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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

OR

|o | 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: 000-28-559

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Universal Access Global Holdings Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

36-4408076(I.R.S. Employer Identification No.)233 S. Wacker Drive, Suite 600
Chicago, Illinois(Address of principal executive offices)

60606(Zip Code)


(312) 660-5000(Registrant's telephone number, including area code)

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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 ý    No o

The
number of shares outstanding of the issuer's common stock, par value $0.01, as of April 30, 2002 was 100,255,146 shares.

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Universal Access Global Holdings Inc.  Form 10-Q  Table of Contents

|Part I                |  |                                                                                                                |  |      
|--------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | -----
|Financial Information |  |                                                                                                               
|Item 1.               |  | Condensed Consolidated Financial Statements                                                                    |  |      
|                      |  | Condensed Consolidated Balance Sheets at March 31, 2002 and December 31, 2001 (Unaudited)                      |  | 3    
|                      |  | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2002 and 2001 (Unaudited) |  | 4    
|                      |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 (Unaudited) |  | 5    
|                      |  | Notes to Condensed Consolidated Financial Statements                                                           |  | 6-9  
|Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                          |  | 10-27
|Item 7A.              |  | Quantitative and Qualitative Disclosures about Market Risk                                                     |  | 28   
|Part II               |  |                                                                                                                |  |      
|Other Information     |  |                                                                                                               
|Item 1.               |  | Legal Proceedings                                                                                              |  | 29   
|Item 2.               |  | Changes in Securities and Use of Proceeds                                                                      |  | 30   
|Item 6.               |  | Exhibits and Reports on Form 8-K                                                                               |  | 31   
|Signatures            |  | 32                                                                                                            

2

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PART I. FINANCIAL INFORMATION        ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        UNIVERSAL ACCESS GLOBAL HOLDINGS INC. AND SUBSIDIARIES        CONDENSED
CONSOLIDATED BALANCE SHEETS        (in thousands, except per share data)    (unaudited)

|                                                        |                                                                                                                                                                                | March 31,
2002             |                                            | Dec. 31,
2001 |        
|------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------------------------------------ | ------------- | -------
|ASSETS                                                  |                                                                                                                                                                                |                            |                                            |               |        
|Current assets:                                         |                                                                                                                                                                                |                            |                                            |               |        
|                                                        | Cash and cash equivalents                                                                                                                                                      |                            | $                                          | 16,705        |        
|                                                        | Short-term investments                                                                                                                                                         |                            |                                            | 11,230        |        
|                                                        | Accounts receivable, less allowance of doubtful accounts of $3,367 and $2,483                                                                                                  |                            |                                            | 10,601        |        
|                                                        | Accounts receivable related parties, net                                                                                                                                       |                            |                                            |              |        
|                                                        | Other receivables                                                                                                                                                              |                            |                                            | 1,348         |        
|                                                        | Prepaid expenses and other current assets                                                                                                                                      |                            |                                            | 5,614         |        
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|                                                        |                                                                                                                                                                                | Total current assets       |                                            |               | 45,498 
|Restricted cash                                         |                                                                                                                                                                                |                            | 14,869                                     |               |        
|Property and equipment, net                             |                                                                                                                                                                                |                            | 86,371                                     |               |        
|Notes receivable                                        |                                                                                                                                                                                |                            | 1,100                                      |               |        
|Goodwill                                                |                                                                                                                                                                                |                            | 4,472                                      |               |        
|Intangible assets, net                                  |                                                                                                                                                                                |                            | 656                                        |               |        
|Other long-term assets                                  |                                                                                                                                                                                |                            | 3,201                                      |               |        
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|                                                        |                                                                                                                                                                                | Total assets               |                                            | $             | 156,167
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                    |                                                                                                                                                                                |                            |                                            |               |        
|Current liabilities:                                    |                                                                                                                                                                                |                            |                                            |               |        
|                                                        | Accounts payable                                                                                                                                                               |                            | $                                          | 6,488         |        
|                                                        | Non income tax payable                                                                                                                                                         |                            |                                            | 2,047         |        
|                                                        | Accrued compensation                                                                                                                                                           |                            |                                            |              |        
|                                                        | Accrued expenses and other current liabilities                                                                                                                                 |                            |                                            | 18,611        |        
|                                                        | Unearned revenue                                                                                                                                                               |                            |                                            | 11,019        |        
|                                                        | Current portion of term loans                                                                                                                                                  |                            |                                            | 2,354         |        
|                                                        | Current obligation under capital leases                                                                                                                                        |                            |                                            | 2,428         |        
|                                                        | Short-term restructuring liability                                                                                                                                             |                            |                                            | 3,751         |        
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|                                                        |                                                                                                                                                                                | Total current liabilities  |                                            |               | 46,698 
|Term Loans                                              |                                                                                                                                                                                |                            |                                           |               |        
|Obligations under capital leases net of current portion |                                                                                                                                                                                |                            | 239                                        |               |        
|Security deposits payable                               |                                                                                                                                                                                |                            | 314                                        |               |        
|Restructuring liability                                 |                                                                                                                                                                                |                            | 22,024                                     |               |        
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|                                                        |                                                                                                                                                                                | Total liabilities          |                                            |               | 69,275 
|Commitments and contingencies (Note 4)                  |                                                                                                                                                                                |                            |                                           |               |        
|Stockholders' equity:                                   |                                                                                                                                                                                |                            |                                            |               |        
|                                                        | Common stock, $.01 par value; 1,000,000,000 shares authorized; 100,281,862 and 100,492,778 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively |                            |                                            | 1,003         |        
|                                                        | Common stock warrants                                                                                                                                                          |                            |                                            | 129           |        
|                                                        | Additional paid-in-capital                                                                                                                                                     |                            |                                            | 288,102       |        
|                                                        | Deferred stock plan compensation                                                                                                                                               |                            |                                            | (10,222       | )      
|                                                        | Accumulated deficit                                                                                                                                                            |                            |                                            | (189,573      | )      
|                                                        | Accumulated other comprehensive income                                                                                                                                         |                            |                                            | (3            | )      
|                                                        | Notes receivableemployees                                                                                                                                                     |                            |                                            | (2,544        | )      
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|                                                        |                                                                                                                                                                                | Total stockholders' equity |                                            |               | 86,892 
|                                                        |                                                                                                                                                                                |                            |                                            |               |        
|                                                        |                                                                                                                                                                                |                            | Total liabilities and stockholders' equity |               | $      
|                                                        |                                                                                                                                                                                |                            |                                            |               |        

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

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UNIVERSAL ACCESS GLOBAL HOLDINGS INC. AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except per share data)        (unaudited)

|                                                                               |                                                                                                                 | Three Months Ended March 31, |        
|------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | ---------------------------- | -------
|
|Revenues                                                                       |                                                                                                                 | $                            | 29,080 
|Costs and expenses:                                                            |                                                                                                                 |                              |        
|                                                                               | Cost of circuit access (exclusive of depreciation of $1,260 and $55 in 2002 and 2001 respectively, shown below) |                              |        
|                                                                               | Operations & administration (excluding stock plan compensation)                                                 |                              |        
|                                                                               | Operations & administration (stock plan compensation)                                                           |                              |        
|                                                                               | Depreciation & amortization                                                                                     |                              |        
|                                                                               |                                                                                                                 |                              |        
|                                                                               |                                                                                                                 | Total costs and expenses     |        
|                                                                               |                                                                                                                 |                              |        
|                                                                               |                                                                                                                 | Operating loss               |        
|                                                                               |                                                                                                                 |                              |        
|Other income, net                                                              |                                                                                                                 |                              | 378    
|                                                                               |                                                                                                                 |                              |        
|Net loss                                                                       |                                                                                                                 |                              | (12,616
|                                                                               |                                                                                                                 |                              |        
|Basic and diluted net loss per share                                           |                                                                                                                 | $                            | (0.13  
|Weighted average shares used in computing basic and diluted net loss per share |                                                                                                                 |                              | 98,049 

The
accompanying notes are an integral part of these condensed consolidated financial statements.

4

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UNIVERSAL ACCESS GLOBAL HOLDINGS INC. AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)        (unaudited)

|                                                     |                                                     | Three Months Ended March 31,                     |       
|---------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------ | ------
|
|Cash flows from operating activities:                |                                                     |                                                  |       
|                                                     | Net cash used for operating activities              |                                                  | $     
|                                                     |                                                     |                                                  |       
|Cash flows from investing activities:                |                                                     |                                                  |       
|                                                     | Additions to property, plant, & equipment           |                                                  |       
|                                                     | Proceeds from sales of property, plant, & equipment |                                                  |       
|                                                     | Increase in notes receivable                        |                                                  |       
|                                                     | Sale of short-term investments                      |                                                  |       
|                                                     |                                                     |                                                  |       
|                                                     |                                                     | Net cash provided by investing activities        |       
|                                                     |                                                     |                                                  |       
|Cash flows from financing activities:                |                                                     |                                                  |       
|                                                     | Payments on capital lease obligations               |                                                  |       
|                                                     | Payment of long-term and short-term obligations     |                                                  |       
|                                                     | Proceeds from short-term obligations                |                                                  |       
|                                                     | Restriction on cash balance                         |                                                  |       
|                                                     | Issuance of common stock                            |                                                  |       
|                                                     | Proceeds of notes receivableemployee               |                                                  |       
|                                                     |                                                     |                                                  |       
|                                                     |                                                     | Net cash provided (used) by financing activities |       
|                                                     |                                                     |                                                  |       
|Effect of exchange rate changes on cash              |                                                     |                                                  | 14    
|Net increase/(decrease) in cash and cash equivalents |                                                     |                                                  | (4,053
|Cash and cash equivalents, beginning of period       |                                                     |                                                  | 20,758
|                                                     |                                                     |                                                  |       
|Cash and cash equivalents, end of period             |                                                     | $                                                | 16,705
|                                                     |                                                     |                                                  |       
|Non-Cash Financing Activities:                       |                                                     |                                                  |       
|                                                     | Issuance of restricted stock                        |                                                  |       

The
accompanying notes are an integral part of these condensed consolidated financial statements.

5

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UNIVERSAL ACCESS GLOBAL HOLDINGS INC. AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        (In thousands, except share and per share amounts and where otherwise
indicated)        (unaudited)

Note 1Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Universal Access Global Holdings Inc. ("Holdings") and its
subsidiaries (collectively, "the Company" or "we"), and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to state fairly the
financial position and the results of operations for the interim periods. The statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such
rules and regulations. These statements should be read in conjunction with the Financial Statements and Notes thereto included in the Company's 2001 Annual Report on Form 10-K.
Results for fiscal 2002 interim periods are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2002.

Note 2Investments

The Company's short-term investments have original maturities between three and twelve months, are classified as
held-to-maturity and are stated at amortized cost. Investments consist of the following at March 31, 2002 and December 31, 2001, respectively:

March 31,
2002

December 31,
2001Commercial paper

$
999

$
11,665Corporate notes


3,477


5,896Government agencies


6,754


8,738Total investments

$
11,230

$
26,299


Note 3Property and Equipment, Net

Property and equipment consists of the following, stated at cost, at March 31, 2002 and December 31, 2001, respectively:

March 31,
2002

December 31,
2001Furniture and fixtures

$
5,112

$
5,420Leasehold improvements


2,793


1,826UTX equipment


71,015


65,014Computer hardware and software


21,399


19,580Other equipment


2,417


1,787Construction in progress


5,690


7,973108,426


101,600Less: Accumulated depreciation and amortization


(22,055
)

(17,033
)Property and equipment, net

$
86,371

$
84,567


6

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Construction
in progress primarily relates to costs incurred during the expansion of the Company's Universal Transport Exchange ("UTX") facilities.

Note 4Commitments and Contingencies

On November 5, 2001, a complaint was filed in federal court for the Southern District of New York on behalf of a purported class of persons who purchased
the Company's stock between March 16, 2000 and December 6, 2000. The complaint generally alleges that various underwriters engaged in improper and undisclosed activities related to the
allocation of shares in our initial public offering of securities. The complaint brings claims for violation of several provisions of the federal securities law against those underwriters, and also
against the Company and certain of its present and former directors and officers. The Company believes that the allegations are without merit and intends to defend the litigation vigorously.
Accordingly, no amount has been accrued as a liability.

The
Company is a party to certain litigation for which the claimants are seeking damages arising out of a letter of intent that the Company entered into in December 1998 relating
to the potential acquisition of a business. Management believes that this litigation is without merit and no amount has been accrued as a liability.

In
March 2002, a client to whom we had provided telecommunication services, filed for protection under the bankruptcy code. We believe that we validly terminated all agreements
with the client prior to its bankruptcy and we are seeking a determination by the bankruptcy court that the agreements were in fact validly terminated; the client is disputing this request. Under a
court-approved agreement, we continue to provide services to the client at a reduced level. We believe that we have claims against the
client under the terminated agreements, and the client has listed in its bankruptcy filings a potential claim against us arising out of the agreements. In light of the client's financial condition, we
may not realize any value from our claims. We have not accrued any amount as a liability in respect of this potential claim.

In
April and May 2002, several law firms announced that they had filed securities class action lawsuits against us. The complaints, filed in the United States District Court for the
Eastern District of Texas, allege violations of the Securities Act of 1934. The Company expects these complaints, and any similarly filed actions, to be consolidated into a single case. The Company
has not been served with the complaints, but has reviewed copies of the filings. Management believes the lawsuits are without merit and intends to defend the actions vigorously, and we have not
accrued any liability in respect of these actions.

We
have been named as a defendant in an adversary proceeding filed by Sphera Optical Networks, Inc. and Sphera Optical Networks N.A., Inc. (collectively, "Sphera"). The
case is pending in the United States Bankruptcy Court for the District of New Jersey. We and Sphera were parties to an asset purchase agreement and financing agreement pursuant to which we
contemplated purchasing certain of Sphera's assets and we extended post-bankruptcy financing to Sphera. Because several material conditions were not met, we terminated the asset purchase agreement and
financing agreement. Sphera filed suit against us seeking injunctive relief to compel us to complete the asset purchase, unspecified damages relating to the termination of the asset purchase agreement
and subordination of the Company's lien. The request for injunctive relief was denied, and the court will set

7

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a trial date on Sphera's damages and lien subordination claims. We intend to defend this litigation vigorously, and we have not accrued any liability in respect of this matter.

Note 5Comprehensive Income

Comprehensive income, which includes net income and all other non-owner changes in equity during a period, is as follows for the three months ended
March 31, 2002:

Net loss

$
(12,616
)Foreign currency translation adjustments


3Comprehensive net loss

$
(12,613
)


Note 6Restructuring

In the quarter ended September 30, 2001, the Company recorded a restructuring charge of $40.9 million. This charge was reduced by
$4.1 million in the quarter ended December 31, 2001 resulting in a net charge of $35.4 million during the year ended December 31, 2001. Based on the strategic direction of
the Company and the overall state of the telecommunications industry, management made the decision to restructure the Company in an effort to remain on target to achieve the Company's 2002 financial
objectives and reduce administrative costs. The primary aspects of the restructuring plan were: (a) the Company reduced the number of employees in all departments and reorganized departments to
further enhance productivity; (b) based on the reduced number of employees and on operational projections, the Company exited a variety of office facilities and one UTX facility; (c) due
to the reduced number of employees and the amount of space being vacated, the Company wrote down fixed assets, such as computer equipment, furniture and fixtures, and leasehold improvements; and
(d) the Company wrote off the value of the investment it had made in a privately-held company because this company commenced liquidation proceedings during the third quarter. The
workforce reduction affected approximately 150 employees or 40% of June 30, 2001 worldwide employees. The $4.1 million restructuring charge reversal in the fourth quarter of 2001 was
primarily a result of the favorable outcome of lease negotiations with a landlord. In the first quarter of 2002, based on updated information, we revised our previous estimates for severance, benefits
and equipment leases and reduced these portions of the reserve. Also in the first quarter of 2002, based on updated information on the commercial real estate market, we increased the facilities
portion of the reserve.

The
restructuring program is substantially completed, except for facility exit costs. Our ability to sublet facilities at the rates contemplated by the restructuring charge will depend
on market conditions. Remaining cash expenditures related to workforce reductions will be substantially paid by the end of 2002. Amounts relating to facilities will be paid over the respective lease
terms through 2013 and will be net of any sublease recoveries.

8

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The
following summarizes the significant components of the restructuring reserve at March 31, 2002:

|                                                          |  | Balance at December 31, 2001 |  | Incurred Cash Payments |   | Adjustments |   | Balance at March 31, 2002
|--------------------------------------------------------- |  | ---------------------------- |  | ---------------------- | - | ----------- | - | -------------------------
|Severance and benefits                                    |  | 639                          |  | (199                   | ) | (399        | ) | 41                       
|Facility exit costs, net of estimated sublease recoveries |  | 26,529                       |  | (1,539                 | ) | 642         |   | 25,632                   
|Other                                                     |  | 554                          |  | (210                   | ) | (243        | ) | 101                      
|                                                          |  |                              |  |                        |   |             |   |                          
|Total                                                     |  | 27,722                       |  |                        |   |             |   | 25,774                   

Note 7Warrants

In February 2002, we issued warrants for the purchase of 750,000 shares of our common stock to certain stakeholders of Sphera. The warrants had an exercise
price of $0.01 per share but were only exercisable under certain conditions. We have delivered notice of termination of the purchase agreement and believe that the warrants are therefore no longer
exercisable and have delivered notice to the warrant holders to this effect. Accordingly, no accounting is necessary.

9

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

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that
are not statements of historical facts may be deemed to be forward-looking statements. For example, words such as "may", "will", "should", "estimates", "predicts", "potential", "continue", "strategy",
"believes", "anticipates", "plans", "expects", "intends", and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those discussed under the
heading "Factors That May Affect Future Results." The following discussion provides information and analysis of our results of operations for the three month periods ended March 31, 2002 and
2001, and our liquidity and capital resources. You should read the following discussion in conjunction with our consolidated financial statements and the related notes included elsewhere in this
quarterly report as well as the reports we file with the SEC. Amounts are in thousands, except for items otherwise indicated and all share and per share amounts.

Overview

We commenced operations on October 2, 1997 for the purpose of facilitating the provisioning, installation and servicing of dedicated communications
circuits for service providers who buy network capacity and transport suppliers who sell network capacity. To date, we have derived substantially all of our revenues from providing ongoing, dedicated
circuit access. Monthly recurring circuit revenues are generated under client contracts with terms ranging from 12 to 60 months, with an average length of 23 months as of
March 31, 2002. Contracts with our clients may be terminated by the client at any time, subject to additional payments. Circuit charges are billed monthly in advance, and circuit revenues are
recognized in the month that service is provided. Amounts billed in advance are recorded on the balance sheet as accounts receivable and unearned revenue. At March 31, 2002, unearned revenue
was $11.0 million.

The
Company's results have been affected by bankruptcies and credit problems in the telecommunications industry. In the first quarter of 2002, we experienced a bankruptcy filing by one
of our large wholesale clients, as well as circuit disconnections and lengthening new business closing cycles. Other clients that have accounted for revenue of approximately $1.3 million in
monthly revenues
have indicated publicly that they may be forced to file for reorganization under bankruptcy law. In addition, we have provided and currently provide services to several clients that are in bankruptcy,
and although these services generally are entitled to priority as post-bankruptcy services, there can be no assurance that there will not be service interruptions or collectability issues with respect
to services provided to these clients. We have increased bad debt reserves in response to the deterioration of credit in the industry.

Circuit
revenues include bundled charges for provisioning, network management and maintenance services. UTX billings and revenue recognition policies are the same as those described
above for circuit revenues.

Our
clients primarily consist of communications service providers and transport suppliers, such as competitive access providers, incumbent telecommunication service providers and other
application and network service providers. Our three largest clients represented approximately 50% of total revenues for the quarter ended March 31, 2002. Our three largest clients represented
approximately 55% of total revenues for the quarter ended March 31, 2001.

10

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To
date, cost of circuit access has primarily consisted of amounts paid to transport suppliers for circuits. We have negotiated volume discounts and network route-specific discounts
under contracts with many of our suppliers. These contracts generally have terms ranging from three to ten years and include minimum monthly purchase commitments that begin anywhere from six to twelve
months after we enter into the contract. At March 31, 2002, these minimum purchase commitments totaled approximately $3.8 million per month. Our aggregate actual purchases under these
contracts, which averaged approximately $4.3 million per month for the quarter ended March 31, 2002, have exceeded these minimum purchase commitments. However, our actual purchases from
certain individual suppliers have at time been less than our purchase commitments with those suppliers. If our actual purchases fall short of contractual commitments, we may seek to negotiate
alternate arrangements with these suppliers, but in the event that these negotiations are unsuccessful, we may be left with a shortfall that would affect our operating margins.

Operations
and administration expense consists of salaries and employee benefits, costs associated with the development, expansion and maintenance of our Universal Information Exchange
("UIX") databases, and costs associated with sales, marketing, operations, administration and facilities.

In
each year since our inception, we have incurred operating losses and net losses, and have experienced negative cash flows from operations. At March 31, 2002, we had an
accumulated deficit of $189.6 million.

|                                                                                            |  | Three Months Ended March 31, |        
|------------------------------------------------------------------------------------------- |  | ---------------------------- | -------
|
|Net loss                                                                                    |  | $                            | (12,616
|                                                                                            |  |                              |        
|Basic and diluted net loss per share                                                        |  | $                            | (0.13  
|Basic and diluted net loss per share (excluding non-cash stock option compensation expense) |  | $                            | (0.13  
|Weighted average shares used in computing net loss per share                                |  |                              | 98,049 

Results of Operations

Comparison of Quarter Ended March 31, 2002 to Quarter Ended March 31, 2001

Revenues

Revenues increased to $29.1 million for the quarter ended March 31, 2002 from $25.7 million for the quarter ended March 31, 2001.
Revenues for the quarter ended March 31, 2002 decreased $6.6 million from $35.7 million in the fourth quarter of 2001. Substantially all of our revenues consisted of circuit
revenues in each of these quarters. The increase in revenues for the quarter ended March 31, 2002 compared to the quarter ended March 31, 2001 was attributable to new consulting services
revenue as well as an increase in circuit revenue. In addition, our UTX facilities enable us to provision circuits more efficiently and therefore directly contributed to increases in circuit revenues.
The lower revenues for the quarter ended March 31, 2002 from the quarter ended December 31, 2001, however, were attributable in part to bankruptcies and credit problems in the
telecommunications industry. We experienced a bankruptcy filing by one wholesale client, circuit disconnections and lengthened new business closing cycles. The large client bankruptcy accounted for
$4.8 million of revenue that we were unable to recognize during the first quarter of 2002.

Cost of Circuit Access

Cost of circuit access increased to $21.2 million for the quarter ended March 31, 2002 from $17.6 million for the quarter ended
March 31, 2001. As a percentage of total revenues, cost of circuit access increased to 73% for the quarter ended March 31, 2002 from 69% for the quarter ended

11

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March 31, 2001. The increase in cost of circuit access in absolute dollars was primarily attributable to an increase in the volume of circuits sold to both an increased number of clients and
additional sales to existing clients. The large client bankruptcy was largely responsible for the increase in circuit cost as a percentage of total revenues as we incurred the cost of certain circuits
but were unable to recognize the associated revenue.

Operations and Administration (Excluding Stock Plan Compensation)

Operations and administration expenses (excluding stock plan compensation) decreased $6.0 million to $15.5 million in the quarter ended
March 31, 2002 from $21.5 million in the quarter ended March 31, 2001. This decrease was primarily attributable to significant decreases in personnel and restructuring of
facilities.

The
number of employees decreased to 229 at March 31, 2002 from 443 at March 31, 2001. After additional steps to reduce headcount in April 2002 to approximately 219,
we expect headcount to remain relatively flat for the remainder of 2002. Salaries and benefits decreased $3.0 million for the quarter ended March 31, 2002 as compared to the quarter
ended March 31, 2001. Similarly, facilities costs, including rent and utilities for corporate offices and sales offices decreased $906 for the quarter ended March 31, 2002 as compared to
March 31, 2001 due in part to the restructuring and the related charge recorded in the third quarter of 2001. Sales and marketing costs, primarily for tradeshows, advertising and promotions,
decreased $605 for the quarter.

In
coordinated transactions in 2001, the Company entered into an agreement to provide services to a client that had previously been provided by a third-party carrier, took an assignment
from the client of the client's agreement with the third-party carrier, and in respect of certain unresolved disputes between the client and third-party carrier, paid $2 million to the
third-party carrier in order to obtain the carrier's consent to the assignment. During the three months ended March 31, 2002, the Company paid an additional $1.6 million to the third
party carrier pursuant to the 2001 agreement. Our total payment of $3.6 million to the third-party carrier was recorded as an other current asset with a reserve against it of
$1.6 million, reflecting management's belief that $2.0 million will be recovered by favorably resolving disputes with the carrier or, alternatively, through the contractual right to seek
reimbursement from the client.

We
expect total operations and administration expenses to continue to decrease in absolute dollars as we realize efficiencies from our UIX databases and implement cost saving measures.

Operations and Administration (Stock Plan Compensation)

During fiscal year 1999 and the first quarter of 2000, we granted stock options to employees and non-employees with per share exercise prices deemed
to be below the fair market value of our common stock at the dates of grant. These stock option issuances have resulted in stock option plan compensation charges, which are initially deferred and
subsequently amortized over the vesting period of the related options.

Stock
plan compensation expense totaled $1.2 million for the quarter ended March 31, 2001 and $291 for the quarter ended March 31, 2002. The decrease in stock plan
compensation charges between periods is primarily due to a reduction in employees who were granted options under our 1999 Stock Plan.

There
were 4,864,419 and 15,562,518 stock options outstanding at March 31, 2002 and 2001, respectively. The lower number of options outstanding reflects the lower number of
employees at March 31, 2002, the number of options that were forfeited by departing employees and the approximately 4.8 million options that were exchanged for restricted shares of our
common stock in the fourth quarter of 2001.

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Depreciation and Amortization

Depreciation expense includes depreciation of furniture, fixtures and equipment at our office facilities and of equipment at our UTX facilities. Depreciation
expense was $5.0 million in the first three months of 2002, compared to $1.6 million in the first three months of 2001, representing an increase of $3.4 million. The increase in
depreciation is primarily attributable to the Company placing into service ten additional UTX facilities during the time period March 31, 2001 through March 31, 2002.

Amortization
expense, which decreased $229 in the quarter ended March 31, 2002, compared with the quarter ended March 31, 2001, relates to intangible assets acquired in
connection with the purchases of Stuff Software, Inc. in November 1999.

Restructuring

In the quarter ended September 30, 2001, the Company recorded a restructuring charge of $40.9 million. This charge was reduced by
$4.1 million in the quarter ended December 31, 2001 resulting in a net charge of $35.4 million during the year ended December 31, 2001. Based on the strategic direction of
the Company and the overall state of the telecommunications industry, management made the decision to restructure the Company in an effort to remain on target to achieve the Company's 2002 financial
objectives and reduce administrative costs. The primary aspects of the restructuring plan were: (a) the Company reduced the number of employees in all departments and reorganized departments to
further enhance productivity; (b) based on the reduced number of employees and on operational projections, the Company exited a variety of office facilities and one UTX facility; (c) due
to the reduced number of employees and the amount of space being vacated, the Company wrote down fixed assets, such as computer equipment, furniture and fixtures, and leasehold improvements; and
(d) the Company wrote off the value of the investment it had made in a privately-held company because this company commenced liquidation proceedings during the third quarter. The
workforce reduction affected approximately 150 employees or 40% of June 30, 2001 worldwide employees. The $4.1 million restructuring charge reversal in the fourth quarter of 2001 was
primarily a result of the favorable outcome of lease negotiations with a landlord. In the first quarter of 2002, based on updated information, we revised our previous estimates for severance, benefits
and equipment leases and reduced these portions of the reserve. Also in the first quarter of 2002, based on updated information on the commercial real estate market, we increased the facilities
portion of the reserve.

The
restructuring program is substantially completed, except for facility exit costs. The ability to sublet facilities at the rates contemplated by the restructuring charge will depend
on market conditions. Remaining cash expenditures related to workforce reductions will be substantially paid by the end of 2002. Amounts relating to facilities will be paid over the respective lease
terms through 2013 and will be net of any sublease recoveries.

The
following summarizes the significant components of the restructuring reserve at March 31, 2002:

|                                                          |  | Balance at December 31, 2001 |  | Incurred Cash Payments |   | Adjustments |   | Balance at March 31, 2002
|--------------------------------------------------------- |  | ---------------------------- |  | ---------------------- | - | ----------- | - | -------------------------
|Severance and benefits                                    |  | 639                          |  | (199                   | ) | (399        | ) | 41                       
|Facility exit costs, net of estimated sublease recoveries |  | 26,529                       |  | (1,539                 | ) | 642         |   | 25,632                   
|Other                                                     |  | 554                          |  | (210                   | ) | (243        | ) | 101                      
|                                                          |  |                              |  |                        |   |             |   |                          
|Total                                                     |  | 27,722                       |  |                        |   |             |   | 25,774                   

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Other Income (Expense)

Other income decreased $1.1 million to $378 from $1.5 million in the quarters ending March 31, 2002 and March 31, 2001, respectively.
The decrease in other income was primarily attributable to a reduction in interest income, reflecting lower balances of cash and investments held by the Company.

Income Taxes

From our inception through September 27, 1998, we elected to be treated as a subchapter S-corporation for income tax purposes. On
September 27, 1998, we converted to a C-corporation. At December 31, 2001, we had approximately $144.8 million of federal and state net operating loss carry forwards.
These carry forwards may be available to offset future taxable income. Our federal and state net operating loss carry forwards expire at various dates beginning in 2018. Due to the uncertainty that we
will generate future earnings sufficient to enable us to realize the benefit of these net operating loss carry forwards, we have recorded a valuation allowance for the full amount of our deferred tax
asset. As a result, no income tax benefit has been recorded in our statement of operations. We assess our deferred tax asset on an ongoing basis and adjust the valuation allowance based on this
assessment. Additionally,
Section 382 of the Internal Revenue Code of 1986, as amended, imposes annual limitations on the use of net operating loss carry forwards if there is a change in ownership, as defined, within
any three-year period. The utilization of certain net operating loss carry forwards may be limited due to our capital stock transactions.

Liquidity and Capital Resources

Our principal uses of cash are to fund operating losses, working capital requirements and capital expenditures. Our capital expenditures will be centered around
the maintenance of our two primary service elements, information and facilities. For information, we will continue to seek out new data resources relating to the provisioning of circuits. For
facilities, we will continue to maintain our UTX and metropolitan connectivity facilities so as to create a competitive advantage in terms of service delivery, cost and pricing.

Cash
and cash equivalents and short and long-term investments were $27.9 million at March 31, 2002, a decrease of approximately $19.2 million from the
level at December 31, 2001. The Company's cash position was adversely affected by unfavorable conditions that impacted revenues and by amounts disbursed under the Sphera loan agreement
described below.

Cash
used by operating activities for the three months ended March 31, 2002 was $12.5 million, compared to $18.4 million for the three months ended March 31,
2001. The change was primarily due to a decrease in operating expenses and improved collection results.

Cash
provided by investing activities was $9.0 million for the three months ended March 31, 2002, compared to $720 for the three months ended March 31, 2001. The
increase is primarily due to a reduction in the purchase of property, plant, and equipment to support the business and the sale of short-term investments.

In
addition, during the three months ended March 31, 2002 the Company loaned $1.1 million to Sphera under the Company's post-petition loan agreement with
Sphera. Subsequent to March 31, the Company has disbursed additional amounts totaling $1.0 million to Sphera and to a trust account established by the counsel for the official unsecured
creditors' committee. The loan agreement is the subject of a dispute referenced in "Legal Proceedings" below.

Cash
used by financing activities was $551 for the three months ended March 31, 2002, compared to cash provided by financing activities of $745 for the three months ended
March 31, 2001. The decrease was primarily due to payments on capital lease obligations and a decrease in proceeds from issuance of common stock.

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In
May 2002, the Company paid $2.6 million as the initial installment to purchase equipment previously covered by a capital lease. The remaining installments, totaling
$1.2 million, will be paid in July and August 2002.

Although
we believe our existing cash balances will be sufficient to fund our business until we become self-funding through operations, our ability to meet our planned growth or changes
in circumstances from our current expectations may require us to raise additional capital in order to fund the business to that point. Raising additional capital may be difficult for us and even if we
are able to raise additional capital, our operational and financial flexibility may be limited and any financing may be dilutive to existing stockholders.

FACTORS THAT MAY AFFECT FUTURE RESULTS

In addition to the factors discussed elsewhere in this Form 10-Q and our other reports filed with the SEC, the following are important factors
which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of us.

We have incurred substantial losses since our inception, and if we fail to reduce our costs and increase our revenues, we will be unable to achieve and maintain profitability.

We have incurred significant losses since inception and expect to continue to incur losses in the future. As of March 31, 2002, we had an accumulated
deficit of $189.6 million. Our revenues have grown to $29.1 million in the three months ended March 31, 2002 from $25.7 million in the three months ended March 31,
2001, although our revenues for this first quarter 2002 were approximately 18% lower than our revenues for the fourth quarter of 2001. We cannot be certain that we will be successful in reducing our
costs, that we will be able to increase our revenues or that we will achieve sufficient revenues to become profitable. We expect to continue to incur expenses in order to:



As
a result, we will need to generate significantly higher revenues to achieve and maintain profitability. If we fail to significantly reduce our costs or to generate higher revenues, we
may continue to incur operating losses and net losses.

If we fail to manage our cost reduction efforts and future expansion effectively, our ability to increase our services and client base could suffer.

Our ability to successfully offer our services and implement our business plan in a rapidly evolving market requires effective planning and management. We plan to
increase the scope of our operations and may substantially increase the number of our employees. At December 31, 1997, we had five employees. By the first quarter 2001, we had over 400
full-time employees. Since that time, we have reduced our headcount to approximately 219 full-time employees. These periods of growth and headcount reductions and our
anticipated growth in future operations will continue to place a significant strain on our management systems and resources. We expect that we will need to improve our financial and managerial
controls, reporting systems, procedures, and expand, train and manage our workforce. Furthermore, we expect that we will be required to manage multiple relationships with various clients, suppliers
and other third parties. We cannot be sure that we will be able to identify and take advantage of market opportunities with our reduced workforce or that we will be able to manage future expansion
effectively.

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Industry conditions and further deterioration in credit quality may affect our clients' ability to pay their obligations to us in a timely manner or at all and may affect the
ability of our carrier suppliers to provide reliable service.

We operate in a highly concentrated, high-risk market that has recently experienced a general deterioration of credit quality. Credit-quality
concerns, which have historically affected smaller network service providers and subsequently smaller telecommunications providers, have more recently impacted, and continue to impact, larger
telecommunications providers and carriers. In recent months, several of our significant clients filed for reorganization or liquidation under the bankruptcy laws. In addition, one of our major clients
has recently filed for bankruptcy and one other significant client, Metromedia Fiber Networks, has publicly indicated that it may be required to file for reorganization under the bankruptcy code. As a
result, some of our clients may have inadequate financial resources to meet all of their obligations. If either significant clients or a significant number of smaller clients are unable to meet their
obligations to us, we may not be able to recognize future revenues and we may also incur additional bad debt expenses and experience reduced opportunities for growth. In addition, notwithstanding a
client's inability to pay us, we may remain obligated to third-parties for the cost of circuits previously provided to the client. These events would harm our cash flow, results of operations
and financial condition, as would future deterioration in market conditions in our industry or in the creditworthiness of our significant clients or a significant number of smaller clients.

In
addition, some of our carrier suppliers may have inadequate financial resources to provide reliable service or to meet their other obligations to us. If a carrier supplier is unable
to meet its obligations to us, we could be required to purchase replacement services on less favorable terms or experience disruptions in service, which could impair our ability to retain or attract
clients and could require us to issue outage credits to our clients.

We may require additional third-party financing, and if we cannot obtain this financing on commercially reasonable terms, our ability to expand our business may suffer.

Although we believe our existing cash balances will be sufficient to fund our business until we become self-funding through operations, our ability to
meet our planned growth and any changes in circumstances from our current expectations may require additional cash resources. In addition, we may, as part of our growth strategy, acquire complementary
businesses and technologies, which may require us to raise additional funds. We expect to supplement our cash flow from operations with additional capital in order to meet our planned cash capital
requirements and retain prudent cash balances. Our ability to do this will depend upon our ability to renegotiate, extend or replace our credit facilities, obtain supplemental financing or raise
additional capital. Additional debt financing may limit our financial and operating flexibility. We may not be able to renegotiate or replace our credit and equipment lease facilities on a timely
basis, on acceptable terms or at all. Additional equity financing may not be available or may be dilutive to existing stockholders. If we are unable to obtain future financing when needed or on
acceptable terms, we may have to delay or abandon our development and expansion plans or take further actions to strengthen our cash position, which could materially adversely affect our growth and
ability to compete.

Our limited operating history makes forecasting difficult.

We have a limited operating history and, therefore, limited meaningful historical financial data upon which to base our planned operating expenses. Specifically,
our UTX business model is relatively new, and we have not operated our UIX database in conjunction with our UTX facilities long enough to accurately predict trends in our business. Moreover, we have
not built out enough UTX facilities for a long enough period of time to be able to test whether our strategy to utilize these facilities will work.

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Accordingly, we are subject to all of the risks that are associated with companies in an emerging industry and in an early stage of development, including:



For
example, from time to time we enter into long-term agreements with communications transport suppliers for the supply and installation of communications network capacity.
These agreements generally provide for monthly minimum revenue commitments from us, which we must negotiate based on forecasts of our future network capacity requirements. At March 31, 2002,
these minimum purchase commitments totaled approximately $3.8 million per month. If we fail to forecast our network capacity requirements accurately or fail to accurately forecast other aspects
of our business, it will be difficult for us to become profitable.

We have an unproven business model, and we cannot be sure that clients will widely accept our services.

Our business strategy is unproven. To be successful, we must convince prospective clients to entrust their network capacity data and transport requirements to a
company without a long and proven track record. We are not aware of any companies that have a directly comparable business, and we cannot be sure that clients will widely accept our services.

Our
ability to expand our client base may be limited by the following factors:



We
may not be able to execute our business model if the markets for our services fail to develop or grow more slowly than anticipated, if competitors enter the market or if we are unable
to expand our client base.

Recent legal proceedings may affect our results and financial position.

We are party to several legal proceedings. Certain of these proceedings relate to transactions that we have entered into with companies that are currently in
bankruptcy. In addition, in April and May 2002, several law firms announced that they had filed securities class action lawsuits against us. Management believes that these lawsuits are without
merit and we intend to defend these actions vigorously. Because of the complexity of certain of the transactions underlying these lawsuits, as well as

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the inherent uncertainty of litigation, however, it is possible that the outcome of one or more of these cases may be adverse to the Company. In addition, the resources required to defend these
cases, including the management time and attention required to adequately defend the Company's position, may affect our results of operations and financial position.

Our ability to implement and maintain our UIX database is unproven. If we cannot increase the scope and accuracy of these databases as planned, our ability to
cost-effectively facilitate the obtaining of circuits for our clients will be at risk.

To be successful, we must increase and update information about pricing, capacity, availability and location of circuits contained in our databases. Our ability
to cost effectively facilitate the supplying of circuits and to provide ongoing dedicated line circuit access depends upon the information we collect from our transport suppliers regarding their
networks, which we include in our UIX database. Our suppliers are not obligated to provide us with this information and could decide to stop providing this information to us at any time. Moreover, we
cannot be certain that the information that our suppliers share with us is completely accurate or current. If we cannot continue to maintain and expand our UIX database as planned, we may be unable to
increase our revenues or to cost-effectively facilitate the supplying of the circuits, and we may never achieve profitability.

If we cannot successfully operate our network operations center, we will be unable to provide monitoring, maintenance and restoration services to our clients.

One of our primary business objectives is to provide our clients with network monitoring, maintenance and restoration services 24 hours a day, seven days a
week through a network operations center. While we currently operate our own network operations facility, our experience in this regard is limited both by the amount of time we have been in business
and providing this service on our own as well as by the technical limitations of managing circuits and services on the networks of other providers. As a consequence, we cannot be sure that our efforts
to provide these services will be successful. Our ability to implement this strategy will depend on many factors, including our ability to train, manage and retain employees. If we fail to
successfully operate a network operations center, we may not be able to monitor network operations effectively or troubleshoot circuits in a cost-effective manner, which would cause us to
lose clients and make it difficult for us to attract new clients.

Competition in our industry is intense and growing, and we may be unable to compete effectively.

The market for the services we provide is highly fragmented. In addition, the market in which we operate is new, rapidly evolving and highly competitive. We
believe that at this time no single competitor competes directly with us with respect to all of the services we offer; however, we currently or potentially compete with a variety of companies,
including some of our transport suppliers, with respect to our products and services individually, including:



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We expect to face additional competition from new market entrants in the future as there are few substantial barriers to entry in our market. Significant new competitors could arise from
increased consolidation and strategic alliances in the telecommunications industry. Other new entrants could enter the market with a business model similar to ours. Our target markets may support only
a limited number of competitors. Operations in such markets with multiple competitive providers may be unprofitable for one or more of such providers. Prices in both the long-distance
business and the data transmission business have declined significantly in recent years and are expected to continue to decline.

Moreover,
while recent regulatory initiatives allow carriers such as us to interconnect with incumbent local exchange carrier facilities and to obtain unbundled network elements from
incumbent local exchange carriers, certain initiatives also provide increased pricing flexibility for, and relaxation of regulatory oversight of, incumbent local exchange carriers. This may present
incumbent local exchange carriers with an opportunity to subsidize services that compete with our services with revenues generated from non-competitive services. This would allow incumbent
local exchange carriers to offer competitive services at lower prices. Existing laws also restrict the regional Bell operating companies from fully competing with us in the market for interstate and
international long-distance telecommunications services, but also permit the FCC to lessen or remove some restrictions. Verizon and SBC, two of the Bell companies, have received FCC
permission to offer long-distance services to customers in a number of states, and the FCC is expected to consider several additional carriers for this relief in the near future. If FCC
decisions under existing law, or future amendments to Federal telecommunications laws, permit the regional Bell operating companies to compete fully with us in this market, our revenues from these
services could be reduced if these companies are able to attract substantial business from our clients.

We
must distinguish ourselves through the quality of our client service, our service offerings and brand name recognition. We may not be successful in doing this.

Many
of our potential competitors have certain advantages over us, including:



Our
competitors may be able to use these advantages to:



If
we are unable to compete successfully against our current and future competitors, our gross margins could decline and we could lose market share, either of which could materially and
adversely affect our business.

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If we have difficulties or delays in delivering circuits to our clients, our ability to generate revenue will suffer and we may lose existing and potential new clients.

It typically takes 30 to 90 days to supply a circuit for a client, and we do not begin to recognize revenue until a circuit has been installed and accepted
by the client. Once we agree to facilitate the supply of a circuit for a client, we negotiate with one or more transport suppliers and manage the personnel and field technicians of multiple vendors. A
client can withdraw its order with minimal liability at any time before accepting the circuit. We may experience difficulties in facilitating the supply of circuits if our transport suppliers run out
of capacity, which would force us to look for alternative sources of capacity on short notice. If we are unable to facilitate the supply of a circuit in a timely manner or fail to obtain client
acceptance of the circuit, we will be unable to recognize revenues for that circuit, and our operating results would be adversely affected. Furthermore, since our clients may cancel orders at any time
before accepting the circuit, we may find it difficult to forecast revenue and plan our expenses accordingly.

The unpredictability of our quarterly results may adversely affect the trading price of our common stock.

Our revenues and operating results will vary significantly from quarter to quarter due to a number of factors, many of which we cannot control and any of which
may cause our stock price to fluctuate. These factors include the following:



In
addition, we depend on decisions by our clients to expand their Internet infrastructure, which in turn depend upon the success and expected demand for the services these clients
offer.

We
expect our operating expenses to remain relatively constant or decline moderately in future periods. Our operating expenses are largely based on anticipated revenue trends, and a high
percentage of our expenses are, and will continue to be, fixed in the short term due in large part to maintenance of our UTX facilities. As a result, fluctuations in our revenue for the reasons set
forth above, or for any other reason, could cause significant variations in our operating results from quarter to quarter and could result in substantial operating losses.

Because
of these factors, we believe that quarter-to-quarter comparisons of our operating results are not, and will not be, a good indication of our future
performance. It is likely that, in some future quarters, our operating results may not meet the expectations of public market analysts and investors. In that event, the price of our common stock may
fall.

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Our continued NASDAQ National Market System listing is not assured, which could reduce the liquidity in the market for our stock and make capital raising and other transactions
more difficult.

The NASDAQ National Market System requires a minimum bid price of $1.00 for continued listing. If at any time the bid price for the Company's Common Stock falls
below $1.00 for a period of 30 consecutive business days, the NASDAQ National Market System has the right to notify the Company of its intent to delist our stock if, within the 90 day period
thereafter, the bid price for the stock is not at least $1.00 per share for a minimum of 10 consecutive business days. As of May 14, 2002, the Company's Common Stock had failed to close with a
minimum bid price of $1.00 for 15 days. On May 10, 2002, the closing price for our Common Stock on the NASDAQ National Market was $0.50. If we lose our NASDAQ National Market status, our
common stock would trade either on the NASDAQ Small Cap market or in the over-the-counter market, both of which are viewed by most investors as less desirable, less liquid
marketplaces. Among other things, this would place increased regulatory burden upon brokers, making them less likely to make a market in the stock. Loss of our NASDAQ National Market status could make
it more difficult for us to raise capital or complete acquisitions and would also complicate compliance with state securities laws.

The market for our UTX services is new and unproven, and we have limited experience providing our UTX services.

The market for our UTX services is new and unproven. To date, we have derived substantially all of our revenues from providing on-going circuit
access, and we have only limited experience providing our UTX services. Our ability to generate revenues from UTX services will suffer if the market for these services fails to develop or develops
more slowly than we expect.

One
of our key strategies has been to expand our business by opening additional UTX facilities in geographically diverse locations, and we may resume this strategy. Delays in the
expansion of our UTX facilities may make it more difficult for us to respond to competitive pressures and establish our presence in the market.

Our ability to open UTX facilities is subject to a number of risks, and opening UTX facilities increases our costs.

Our ability to open UTX facilities is subject to a number of risks, including the availability of appropriate space for these facilities on reasonable terms,
construction delays and cost overruns.

In
addition, our costs will increase if we continue to open UTX facilities. If the demand for UTX services from these facilities does not develop as we anticipate, we will have certain
costs without corresponding revenue and our business will be harmed. These costs include:



An
inability to establish additional UTX facilities as planned, to effectively manage our expansion or to attract sufficient clients to our UTX facilities would harm our ability to
generate revenues.

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If we cannot successfully aggregate circuits, this could limit our ability to increase our margins.

We plan to actively manage circuits through our UTX facilities to deliver circuits to clients more quickly and to increase margins. We plan to achieve this by
physically aggregating circuits on the same route. In order to physically aggregate circuits, we have, on a limited basis, deployed optical switches that allow circuits to be optically switched
between networks. We may also face delays in installing optical switches. In addition, we cannot be sure that there will be enough circuits on routes between existing UTX facilities to allow us to
cost-effectively aggregate these circuits. If we cannot successfully deploy optical switches or physically aggregate circuits, this could limit our ability to increase our margins.

Our facilities and the networks on which we depend may fail, which would interrupt the circuit access we provide and make it difficult for us to retain and attract clients.

Our clients depend on our ability to provide ongoing dedicated circuit access. The operation of these circuits depends on the networks of third party transport
suppliers. The networks of transport suppliers and clients who may use our UTX facilities may be interrupted by failures in or damage to these facilities. Our facilities and the ongoing circuit access
we provide may be interrupted as a result of various events, many of which we cannot control, including fire, human error, earthquakes and other natural disasters, disasters along communications
rights-of-way, power loss, telecommunications failures or sabotage or vandalism.

We
may be subject to legal claims and be liable for losses suffered by clients and carriers for disruptions to circuits or damage to client or carrier equipment resulting from failures
at our facilities or on the networks of third party providers. We generally provide outage credits to our clients if circuit disruptions occur. If our circuit failure rate is high, we may incur
significant expenses related to circuit outage credits, which would reduce our revenues and gross margins. We would also incur significant expenses in investigating and addressing the causes of such
circuit failures, which would divert resources from the expansion of our services and cause our business to suffer. Clients may seek to terminate their contracts with us if there is a circuit failure.
In addition, if our circuit failure rate is high, our reputation could be harmed.

Terrorist attacks and threats or actual war may negatively impact our business, financial condition and results of operations.

Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors
outside of our control, such as terrorist attacks and acts of war. Recent terrorist attacks in the United States, as well as events occurring in response to or in connection with them, including
future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our
clients, may adversely impact our operations. As a result, there could be delays or losses in the delivery of our service, decreased sales of our services and extension of time for payment of accounts
receivable from our clients. Strategic targets such as communications networks and the Sears Tower may be at greater risk of future terrorist attacks than other targets in the United States. This
occurrence could have an adverse impact on our operations. It is possible that any or a combination of these occurrences could have a material adverse effect on our business, financial condition and
results of operations.

We depend on several large clients, and the loss of one or more of these clients, or a significant decrease in total revenues from any of these clients, could significantly
reduce our revenue and income.

Historically, a substantial portion of our revenues has come from a limited number of clients. For example, for the year ended December 31, 2000, our
largest four largest clients accounted for

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approximately 74% of our total revenues, and for the year ended December 31, 2001, our three largest clients accounted for approximately 55% of our total revenues. For the quarter ended
March 31, 2002, our three largest clients accounted for approximately 50% of our total revenues. We have a number of significant revenue contracts with these clients. These contracts expire on
various dates between now and March 2005. If we lose one or more large clients, or if one or more of our large clients reduces the services they purchase from us and we fail to add new clients,
our revenues could decline and our results of operations would suffer.

The regulatory framework under which we operate and new regulatory requirements or new interpretations of existing regulatory requirements could require substantial time and
resources for compliance, which could make it difficult for us to operate our business.

Our communications services are subject to both federal and state regulation. In providing our interstate and international communications services, we must
comply with federal telecommunications laws and regulations prescribed by the FCC. At the state level, we are subject to state laws and to regulation by state public utility commissions. If we expand
internationally, we would also become subject to regulation by foreign authorities and, in some markets, supra-national authorities, such as the European Union.

These
laws and regulations are subject to frequent changes and different interpretations, and therefore, it is difficult for us to assess the impact of these factors on our operations.
The current domestic and international trend is toward deregulation of telecommunications and Internet services. However, we cannot be certain that this trend will continue, and it is possible that
changes in regulatory policies could limit our ability to compete in some markets. The implementation, modification, interpretation and enforcement of laws and regulations vary and can limit our
ability to provide many of our services.

We
have been required to obtain authorization from the FCC and many state public utilities commissions to offer particular types of telecommunications services. Pursuant to these
authorizations, we have to comply with a variety of regulatory obligations on an ongoing basis. We cannot assure you that the FCC or state commissions will grant us required authority (or do so in a
timely manner), or refrain from taking action against us if we are found to have violated any requirements of their rules. If authority is not obtained or if our schedules of prices, terms and
conditions are not filed, or are not updated, or otherwise do not fully comply with the rules of the FCC or state regulatory agencies, third parties or regulators could challenge our ability to offer
our services. Such challenges could cause us to incur substantial legal and administrative expenses.

Required regulatory approvals may interfere with or delay corporate transactions.

As a regulated company, we are required to obtain the approval of the FCC and certain state regulators before engaging in certain types of transactions, including
some mergers, acquisitions of other regulated companies, sales of all or substantial parts of our business, issuances of stock, and incurrence of debt obligations. The particular types of transactions
that require approval differ in each jurisdiction. If we cannot obtain the required approvals, or if we encounter substantial delays in obtaining them, we may not be able to enter into transactions on
favorable terms and our flexibility in operating our business will be limited. If our flexibility is limited, we may not be able to optimize our operating results.

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Telecommunications regulations of other countries may restrict our operations.

We will be subject to the regulatory regimes in each of the countries in which we conduct business. Local regulations range from permissive to restrictive,
depending upon the country. Changes to existing regulations of foreign countries may decrease the opportunities that are available for us to enter into those markets, or may increase our legal,
administrative or operational costs, or may constrain our activities in other ways that we cannot necessarily anticipate. Any of these developments could impair our efforts to develop foreign
operations.

We may incur operational and management inefficiencies when we acquire new businesses.

To further our strategy, we may seek to acquire businesses and technologies which we believe will complement our existing business. Any such acquisitions would
likely involve some or all of the following risks:



We
may need to complete these transactions in order to remain competitive. We cannot be sure that we will be able to obtain any required financing for these transactions or that these
transactions will occur.

We must continue our marketing and sales initiatives to increase market awareness and sales of our services.

Our services require a sophisticated sales and marketing effort that targets key people within our prospective clients' organizations. This sales effort requires
the efforts of select personnel as well as specialized system and consulting engineers within our organization. Our ability to execute our sales and marketing initiatives depends on many factors,
including our ability to train, manage and retain employees. If we are unable to effectively staff our marketing and sales operations, or our marketing efforts are not successful, we may not be able
to increase market awareness or sales of our products and services, which may prevent us from achieving and maintaining profitability.

Our plans to develop new service offerings may not be successful.

We intend to continue investing significant sales and management resources to developing and selling new service offerings. There are significant
out-of-pocket expenses associated with this investment, which in turn reduces resources available to develop our traditional lines of business. The success of these service
offerings is uncertain and depends on our ability to successfully coordinate our internal financial, engineering and sales personnel and on many factors outside of our control, including the
willingness of our clients to pay for these offerings and the willingness of our vendors to

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provide the goods and services that these new service offerings require. If we are unsuccessful in developing and selling our new service offerings, our growth could be adversely affected.

If we do not continue to train, manage and retain employees in our client support organization, clients may significantly reduce purchases of our services.

Our client support organization is responsible for providing our clients with technical and operational support, and for identifying and developing opportunities
to provide additional services to our existing clients. Competition for qualified client support personnel is intense because few people have the necessary level of technical skills and experience in
telecommunications provisioning and network management. If we fail to train, manage and retain employees in our client support organization, we may be limited in our ability to gain more business from
existing clients, and we may be unable to obtain or maintain current information regarding our clients' and suppliers' communications networks, which could limit our ability to provision future
circuits for our clients.

If we do not establish and maintain key client relationships, our revenues may decline.

Our success will depend upon our ability to develop and manage key client relationships in order to generate additional revenues from existing clients. Our
ability to develop and manage our client relationships depends on, among other things:



If
we fail to establish and maintain these client relationships, our revenues may stagnate or decline.

Failure to successfully complete the implementation of our management information systems could harm our ability to operate or manage our business effectively.

We are in the process of augmenting our management information systems to facilitate management of client order, client service, billing and financial
applications. Our ability to manage our business could be harmed if we fail to successfully and promptly:



In
addition, our ability to efficiently operate our business could suffer if the software which runs our information systems malfunctions.

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We depend on our key personnel to manage our business effectively in a rapidly changing market, and our ability to generate revenues will suffer if we are unable to retain our
key personnel and hire additional personnel.

Our future success depends upon the continued services of our executive officers and other key sales, marketing and support personnel. We do not have "key person"
life insurance policies covering any of our employees. In addition, we depend on the ability of a relatively new management team to effectively execute our strategies. We recently hired some of our
key employees. Because some members of our management team have worked together only for a short period of time, we need to integrate these officers into our operations.

We
will need to hire additional personnel in our communications provisioning, sales, marketing and support areas in the future, and we believe our success depends, in large part, upon
our ability to attract and retain our key employees. Competition for these persons can be intense, especially in the communications provisioning area. In particular, we have experienced difficulty in
hiring qualified network engineers, and we may not be successful in attracting and retaining these individuals. The loss of the services of any of our key employees, the inability to attract or retain
qualified personnel in the future, or delays in hiring required personnel could limit our ability to generate revenues.

Because we have no patented technology and have limited ability to protect our proprietary information, competitors may more easily enter our market and harm our ability to
generate revenues.

We have no patented technology that would preclude or inhibit competitors from entering our market. We rely on a combination of copyright, trademark, service mark
and trade secret laws and contractual restrictions to establish and protect our intellectual property. We have applied for registration of certain of our service marks in the United States and in
other countries, and have obtained registrations for certain of our service marks in the United States, the European Union, Australia, Thailand, Switzerland, New Zealand and Singapore. Even if
additional registrations are granted, we may be limited in the scope of services for which we may exclusively use our service marks. We enter into confidentiality agreements with our employees,
consultants and partners, and we control access to, and distribution of, our proprietary information. Our intellectual property may be misappropriated or a third party may independently develop
similar intellectual property. Moreover, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States. Unauthorized use
of any of our proprietary information could expose us to competition, which would harm our ability to attract new and existing clients and generate revenues.

Certain stockholders will continue to have substantial control over the Company and could delay or prevent a change in corporate control.

Internet Capital Group, Inc., funds affiliated with ComVentures and other stockholders, directors and officers, in the aggregate, beneficially own
approximately 48% of our outstanding common stock. These stockholders, acting alone or together, would be able to influence significantly all matters requiring
approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions.

Provisions of our charter documents may have anti-takeover effects that could prevent a change in corporate control.

Provisions of our certificate of incorporation, bylaws, and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be a
benefit to our stockholders.

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There may be sales of a substantial amount of our common stock that could cause our stock price to fall.

Our current stockholders hold a substantial number of shares of our common stock, substantially all of which they are able to sell in the public market. Sales of
a substantial number of shares of our common stock or market expectations that these sales may occur could cause our stock price to fall. In addition, the sale of these shares could impair our ability
to raise necessary capital through the issuance of additional common stock.

We expect to experience volatility in the trading of our stock, which could negatively affect its value.

The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including:



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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without
significantly increasing risk. Some of the securities that we may invest in may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the
investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. To minimize this risk, we maintain our portfolio of cash equivalents and short-term investments in a variety of securities,
including commercial paper, money market funds, government and non-government debt securities. In general, money market funds are not subject to market risk because the interest paid on
such funds fluctuates with the prevailing interest rate. As of March 31, 2002, all of our investments were in cash equivalents and short-term investments.

Interest Rate Sensitivity

We maintain our cash equivalents and short-term investments primarily in a portfolio comprised of commercial paper, money market funds, and investment
grade debt securities. As of March 31, 2002, all of our investments had maturities of less than six months. Accordingly, we do not believe that our investments have significant exposure to
interest rate risk.

Exchange Rate Sensitivity

We currently operate primarily in the United States, and substantially all of our revenues and expenses to date have been in U.S. dollars. Accordingly, we have
had no material exposure to foreign currency rate fluctuations.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On March 15, 2002, a client Aleron, Inc. filed for protection under Chapter 11 of the bankruptcy code in the United States Bankruptcy Court for the
Eastern District of Virginia. Prior to the bankruptcy, we provided telecommuications services to Aleron. We believe that we validly terminated all agreements between Universal Access and Aleron prior
to Aleron's bankruptcy. Aleron is disputing this claim and we are seeking a determination by the bankruptcy court that the agreements were in fact validly terminated by us prior to Aleron's bankruptcy
filing. We have asked, in the alternative, that the bankruptcy court require that Aleron provide adequate assurance that it will be able to perform under the agreements. Under a court-approved
agreement, we continue to provide services to Aleron at a reduced level. We believe that we have claims against Aleron under the terminated agreements. Aleron has listed in its bankruptcy filings a
potential claim against us arising out of the agreements. In light of Aleron's financial position, we cannot predict whether we will realize any value from our claims, nor are we in a position to
predict the outcome in the bankruptcy court of the potential claim Aleron cites in its filing.

In
April and May 2002, several law firms announced that they had filed securities class action lawsuits against us. The complaints, filed in the United States District Court for
the Eastern District of Texas, allege violations of the Securities Act of 1934. The Company expects these complaints, and any similarly filed actions, to be consolidated into a single case. The
Company has not been served with the complaints, but has reviewed copies of the filings. The Company believes the lawsuits are without merit and intends to defend the actions vigorously.

We
have been named as a defendant in an adversary proceeding filed by Sphera. The case is pending in the United States Bankruptcy Court for the District of New Jersey. The Company and
Sphera were parties to an asset purchase agreement and financing agreement pursuant to which the Company contemplated purchasing certain of Sphera's assets and extended post-bankruptcy
financing to Sphera. Because several material conditions were not met, the Company terminated the asset purchase agreement and financing agreement. Sphera filed suit seeking injunctive relief
compelling the Company to close the asset purchase agreement, unspecified damages relating to the termination of the asset purchase agreement and subordination of the Company's lien. The request for
injunctive relief was
denied, and the court will set a trial date on Sphera's damages and lien subordination claims. We intend to defend this litigation vigorously.

In
February 2000, a complaint was filed in the Superior Court of California, County of Santa Clara, against us, certain of our directors and officers and other parties by Point West
Ventures, LP ("Point West") and certain other shareholders in Vaultline Incorporated ("Vaultline"). The claim arises out of a non-binding letter of intent relating to our potential acquisition of
Vaultline. After performing due diligence as contemplated in the letter of intent, we determined not to complete the transaction and entered into a mutual settlement agreement and release with
Vaultline. Subsequently, Vaultline ceased doing business and the claimants brought this action claiming that the mutual settlement agreement was not authorized. We believe we satisfied all of our
legal obligations and are vigorously defending this matter. In May and July, 2000, the Superior Court granted petitions to compel arbitration and to stay proceedings pending arbitration. In February
2002, Point West was placed into receivership by the United States District Court for the Northern District of California. The United States Small Business Administration (the "SBA") was appointed as
Receiver. All matters involving Point West were stayed pending review by the SBA.

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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)  On
February 11, 2002, in connection with entering into an agreement contemplating the acquisition of certain metropolitan fiber-optic ring and other assets of
Sphera, we issued warrants to purchase an aggregate of 750,000 shares of our common stock to certain stakeholders of Sphera. The warrants were issued to the stakeholders as part of a loan
agreement between the Company and the shareholders. It was contemplated that the funds would be used to facilitate post-bankruptcy financing of up to $2.1 million to Sphera and to
fund cure payments of up to $3.9 million. The warrants had an exercise price of $0.01 per share but were only exercisable under certain conditions. We have delivered notice of termination of
the purchase agreement and believe that the warrants are therefore no longer exercisable and have delivered notice to the warrant holders to this effect. The issuance of the warrants was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933 and Regulation D.

(d)  The
effective date of the Registration Statement filed on Form S-1 under the Securities Act of 1933, as amended (File
No. 333-93039), was March 16, 2000. The class of securities registered was Common Stock. The offering commenced on March 16, 2000. The managing underwriters for the
offering were Goldman, Sachs & Co., Chase Securities Inc. and FleetBoston Robertson Stephens Inc. Pursuant to the Registration Statement, 12,650,000 shares of the Company's Common
Stock were sold. After deducting approximately $12,397,000 in underwriting discounts and commissions and approximately $2,342,000 in other expenses related to the offering, the net proceeds to the
Company were approximately $162,361,000. The Company invested the proceeds from the offering in short-term investment grade,
interest-bearing securities and intends to use the proceeds for working capital and general corporate purposes, including expenditures for construction of additional UTX facilities, sales channel
development and other corporate purposes. In addition, we may use a portion of the net proceeds to acquire businesses, products or technologies that are complementary to our current or future business
and product lines. The use of proceeds from the offering does not represent a material change in the use of proceeds described in the prospectus for the offering.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Agreement and Plan of Merger among the Company, Migration Corporation and Universal Access, Inc. dated July 18, 2001.(1)                                                                                                                                                  
|3.1            |  | Certificate of Incorporation of the Company.(1)                                                                                                                                                                                                                           
|3.1.1          |  | Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock.(1)                                                                                                                                                            
|3.1.2          |  | Certificate of Ownership and Merger Merging Renaming Corporation into UAXS Global Holdings Inc. dated October 29, 2001.(2)                                                                                                                                                
|3.2            |  | Amended and Restated Bylaws of the Company.(1)                                                                                                                                                                                                                            
|4.1            |  | Form of the Company's Common Stock certificate.(3)                                                                                                                                                                                                                        
|4.2            |  | Amended and Restated Registration and Informational Rights Agreement, dated June 28, 1999.(4)                                                                                                                                                                             
|4.3            |  | Amended and Restated Registration and Informational Rights Agreement, dated June 30, 1999.(4)                                                                                                                                                                             
|4.4            |  | Registration Rights Agreement, dated November 10, 1999.(4)                                                                                                                                                                                                                
|4.5            |  | Registration Rights Agreement dated July 1, 2000.(5)                                                                                                                                                                                                                      
|4.6            |  | Form of warrant to purchase shares of Common Stock of the Company issued to Advanced Equities.(4)                                                                                                                                                                         
|4.7            |  | Preferred Stock Rights Agreement, dated as of July 31, 2000, between Universal Access, Inc. and Wells Fargo, including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A,
B, and C, respectively.(6)
|4.7.1          |  | Assumption of and Amendment to the Universal Access, Inc. Preferred Stock Rights Agreement dated July 13, 2001.(1)                                                                                                                                                        

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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.

|                    |  | UNIVERSAL ACCESS GLOBAL HOLDINGS INC.
(Registrant)
|------------------- |  | --------------------------------------------------
|Dated: May 15, 2002 |  | By                                                

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