<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-Q

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

  For the quarterly period ended March 31, 2001

                                       OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934

  For the transition period from                 to                 .

                       Commission File Number: 000-31201

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

                                IASIAWORKS, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>
                 Delaware                                   94-3228782
       (State or other jurisdiction                        (IRS Employer
     of incorporation or organization)                  Identification No.)
</TABLE>

                        555 Airport Boulevard, Suite 300
                          Burlingame, California 94010
                                 (650) 340-8460
(Address, including zip code, and telephone number, including area code, of the
                   registrant's principal executive offices)

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

   Indicate by check mark whether the registrant (1) has filed all reports
required 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. [X] Yes [_] No

   The number of outstanding shares of the registrant's Common Stock, $0.001
par value, was 39,679,190 at May 1, 2001

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                IASIAWORKS, INC.

                                   FORM 10-Q

                                     INDEX

<TABLE>
<CAPTION>
                                                                       Page
                                                                       ----
 <C>     <S>                                                           <C>  <C>
 PART I: FINANCIAL INFORMATION

 Item 1. Financial Statements

         Condensed Consolidated Balance Sheets as of December 31,
         2000 and March 31, 2001....................................     3

         Condensed Consolidated Statements of Operations for the
          Three Months Ended
          March 31, 2000 and 2001...................................     4

         Condensed Consolidated Statements of Cash Flows for the
          Three Months Ended
          March 31, 2000 and 2001...................................     5

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

 Item 2. Management's Discussion and Analysis of Financial Condition
         and Results of Operations..................................     9

 Item 3. Quantitative and Qualitative Disclosures About Market
         Risk.......................................................    26

 PART II: OTHER INFORMATION

 Item 1. Legal Proceedings..........................................    27

 Item 2. Changes in Securities and Use of Proceeds..................    27

 Item 3. Defaults Upon Senior Securities............................    27

 Item 4. Submission of Matters to a Vote of Security Holders........    27

 Item 5. Other Information..........................................    27

 Item 6. Exhibits and Reports on Form 8-K...........................    27

 Signatures..........................................................   28
</TABLE>

                                       2
<PAGE>

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                IASIAWORKS, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                        December 31, March 31,
                                                            2000       2001
                                                        ------------ ---------
<S>                                                     <C>          <C>
                        ASSETS
                        ------

Current assets:
  Cash and cash equivalents............................   $ 62,045   $  29,387
  Marketable securities................................      9,339         --
  Restricted cash......................................      7,063       8,685
  Accounts receivable, net.............................      4,480       5,789
  Prepaid expenses and other current assets............      6,578       7,078
                                                          --------   ---------
    Total current assets...............................     89,505      50,939
Property and equipment, net............................     69,276      95,821
Goodwill, intangibles and other assets.................     34,786      25,770
                                                          --------   ---------
    Total assets.......................................   $193,567   $ 172,530
                                                          ========   =========

         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------

Current liabilities:
  Accounts payable.....................................   $  5,087   $   7,637
  Accruals and other liabilities.......................      5,442      12,663
  Deferred revenue.....................................      1,121       1,223
  Current portion of capital lease obligations.........        560       1,015
  Current portion of long-term debt....................        349          79
                                                          --------   ---------
    Total current liabilities..........................     12,559      22,617
Capital lease obligations, net of current portion......      1,045       1,205
Long-term notes payable................................     28,986      28,822
                                                          --------   ---------
                                                            42,590      52,644
                                                          --------   ---------
Stockholders' equity:
  Common stock, $0.001 par value; 300,000 shares
   authorized; 39,634 shares issued and outstanding at
   December 31, 2000 and 39,673 shares issued and
   outstanding at March 31, 2001.......................         39          39
Additional paid-in capital.............................    251,551     251,644
Deferred stock-based compensation......................    (13,123)     (8,152)
Accumulated other comprehensive loss...................     (1,681)     (3,261)
Accumulated deficit....................................    (85,809)   (120,384)
                                                          --------   ---------
    Total stockholders' equity.........................    150,977     119,886
                                                          --------   ---------
    Total liabilities and stockholders' equity.........   $193,567   $ 172,530
                                                          ========   =========
</TABLE>

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

                                       3
<PAGE>

                                IASIAWORKS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                               Three Months
                                                             Ended March 31,
                                                             -----------------
                                                              2000      2001
                                                             -------  --------
<S>                                                          <C>      <C>
Revenue:
  Internet access and related services...................... $ 3,533  $  3,747
  Hosting, co-location and other managed services...........   1,189     5,618
                                                             -------  --------
    Total revenue...........................................   4,722     9,365
Cost of revenue:
  Cost of revenue...........................................   3,696     9,670
  Depreciation..............................................     565     1,002
                                                             -------  --------
    Total cost of revenue...................................   4,261    10,672
                                                             -------  --------
  Gross margin..............................................     461    (1,307)
                                                             -------  --------
Operating expenses:
  Network operations and support (including stock-based
   compensation of $293 and $292 for the three months ended
   March 31, 2000 and 2001, respectively)...................   1,147     6,190
  Sales and marketing (including stock-based compensation of
   $330 and $399 for the three months ended March 31, 2000,
   and 2001, respectively)..................................   1,785     5,347
  General and administration (including stock-based
   compensation of $2,169 and $1,593 for the three months
   ended March 31, 2000 and 2001, respectively).............   3,972     7,164
  Amortization of intangibles...............................   3,464     4,007
  Impairment of goodwill....................................     --      3,664
                                                             -------  --------
  Total operating expenses before non-recurring operating
   expenses.................................................  10,368    26,372
  Non-recurring operating expenses..........................     --      7,517
                                                             -------  --------
    Total operating expenses................................  10,368    33,889
Loss from operations........................................  (9,907)  (35,196)
  Interest income...........................................     511       734
  Interest expense..........................................     (98)     (182)
  Other income, net.........................................      54        69
                                                             -------  --------
Loss before provision for income taxes......................  (9,440)  (34,575)
  Provision for income taxes................................     --        --
                                                             -------  --------
Net loss.................................................... $(9,440) $(34,575)
                                                             =======  ========
Net loss per share--basic and diluted....................... $ (3.22) $  (0.87)
                                                             =======  ========
Shares used in computing basic and diluted net loss per
 share......................................................   2,936    39,652
                                                             =======  ========
</TABLE>

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

                                       4
<PAGE>

                                IASIAWORKS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                               Three Months
                                                             Ended March 31,
                                                             -----------------
                                                              2000      2001
                                                             -------  --------
<S>                                                          <C>      <C>
Cash flows from operating activities:
  Net loss.................................................. $(9,440) $(34,575)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation and amortization...........................   3,876     8,849
    Warrants issued in connection with loans recorded as
     interest expense.......................................      23       --
    Stock-based compensation expense........................   2,792     2,284
    Accelerated amortization charges........................     --      2,599
    Loss on sale of virtual hosting business................     --      2,359
    Changes in operating assets and liabilities:
      Increase in accounts receivable.......................     707    (1,880)
      Increase in prepayments and other current assets......  (2,922)     (569)
      Increase in provision for doubtful accounts...........      19       427
      Increase in accounts payable and accrued expenses.....   1,459     9,914
      Increase in deferred revenue..........................     322       133
                                                             -------  --------
        Net cash used in operating activities...............  (3,164)  (10,459)
                                                             -------  --------
Cash flows from investing activities:
  (Purchase)/sales of marketable securities.................    (195)    9,339
  Purchase of property and equipment........................  (1,260)  (30,534)
  Increase in other long term assets........................     --       (607)
  Increase in restricted cash and deposits..................    (150)     (998)
                                                             -------  --------
        Net cash used in investing activities...............  (1,605)  (22,800)
                                                             -------  --------
Cash flows from financing activities:
  Proceeds from loans and capital lease obligations.........      52     1,070
  Principal payments on loans...............................     --       (349)
  Principal payments on capital lease obligations...........     --       (145)
  Exercise of stock options.................................      63         1
  Proceeds from issuance of preferred stock and preferred
   stock warrants, net......................................     943       --
  Proceeds from sale of common stock, net...................     --        180
                                                             -------  --------
        Net cash provided by (used in) financing
         activities.........................................   1,058       757
                                                             -------  --------
Effect of exchange rate changes on cash and cash
 equivalents................................................    (235)     (156)
Net decrease in cash and cash equivalents...................  (3,946)  (32,658)
Cash and cash equivalents at beginning of the period........  42,222    62,045
                                                             -------  --------
Cash and cash equivalents at end of the period.............. $38,276  $ 29,387
                                                             =======  ========
Supplemental cash flow disclosures:
  Cash paid during the period for:
    Interest................................................ $    51  $    795
                                                             =======  ========
    Taxes................................................... $    22  $      2
                                                             =======  ========
Disclosure of non-cash activities:
  Assets acquired under capital leases...................... $    77  $    781
                                                             =======  ========
  Issuance of preferred stock in connection with
   acquisition.............................................. $ 1,000  $    --
                                                             =======  ========
</TABLE>

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

                                       5
<PAGE>

                                IASIAWORKS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2001
                                  (unaudited)

NOTE 1--THE COMPANY

   iAsiaWorks, Inc. (the "Company") offers a broad range of Internet solutions
that allows business customers to build or extend their presence across
multiple markets in the Asia-Pacific region. These Internet solutions include
high-speed, leased-line Internet access, hosting, co-location, managed services
and other value-added services.

NOTE 2--INTERIM BASIS OF PRESENTATION

   The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary for the fair presentation of
the Company's financial position as of March 31, 2001, and the results of its
operations and cash flows for the three month periods ended March 31, 2001 and
2000. These financial statements should be read in conjunction with the
Company's audited consolidated financial statements as of December 31, 2000 and
1999 and for each of the years in the three year period ended December 31,
2000, including notes thereto, included in the Company's annual report filed on
Form 10-K. Operating results for the three month period ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001

   Share numbers included in this document reflect the 3 for 1 reverse stock
split which was effected early in August 2000 prior to the Company's initial
public offering.

NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Basis of Consolidation

   The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All inter-company transactions and
balances have been eliminated in the consolidation.

 Revenue Recognition

   The Company's revenue consists of contracts for Internet access and related
services and monthly fees from customer use of Internet data centers, managed
services, and professional services and use of equipment provided by the
Company. Internet access, hosting and co-location revenues are generally billed
and recognized ratably over the term of the contract, which generally has a
one-year term. Internet access-related services revenue includes installation
fees and related direct costs. Installation fees and related direct costs are
deferred and recognized over the contract term.

   Managed and other value-added services include administration, monitoring,
security, data backup and consulting services, and equipment sales. The Company
recognizes revenue from maintenance fees for ongoing customer support ratably
over the period of the maintenance contract. Payments for maintenance fees are
generally made in advance and are non-refundable. Consulting revenue is
generally billed on a time and materials basis, and is recognized as the
consulting services are rendered. Revenue from equipment sales is recognized
when the equipment has been delivered to the customer or placed into service at
one of the Company's Internet data centers.

                                       6
<PAGE>

                                IASIAWORKS, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Net Loss Per Share

   Net loss per share has been computed by dividing the net loss by the
weighted-average number of shares outstanding during the period.

   The following table sets forth the computation of net loss per share for the
periods indicated. For periods prior to the Company's initial public offering,
the computation does not reflect the conversion of preferred stock into common
stock, which occurred upon the closing of our initial public offering, nor does
it include the exercise of outstanding options and warrants for any period. The
information set forth is stated in thousands, except for per share data:

<TABLE>
<CAPTION>
                                                              Three Months
                                                            Ended March 31,
                                                            -----------------
                                                             2000      2001
                                                            -------  --------
   <S>                                                      <C>      <C>
   Numerator:
     Net loss.............................................. $(9,440) $(34,575)
                                                            =======  ========
   Denominator:
     Shares used in computing net loss per share
      attributable to common stockholders, basic and
      diluted..............................................   2,936    39,652
                                                            =======  ========
     Net loss per share attributable to common
      stockholders, basic and diluted...................... $ (3.22) $  (0.87)
                                                            =======  ========
</TABLE>

NOTE 4--INITIAL PUBLIC OFFERING

   On August 3, 2000, the Company completed its initial public offering and
issued 9,000,000 shares of its common stock at a price of $13.00 per share. The
Company received approximately $106.1 million in cash, net of underwriting
discounts, commissions and offering costs. Simultaneously with the closing of
the initial public offering, each outstanding share of the Company's
Convertible Preferred Stock was automatically converted into Common Stock based
on the appropriate conversion ratio.

NOTE 5--COMPREHENSIVE LOSS

   The components of comprehensive loss are as follows (in thousands):

<TABLE>
<CAPTION>
                                                               Three Months
                                                             Ended March 31,
                                                             -----------------
                                                              2000      2001
                                                             -------  --------
   <S>                                                       <C>      <C>
   Net loss................................................. $(9,440) $(34,575)
   Change in foreign currency translation adjustments.......    (213)   (1,580)
                                                             -------  --------
   Comprehensive loss....................................... $(9,653) $(36,155)
                                                             =======  ========
</TABLE>

   Accumulated other comprehensive loss consists of unrealized gains or losses
on marketable securities, and cumulative translation adjustments.

                                       7
<PAGE>

                                IASIAWORKS, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 6--RECENT ACCOUNTING PRONOUNCEMENTS

   In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 establishes a new model for accounting for derivatives and hedging
activities and supersedes and amends a number of existing accounting standards.
SFAS No. 133 requires that all derivatives be recognized in the balance sheet
at their fair market value and that the corresponding derivative gains or
losses be reported either in the statement of operations or as a deferred item
depending on the type of hedge relationship that exists with respect to these
derivatives. In July 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133. SFAS No. 137 deferred the Effective date until
fiscal years commencing after June 15, 2000. In June 2000, the FASB issued SFAS
No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities--An Amendment of SFAS No. 133, which amended the accounting and
reporting standards for certain derivative instruments and hedging activities.
The Company adopted SFAS No. 133 in the quarter ending March 31, 2001. The
Company has determined that the adoption of this pronouncement did not have a
material impact on its financial condition or results of operations.

                                       8
<PAGE>

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

   This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. Forward-looking statements are
identified by words such as "believes," "anticipates," "expects," "intends,"
"will," "may "and other similar expressions. In addition, any statements that
refer to expectations, projections or other characterizations of future events
or circumstances are forward looking statements. Readers are urged to review
and consider carefully the various disclosures made by us in this report and in
other reports "filed with the Securities and Exchange Commission that advise
interested parties of risks and uncertainties that may affect our business. Our
actual results may differ materially from any forward-looking statements due to
such risks and uncertainties.

Overview

   From inception in August 1995 until July 1999, we focused on providing high-
speed, leased-line Internet access to business customers in selected markets in
the Asia-Pacific region and derived substantially all of our revenue from these
services. In July 1999, we began to implement a significant change in our
business strategy to focus on providing dedicated hosting, co-location and
managed services. Prior to that time, we derived virtually no revenue from
hosting, co-location and managed services. During the three months ended March
31, 2001, hosting, co-location and other managed services accounted for 60
percent of our revenue.

   Internet access, hosting, co-location and certain managed services, such as
security and monitoring services, are billed on a monthly basis. Contracts for
these services are generally for an initial one-year term. Certain other
managed services and value-added services are typically billed on a usage
basis. Equipment sales are billed when shipped.

   Cost of revenue consists primarily of the cost of contracting lines from
telecommunication providers worldwide, expenses related to data centers, and
depreciation of equipment and data centers. Generally, we lease lines under
contracts of one year or more. The leasing of international private lines
comprises the largest component of our telecommunications expense, with
additional costs arising from leasing local circuits into our Internet data
centers. In the future, we expect to increase the size and number of circuits
leased as our network volume grows. We expect depreciation expense to increase
in the second quarter and level off in the second half of 2001 as the assets
related to the our new Internet data centers are available for service.

   Beginning in the fourth quarter of 2000, we began to incur large capital
expenditures and operating expenses related to these facilities and the
building of our network. Depreciation expense will be incurred with respect to
these Internet data centers beginning in the first and continuing into the
second and third quarters in 2001. We believe that we will continue to incur
operating and net losses, even when one excludes certain non-recurring charges,
for the next couple of years, and that our losses will increase from current
levels.

   On August 3, 2000, we raised $106.1 million, net of underwriting discounts,
commissions and offering costs, in an initial public offering of nine million
shares of our common stock on the Nasdaq National Market. The proceeds from the
offering have been used principally to fund the build out of Internet data
centers in the Asia-Pacific region and to fund our growth. Initial construction
of our Internet data centers in Hong Kong and Taiwan was completed in February
2001. We expect initial construction of our Internet data center in Korea to be
completed in the second quarter of 2001. Although these Internet data centers
will be operational and capable of serving customers upon completion of their
initial construction, not all space in the Internet data centers are available
for hosting and co-location services. Additional work must be completed on the
Taiwan and Korean Internet data centers to make all space in them fully conform
to our specifications.

   This work may not be completed unless we obtain additional financing. We are
currently attempting to raise additional financing to fund our operations.
Absent outside debt or equity financing, and excluding

                                       9
<PAGE>

significant expenditures required for our major projects, we currently
anticipate that cash on hand and anticipated cash flow from operations will
only be adequate to fund our operations in the ordinary course until late in
the second quarter of 2001. Any significant increase in planned capital
expenditures or other costs or any decrease in or elimination of anticipated
sources of revenue could cause us to further restrict our business and product
development efforts or to deplete our available cash at an earlier date.

   We need to find additional funding to finance our operations. Funding
alternatives may not be available to us within the necessary timeframe, on
favorable terms or at all. If we do not realize significant additional revenue
or raise additional debt or equity financing, we will be unable to execute our
business development efforts, and we may be unable to continue as a going
concern.

   The current economic environment and resulting slow down in IT spending has
impacted our business. We currently see the greatest demand for our Internet
data centers from the large telecommunications carriers, global service
providers and undersea cable companies. Many of these customers are cutting
back their capital expenditures and we believe that as these companies
determine that it is quicker, more cost-effective and more reliable to
outsource than to build their own hosting facilities, these customers will
increasingly seek to outsource their hosting function to establish their points
of presence in the Asia-Pacific region.

   As a result, in the first quarter, we took steps to refocus our business and
reduce our cost structure. Going forward, our business strategy is focused on
selling primarily to large, technologically sophisticated customers that need
world-class facilities. These customers include multi-national corporations,
telecommunications carriers, global service providers, and undersea cable
companies.

   As part of our efforts to refocus our business and reduce our cost
structure, we sold our virtual hosting business in Australia. As a result of
the sale of this business, the Company took a charge of $2.4 million of which
$1.2 million was related to the write-off of goodwill. Second, we reduced our
cost structure by significant headcount reduction throughout the Company. The
result of these two actions was to reduce overall headcount by one-third to
approximately 300. Headcount reductions were primarily in our headquarters in
the U.S. and Hong Kong, and many of these people were hired in anticipation of
our expansion into other markets. Other cost reduction initiatives that are
ongoing include: consolidating partner Internet data center facilities where
possible; reviewing and renegotiating contracts where appropriate; and
controlling discretionary expenses. These efforts have extended the period that
our financial resources will be sufficient to fund our operations in the
ordinary course of business until late in the second quarter of 2001.

   Our business has been impacted by Internet-related companies reducing the
size and scope of operations. Existing customers have expanded their use of our
services more slowly than we expected, and the sales cycle for new customers
has grown longer. Additionally, price has replaced speed as one of the key
decision criteria for customers, which creates downward pressure on our prices
and consequently our gross margins. Many customers and prospective customers
have scaled down their budgets for capital expenditures and are allocating less
money for expansion into new geographic markets, which frequently include the
markets we serve in the Asia-Pacific region.

   Furthermore, because it is a difficult environment for companies in the
United States and the Asia-Pacific region to raise additional funds, we have
seen an increase in the aging of our accounts receivables and in the level of
payment defaults.

                                       10
<PAGE>

Results of Operations

   We believe that period-to-period comparisons of our historical operational
results are not necessarily meaningful and should not be relied upon as being
indicative of future performance. Our prospects must be considered in light of
the risks, expenses and difficulties frequently experienced by companies in the
early stages of development, particularly companies in new and rapidly evolving
markets like ours. The following table presents financial data for the periods
indicated as a percentage of total revenue.

<TABLE>
<CAPTION>
                                                             Three Months
                                                            Ended March 31,
                                                            -----------------
                                                             2000      2001
                                                            -------   -------
                                                              (unaudited)
<S>                                                         <C>       <C>
Revenue:
  Internet access and related services.....................      75%       40%
  Hosting, co-location and other managed services..........      25        60
    Total revenue..........................................     100%      100%
Cost of revenue:
  Cost of revenue..........................................      78       103
  Depreciation.............................................      12        11
                                                            -------   -------
    Total cost of revenue..................................      90       114
                                                            -------   -------
  Gross margin.............................................      10       (14)
Operating expenses:
  Network operations and support...........................      25        66
  Sales and marketing......................................      38        57
  General and administration...............................      84        77
  Amortization of intangibles..............................      73        43
  Impairment of goodwill...................................     --         39
                                                            -------   -------
    Total operating expenses before non-recurring operating
     expenses..............................................     220       282
Non-recurring operating expenses...........................     --         80
                                                            -------   -------
    Total operating expenses...............................     220       362
Loss from operations.......................................    (210)     (376)
Interest income............................................      11         8
Interest expense...........................................      (2)       (2)
Other income, net..........................................       1         1
                                                            -------   -------
Net loss...................................................    (200%)    (369%)
                                                            =======   =======
</TABLE>

Three months ended March 31, 2000 and 2001

 Revenue

   Total revenue increased 98 percent to $9.4 million for the three months
ended March 31, 2001 from $4.7 million for the three months ended March 31,
2000. The increase in revenue is primarily due to an increase in additional
sales of hosting, co-location and managed services, including equipment sales
which represented 60 percent of revenue in the first quarter of 2001. We began
offering hosting and co-location services late in the second quarter of 1999.

 Expenses

  Cost of Revenue

   Cost of revenue increased 150 percent to $10.7 million for the three months
ended March 31, 2001, from $4.3 million for the three months ended March 31,
2000. As a percentage of sales, cost of revenue increased to 114 percent for
the three months ended March 31, 2001, from 90 percent for the three months
ended March 31, 2000.

                                       11
<PAGE>

   The relative and absolute increases in cost of sales was caused by the build
out of our international network and expenses resulting from the opening of our
new Internet data center facilities in Hong Kong and Taiwan. Going forward, we
expect to generate negative gross margins until we have achieved the necessary
revenue levels to offset the initial fixed costs and expenses related to
operating our Internet data center facilities and other infrastructure.

  Network Operations and Support

   Network operations and support expenses increased nearly 440 percent to $6.2
million for the three months ended March 31, 2001, from $1.1 million for the
three months ended March 31, 2000. Network operations and support expenses as a
percentage of total revenue increased to 66 percent for the three months ended
March 31, 2001, from 25 percent for the three months ended March 31, 2000. The
increase in network operations and support expenses in dollar terms in both
periods is primarily due to an increase in our engineering, operations and
professional service staff to support the new Internet data centers. Going
forward, we expect network operations costs as a percent of revenue to decrease
slightly as a result of the reduction in headcount and other cost cutting
measures off-set by the increased levels of expenses related to the start-up of
the new Internet data center facilities.

  Sales and Marketing

   Sales and marketing expenses increased 200 percent to $5.3 million for the
three months ended March 31, 2001, from $1.8 million for the three months ended
March 31, 2000. Sales and marketing expense as a percentage of total revenue
increased to 57 percent for the three months ended March 31, 2001, from
38 percent for the three months ended March 31, 2000. We expect sales and
marketing expenses will decrease in absolute terms as compared to the last
several quarters during which the Company was focused on an extensive marketing
and brand building campaign. We expect ongoing costs will also be reduced as a
result of reduced headcount in the sales and marketing organizations as we
focus our sales efforts on large customers and focus on our three core
markets--Hong Kong, Taiwan and Korea.

  General and Administration

   General and administration expenses increased 80 percent to $7.2 million for
the three months ended March 31, 2001, from $4.0 million for the three months
ended March 31, 2000. General and administration expense as a percentage of
total revenue decreased to 77 percent for the three months ended March 31,
2001, from 84 percent for the three months ended March 31, 2000. This increase
in general and administration expenses in absolute dollars was due primarily to
an increase in the amount of staffing and related expenses both in the Asia-
Pacific region and in the United States. We expect that going forward, general
and administration expenses will continue to decrease as a percentage of
revenue as a result of our recent restructuring and from additional cost
reduction efforts.

  Amortization of Intangible Assets

   We recorded amortization of intangible assets of $4.0 million for the three
months ended March 1, 2001, which represents an increase of 16 percent from
$3.5 million for the three months ended March 31, 2000. We expect that, going
forward, the amortization of intangible assets will decrease as a result of the
sale of the Australian shared virtual hosting business and the impairment of
goodwill from our U.S.-based dedicated hosting business, which was acquired in
January 2000.

   As of March 31, 2001, $25.8 million was recorded as goodwill and other
assets which will be amortized over their remaining lives of two to three
years. Amortization of intangible assets includes the amortization of goodwill
and other intangible assets.

                                       12
<PAGE>

  Impairment of Goodwill

   The Company performed an impairment assessment of identified intangibles and
goodwill recorded in connection with the acquisition of Web Professionals. As a
result, the Company recorded a $3.7 million impairment charge to reduce
goodwill. The charge was based upon the reduction in revenues generated from
customers of Web Professionals in the first quarter of 2001, the forecasted
revenues from those customers, and the estimated cash flows over the remaining
useful life of the goodwill. The assumptions supporting the cash flows were
determined using the Company's best estimates as of such date and were the
result of the losses incurred by that business in the quarter and those losses
projected for the remaining life of the goodwill.

  Non-Recurring Operating Expense

   In the first quarter of 2001, the Company recorded a non-recurring operating
charge of $7.5 million. This charge was taken as part of our efforts to refocus
our business and reduce our cost structure. As part of the restructuring, the
Company sold its virtual hosting business in Australia and made significant
headcount reductions across the Company.

   Of this charge, $2.6 million will have a negative impact on future cash
balances and is related to fees associated with ongoing financing initiatives
and the severance costs associated with the resignation of our former Chief
Executive Officer. The remaining $4.9 million is related to non-cash accounting
charges arising from the sale of our virtual hosting business in Australia and
the accelerated vesting of stock options previously granted to our former Chief
Executive Officer.

   The result of these two actions was to reduce overall headcount by one-third
to just over 300. The total restructuring charge will be approximately $10
million. The balance of the charge, which will be recognized in the second
quarter, relates to severance payments for employees and related amortization
of stock based compensation.

  Interest Income and Other Income (Expense)

   Net interest and other income (expense) increased to $621,000 for three
months ended March 31, 2001, from $467,000 for the three months ended March 31,
2000. The increase in net interest and other income was due to increased levels
of interest earned on investments in short-term securities and bank deposits on
funds received from our initial public offering in August 2000.

  Provision for Income Taxes

   We have incurred operating losses for all periods from inception through
March 31, 2001. We have recorded a valuation allowance for the full amount of
our deferred tax assets, as the future realization of the tax benefits is
uncertain. Accordingly, we have recorded no provision for income taxes.

Liquidity and Capital Resources

   From our inception until our initial public offering, we financed our
operations primarily from private sales of convertible preferred stock, net of
issuance costs, which totaled $109.4 million and, to a lesser extent, from bank
borrowings and lease financings. The size of our accumulated deficit, our
losses since inception and our ongoing need for capital to continue our
operations raises substantial doubt as to our ability to continue operations
during the year 2001. We will need to obtain additional financing to finance
continuing operating losses. There can be no assurance that we will be
successful in our efforts to reduce expenses or to obtain additional financing.
Failure to reduce expenses and/or to obtain additional financing will result in
a material adverse effect on our ability to meet our business objectives and
continue as a going concern.

   On August 3, 2000, the Company completed its initial public offering and
received approximately $106.1 million in cash, net of underwriting discounts,
commissions and offering costs. In our prospectus for our initial public
offering, we stated that proceeds from the offering would only fund the
business for nine months,

                                       13
<PAGE>

and that we would likely need additional capital beyond that nine-month period.
Absent outside debt or equity financing, and excluding significant expenditures
required for our major projects, we currently anticipate that cash on hand and
anticipated cash flow from operations will only be adequate to fund our
operations in the ordinary course until late in the second quarter of 2001.

   Net cash used by operating activities for the first quarter 2001 was
approximately $10 million. Net cash used for investment activities was
approximately $23 million.

   Net cash provided by financing activities was $135.3 million related
primarily to the completion of our initial public offering in August 2000. This
financing activity also included secured loan financings in October and
November 2000 for the Company's Internet data center projects in South Korea
and Taiwan, respectively. The loan in South Korea was for approximately $11
million. It is secured against the land and buildings, is for a term of 5
years, and bears interest at a variable rate no greater than 11% per annum,
with a rate adjustment after the third year. The loan in Taiwan was for
approximately $18 million. It is secured against the land and buildings, is for
a term of 15 years, and currently bears interest at 7.5% per annum. The
principal balance on the loans in Korea and Taiwan are denominated in local
currency and are subject to exchange rate fluctuations. We will continue to use
equipment financing to reduce our capital expenditures going forward. As noted
above, there is the risk that additional funding may not be available to us on
terms acceptable to us, or at all, to fund our expansion plans.

   At March 31, 2001, we had cash and cash equivalents aggregating $38.1
million of which $8.7 million was restricted cash. In addition, we had a debt
balance at March 31, 2001, of $29.0 million, related to the purchase of land
and buildings in Taiwan and South Korea for our Internet data centers. The
amount of the debt in U.S. Dollar equivalents was reduced due to declines in
the value of the Taiwan Dollar and Korean Won against the U.S. Dollar. We had
capital lease obligations of $2.2 million at March 31, 2001. As well, accounts
payable and accrued liabilities have increased significantly due to increased
level of activity related to the build-out of the Internet data center and
timing of payables.

   Our capital outlays primarily relate to the build out of our Internet data
centers in South Korea and Taiwan. Initial construction of our new, large scale
Internet data centers in Hong Kong and Taiwan was completed in February 2001.
Korean Internet data center was opened on May 9, 2001. Although these Internet
data centers will be operational and capable of serving customers upon
completion of their initial construction, not all space in the Internet data
centers is available for hosting and co-location services. Additional work must
be completed on the Taiwan and Korean Internet data centers to make all space
in them fully conform to our specifications. This work may not be completed
unless we obtain additional financing.

   Our liquidity and capital requirements depend on numerous factors discussed
under the section entitled "Risk Factors" beginning on page 15. Factors such as
the ability to obtain additional financing to continue operations, expand our
customer base, the level of investment in new Internet data centers, the level
of expenditures for marketing and sales, the level of investment in
distribution, customer service and other capabilities would also increase our
liquidity requirements. The timing and amount of these capital requirements
cannot be accurately predicted.

   Our financial statements were prepared on the assumption that we will
continue as a going concern. The report of our independent accountants
acknowledges that we have incurred losses in each of the last three fiscal
years and that we will require additional funding to sustain our operations.
These conditions cause substantial doubt as to our ability to continue as a
going concern. Our financial statements included herein do not include any
adjustments that might result should we be unable to continue as a going
concern.

   We may enter into additional credit arrangements in order to raise
additional funds. These credit arrangements may not be available to us on
reasonable terms or at all. Our loan agreement with Korea First Bank limits our
ability to borrow money from other parties, by prohibiting the use of our
Korean Internet data center as collateral for other loans and by requiring us
to maintain certain financial ratios. In addition, a further

                                       14
<PAGE>

downturn in our financial situation, bankruptcy proceedings or other action
against us based upon our financial condition, may result in non-compliance
with our existing credit arrangements. As of March 31, 2001, we were in
compliance with our existing credit arrangements. Our failure to adequately
remedy any non-compliance with any of our credit arrangements may cause the
Company to be in default under one or more of our credit arrangements and, if
declared by the lenders, such defaults will trigger cross defaults in our other
credit arrangements, accelerate repayment of certain debts, and may permit
lenders to foreclose upon our new Internet data center in South Korea. Such
events could materially adversely affect our business, financial condition and
results of operations.

   In addition to the recent reduction in force, our management is implementing
plans designed to reduce our cash requirements through a combination of
reductions in components of working capital, equipment purchases, operating
expenditures and a significant reduction in force. However, there can be no
assurance that we will be able to successfully implement these plans or that we
will be able to do so without a material adverse effect on our business,
financial condition or results of operations. Despite these cost cutting
measures, absent additional funding we will probably be forced into taking
additional steps such as future workforce reductions and may be unable to
continue as a going concern, may have to sell assets, or may have to file for
bankruptcy.

   If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our stockholders will be diluted.
Furthermore, any new securities could have rights, preferences and privileges
senior to those of our common stock. There is currently no agreement in place
with any source of financing, and there can be no assurance that we will be
able to raise additional funds or that such funds will be available on
acceptable terms or at all. Lack of additional funds will materially adversely
affect us and our business and may cause us to sell assets or to cease
operations. Consequently, our stockholders could incur a loss of their entire
investment in us.

                                       15
<PAGE>

                                  RISK FACTORS

   Our business, financial condition or operating results could be seriously
harmed by any of the following risks. In addition, the trading price of our
common stock could decline due to any of the following risks, and you may lose
all or part of any investment you make in our common stock.

                         Risks Related to Our Business

We expect significant increases in our operating expenses and continued losses.

   We have never achieved profitability, have accumulated net losses of $120
million from our inception through March 31, 2001 and have had to rely on the
proceeds of the sale of equity securities and the incurrence of debt to fund
our operations. We believe that we will continue to incur losses for at least
the next several years and that our losses will increase significantly from
current levels. We expect to fund our growth through equity or debt financings
or business combination transactions, if available.

We may not be able to grow our business or continue operating if we cannot
raise additional financing.

   Our independent certified public accountants have included an explanatory
paragraph in their audit report with respect to our financial statements
related to a substantial doubt with respect to our ability to continue as a
going concern. Absent outside debt or equity financing, and excluding
significant expenditures required for our major projects, we currently
anticipate that cash on hand and anticipated cash flow from operations may be
adequate to fund our operations in the ordinary course until late in the second
quarter of 2001. Any significant increase in planned capital expenditures or
other costs or any decrease in or elimination of anticipated sources of revenue
could cause us to restrict our business and product development efforts or to
deplete our available cash at an earlier date. We need to find additional
funding to finance our operations. Funding alternatives may not be available to
us within the necessary timeframe, on favorable terms or at all. If we do not
realize significant additional revenue or raise additional debt or equity
financing, we will be unable to execute our business development efforts, and
we may be unable to continue as a going concern or we may have to sell assets.
The factors leading to and the existence of the explanatory paragraph in the
audit report will have a material adverse effect on our ability to obtain
additional financing.

Our existing indebtedness may complicate our financing efforts.

   The continued existence of our current indebtedness secured by our new
Internet data centers in South Korea and Taiwan, as well as indebtedness
incurred, may make it more difficult for us to obtain additional debt
financing. In addition, a further downturn in our financial situation, the
imposition of bankruptcy proceedings or other action against us based upon our
financial condition, may result in non-compliance with our existing credit
arrangements. As of March 30, 2001, we were in compliance with our existing
credit arrangements. Our failure to adequately remedy any future non-compliance
with any of our credit arrangements may cause the Company to be in default
under one or more of our credit arrangements and, if declared by the lenders,
such defaults will trigger cross defaults in our other credit arrangements,
accelerate repayment of certain debts, and may permit lenders to foreclose upon
our new Internet data center in South Korea. In the event we are the subject of
a bankruptcy proceeding, we may be forced to reorganize or possibly dissolve,
and our stockholders may not receive any assets upon liquidation. In addition,
we could be delisted by the Nasdaq National Market. Such events could
materially adversely affect our business, financial condition and results of
operations.

Our cost-cutting efforts may harm our business.

   Our management is implementing plans designed to reduce our cash
requirements through a combination of reductions in components of working
capital, equipment purchases and operating expenditures, including a
significant reduction in force. However, there can be no assurance that we will
be able to successfully

                                       16
<PAGE>

implement these plans or that we will be able to do so without a material
adverse effect on our business, financial condition or results of operations.

Any financing we obtain may significantly dilute the ownership of our existing
stockholders.

   If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our stockholders will be significantly
diluted. Furthermore, any new securities could have rights, preferences and
privileges senior to those of our common stock. There is currently no agreement
in place with any source of financing, and there can be no assurance that we
will be able to raise additional funds or that such funds will be available on
acceptable terms. Lack of additional funds will materially adversely affect us
and our business and may cause us to cease operations or cause us to sell
assets. Consequently, our stockholders could incur a loss of their entire
investment in us.

As a result of questions concerning our status as a going concern, our
customers and vendors may decide not to do business with us.

   Due to concerns regarding our ability to continue operations, customers and
vendors may decide not to conduct business with us, or may conduct business
with us on terms that are less favorable than those customarily extended by
them. Additionally, we are currently experiencing some resistance in the
marketplace and we believe that one of the several factors for this resistance
is related to concerns regarding our ability to continue our business as a
going concern. In any event, if customers and vendors decide not to conduct
business with us, our net sales would further decrease, and our business will
suffer significantly.

If we are unable to motivate and retain our personnel, it could have a
material, adverse effect on our business.

   Our success depends in large part on our ability to motivate and retain
highly-skilled employees on a timely basis. Our cost-cutting efforts as well as
our recent and any future workforce reduction will result in some disruption of
our ongoing operations and impair our efforts to motivate existing employees.
Our failure to retain highly-skilled personnel may limit the rate at which we
generate revenue and develop new products and services or product enhancements.
This could have a material adverse effect on our business, operating results
and financial condition.

We are the subject of, and may be the subject of additional, class action
suits, which would divert significant resources away from our business.

   We are a defendant in several putative class action lawsuits alleging
violations of the Federal securities laws. All of these lawsuits are at a very
early stage, and we are unable to predict their outcomes. These lawsuits may
adversely affect our ability to obtain financing necessary to continue our
operations. In addition an unfavorable outcome in any of these lawsuits could
have a material adverse effect on our prospects and financial condition. Even
if the litigation is resolved in our favor, the defense of that litigation will
entail considerable cost and diversion of efforts of management, either of
which are likely to adversely affect our results of operations. We believe that
these lawsuits are without merit and intend to vigorously defend against these
lawsuits.

Continuing uncertainty of the U.S. economy may have serious implications for
the growth and stability of our business and may negatively effect our stock
price.

   The revenue growth and profitability, if any, of our business depends
significantly on the overall demand for dedicated hosting, co-location and
managed services, particularly in the service segments in which we compete.
Softening demand for these services caused by ongoing economic uncertainty may
continue to result in decreased revenues or earnings levels or growth rates.
The U.S. economy has weakened and market

                                       17
<PAGE>

conditions continue to be challenging. This has resulted in individuals and
companies delaying or reducing expenditures for purposes such as increasing
their use of Internet services. Further delays or reductions in Internet
services expansion spending could have a material adverse effect on demand for
our services, and consequently on our business, operating results, financial
condition, prospects and stock price.

We may not grow our business or become profitable if we are not successful in
completing a change in our strategic focus.

   From inception in August 1995 until July 1999, we focused on providing high-
speed, leased-line Internet access in selected markets in the Asia-Pacific
region. In July 1999, we began to implement a significant change in our
business strategy to focus on providing dedicated hosting, co-location and
managed services throughout the Asia-Pacific region. Our inability to
successfully execute this business strategy could compromise our future growth
and profitability, if any.

Our Internet data center construction plans may be delayed, never be completed
or experience other significant problems, which would delay or prevent us from
realizing our ultimate profitability.

   Some of the Internet data centers currently operated by us or our strategic
partners are not large-scale facilities. Our future growth and ultimate
profitability, if any, will be jeopardized if we cannot continue to establish
significant new Internet data center capacity, which may not occur due to
inadequate facilities available for sale or lease, construction delays,
inability to obtain additional adequate financing, inability to obtain
necessary authorizations or technological problems.

   In addition to our smaller scale Internet data centers operated by our
strategic partners, we also operate three large-scale, high performance
Internet data centers. We have a limited track record for the operation of
large-scale, high performance Internet data centers. In addition if any of
these risks affect our Internet data center operations, the benefits of our
substantial investment in these Internet data centers may be delayed or never
occur. In that case, we will be delayed or prevented from realizing our
ultimate profitability.

We will need to greatly expand our revenue base to benefit from our investments
in our Internet data centers.

   We have incurred and will continue to incur significant costs to establish
and operate our new Internet data centers. If we are unable to significantly
grow our revenue base, we will not be able to achieve the economies of scale
necessary to offset our fixed and other operating costs. We have limited
experience in attracting and servicing our hosting, co-location, managed
services and other value-added services customers. Our ability to attract and
retain additional customers for these services depends on a variety of factors
including the willingness of businesses to outsource their Internet operations
and the quality, reliability and cost-effectiveness of our services. If we are
unable to significantly increase our customer base for hosting, co-location,
managed services and other value added services, we will not realize our
expected growth or achieve profitability.

Our stock price has been extremely volatile in the past and is likely to be
extremely volatile in the future, which could lead to a high rate of attrition
of our employees and lost revenue and lost contracts with customers and
vendors.

   The market price of our common stock has been and may continue to be
extremely volatile in the future. The stocks of Web-related and technology
companies like ours have experienced extreme price and volume fluctuations in
recent months. Although the market price of our stock will in part be based on
our business, financial condition and operating results, we expect that it will
also be affected to a significant degree by these market-wide and industry-wide
factors.

                                       18
<PAGE>

   Fluctuations in our stock price could continue to lead to employees leaving
us due to their perception of the value of their stock options in relation to
the price of our common stock. If this were to continue to occur, our business,
results of operations and financial condition could be harmed.

   Fluctuations in our stock price could also lead to a loss of revenue due to
our inability to engage new customers and vendors and to renew contracts with
our current customers and vendors. We are currently experiencing some
resistance in the marketplace and we believe that one of the several factors
for this resistance is related to our fluctuating stock price. Existing and
potential customers and vendors may perceive our fluctuating stock price as a
sign of instability and may therefore be unwilling to do business with us. If
this were to continue to occur, our business, results of operations and
financial condition could continue to be harmed.

Recent economic conditions in the securities markets may decrease our chances
of obtaining additional financing and may make the terms of any additional
financings or tender offers unfavorable to us or our shareholders.

   The market prices of the equity securities of many public companies and in
particular Internet technology companies have decreased in recent months as a
result of market conditions in the United States. These current economic
conditions make raising capital through equity financings more difficult to
obtain. Potential investors in our company may perceive an investment in us as
being risky due to the recent trends in our stock price and the stock prices of
similar companies. If this were to occur, raising additional capital through an
equity financing may not be obtainable or may only be obtainable on terms
unfavorable to us or the stockholders or both. Potential terms may have
negative consequences, such as dilution of stockholders or a further decline in
our common stock price.

   Any declines in our common stock price resulting from current economic
conditions may make us more vulnerable to becoming acquired through a tender
offer. If this were to occur, we may be acquired at a price or on terms
unfavorable to the stockholders.

We have taken steps and may take further steps to reduce our expenses to help
maintain our viability. Failure to manage these and earlier cost reductions may
result in adverse effects on our business, operating results and financial
condition.

   In order to preserve our capital resources, we have taken steps and may take
further steps to streamline our business and reduce costs. These cost-cutting
efforts have include significant reductions in our workforce, and we may engage
in additional workforce reductions. If we do not properly manage reductions in
our cost structure, it could have a material adverse effect on our business,
financial condition and results of operations. Any failure to manage the impact
of cost-cutting efforts on our operations, our customer service, our ability to
retain remaining personnel, or our ability to recruit new employees in the
future could have a material adverse effect on our business, operating results
and financial condition. In addition, there will be costs associated with these
cost-cutting efforts that could materially adversely affect our operating
results and financial condition.

We operate in a relatively new and evolving market with rapid technological
changes and uncertain prospects for growth. This market may evolve in a manner
that jeopardizes our prospects for growth and profitability.

   The market for our services in the Asia-Pacific region has only recently
begun to develop and is evolving rapidly. Projected growth of this market may
not be realized. The market for our services may not grow, our services may not
be adopted and businesses may not use these Internet-based services to the
degree or in the manner that we expect. In addition, if we are not able to
effectively respond to technological changes or if technological advances
diminish the benefits derived by our customers from the use of our products and
services, future demand for our services could be reduced. For example, it is
possible that businesses may find

                                       19
<PAGE>

it cheaper, more secure or otherwise preferable to host their web sites and
applications internally and decide not to outsource the management of their web
sites and applications. In addition, the market for our services has developed
more slowly than we originally expected. If we are not able to react quickly to
changes in the market, if the market fails to develop or continue to develop
more slowly than expected or if our services do not achieve market acceptance,
we will not achieve growth levels necessary to become profitable.

The potential market for Internet services in the Asia-Pacific region may
attract new and existing competitors, which could narrow our margins and limit
our growth prospects.

   The market for Internet access, as well as for hosting, co-location and
managed services, is extremely competitive and there are few substantial
barriers to entry. New market entrants or the creation of stronger competitors
through combinations could result in increased price competition, which would
make it difficult for us to attract new customers, retain existing customers,
or attain revenue and gross margin levels sufficient to generate a return on
our prior investment in our business.

   We are dependent upon businesses, such as national telecommunications
carriers that are monopolies or have significant regulatory advantages over us,
which provide us with resources we need to provide services in one or more
markets. These businesses either currently compete with us or may compete with
us in the future. Increasingly, Internet service providers, hosting companies,
telecommunications companies and equipment manufacturers based in North America
have announced plans to enter into or expand their operations in markets in the
Asia-Pacific region. For example, companies such as AboveNet Communications,
and its parent Metropolitan Fiber Networks, Exodus Communications, Global
Crossing, Level 3, WorldCom, Pihana Pacific, and Intel have announced plans to
enter into or expand their current operations in the Asia-Pacific region. When
these companies expand their presence in the Asia-Pacific region, customers may
decide to use their services in the region instead of ours.

   Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
As a result, certain of these competitors may be able to develop and expand
their network infrastructures and service offerings more quickly, adapt to new
or emerging technologies and changes in customer requirements more readily,
take advantage of acquisition and other opportunities more effectively, devote
greater resources to the marketing and sale of their products and adopt more
aggressive pricing policies than we can. In addition, these competitors have
entered and will likely continue to enter into joint ventures or consortiums to
provide additional value-added services competitive with those provided by us.
We may not have, or be able to acquire, the resources or expertise to compete
successfully in the future, which could narrow our margins and limit our growth
prospects.

Our limited operating history makes forecasting difficult. Because most of our
expenses are based on planned operating results, failure to achieve forecast
revenue could significantly increase our net losses in any given period.

   As a result of our limited operating history, particularly since our change
in strategic focus in mid-1999, it is difficult to accurately forecast our
revenue, and we have limited meaningful historical financial data upon which to
base planned operating expenses. We base our current and future expense levels
on, among other factors, our operating plans, our financing needs and
availability, the anticipated dates that our new large-scale, high performance
Internet data centers will be completed and available for customer use,
expected use of our new Internet data centers and estimates of future revenue.
Because our significant expenses are to a large extent fixed in the short term,
we may be unable to adjust our spending in a timely manner to compensate for
any unexpected revenue shortfall. In addition, if we are unable to obtain
additional funding, we may not be able to adjust our spending levels downward
in a timely manner so as to maximize our available capital. This could
significantly increase our net losses in any given period or cause us to
deplete our cash more quickly than expected.

                                       20
<PAGE>

Our operating results are difficult to predict. If we fail to meet the
expectations of public market analysts and investors, the market price of our
common stock may decline significantly.

   Our annual and quarterly operating results have fluctuated in the past and
will continue to fluctuate significantly in the future due to a variety of
factors, many of which are outside of our control. For example, for several
quarters beginning in late 1997, our operating results were adversely affected
by the economic crisis in the Asia-Pacific region. It is possible that, in the
future, our quarterly operating results may fall below the expectations of
securities analysts and investors. In this event, the trading price of our
common stock may decline significantly.

If we cannot effectively manage our growth in the number of personnel, our
increasing geographic breadth and our acquisitions, our revenue growth may not
occur, and we may not be able to achieve our projected plan and operating
results.

   We have grown and, depending on the availability of additional funding, may
continue to grow our business by hiring additional personnel and acquiring
businesses in our existing markets and other markets in the Asia-Pacific
region. Any additional personnel, increased geographic breadth of our
operations, and challenges presented by an evolving corporate culture, would
make it increasingly difficult to effectively manage our operations in order to
implement our business plan and effectively oversee our personnel. We may be
unable to maintain uniform standards, controls, procedures and policies if we
fail in these efforts. If we cannot effectively manage our growth, our revenue
growth may not occur and we may not be able to achieve our projected plan and
operating results.

We may be unable to hire and retain the skilled engineering and technical
personnel necessary to develop our business.

   Depending on the availability of funding, we may hire additional engineering
and technical personnel. Competition for these individuals with relevant
experience and expertise is intense, and we may not be able to attract,
assimilate or retain highly qualified personnel in the future. The market for
qualified engineering and technical personnel in the Asia-Pacific region is
extremely limited and finding individuals with relevant country specific
experience may be difficult. Our failure to attract and retain the highly
trained engineering and technical people who are integral to our business may
limit our growth rate and harm our business. We have had greater difficulty
attracting these personnel with equity incentives as a public company than we
did as a privately held company.

The expansion of our network is dependent upon the availability of adequate
connectivity with third party providers and any failure or delay in obtaining
necessary connectivity would limit our growth.

   In building our network, we rely upon connectivity and bandwidth from
Internet service providers and local and international telecommunications
carriers. In some of our markets, we are dependent on one or a limited number
of connectivity providers. Many of these carriers are our competitors. Because
of market and competitive factors, it is uncertain whether we will be able to
obtain the requisite network connectivity at commercially viable prices or that
the necessary connectivity will be available on a timely basis or at all.
Failure to obtain this connectivity would jeopardize our ability to conduct our
business in the Asia-Pacific region and would restrict our growth.

We must offer services priced above the overall cost of bandwidth, and any
failure to do so could cause us to sell our services at a loss.

   We purchase our bandwidth capacity in amounts based upon projected usage by
our customers on a fixed-price basis in advance of the sale of our services. We
sell our services, by contract, on the basis of actual usage. If we do not
obtain adequate bandwidth capacity on acceptable terms and realize appropriate
customer volume for such bandwidth, we will not achieve positive gross profit.

                                       21
<PAGE>

   We expect that the cost of obtaining bandwidth for the transport of data
over our network will decline over time as a result of, among other things, the
large amount of capital currently being invested to build network
infrastructure. We expect the prices we charge for data transported over our
network will also decline over time as a result of, among other things, the
lower cost of obtaining bandwidth and existing and new competition in the
markets we address. If we fail to accurately predict the decline in costs of
bandwidth, are unable to sell our services at acceptable prices, or fail to
offer additional services from which we can derive additional revenue, the
value of our services will be substantially reduced, our revenue will decrease
and our business, results of operations and financial condition will suffer.

If we lose the services of key members of our management, we may not be able to
effectively execute our business plan and our trading price may suffer.

   Our future success depends to a significant degree on the skills, experience
and efforts of our key personnel. The loss of the services of any of these
individuals could compromise our ability to effectively operate our business.
In addition, we have not obtained key person life insurance on any of our key
employees. If any of our key employees left or was seriously injured and unable
to work and we were unable to find a qualified replacement, our business,
results of operations and financial condition could be harmed.

We could lose customers and be exposed to liability if our service to our
customers is disrupted or damaged or the security of confidential information
stored in our computer systems is compromised.

   Our success, in particular our ability to successfully provide our services
in a high quality and reliable manner, largely depends upon the efficient and
uninterrupted operation of our Internet data centers, including our computer
and communications hardware and software systems and the power and cooling
systems upon which they rely. Any of the acts or events described below could
lead to interruptions, physical or electronic loss of data, delays or cessation
of service to our customers or a decrease in responsiveness, which could harm
our relationships with our customers, result in liability damages and reduce
revenue. Our systems and operations are vulnerable to damage or interruption
from:

  . earthquake, fire, flood and other natural disasters;

  . failure of our internal systems, including failure of our computer
    systems or our telecommunications network, operator negligence, improper
    operation by or supervision of our employees;

  . third party or systemic infrastructure failures, including Internet
    network outages, power and utility loss and problems with the satellite
    systems used for our data back-up; and

  . disruptions due to human intervention, including computer viruses,
    interruption, break-ins, security breaches, misappropriation, denial of
    service, vandalism and similar disruptive problems caused by our
    customers or Internet hackers.

   Furthermore, any inappropriate use of the network by third parties could
potentially jeopardize the security of confidential information stored in our
computer systems and our customers' computer systems, which may result in
liability to us and act as a deterrent to potential customers. Although we
intend to continue to implement security measures, any measures we implement
may be circumvented in the future. The costs and resources required to
eliminate computer viruses and alleviate other security problems may divert
resources from other activities and may result in interruptions or delays to
our customers that could cause our business, results of operations and
financial condition to suffer.

Because of the significant stock ownership of our officers, directors and
significant stockholders, you will be unable to exert significant control over
our future direction.

   Based upon our shares outstanding as of April 1, 2001, our executive
officers and directors and their affiliates will together control approximately
39.0 percent of our outstanding common stock as a result of their

                                       22
<PAGE>

shareholdings, which if they act together, would enable them to significantly
influence matters requiring our stockholders' approval, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may delay, prevent or deter a change in control,
could deprive our stockholders of an opportunity to receive a premium for their
common stock as part of a sale of iAsiaWorks or our assets and might adversely
affect the trading price of our common stock.

Provisions of our certificate of incorporation and bylaws may make changes of
control difficult, even if they would be beneficial to stockholders.

   Anti-takeover provisions of Delaware law and in our certificate of
incorporation and bylaws may make a change in control of iAsiaWorks difficult,
even if a change in control would be beneficial to our stockholders. These
provisions may allow our board of directors to prevent or make changes in the
management and control of iAsiaWorks. In addition, under Delaware law, our
board of directors may adopt additional anti-takeover measures in the future.
The rights of holders and the price of our common stock could be adversely
affected by these anti-takeover provisions.

We may not be able to maintain our listing on the NASDAQ national market.

   Our common stock is currently listed on the Nasdaq National Market. We must
satisfy a number of requirements to maintain its listing on the Nasdaq National
Market, including maintaining a minimum bid price for our common stock of $1.00
per share. As of May 10, 2001, the price of our common stock was $0.95. If the
common stock loses its Nasdaq National Market status, it would likely trade on
the Nasdaq Over the Counter Bulletin Board, which is viewed by most investors
as a less desirable, less liquid marketplace.

Our long-lived assets may be impaired if we are unable to obtain the financing
necessary to expand our business to the level necessary to achieve
profitability and generate positive cash flows.

   We cannot assure you that we will be able to obtain financing in a
sufficient amount to expand our business to the level necessary to achieve
profitability and generate positive cash flow from operations. Our failure to
do so will likely result in our conclusion that the carrying amount of certain
long-lived assets are not recoverable. Under generally accepted accounting
principles relating to the impairment of assets, we would then be required to
write-off all or a portion of long-lived assets, including goodwill and other
acquisition-related intangible assets, which would have a material and adverse
effect on our business, results of operations and financial position.

The large number of shares that may be resold in the public market could cause
our stock price to decline.

   As our shares become eligible for public resale, the market price of our
common stock may drop if the holders of these shares sell them or are perceived
by the market as intending to sell them. Most of the shares we have outstanding
or assumable upon exercise of options or warrants became eligible for public
resale in January 2001. For a more detailed description of the eligibility of
the outstanding shares of our common stock for resale in the public market, see
our Registration Statement filed with the SEC, SEC File No.333-35278.

Our business operations may be adversely affected by the California energy
crisis.

   Our principal executive offices are located in the Silicon Valley in
Northern California. California has been experiencing an energy crisis that has
resulted in disruptions in power supply and increases in utility costs to
consumers and businesses throughout the State. Should the energy crisis
continue, together with many other Silicon Valley companies, we may experience
power interruptions and shortages and be subject to significantly higher costs
of energy. Although we have not experienced any material disruption to our
business to date, if the energy crisis continues and power interruptions or
shortages occur in the future, they may adversely affect our business.

                                       23
<PAGE>

          Risks specific to the Internet, our industry and our markets

The political, legal and economic climate in the Asia-Pacific region is
volatile, uncertain, subject to change and presents risks that could materially
adversely affect our business.

   We currently operate throughout the Asia-Pacific region. As a result, our
results of operation and future growth depend on the economies in these
markets. There are certain risks inherent in conducting business in the Asia-
Pacific region that could affect our profitability, if any, including:

  . political and economic instability;

  . risk of expropriation;

  . risk of currency exchange controls and repatriation;

  . export restrictions, tariffs and other trade barriers;

  . changes in regulatory requirements;

  . legal restrictions on the business practices of United States companies
    operating outside of the United States, such as the Foreign Corrupt
    Practices Act;

  . lack of clarity, transparency and consistency in the application of laws
    and regulations in various jurisdictions; and

  . potential adverse tax consequences.

   Beginning in mid-1997, many countries in the Asia-Pacific region experienced
significant economic downturns and related difficulties. As a result of the
decline in the value of the region's currencies, many governments in the Asia-
Pacific region and companies operating in the region had difficulties servicing
foreign currency denominated debt and many corporate borrowers defaulted on
their payments. These currency fluctuations, as well as resulting higher
interest rates and other factors, materially adversely affected the economies
of many countries in the Asia-Pacific region. While the region has generally
shown signs of improvement in recent periods, the economic conditions in the
Asia-Pacific region may not continue to improve and any recent improvements may
not be sustained.

   Governmental regulation and the application of existing laws of countries in
the Asia-Pacific region often lack clarity and are subject to change without
notice. Such uncertainty and lack of transparency may result in unexpected
liabilities and violation of local law, especially with regard to obtaining
local and national government approvals, limitations on foreign investments and
the purchase of real property, and complying with zoning, environmental, labor
and similar regulatory requirements. In particular, zoning and land use
regulations in the Asia-Pacific region often reflect the time lag, often
considerable, between telecommunications liberalizations and corresponding
amendments to zoning, use and other local land regulations to accommodate such
liberalizations. Applicable zoning regulations and use permits in the Asia-
Pacific region in certain countries where we operate do not explicitly allow
for the operation of Internet data centers, as land is zoned into broad
categories, such as commercial, industrial and residential, that do not always
take account of current business usage. If we violate these regulations, we may
face significant fines and penalties and may be unable to operate our
facilities, all of which could have a material adverse effect on our business,
results of operations and financial condition.

   Any adverse political, legal or economic development in the Asia-Pacific
region could materially adversely affect our markets and our business. For
example, while Hong Kong is a Special Administrative region under the
government of mainland China, with its own government and legislature, it may
not remain autonomous from mainland China. Any loss of autonomy could affect
the regulation of business in Hong Kong, hinder our ability to operate in Hong
Kong, and destabilize the Asia-Pacific region. Similarly, any conflict between
mainland China and Taiwan or between North Korea and South Korea may also
destabilize the region and render us unable to transact business in the region.
If any of these events were to occur, our business model would be undermined.

                                       24
<PAGE>

Governmental regulation and the application of existing laws to the Internet
may slow the Internet's growth, increase our costs of doing business and create
potential liability for the dissemination of information over the Internet.

   Laws and regulations directly applicable to Internet communications are
becoming more prevalent. Uncertainty and new laws and regulations, as well as
the application of existing law to the Internet, in our markets could prevent
or limit our ability to operate in certain of our markets, expose us to
compliance costs and substantial liability and could result in costly and time
consuming litigation, all of which could materially harm our business,
operating results and financial condition.

   The international nature of the Internet and the possibility that we may be
subject to conflicting laws of, or the exercise of jurisdiction by, different
countries may make it difficult or impossible to comply with all the laws that
may govern our activities. Furthermore, the law relating to the liability of
online service providers for information carried on or disseminated through
their networks is currently unsettled.

Underdeveloped telecommunications and Internet infrastructure may limit the
growth of the Internet in the Asia-Pacific region and the growth of our
business.

   Access to the Internet requires advanced telecommunications infrastructure.
The telecommunications infrastructure in many parts of the Asia-Pacific region
is not as well developed as in the United States and is owned and operated by
current or former national monopoly telecommunications carriers or may be
subject to a restrictive regulatory environment. The quality and continued
development of telecommunications infrastructure in the Asia-Pacific region
will have a substantial impact on our ability to deliver our services and on
the market use and acceptance of the Internet in general.

   In addition, the recent growth in the use of the Internet has caused
frequent periods of performance degradation, requiring the upgrade of routers
and switches, telecommunications links and other components forming the
infrastructure of the Internet by Internet service providers and other
organizations with links to the Internet. Any perceived degradation in the
performance of the Internet as a whole could undermine the benefits of our
services. The quality of our services is ultimately limited by and reliant upon
the speed and reliability of the networks operated by third parties.
Consequently, the emergence and growth of the market for our services is
dependent on improvements being made to the entire Internet infrastructure in
the Asia-Pacific region to alleviate overloading and congestion.

Inability to acquire sufficient power to facilitate our operations may limit
our growth in the Asia-Pacific region.

   The underdeveloped infrastructure in many countries in the Asia-Pacific
region may inhibit our ability to attain sufficient, reasonably priced sources
of electrical power to support our Internet data centers. The quality and
reliability of the available power sources may also interfere with the
uninterrupted operation of our services, which could adversely impact the
operation of our Internet data centers.

Currency fluctuations could decrease our revenue or increase our costs. In
addition, restrictions on currency exchange could prevent us from effectively
using our funds.

   We conduct business in multiple countries in the Asia-Pacific region and
generate revenue, expenses and liabilities in multiple Asia-Pacific currencies.
Gains and losses on the conversion of foreign payments may contribute to
fluctuations in our results of operations and fluctuating exchange rates could
cause reduced revenue and gross margins from our international sales.
Additionally, the U.S. Dollar value of overseas assets may decline if exchange
rates in the region weaken in relation to the U.S. Dollar. We currently engage
only in very limited currency hedging activities. In addition, some of the
countries in which we operate or plan to operate impose exchange controls. As a
result, we may not be able to freely convert the relevant local currencies into
other Asia-Pacific or non Asia-Pacific currencies, including U.S. dollars,
which could prevent us

                                       25
<PAGE>

from effectively using our funds. Currency rate fluctuations and exchange
controls could negatively impact our financial performance by increasing costs
and offsetting revenue or income from our operations.

Our business and prospects will suffer if the Internet does not develop into an
effective commercial and information medium in the Asia-Pacific region.

   The market for Internet services in the Asia-Pacific region has only begun
to develop. Because the Internet is an unproven medium for information,
advertising and other commercial services in the Asia-Pacific region, our
future operating results and prospects depend substantially on the increased
acceptance and use of the Internet for publication, distribution and commerce
in the Asia-Pacific region. Many potential customers may have limited
experience with the Internet, may not have devoted a significant portion of
their available funds to web site development and may not find the Internet to
be effective for promoting, distributing or conducting their products and
services relative to traditional means. Furthermore, critical issues concerning
the commercial use of the Internet in the Asia-Pacific region, such as
security, reliability, cost, ease of deployment, administration and quality of
services, may affect the adoption of the Internet to solve business needs.

ADDITIONAL DISCUSSION OF THESE AND OTHER RISK FACTORS IS DISCLOSED IN OUR
ANNUAL REPORT ON FORM 10-K, AS AMENDED, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, AS WELL AS IN OUR OTHER PUBLIC FILINGS.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

   We are exposed to market risks inherent in our operations, primarily related
to currency risk. This risk arises from transactions and operations entered
into in the normal course of business.

   Our subsidiaries primarily operate in foreign markets, and predominantly
have their local currencies as their functional currencies. These subsidiaries
do not have third party borrowings in currencies other than their local
currencies, and therefore there are no appropriate quantitative disclosures.

   Our primary currency rate risk exposures relate to:

  . our decentralized operations, whereby, for example, approximately 59% of
    our revenues during the fiscal quarter ended March 31, 2001 were derived
    from operations in the Asia-Pacific region, and were denominated in
    currencies other than the U.S. dollar;

  . the ability of our United States operations to satisfy cash flow
    requirements of predominantly U.S. dollar denominated long-term debt
    without the need to repatriate into the United States foreign earnings
    and profits, which are denominated in currencies other than the U.S.
    dollar; and

  . our investments in foreign subsidiaries being primarily directly from us
    as the U.S. parent, resulting in U.S. dollar investments in foreign
    currency functional companies.

   We manage our currency rate risks through a variety of measures. We operate
on a decentralized regional basis with operations located in most major Asia-
Pacific markets. As a result, our individual markets are not necessarily
impacted by changes in currency exchange rates. In addition, in certain limited
instances in fiscal year 2000, we entered into, and expect to enter into
additional, forward exchange contracts in connection with inter-company
transactions. We do not expect these contracts to extend longer than one year.

                                       26
<PAGE>

                           PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

   Beginning on March 23, 2001, several putative class actions were filed
against us, several of our officers and directors, and the underwriters of our
initial public offering in the United States District Court for the Southern
District of New York on behalf of all persons who purchased shares of our stock
between August 3, 2000 and November 27, 2000. The plaintiffs allege claims
under Sections 11, 12 and 15 of the Securities Act of 1933 and seek unspecified
damages arising out of, among other things, allegedly false or misleading
statements in the prospectus and registration statement issued in connection
with our initial public offering. These actions are at a very early stage and,
accordingly, we are unable to predict their ultimate outcome.

   However, we believe the foregoing actions are without merit and intend to
defend against them vigorously. An unfavorable outcome in these actions could
have a material adverse effect on our business, financial condition and results
of operations. In addition, even if the ultimate outcome is resolved in our
favor, the defense of such litigation could entail considerable cost and the
diversion of efforts of management, either of which could have a material
adverse effect on our results of operation.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

   On August 8, 2000, we closed our initial public offering of common stock,
$0.001 par value. The underwriters in the offering were Goldman Sachs & Co.,
Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. The shares of
common stock sold in the offering were registered under the Securities Act of
1933, as amended, on a registration statement on Form S-1 (Reg. No. 333-35278)
that was declared effective by the SEC on August 2, 2000. All 9,000,000 shares
of common stock registered under the registration statement were sold at a
price of $13.00 per share. The aggregate offering amount registered was
$117,000,000. In connection with the offering, we paid an aggregate of
$8,190,000 in underwriting discounts to the underwriters. The net offering
proceeds to us after deducting the underwriting discounts and total expenses
related to the offering were approximately $106,061,000. Of the proceeds and
the existing cash balance on the date of the IPO, as of March 31, 2001,
approximately $85,089,000 were used for the establishment of Internet data
center facilities in Hong Kong, South Korea and Taiwan, the hiring of
additional personnel and for general corporate purposes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

   Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   Not applicable.

ITEM 5. OTHER INFORMATION

   Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

   a. Exhibits

<TABLE>
<CAPTION>
 Exhibit
 Number                            Description
 -------                           -----------
 <C>     <S>
 10.30   Employment Agreement, dated April 23, 2001, by and between the
          registrant and Dennis Muse.
 27.1    Financial Data Schedule
</TABLE>

   b. Reports on Form 8-K

   None.

                                       27
<PAGE>

   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.

                                          iAsiaworks, Inc.

                                                        /s/
Date: May   , 2001                        By: _________________________________
                                                       Jon F. Beizer
                                                  Chief Executive Officer
                                                  Chief Financial Officer
                                                       President--U.S.

                                       28
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                                          Description
-------                                         -----------
<S>      <C>
10.30    Employment Agreement, dated April 23, 2001, by and between the registrant and Dennis Muse.
27.1     Financial Data Schedule
</TABLE>