMISSION FILE NUMBER 000-24653

                          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)

            391 TOTTEN POND ROAD
                SUITE 401
           WALTHAM, MASSACHUSETTS                               02451
   (Address of principal executive offices)                   (Zip Code)

               Registrant's telephone number, including area code:
                                 (781) 890-6868

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 March 31, 1999 there were 16,077,738 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:

<TABLE>
<S>                                                                              <C>
Condensed Consolidated Balance Sheets at March 31, 1999 (Unaudited)
and December 31, 1998.............................................................3

Condensed Consolidated Statements of Operations for the three month periods
ended March 31, 1999 and March 31, 1998 (Unaudited)...............................4

Condensed Consolidated Statements of Cash Flows for the three month periods
ended March 31, 1999 and March 31, 1998 (Unaudited)...............................5

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

</TABLE>


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


                                                                    Page 2 of 20

<PAGE>


                          NORTHEAST OPTIC NETWORK, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                     MARCH 31,       DECEMBER 31,
                                                                                       1999              1998
<S>                                                                                <C>              <C>         
                                      ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                                                         $ 43,273,561     $ 57,737,792
 Short-term restricted cash and investments                                          11,256,861       23,149,975
 Short-term investments                                                              55,133,067       48,581,949
 Accounts receivable                                                                    187,999          111,915
 Refundable taxes from related party                                                         --          755,838
 Prepaid expenses and other current assets                                              953,542          506,947
                                                                                   ------------     ------------

    Total current assets                                                            110,805,030      130,844,416
                                                                                   ------------     ------------

PROPERTY AND EQUIPMENT, NET                                                          67,364,457       52,922,677

RESTRICTED CASH AND INVESTMENTS                                                      52,081,820       51,371,859

INTANGIBLE ASSETS, NET                                                               56,600,474       56,773,282
                                                                                   ------------     ------------

                                                                                   $286,851,781     $291,912,234
                                                                                   ------------     ------------
                                                                                   ------------     ------------
                        LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Current maturities of long-term obligations                                       $     19,225     $    127,619
 Accounts payable                                                                     4,712,979          322,285
 Accounts payable construction-in-progress                                            3,341,924        2,647,719
 Accrued expenses                                                                     6,948,457       13,526,702
 Accrued right-of-way fees, related party                                               886,322        1,084,325
 Deferred revenue                                                                     1,071,198        1,168,900
                                                                                   ------------     ------------

    Total current liabilities                                                        16,980,105       18,877,550
                                                                                   ------------     ------------

LONG-TERM ACCOUNTS PAYABLE                                                            2,099,585               --
                                                                                   ------------     ------------

LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES                                      180,000,000      180,000,000
                                                                                   ------------     ------------

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                               --              --

COMMITMENTS AND CONTINGENCIES

CMP WARRANT                                                                                  --              --

STOCKHOLDERS' EQUITY:
 Common stock, $.01 par value-
 Authorized--30,000,000 shares; 16,077,783 and 16,066,333
  shares issued and outstanding March 31, 1999 and December 31, 1998,
  respectively                                                                          160,778          160,663
 Warrants                                                                                 8,595            8,595
 Additional paid-in capital                                                         108,106,256      108,105,684
 Accumulated deficit                                                                (20,503,538)     (15,240,258)
                                                                                   ------------     ------------

    Total stockholders' equity                                                       87,772,091       93,034,684
                                                                                   ------------     ------------

                                                                                   $286,851,781     $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
                                                                             MARCH 31,
                                                                      1999             1998
<S>                                                               <C>               <C> 
REVENUES:
 Contract                                                         $   421,481       $ 146,257
 Other service                                                         99,475           5,106
                                                                  -----------       ---------
   Total revenues                                                     520,956         151,363
                                                                  -----------       ---------

EXPENSES:
 Cost of sales                                                        928,988         247,386
 Selling, general and administrative                                1,321,373         225,122
 Depreciation and amortization                                        794,978         302,013
                                                                  -----------       ---------

   Total expenses                                                   3,045,339         774,521
                                                                  -----------       ---------

   Loss from operations                                            (2,524,383)       (623,158)

OTHER INCOME (EXPENSE):
 Interest income and other, net                                     2,240,764          30,322
 Interest expense                                                  (4,979,661)        (91,816)
                                                                  -----------       ---------

   Total other income (expense)                                    (2,738,897)        (61,494)

   Loss before minority interest in subsidiaries' earnings and
   benefit from income taxes                                       (5,263,280)       (684,652)

MINORITY INTEREST                                                          --         314,498

PROVISION FOR (BENEFIT FROM) INCOME TAXES                                  --         (77,000)

NET LOSS                                                          $(5,263,280)      $(293,154)
                                                                  -----------       ---------
                                                                  -----------       ---------

BASIC AND DILUTED LOSS PER SHARE                                  $     (0.33)      $   (1.03)
                                                                  -----------       ---------
                                                                  -----------       ---------

BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING              16,070,027         284,828
                                                                  -----------       ---------
                                                                  -----------       ---------

</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>

                                                                         THREE MONTHS ENDED MARCH 31,
                                                                            1999             1998
<S>                                                                     <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                               $ (5,263,280)    $  (293,154)
 Adjustments to reconcile net loss to net cash (used in)
  provided by operating activities-
 Accretion of long-term obligations                                               --          26,642
 Depreciation and amortization                                               794,978         302,013
 Amortization of deferred financing costs                                    156,661              --
 Changes in assets and liabilities-
  Accounts receivable                                                        (76,084)        865,651
  Refundable taxes from related party                                        755,838        (126,641)
  Prepaid expenses and other current assets                                 (446,595)        (96,321)
  Accounts payable                                                         4,390,694          (4,122)
  Accrued expenses                                                        (6,776,248)         (7,045)
  Deferred revenue                                                           (97,702)        (14,595)
  Deferred tax liability                                                          --          25,192
                                                                        -------------    ------------
   Net cash (used in) provided by operating activities                    (6,561,738)        677,620
                                                                        -------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of short-term investments                                      (6,551,118)             --
 Purchases of property and equipment                                     (14,837,780)     (3,297,062)
 Increase in intangible assets                                              (382,831)       (243,413)
                                                                        -------------    ------------

   Net cash used in investing activities                                 (21,771,729)     (3,540,475)
                                                                        -------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 (Decrease) increase in construction and long-term accounts
  payable                                                                  2,793,790       1,587,222
 Proceeds from note payable to related party                                      --       1,875,000
 Payments on long-term obligations                                          (108,394)       (131,328)
 Decrease (Increase) in restricted cash and investments                   11,183,153         (19,739)
 Proceeds from exercise of stock options and warrants                            687              --

 Increase in minority interest in subsidiary                                      --        (314,498)
                                                                        -------------    ------------

   Net cash provided by financing activities                              13,869,236       2,996,657
                                                                        -------------    ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                     (14,464,231)        133,802

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

CASH AND CASH EQUIVALENTS, END OF YEAR                                  $ 43,273,561     $ 1,232,254
                                                                        -------------    ------------
                                                                        -------------    ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid during the year for-
  Interest                                                              $ 12,244,324     $   161,555
                                                                        -------------    ------------
                                                                        -------------    ------------
  Taxes                                                                 $         --     $    28,440
                                                                        -------------    ------------
                                                                        -------------    ------------

</TABLE>



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


                                                                    Page 5 of 20

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1)      OPERATIONS

         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 6 of 20

<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 three 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 7 of 20

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<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 March 31, 1999,
              no such shares are issued and outstanding.

         (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.


                                                                    Page 8 of 20

<PAGE>


(6)      SEGMENT DISCLOSURE

         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 March 31,
                                       1999           1998
<S>                                  <C>           <C>     
         Dark fiber revenues         $386,681      $146,257
         Lit fiber revenues            34,800            --
                                     --------      --------
         Total contract revenues     $421,481      $146,257
                                     --------      --------
                                     --------      --------

</TABLE>


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

                                  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 900 route miles, or approximately 70,000
         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 March 31, 1999 amounted to $520,956 an
         increase of $369,593 or 244% compared to $151,363 in the same quarter
         in 1998. The increase in revenues reflects the Company's continuing
         expansion of lit services on the system as well as the recurring lease
         services to existing customers that came on line during the years 1998
         and 1997.

         Cost of sales for the three months ended March 31, 1999 amounted to
         $928,988 an increase of $681,602 compared to $247,386 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.

         Selling, general and administrative expenses amounted to $1,321,373 for
         the quarter ending March 31, 1999 compared to $225,122 in the same
         quarter in 1998. 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 29 from 8 or approximately 263%
         since March 31, 1998.

         Depreciation and amortization expense was $794,978 for the quarter
         ended March 31, 1999 compared to $302,013 for the quarter ended March
         31, 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 $2,738,897 and $61,494 for the quarters
         ending March 31,1999 and March 31,1998, 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 to the Condensed Consolidated Financial Statements).

         The Company's net loss for the quarter ended March 31, 1999 amounted to
         $5,263,280 or $0.33 per share loss. This compares to a net loss of
         $293,154 or $1.03 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 March 31, 1998 would
         have amounted to $0.02, respectively. 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 ($6,561,738)
         and $677,620 for the quarters ended March 31, 1999 and 1998,
         respectively. Net cash used by operating activities for the quarter
         ended March 31, 1999 was due primarily to a decrease in accrued
         interest associated with the payment of interest on the 12 3/4% Senior
         Notes.

         Cash used in investing activities totaled $21,771,729 and $3,540,475
         for the quarters ended March 31, 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 $13,869,236 and $2,996,657
         for the quarters ended March 31, 1999 and 1998, respectively. Cash flow
         from financing activities during the quarter ended March 31, 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.

         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.

         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


                                                                   Page 11 of 20

<PAGE>


         Company is currently in the process of assessing 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 is in the process of determining the
         nature and extent of the work required to make its internal information
         technology ("IT") and non-IT systems Year 2000 complaint and is using 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 is currently unable to estimate the
         costs of addressing its Year 2000 issues, if any, or of possible worst
         case Year 2000 scenarios, and the Company has not yet developed a
         contingency plan for the most reasonably likely worst case scenario.

         CRITICAL VENDORS. The Company relies on third party vendors of products
         and services in the conduct of its business and as a result, is in the
         process of seeking 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 March 31, 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
         limited 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


                                                                   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, in one such case, 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
         March 31, 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: 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 19 of 20

<PAGE>


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

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

</TABLE>


                                                                   Page 20 of 20