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


                                    FORM 10-Q


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

                  For the quarterly period ended June 30, 2002

                                       OR

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


                        (Commission File Number 1-11965)

                            ICG COMMUNICATIONS, INC.
                 (Debtor-in-Possession as of November 14, 2000)
             (Exact names of registrant as specified in its charter)


               Delaware                                84-1342022
    (State or other jurisdiction of         (IRS Employer Identification No.)
     incorporation or organization)

                            161 Inverness Drive West
                            Englewood, Colorado 80112
                    (Address of principal executive offices)

             Registrants' telephone numbers, including area codes:
                         (888)424-1144 or (303)414-5000


     Indicate by check mark whether the  registrants  (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes |X| No____


     The number of outstanding common shares of ICG  Communications,  Inc. as of
August 6, 2002 was 55,244,915.

                                       1

<PAGE>

                                TABLE OF CONTENTS




PART I ........................................................................3

      ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ....................3
               -------------------------------------------
               Consolidated Balance Sheets as of December 31, 2001 and June
                 30, 2002 (unaudited)..........................................3
               Consolidated Statements of Operations for the Three and Six
                 Months Ended June 30, 2001 and 2002 (unaudited)...............5
               Consolidated Statement of Stockholders' Deficit for the Six
                 Months Ended June 30, 2002 (unaudited)........................6
               Consolidated Statements of Cash Flows for the Three and Six
                 Months Ended June 30, 2001 and 2002 (unaudited)...............7
               Notes to Consolidated Financial Statements (unaudited)..........9
      ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               -----------------------------------------------------------
               AND RESULTS OF OPERATIONS .....................................17
               -------------------------
      ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....33
               ----------------------------------------------------------

PART II ......................................................................34

      ITEM 1.  LEGAL PROCEEDINGS .............................................34
               -----------------
      ITEM 2.  CHANGES IN SECURITIES .........................................35
               ---------------------
      ITEM 3.  DEFAULTS UPON SENIOR SECURITIES ...............................35
               -------------------------------
      ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS .........35
               -----------------------------------------------------
      ITEM 5.  OTHER INFORMATION .............................................35
               -----------------
      ITEM 6.  EXHIBITS AND REPORT ON FORM 8-K ...............................36
               -------------------------------
               Exhibits ......................................................36
               Reports on Form 8-K ...........................................37





                                       2
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                 December 31, 2001 and June 30, 2002 (Unaudited)

<TABLE>
<CAPTION>
                                                       December 31,   June 30,
                                                           2001         2002
                                                       ------------  -----------
                                                            (in thousands)

Assets

Current assets:
<S>                                                    <C>           <C>
  Cash and cash equivalents                            $   146,587   $  101,532
  Trade receivables, net of allowance of $44 million
    and $22 million at December 31, 2001 and
    June 30, 2002, respectively                             42,365       31,721
  Other receivables                                            559        6,043
  Prepaid expenses and deposits                             13,559       14,269
                                                       ------------  -----------

   Total current assets                                    203,070      153,565

Property and equipment, net (note 4)                       531,187      503,020

Restricted cash                                              7,299        7,261
Investments                                                    100          100
Deferred financing costs, net of accumulated
  amortization of  $2 million (note 3)                       3,050        2,689
Deposits and other assets                                   10,459       11,417
                                                       ------------  -----------

Total Assets (note 1)                                  $   755,165   $  678,052
                                                       ============  ===========
                                                                     (continued)
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
               Consolidated Balance Sheets (Unaudited), Continued

<TABLE>
<CAPTION>
                                                       December 31,   June 30,
                                                           2001         2002
                                                       ------------  -----------
                                                            (in thousands)

Liabilities and Stockholders' Deficit

Current liabilities not subject to compromise:
<S>                                                    <C>           <C>
  Accounts payable                                     $     8,871   $   11,096
  Accrued liabilities                                       73,853       50,995
  Deferred revenue                                           9,067        8,157
                                                       ------------ ------------
    Total current liabilities not subject to
      compromise                                            91,791       70,248

Liabilities subject to compromise (notes 1 and 3)        2,729,590    2,724,076

Long-term liabilities not subject to compromise:
  Capital lease obligations                                 50,708       51,001
  Other long-term liabilities                                1,088           59
                                                       ------------ ------------

Total liabilities                                        2,873,177    2,845,384

Preferred stock, at liquidation value:
  Redeemable preferred stock of subsidiary                 449,056      449,056
  Mandatorily redeemable preferred securities of
    ICG Funding                                             92,336       55,380
  8% Series A Convertible Preferred Stock                  785,353      785,353
                                                       ------------  -----------
Total preferred stock                                    1,326,745    1,289,789

Stockholders' deficit:
  Common stock, $0.01 par value, 100,000,000 shares
    authorized; 53,706,777 and 55,244,915 shares
    issued and outstanding at December 31, 2001 and
    June 30, 2002, respectively                                537          552
  Additional paid-in capital                               922,040      958,980
  Accumulated deficit                                   (4,367,334)  (4,416,653)
                                                       ------------  -----------
Total stockholders' deficit                             (3,444,757)  (3,457,121)

Commitments and contingencies (note 7)                 ------------  -----------

Total Liabilities and Stockholders' Deficit (note 1)   $   755,165   $  678,052
                                                       ============  ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
                Consolidated Statements of Operations (Unaudited)
            For the Three and Six Months Ended June 30, 2001 and 2002

<TABLE>
<CAPTION>
                                       Three months ended     Six months ended
                                            June 30,              June 30,
                                      --------------------- --------------------
                                         2001       2002       2001       2002
                                      ---------- ---------- ---------- ---------
                                        (in thousands, except per share data)

<S>                                   <C>        <C>        <C>        <C>
Revenue                               $ 121,252  $ 102,780  $ 257,649  $214,951

Operating costs and expenses:

  Operating costs                        84,813     60,912    197,375   128,290
  Selling, general and administrative
    expenses                             26,470     23,960     57,166    51,562
  Depreciation and amortization          16,194     25,311     32,183    44,937
  Loss (gain) on disposal of assets       7,562       (108)     7,633      (114)
  Provision for impairment of
    long-lived assets                         -        643          -       643
                                      ---------- ---------- ---------- ---------
     Total operating costs and
       expenses                         135,039    110,718    294,357   225,318
                                      ---------- ---------- ---------- ---------

Operating loss                          (13,787)    (7,938)   (36,708)  (10,367)

Other income (expense):
  Interest expense (note 3)             (11,081)    (4,599)   (23,799)  (10,303)
  Reorganization expense, net (note 2)   (9,819)    (5,441)   (27,505)  (28,732)
  Other income (expense), net             1,366        (57)     1,334        83
                                      ---------- ---------- ---------- ---------
   Total other expense, net             (19,534)   (10,097)   (49,970)  (38,952)
                                      ---------- ---------- ---------- ---------

Net loss                              $ (33,321) $ (18,035) $ (86,678) $(49,319)
                                      ========== ========== ========== =========

Net loss per share - basic and
  diluted                             $   (0.64) $   (0.33) $   (1.66) $  (0.91)
                                      ========== ========== ========== =========

Weighted average number of shares
  outstanding - basic and diluted        52,118     54,856     52,093    54,285
                                      ========== ========== ========== =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
           Consolidated Statement of Stockholders' Deficit (Unaudited)
                     For the Six Months Ended June 30, 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
                               Common Stock    Additional                   Total
                            ------------------  Paid-in    Accumulated  Stockholders'
                             Shares   Amount    Capital      Deficit       Deficit
                            -------- --------- ---------- ------------- -------------

<S>                         <C>      <C>       <C>        <C>           <C>
Balances at January 1, 2002  53,707  $    537  $ 922,040  $ (4,367,334) $ (3,444,757)

Shares issued upon
  conversion of mandatorily
  redeemable preferred
  securities of ICG Funding   1,538        15     36,940             -        36,955
Net loss                          -         -          -       (49,319)      (49,319)
                            -------- --------- ---------- ------------- -------------

Balances at June 30, 2002    55,245  $    552  $ 958,980  $ (4,416,653) $ (3,457,121)
                            ======== ========= ========== ============= =============
</TABLE>


          See accompanying notes to consolidated financial statements.







                                       6
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Unaudited)
                 For the Six Months Ended June 30, 2001 and 2002

<TABLE>
<CAPTION>
                                                       Six months ended June 30,
                                                       -------------------------
                                                           2001         2002
                                                       ------------  -----------
                                                            (in thousands)

Cash flows from operating activities:
<S>                                                    <C>           <C>
  Net loss                                             $   (86,678)  $  (49,319)
  Adjustments to reconcile net loss to net cash
    provided by operating activities before
    reorganization items:
      Reorganization expense, net                           27,505       28,732
      Depreciation and amortization                         32,183       44,937
      Net loss (gain) on disposal of long-lived assets       7,633         (114)
      Provision for uncollectible accounts                   7,404        3,675
      Provision for impairment of long-lived assets              -          643
      Interest costs capitalized on assets under
        construction                                          (979)        (242)
      Interest expense deferred and included in
        capital lease obligations                                -        1,835
      Amortization of deferred financing costs
        included in interest expense                         4,236          357
      Realized gain on sale of available for sale
        securities                                          (1,542)           -
      Change in operating assets and liabilities,
        excluding the effects of dispositions and
        non-cash transactions:
          Receivables                                       18,888        1,602
          Prepaid expenses and deposits                     (2,837)      (1,400)
          Accounts payable and accrued liabilities             982      (24,378)
          Deferred revenue                                  (4,990)      (1,939)
                                                       ------------  -----------
  Net cash provided by operating activities before
    reorganization items                                     1,805        4,389
      Reorganization items:
        Reorganization expense, net                        (27,505)     (28,732)
        Net gain on disposal of long-lived assets                -         (195)
        Net gain on contract settlements                         -       (6,854)
        Increase in post-petition restructuring
          accruals                                           3,425        2,704
        Increase (decrease) in liabilities subject to
          compromise                                       (15,079)      12,822
                                                       ------------  -----------
                                                           (39,159)     (20,255)
                                                       ------------  -----------
Net cash used by operating activities                      (37,354)     (15,866)

Cash flows from investing activities:
  Acquisition of property and equipment                    (16,919)     (24,223)
  Change in prepaid expenses, accounts payable and
    accrued liabilities for acquisition of property
    and equipment                                              243          904
  Proceeds from disposition of property, equipment
    and other assets                                         1,218        3,181
  Purchase of short-term investments                             -      (10,684)
  Proceeds from sales of short-term investments              9,748       10,684
  Decrease (increase) in restricted cash                        (7)          38
  Increase in long-term deposits                            (2,926)      (1,119)
  Reorganization items:
    Decrease in restricted cash due to settlement of
      liabilities subject to compromise                      2,096            -
                                                        ------------------------
Net cash used by investing activities                       (6,547)     (21,219)
                                                                     (continued)
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       7
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
          Consolidated Statements of Cash Flows (Unaudited), Continued

<TABLE>
<CAPTION>
                                                       Six months ended June 30,
                                                       -------------------------
                                                           2001         2002
                                                       ------------  -----------
                                                            (in thousands)

Cash flows from financing activities:
<S>                                                    <C>           <C>
  Payments of deferred debt issuance costs             $    (2,000)  $        -
  Reorganization items:
    Principal payments on capital lease obligations
      subject to compromise                                (14,471)      (8,133)
    Settlement of preferred dividends                       (1,312)         163
                                                       ------------  -----------
Net cash used by financing activities                      (17,783)      (7,970)
                                                       ------------  -----------

Net decrease in cash and cash equivalents                  (61,684)     (45,055)

  Cash and cash equivalents, beginning of period           196,980      146,587
                                                       ------------  -----------
Cash and cash equivalents, end of period               $   135,296   $  101,532
                                                       ============  ===========

Supplemental disclosure of cash flows information:
  Cash paid for interest                               $    13,313   $    8,593
                                                       ============  ===========
  Cash paid for income taxes                           $         -   $        -
                                                       ============  ===========

Supplemental schedule of non-cash investing
  activities:
    Assets acquired under capital leases               $    50,355   $        -
                                                       ============  ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       8
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (Unaudited)

(1)  Business and Summary of Significant Accounting Policies

     (a)  Organization and Description of Business

          ICG Communications, Inc., a Delaware corporation, and its subsidiaries
          are  collectively  referred  to as  "ICG" or the  "Company".  Prior to
          November 14, 2000, the Company's common stock was traded on the NASDAQ
          National Market  ("NASDAQ").  However,  due to the bankruptcy  filings
          described  below,  the NASDAQ halted  trading of the Company's  common
          stock on November  14,  2000 and  delisted  the stock on November  18,
          2000.

          The Company provides voice, data and Internet communication  services.
          Headquartered  in  Englewood,   Colorado,   the  Company  operates  an
          integrated  metropolitan and nationwide fiber optic  infrastructure to
          offer:

          o    Dial-Up  Services,  including  primary rate  interface and remote
               access  services,  on a wholesale  basis to national and regional
               Internet service providers ("ISP"s).

          o    Point-to-Point  Broadband Service,  providing traditional special
               access service to long-distance and long-haul carriers and medium
               to large sized  corporate  customers,  as well as switched access
               and SS7 services.

          o    Corporate  Services,  primarily retail voice and data services to
               businesses.

     (b)  Basis of Presentation

          The accompanying  financial  statements  should be read in conjunction
          with ICG's Annual Report on Form 10-K for the year ended  December 31,
          2001, as certain information and note disclosures normally included in
          financial  statements  prepared in accordance with generally  accepted
          accounting principles ("GAAP") have been condensed or omitted pursuant
          to the rules and  regulations  of the  United  States  Securities  and
          Exchange  Commission.  The Company's interim financial  statements are
          unaudited,  but in the opinion of  management,  reflect all  necessary
          adjustments. Operating results for the three and six months ended June
          30, 2002 are not  necessarily  indicative  of the results  that may be
          expected for the fiscal year ending December 31, 2002. All significant
          intercompany   accounts  and  transactions  have  been  eliminated  in
          consolidation.  Certain 2001 amounts have been reclassified to conform
          to the 2002 presentation.

          The  preparation  of  financial  statements  in  conformity  with GAAP
          requires  management to make estimates and assumptions that affect the
          amounts reported in the financial  statements and accompanying  notes.
          Actual results could differ from those estimates.

          These  consolidated   financial   statements  have  been  prepared  in
          accordance with AICPA Statement of Position  ("SOP") 90-7,  "Financial
          Reporting by Entities in  Reorganization  under the Bankruptcy  Code."
          Pursuant   to  SOP  90-7,   the   financial   statements   distinguish
          transactions  and  events  that  are  directly   associated  with  the
          reorganization  from the ongoing operations of the business.  Expenses
          and  other  items not  directly  related  to  ongoing  operations  are
          reflected  separately in the  consolidated  statement of operations as
          reorganization  expense,  net (see note 2).  Pre-petition  liabilities
          that  are  subject  to  compromise  are  reflected  separately  in the
          consolidated balance sheet (see note 3).

     (c)  Bankruptcy Proceedings

          On November  14, 2000 (the  "Petition  Date"),  ICG and its  operating
          subsidiaries filed voluntary petitions for protection under Chapter 11
          of the United States  Bankruptcy Code (the  "Bankruptcy  Code") in the
          United  States  District  Court  for the  District  of  Delaware  (the
          "Bankruptcy  Court") in order to facilitate the  restructuring  of the
          Company's debt, trade liabilities and other obligations.  (ICG and its
          operating subsidiaries are collectively referred to as the "Debtors.")
          The Debtors are currently operating as debtors-in-possession under the
          supervision of the Bankruptcy Court.

          On  December  19,  2001,   the  Debtors   filed  a  proposed  Plan  of
          Reorganization and a Disclosure Statement in the Bankruptcy Court. The
          Debtors  subsequently  filed a First Amended  Disclosure  Statement on

                                       9
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

          March 1, 2002 and a Second Amended  Disclosure  Statement on March 26,
          2002, which was amended on April 3, 2002 (the Plan of  Reorganization,
          the Disclosure  Statement,  the First Amended Disclosure Statement and
          the Second Amended Disclosure  Statement are collectively  referred to
          herein  as the  "Original  Plan").  On  April  3,  2002,  the  Company
          submitted the Original  Plan to the Company's  creditors for approval.
          On May 16,  2002,  the  Company's  balloting  agent filed an affidavit
          indicating  that the Original Plan had been accepted by all classes of
          creditors  entitled to vote.  On May 21, 2002,  the  Bankruptcy  Court
          entered an order ("the Original  Confirmation  Order")  confirming the
          Original Plan.

          The  Original   Plan  was   formulated   on  the  basis  of  extensive
          negotiations   conducted   among  the   Debtors   and  their   primary
          constituencies.  As part of the Original  Plan,  the Debtors  received
          commitment  letters  for  new  financing  totaling  $65  million  (the
          "Original  Exit  Financing").  The Original  Exit  Financing was to be
          funded  predominantly by Cerberus Capital  Management,  L.P.  ("CCM").
          After the Original  Confirmation  Order was entered by the  Bankruptcy
          Court,  but before  completion of the final  Original  Exit  Financing
          documents,  CCM requested  the inclusion of certain  provisions in the
          Original Exit Financing documents.  CCM asserted that these additional
          provisions were both  customary,  as contemplated by the Original Plan
          and  CCM's  commitment  letters,  and  necessary  as a  result  of the
          Debtors'  recent  operating  results and CCM's  belief that a Material
          Adverse  Change and a Financial  Markets  Disruption  had occurred (as
          those terms are  defined in the  commitment  letters for the  Original
          Exit  Financing).  The Debtors  disagreed with CCM's  contentions  and
          believed  that the  requested  provisions  were neither  customary nor
          consistent   with  the  commitment   letters  for  the  Original  Exit
          Financing.  Further,  because the inclusion of these  provisions would
          have  resulted in a significant  change to the economics  described in
          the original  disclosure  statement,  the Debtors  believed  that they
          would have been in  contravention  of the Original  Plan.  The Debtors
          also  disputed  CCM's  contention  that a Material  Adverse  Change or
          Financial  Markets  Disruption  had occurred and believed that CCM was
          contractually   obligated  to  close  the  Original   Exit   Financing
          transactions.  Therefore,  although the Bankruptcy Court confirmed the
          Original Plan, the closing of the Original Exit Financing transactions
          did not occur and the Original Plan did not become effective.

          After  consulting  with the Debtors'  official  committee of unsecured
          creditors (the "Creditors  Committee") and the Debtors' senior secured
          lenders  (the  "Senior  Secured  Lenders"),  the  Debtors  engaged  in
          settlement discussions with CCM. As a result of those negotiations, on
          July 25, 2002 the Debtors  entered into an agreement  with CCM that is
          supported  by both the  Creditors  Committee  and the  Senior  Secured
          Lenders, which agreement is embodied in a proposed modification to the
          Original  Plan (the Original Plan as modified is referred to herein as
          the "Modified Plan").

          Under the  Modified  Plan,  the Debtors  will  receive  new  financing
          consisting of a $25 million senior subordinated term loan (the "Senior
          Subordinated  Term Loan" or the "New Exit  Financing").  Proceeds from
          the New  Exit  Financing  will be used to pay  down a  portion  of the
          Company's  senior  secured  credit  facility (the "Senior  Facility").
          Pursuant  to the  settlement  with  CCM,  as of  July  25,  2002,  all
          principal  documents  necessary to  consummate  the Modified Plan were
          fully  executed  and the $25  million  in  proceeds  from the New Exit
          Financing was funded by CCM into escrow.

          The  Debtors  determined  that the  changes  to the  Original  Plan as
          reflected in the Modified Plan were of such a significant nature as to
          require a  resolicitation  of votes from certain classes of creditors.
          Thus, on July 26, 2002,  the Debtors filed the proposed  Modified Plan
          and a Supplement to the Disclosure  Statement in the Bankruptcy Court.
          A hearing has been  scheduled  for August 23, 2002,  at which time the
          Bankruptcy  Court will make a determination  as to the adequacy of the
          Supplement to the Disclosure Statement.  If approved by the Bankruptcy
          Court,  the Debtors  will then submit the  Modified  Plan to a vote by
          certain classes of creditors.

          Accordingly,  if the  Debtors'  creditors  again  vote in favor of the
          Modified  Plan  and it is  confirmed  by the  Bankruptcy  Court,  upon
          certification  by the Debtors that they are in compliance with certain
          covenants,  representations and warranties, the escrowed proceeds from
          the New Exit Financing will be released for distribution on account of
          the  Senior  Secured  Lenders  in  accordance  with  the  terms of the
          Modified  Plan,  and the  Effective  Date  for the  Modified  Plan can

                                       10
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

          immediately  occur. It is anticipated  that the Effective Date and the
          Company's  emergence from Chapter 11 bankruptcy  protection will occur
          not later than the end of October 2002.

          On the Effective  Date,  the Company will apply Fresh Start  reporting
          ("Fresh  Start") in accordance  with GAAP and the  requirements of SOP
          90-7. Under Fresh Start,  the Company and its financial  advisors will
          determine the  reorganization  value of the Company,  which  generally
          represents  the going  concern  value.  On the  Effective  Date, a new
          capital  structure  will be  established  and assets and  liabilities,
          other  than  deferred  taxes,  will be stated at their  relative  fair
          values.  Deferred  taxes will be  determined  in  conformity  with the
          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  109,
          "Accounting for Income Taxes."

          The Company, assisted by its financial advisors, Miller Buckfire Lewis
          & Co.,  LLC (the  principals  of which  were  formerly  executives  of
          Dresdner   Kleinwort  &  Wasserstein,   Inc.),   has  reevaluated  the
          reorganization  value of the Company in  connection  with the Modified
          Plan. The reorganization value of the Company on a going concern basis
          is now  estimated  to be between $250  million and $325  million.  The
          Modified Plan as submitted  reflects a reorganization  value of $287.5
          million,  which would result in a valuation  of the new common  equity
          and  outstanding   warrants  totaling  $82.6  million.  The  range  of
          reorganization values in the Modified Plan indicates that the value of
          property and equipment may need to be reduced by up to $270 million at
          the Effective Date pursuant to Fresh Start requirements.  However, the
          Modified  Plan   assumptions  may  differ  from  the  actual  business
          conditions on the Effective Date. Therefore,  the fair values assigned
          to assets and liabilities on the Effective Date may also be different.
          The valuation is based on numerous assumptions, including, among other
          things, the achievement of certain operating results, market values of
          publicly-traded  securities  of other similar  companies,  and general
          economic and industry conditions.

          No  assurance  can be given that the  Company  will be  successful  in
          reorganizing its affairs within the Chapter 11 bankruptcy proceedings.
          Notwithstanding the foregoing, based on discussions with the Company's
          creditors,  the Company anticipates that both the Bankruptcy Court and
          the  requisite  number of the  Company's  creditors  will  approve the
          Modified  Plan.  Because of the ongoing  nature of the  reorganization
          cases, the outcome of which is not determinable until finally approved
          by the creditors and the Bankruptcy Court, the consolidated  financial
          statements contained herein are subject to material uncertainties.

          The ability of the Company to continue as a going concern is dependent
          upon,  but not  limited  to,  successfully  emerging  from  Chapter 11
          bankruptcy protection, access to adequate sources of capital, customer
          and employee  retention,  the ability to provide high quality services
          and the ability to sustain  positive  results of  operations  and cash
          flows sufficient to continue to fund operations.

                                       11
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

(2)  Reorganization Expense, Net

     In accordance  with SOP 90-7 (see note 1), the Company has  segregated  and
     classified  certain  income  and  expenses  as  reorganization  items.  The
     following  reorganization  items  were  incurred  during  the three and six
     months ended June 30, 2001 and 2002, respectively:

<TABLE>
<CAPTION>
                                       Three months ended     Six months ended
                                            June 30,              June 30,
                                      --------------------- --------------------
                                         2001       2002       2001      2002
                                      ---------- ---------- --------- ----------
                                                   (in thousands)

     Severance and employee
<S>                                   <C>        <C>        <C>       <C>
       retention costs                $   1,560  $   3,582  $ 11,819  $   3,894
     Legal and professional fees          6,239      3,249    12,690      6,957
     Switch site closure costs              929        630     3,182      1,336
     Contract termination expenses        2,407      1,754     2,719     23,308
     Net loss (gain) on disposal
       of long-lived assets                   -      2,759         -       (195)
     Net gain on contract
       settlements                            -     (6,854)        -     (6,854)
     Interest income                     (1,578)      (411)   (4,206)      (988)
     Other                                  262        732     1,301      1,274
                                      ---------- ---------- --------- ----------
                                      $   9,819  $   5,441  $ 27,505  $  28,732
                                      ========== ========== ========= ==========
</TABLE>

     The Company is required to reconcile recorded pre-petition liabilities with
     claims  filed by its  creditors  with  the  Bankruptcy  Court.  Differences
     resulting from that  reconciliation  process are recorded as adjustments to
     pre-petition  liabilities with an offset for significant items not relating
     to ongoing operations included in reorganization  expense,  net. During the
     six months  ended June 30,  2002,  the  Company  recorded  an  increase  in
     pre-petition  liabilities of $23 million for contract termination expenses.
     Of this,  $19  million  is related to a  pre-petition  contract  for system
     design and implementation. In the first quarter of 2002, in connection with
     its ongoing  reconciliation of outstanding  claims,  the Company determined
     that this amount should be recognized as additional pre-petition liability.

(3)  Liabilities Subject to Compromise

     Pursuant  to SOP  90-7  (see  note  1),  the  Company  has  segregated  and
     classified  certain  pre-petition  obligations  as  liabilities  subject to
     compromise.  Liabilities  subject to  compromise  have been recorded at the
     allowed claim amount. The following table sets forth the liabilities of the
     Company  subject to  compromise  as of December 31, 2001 and June 30, 2002,
     respectively:

                                                       December 31,   June 30,
                                                           2001          2002
                                                       ------------ ------------
                                                            (in thousands)

     Unsecured long-term debt                          $ 1,968,781  $ 1,968,781
     Unsecured creditors                                   476,243      481,882
     Capital lease obligations, secured                    166,637      156,311
     Capital lease obligations, unsecured                   18,881       18,251
     Senior Facility                                        85,503       85,503
     Priority creditors                                     13,545       13,348
                                                       ------------ ------------
                                                       $ 2,729,590  $ 2,724,076
                                                       ============ ============

     Between  December  31, 2001 and June 30,  2002,  liabilities  to  unsecured
     creditors   increased   primarily  due  to  the   recognition  of  contract
     termination expenses.  Capital lease obligations,  secured,  decreased as a
     result of the Company's  negotiations  with vendors to reduce the amount of
     equipment  under lease,  as well as principal  payments on certain  capital
     leases.

     As a result  of the  Company's  bankruptcy  proceedings,  all  pre-petition
     contractual  debt  payments are  suspended  and subject to revised  payment
     terms during the bankruptcy process on a case-by-case basis. As of June 30,
     2002,  the Company is in default  with  respect to all of its  pre-petition
     debt.  All deferred  financing  costs have been written off,  except the $3
     million  at June 30,  2002  that  relates  to the  Senior  Facility  of $85
     million.

                                       12
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

     In connection with its bankruptcy filing, the Company is no longer accruing
     or  paying  interest  on the  unsecured  long-term  debt  and the  rejected
     pre-petition  capital lease obligations.  Contractual interest not recorded
     amounted to $60 million and $63 million for the three months ended June 30,
     2001 and 2002, respectively,  and $120 million and $126 million for the six
     months ended June 30, 2001 and 2002, respectively.

     The Company  continues to accrue and make  interest  payments on the Senior
     Facility,  as approved by the Bankruptcy  Court.  The Bankruptcy  Court has
     stayed the payment of principal due under the Senior Facility.

     The Modified Plan  contemplates  the  conversion  of the Debtors'  existing
     unsecured  debt  into  common  equity in the  post-bankruptcy,  reorganized
     Company.  The  Modified  Plan also  contemplates  the issuance of a new $25
     million  Senior  Subordinated  Term Loan (the  proceeds  of which  would be
     utilized to pay down the Senior Facility to a balance of approximately  $60
     million) and the  restructuring  of the Senior  Facility with new terms and
     new notes (the "Secured Notes").

(4)  Property and Equipment

     Property and  equipment,  including  assets held under capital  leases,  is
     comprised of the following:

                                                       December 31,   June 30,
                                                           2001         2002
                                                       ------------  -----------
                                                            (in thousands)

     Land                                              $     1,214   $        -
     Buildings and improvements                             50,358       50,355
     Furniture, fixtures and office equipment               33,593       28,780
     Machinery and equipment                                14,548       13,914
     Fiber optic equipment                                 150,982      144,813
     Switch equipment                                      136,133      136,636
     Fiber optic network                                    90,137       98,580
     Site improvements                                      11,245        4,042
     Construction in progress                               95,415      124,781
     Assets held for sale                                    8,570        4,035
                                                       ------------  -----------
                                                           592,195      605,936
     Less accumulated depreciation                         (61,008)    (102,916)
                                                       ------------  -----------
                                                       $   531,187   $  503,020
                                                       ============  ===========

     Property and equipment includes $125 million of equipment that has not been
     placed in service and $4 million of  equipment  that is being held for sale
     at June 30, 2002, and, accordingly, is not being depreciated.

(5)  Major Customers

     A  significant  amount of the Company's  revenue is derived from  long-term
     contracts with certain large customers, including one major customer, Qwest
     Communications   Corporation   (together  with  its  affiliated   entities,
     "Qwest").  Revenue from Qwest accounted for 15% and 31% of total revenue in
     the three months ended June 30, 2001 and 2002. Revenue from Qwest accounted
     for 12% and 28% of total  revenue in the six months ended June 30, 2001 and
     2002,  respectively.  As of June 30, 2002,  the Company had $1.6 million in
     net trade receivables from Qwest.

     Prior to the bankruptcy filing, the Company and Qwest developed a number of
     important  and  mutually  valuable  business  relationships,  governed by a
     number of contracts (collectively,  the "Pre-petition Agreements").  During
     the pendency of the Chapter 11 cases,  both the Company and Qwest  asserted
     various  breaches  of,  and  claims  under,  the  Pre-petition  Agreements.
     Following  lengthy  negotiations,  the  parties  agreed  to  enter  into  a
     settlement  resolving all of the claims and issues between the parties (the
     "Qwest Settlement Agreement") in order to continue a cooperative,  mutually
     beneficial  relationship and to avoid potentially  costly  litigation.  The
     Bankruptcy Court approved the Qwest Settlement Agreement in June 2001.

                                       13
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

     The Qwest Settlement Agreement  contemplates the transfer of certain of the
     Company's   assets  with  a  net  carrying   value  at  June  30,  2002  of
     approximately  $13 million and a remaining  economic life of  approximately
     two years.  The  transfer  requires  the  approval by a major  vendor whose
     approval  is  contingent  upon  acceptance  of  the  Modified  Plan  by the
     Bankruptcy  Court.  Further,  the transfer  requires approval by the Senior
     Secured Lenders. Management believes that the release of pre-existing liens
     on this equipment by the Senior Secured Lenders is remote.  Therefore,  the
     transfer of the assets has not been  reflected in the financial  statements
     as of June 30, 2002.

     At June 30, 2002, the Company had $143 million of deferred  revenue related
     to an agreement,  which was not part of the Qwest Settlement Agreement,  to
     provide  exclusive  service  to  Qwest  over  designated  portions  of  the
     Company's local fiber optic networks (see note 7(a)).

     In  the  first  quarter  and  first  half  of  2002,   the  companies  that
     individually represented more than 5% of total revenue were Qwest, UUNet (a
     division  of  WorldCom,  Inc.)  and a  large  national  ISP.  MCI,  another
     subsidiary of WorldCom, Inc., was also a significant customer,  although it
     individually  represented  less than 5% of total revenue.  On July 21, 2002
     WorldCom,  Inc.  and  substantially  all of its active  U.S.  subsidiaries,
     including UUNet and MCI, filed voluntary petitions for reorganization under
     Chapter 11 of the  Bankruptcy  Code (see note  7(b)).  All  WorldCom,  Inc.
     subsidiaries combined represented 12% of total revenue in the three and six
     months ended June 30, 2002,  up from 11% and 9% in the three and six months
     ended June 30, 2001, respectively.

(6)  Settlement with SBC Communications, Inc.

     In  January  2002,   SBC   Communications,   Inc.,  on  behalf  of  various
     subsidiaries   (collectively   "SBC")  filed  a  motion  in  the  Company's
     bankruptcy  case seeking  permission  to terminate the services it provides
     the Company pursuant to its interconnection  agreements. SBC contended that
     the Company owed SBC in excess of $24 million related to past billing, and,
     as a  result,  should be  entitled  to  terminate  services  and  pursue an
     administrative claim for the alleged past due receivable. The Company filed
     a response to SBC's  motions  contending  that it did not owe a significant
     portion  of the  alleged  past  due  amount.  Additionally,  the  Company's
     response provided that SBC owed the Company more than the Company owed SBC.
     On March 29, 2002, the Company and SBC entered into a settlement  agreement
     regarding wholesale  services.  On April 30, the Bankruptcy Court issued an
     order  approving  the  terms  of the  settlement.  Under  the  terms of the
     settlement,  the  Company  recorded  a  net  $5  million  of  non-recurring
     reciprocal  compensation  revenue in the three months ended March 31, 2002.
     As no  expenses  were  directly  attributable  to the  revenue,  none  were
     recorded in the three months ended March 31, 2002.

     On May 10, 2002,  the order became final and  non-appealable.  Only amounts
     allegedly  owed for retail  services  have yet to be resolved.  The Company
     believes that the ultimate  resolution of the remaining  items  relating to
     retail services will be immaterial to the Company's operating results.

     As of the date of this report, the Company has not received the full amount
     of the settlement contemplated in the settlement agreement, but anticipates
     that it will be received in the near future.

(7)  Commitments and Contingencies

     As a  result  of the  Company's  bankruptcy  filing,  all  commitments  and
     contingencies   could  be  substantially   modified  during  the  Company's
     reorganization process.

     (a)  Network Capacity and Construction

          At June 30, 2002,  the Company had $143  million of deferred  revenue,
          which is included in liabilities subject to compromise,  related to an
          agreement  with Qwest to provide  exclusive  service  over  designated
          portions of the Company's  local fiber optic  networks.  Qwest has not
          yet  fully  ordered  from the  Company,  and the  Company  has not yet
          delivered,  certain equipment and services required by this agreement.
          The Company recognized $4 million and $5 million of revenue in the six
          months ended June 30, 2001 and 2002, respectively, relating to certain
          equipment  and  services  which  Qwest has ordered and the Company has
          delivered  under this  agreement.  The  Company  anticipates  that the
          deferred  revenue  balance will be revalued in  connection  with Fresh
          Start based on the expected value of providing  future  services.  The
          Modified Plan as submitted  reflects a deferred revenue balance of $49

                                       14
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

          million   related  to  this  agreement  in  the  projected   pro-forma
          reorganized  balance sheet.  The actual value of the deferred  revenue
          after application of Fresh Start may differ.

     (b)  Impact of WorldCom, Inc. Bankruptcy

          On July 21, 2002,  WorldCom,  Inc. and substantially all of its active
          U.S.  subsidiaries  (collectively  referred  to as  "WorldCom")  filed
          voluntary  petitions  for  reorganization  under  Chapter  11  of  the
          Bankruptcy  Code. As of June 30, 2002, ICG had $2.6 million on deposit
          with  WorldCom,  pursuant  to an  order  issued  in  ICG's  bankruptcy
          proceedings,  whereby  ICG was  required  to post a deposit to provide
          WorldCom  with  adequate  assurance  of future  payment  for  services
          rendered  by  WorldCom  to the  Company.  On July 16,  2002,  WorldCom
          applied $1 million of this deposit to outstanding balances owed by ICG
          to WorldCom.  The Company  believes that the remaining $1.6 million of
          the  deposit  has been or should be held by  WorldCom in trust for the
          Company's benefit.  As such, at this time the Company is not reserving
          for the deposit.  Further,  as of June 30, 2002,  the Company had $0.7
          million  in trade  receivables  from  WorldCom,  all of which has been
          reserved for in the allowance for doubtful accounts.

          Between June 30, 2002 and July 21, 2002,  ICG provided $2.4 million of
          services  to  WorldCom.  Due  to  WorldCom's  bankruptcy  filing,  the
          collectibility of this amount is in question;  therefore,  it will not
          be  recorded  as  revenue in the third  quarter of 2002.  In the event
          WorldCom  elects  to  affirm  one or more of its  contracts  with  the
          Company  through its bankruptcy  proceedings,  and thus is required to
          cure  pre-petition  defaults as provided by the  Bankruptcy  Code, the
          Company will record the revenue accordingly.

          All  WorldCom   subsidiaries   combined,   including  UUNet  and  MCI,
          represented  12% of total  revenue in the three and six  months  ended
          June 30,  2002,  up from 11% and 9% in the three and six months  ended
          June 30, 2001, respectively.

     (c)  Other Commitments and Contingencies

          The   bankruptcy    filing   and   the   severe    downturn   in   the
          telecommunications  industry have had a significant negative effect on
          the Company's basic operations and its dealings with all third parties
          including its customers, vendors and employees. Significant amounts of
          both  pre-petition and  post-petition  billings to customers and costs
          billed  to the  Company  by  vendors  are in  dispute.  Some of  these
          disputes may result in litigation.  As a result,  significant judgment
          is needed in  determining  the proper  presentation  and  valuation of
          revenues and costs in the financial  statements.  The Company  expects
          that  negotiations with major customers and vendors to settle disputed
          amounts could involve a lengthy  process.  The Company  cannot predict
          the  possible   outcome  of  such   negotiations.   Accordingly,   the
          consolidated  financial  statements do not include all the adjustments
          that may  ultimately be required to settle such  contingencies  or any
          other  contingencies,  which may be required pursuant to the Company's
          Chapter 11 proceedings.

          Under the  Bankruptcy  Code, the Company may elect to assume or reject
          pre-petition  real  estate  leases,  employment  contracts,   personal
          property  leases,  service  contracts,  and other unexpired  executory
          pre-petition   contracts,   subject  to  Bankruptcy   Court  approval.
          Conversely,  the Company  will be  required  to cure all  pre-petition
          defaults  with respect to contracts  that are affirmed by the Company.
          The Company  cannot  presently  determine  with certainty the ultimate
          aggregate liability that will result from the filing and settlement of
          claims relating to such pre-petition contracts,  which may be affirmed
          or rejected.

          The Company has  entered  into  various  equipment  and line  purchase
          agreements with certain of its vendors. Under these agreements, if the
          Company does not meet a minimum  purchase level in any given year, the
          vendor may discontinue  certain  discounts,  allowances and incentives
          otherwise provided to the Company. In addition,  either the Company or
          the vendor, upon prior written notice, may terminate the agreements.

                                       15
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
        Notes to Consolidated Financial Statements (Unaudited), Continued

(8)  New Accounting Standard

     In July  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
     Associated  with Exit or Disposal  Activities."  This  Statement  addresses
     financial  accounting  and  reporting  for  costs  associated  with exit or
     disposal  activities  and  nullifies  Emerging  Issues Task Force Issue No.
     94-3, "Liability  Recognition for Certain Employee Termination Benefits and
     Other  Costs to Exit an Activity  (including  Certain  Costs  Incurred in a
     Restructuring)."  This  Statement  requires  that  a  liability  for a cost
     associated  with  an exit or  disposal  activity  be  recognized  when  the
     liability is incurred, not at the date of an entity's commitment to an exit
     plan,  as was required  under Issue 94-3.  Examples of costs covered by the
     standard include lease  termination  costs and certain  employee  severance
     costs that are associated  with a  restructuring,  discontinued  operation,
     plant  closing,  or other exit or disposal  activity.  This  Statement also
     establishes that fair value is the objective for initial measurement of the
     liability.  The  provisions  of this  Statement  are  effective for exit or
     disposal activities that are initiated after December 31, 2002.


                                       16
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     This  section  and  other  parts of this  Report  contain  "forward-looking
statements" intended to qualify as safe harbors from liability as established by
the Private  Securities  Litigation  Reform Act of 1995.  These  forward-looking
statements  can  generally  be  identified  as such  because  the context of the
statements   include   words  such  as  "intends,"   "anticipates,"   "expects,"
"estimates,"   "plans,"  "believes"  and  other  similar  words.   Additionally,
statements  that describe the Company's  future plans,  objectives or goals also
are forward-looking  statements.  All forward-looking  statements are subject to
certain risks and  uncertainties  that could cause actual results or outcomes to
differ  materially from those currently  anticipated.  Factors that could affect
actual results include, but are not limited to, the following:

     o    The material  uncertainty  of the  Company's  ability to continue as a
          going concern due to the filing for protection under bankruptcy law;

     o    The approval and confirmation of a plan of reorganization;

     o    The significant amount of indebtedness incurred by the Company and the
          Company's ability to successfully restructure this indebtedness within
          the bankruptcy proceeding;

     o    The existence of historical  operating  losses and the  possibility of
          continued operating losses;

     o    The  Company's  ability to achieve  and  sustain a level of  operating
          profitability sufficient to fund its business;

     o    The   Company's   ability   to   successfully    maintain   commercial
          relationships with its critical vendors and suppliers;

     o    The  Company's  ability to retain its major  customers  on  profitable
          terms;

     o    The extensive competition the Company will face;

     o    The Company's  ability to attract and retain qualified  management and
          employees;

     o    The Company's ability to access capital markets in a timely manner, at
          reasonable costs and on satisfactory terms and conditions;

     o    Changes  in,  or the  Company's  inability  to comply  with,  existing
          government regulations; and,

     o    General  economic  conditions and the related impact on demand for the
          Company's services.

     These  forward-looking  statements  speak  only  as of  the  date  of  this
Quarterly  Report.  The Company does not undertake  any  obligation to update or
revise  publicly  any  forward-looking  statements,  whether  as a result of new
information,  future events or otherwise. Although the Company believes that its
plans,   intentions   and   expectations   reflected  in  or  suggested  by  the
forward-looking  statements made in this Quarterly Report are reasonable,  there
is no assurance that such plans, intentions or expectations will be achieved.

     The results of operations  for the three and six months ended June 30, 2001
and 2002 represent the consolidated  operating results of the Company.  (See the
unaudited consolidated financial statements of the Company for the three and six
months ended June 30, 2002 included  elsewhere  herein.) The terms  "fiscal" and
"fiscal year" refer to the Company's  fiscal year ending December 31. All dollar
amounts are in U.S. dollars.


                                       17
<PAGE>
COMPANY OVERVIEW

     ICG is a facilities-based,  nationwide  communications  provider focused on
providing  data and voice  services  to  Internet  service  providers  ("ISP"s),
telecommunication  carriers and corporate customers.  ICG is a competitive local
exchange  carrier  ("CLEC")  certified  in most  of the  United  States,  having
interconnection  agreements  with every  major  local  exchange  carrier.  ICG's
facilities  support three product  offerings:  (i) Dial-Up  Services,  providing
wholesale   managed  modem   connection  to  ISPs  and  other   carriers;   (ii)
Point-to-Point  Broadband,  or  special  access  service,   providing  dedicated
broadband  connections  to other  carriers,  as well as SS7 and switched  access
services;  and (iii)  Corporate  Services,  providing voice and data services to
corporate  customers  with an  emphasis on  Dedicated  Internet  Access  ("DIA")
services.

o    Dial-Up Services: The Company provides primary rate interface ("PRI") ports
     (one  and two way)  and  managed  modem  services  ("IRAS")  to many of the
     largest national ISPs and other telecommunications  carriers, as well as to
     numerous regional ISPs and other communication  service companies.  Most of
     these services are on-switch through the Company's owned facilities. Before
     the related reciprocal compensation,  revenue from these services accounted
     for 44% of the  Company's  total second  quarter 2002  revenue.  Associated
     reciprocal compensation revenue accounted for 13% of the Company's revenue.

o    Point-to-Point  Broadband Service: The Company provides dedicated bandwidth
     to connect (i) long-haul carriers to local markets,  large corporations and
     other  long-haul  carrier  facilities and (ii) large  corporations to their
     long-distance  carrier sites and other corporate locations.  Special access
     sales are focused in areas where ICG  maintains  local fiber and  buildings
     on-net  or  in  close  proximity.  Point-to-Point  Broadband  service  also
     includes switched access and SS7 services. Point-to-Point Broadband service
     accounted for 26% of the Company's total second quarter 2002 revenue.

o    Corporate  Services:  The Company offers  Internet  access,  data and voice
     service to  corporate  customers.  ICG is well  positioned  to expand  this
     service with its metropolitan asset base, data network infrastructure,  and
     Internet  experience.  Corporate Services accounted for 17% of total second
     quarter 2002 revenue.

     To provide its service  offerings,  ICG  combines  its 5,542 route miles of
metropolitan  and  regional  fiber  network   infrastructure,   nationwide  data
backbone,  data points of presence,  26  asynchronous  transfer  mode  switches,
numerous private and public Internet peering  arrangements and 46 voice and data
switches.  The Company's  data network is supported by a nationwide  fiber optic
backbone  currently  operating  at OC-12  capacity.  The design of the  physical
network  permits the Company to offer  flexible,  high-speed  telecommunications
services to its customers.

     The  metropolitan  and regional  network  infrastructure  consists of fiber
optic cables and associated advanced electronics and transmission equipment. The
Company's  network is  generally  configured  in redundant  synchronous  optical
network  rings to make the network  accessible to the largest  concentration  of
telecommunications  intensive  business  customers  within a given market.  This
network  architecture also offers the advantage of uninterrupted  service in the
event of a fiber cut or equipment failure,  thereby resulting in limited outages
and increased network reliability in a cost efficient manner.

REORGANIZATION AND EMERGENCE FROM BANKRUPTCY

     During the  second  half of 2000,  a series of  financial  and  operational
events negatively  impacted ICG and its  subsidiaries.  These events reduced the
Company's  expected  revenue and cash flow  generation for the remainder of 2000
and 2001,  which in turn  jeopardized  the Company's  ability to comply with its
existing senior secured credit facility (the "Senior Facility").  As a result of
these and other events, on November 14, 2000 (the "Petition Date"),  ICG and its
operating subsidiaries filed voluntary petitions for protection under Chapter 11
of the  United  States  Bankruptcy  Code (the  "Bankruptcy  Code") in the United
States District Court for the District of Delaware (the  "Bankruptcy  Court") in
order to facilitate the  restructuring of the Company's debt, trade  liabilities
and other  obligations.  (ICG and its operating  subsidiaries  are  collectively
referred  to  as  the  "Debtors.")  The  Debtors  are  currently   operating  as
debtors-in-possession under the supervision of the Bankruptcy Court.

     Under the  Bankruptcy  Code,  the  rights  and  treatment  of  pre-petition
creditors and shareholders will be substantially  altered.  As a result of these
bankruptcy proceedings, virtually all liabilities, litigation and claims against
the Company that were in existence as of the Petition Date are stayed unless the
stay is  modified  or lifted or payment  has been  otherwise  authorized  by the
Bankruptcy  Court.  Because  of the  bankruptcy  filings,  all of the  Company's
liabilities incurred prior to the Petition Date, including certain secured debt,
are subject to  compromise.  At this time,  it is not  possible to predict  with
certainty  the outcome of the  Chapter 11 cases in general,  the effects of such
cases on the Company's business, or the effects on the interests of creditors.

                                       18
<PAGE>
     On December 19, 2001,  the Debtors filed a proposed Plan of  Reorganization
and a Disclosure  Statement in the Bankruptcy  Court.  The Debtors  subsequently
filed a First Amended Disclosure Statement on March 1, 2002 and a Second Amended
Disclosure  Statement on March 26, 2002, which was amended on April 3, 2002 (the
Plan of Reorganization,  the Disclosure Statement,  the First Amended Disclosure
Statement and the Second Amended Disclosure Statement are collectively  referred
to herein as the "Original  Plan").  On April 3, 2002, the Company submitted the
Original Plan to the Company's  creditors  for  approval.  On May 16, 2002,  the
Company's  balloting agent filed an affidavit  indicating that the Original Plan
had been accepted by all classes of creditors entitled to vote. On May 21, 2002,
the  Bankruptcy  Court  entered an order  ("the  Original  Confirmation  Order")
confirming the Original Plan.

     The Original  Plan was  formulated  on the basis of extensive  negotiations
conducted  among the Debtors and their  primary  constituencies.  As part of the
Original  Plan,  the  Debtors  received  commitment  letters  for new  financing
totaling  $65  million  (the  "Original  Exit  Financing").  The  Original  Exit
Financing was to be funded  predominantly by Cerberus Capital  Management,  L.P.
("CCM").  After the Original  Confirmation  Order was entered by the  Bankruptcy
Court, but before completion of the final Original Exit Financing documents, CCM
requested  the inclusion of certain  provisions  in the Original Exit  Financing
documents. CCM asserted that these additional provisions were both customary, as
contemplated by the Original Plan and CCM's commitment letters, and necessary as
a result of the  Debtors'  recent  operating  results  and CCM's  belief  that a
Material  Adverse  Change and a Financial  Markets  Disruption  had occurred (as
those  terms  are  defined  in the  commitment  letters  for the  Original  Exit
Financing).  The Debtors  disagreed with CCM's contentions and believed that the
requested  provisions were neither  customary nor consistent with the commitment
letters for the Original Exit Financing. Further, because the inclusion of these
provisions  would  have  resulted  in a  significant  change  to  the  economics
described in the original disclosure  statement,  the Debtors believed that they
would have been in contravention of the Original Plan. The Debtors also disputed
CCM's contention that a Material Adverse Change or Financial Markets  Disruption
had  occurred  and believed  that CCM was  contractually  obligated to close the
Original Exit Financing transactions.  Therefore,  although the Bankruptcy Court
confirmed  the  Original  Plan,  the  closing  of the  Original  Exit  Financing
transactions did not occur and the Original Plan did not become effective.

     After  consulting  with  the  Debtors'  official   committee  of  unsecured
creditors (the  "Creditors  Committee")  and the Debtors' senior secured lenders
(the "Senior Secured  Lenders"),  the Debtors engaged in settlement  discussions
with  CCM.  As a result  of those  negotiations,  on July 25,  2002 the  Debtors
entered  into an  agreement  with CCM that is  supported  by both the  Creditors
Committee  and the Senior  Secured  Lenders,  which  agreement  is embodied in a
proposed  modification  to the Original  Plan (the  Original Plan as modified is
referred to herein as the "Modified Plan").

     Under the Modified Plan, the Debtors will receive new financing  consisting
of a $25 million senior  subordinated  term loan (the "Senior  Subordinated Term
Loan" or the "New Exit Financing"). Proceeds from the New Exit Financing will be
used to pay down a portion of the Senior  Facility.  Pursuant to the  settlement
with CCM, as of July 25, 2002, all principal  documents  necessary to consummate
the Modified  Plan were fully  executed and the $25 million in proceeds from the
New Exit Financing was funded by CCM into escrow.

     The Debtors  determined  that the changes to the Original Plan as reflected
in the  Modified  Plan  were  of  such a  significant  nature  as to  require  a
resolicitation  of votes from certain  classes of  creditors.  Thus, on July 26,
2002,  the Debtors  filed the proposed  Modified  Plan and a  Supplement  to the
Disclosure  Statement in the Bankruptcy  Court. A hearing has been scheduled for
August 23, 2002 at which time the Bankruptcy  Court will make a determination as
to the adequacy of the  Supplement to the Disclosure  Statement.  If approved by
the Bankruptcy  Court,  the Debtors will then submit the Modified Plan to a vote
by certain classes of creditors.

     Accordingly,  if the Debtors' creditors again vote in favor of the Modified
Plan and it is confirmed by the  Bankruptcy  Court,  upon  certification  by the
Debtors that they are in compliance with certain covenants,  representations and
warranties,  the escrowed  proceeds from the New Exit Financing will be released
for distribution on account of the Senior Secured Lenders in accordance with the
terms of the Modified  Plan,  and the  Effective  Date for the Modified Plan can
immediately  occur. It is anticipated  that the Effective Date and the Company's
emergence  from Chapter 11 bankruptcy  protection  will occur not later than the
end of October 2002.

     On July 23, 2002,  the Company and the Senior  Secured  Lenders agreed to a
stipulated  order to be issued  by the  Bankruptcy  Court  that  authorizes  the
Company to  continue  using the  Senior  Secured  Lenders'  cash  collateral  in
accordance  with a  proposed  budget.  Under the terms of the  stipulation,  the
Company  has  agreed  to  maintain  a  total,   consolidated   cash  balance  of
approximately $90 million. The stipulation also provides that ICG Holdings, Inc.
and its  subsidiaries may use the cash collateral in an amount not to exceed $10
million at any one time. The remaining  balance of cash  collateral is to remain
in an account  established  by ICG  Services,  Inc. This  stipulated  order will
remain in place until the earlier of October 31, 2002 or the Effective Date.

                                       19
<PAGE>
     Under the New Exit  Financing,  the Company  will be subject to a number of
customary   affirmative,   negative  and   financial   covenants.   Among  other
restrictions,  these covenants limit the Company's  ability to incur  additional
debt and liens,  prohibit  investments  by the Company and restrict  mergers and
sales of the  Company's  assets.  The  Company  must also  comply  with  several
financial covenants that restrict the Company's capital spending and require the
Company to maintain certain minimum EBITDA and cash levels.

     The  Company's  management,  assisted  by its  financial  advisors,  Miller
Buckfire Lewis & Co., LLC (the  principals of which were formerly  executives of
Dresdner  Kleinwort & Wasserstein,  Inc.),  has reevaluated  the  reorganization
value of the Company in connection  with the Modified Plan.  The  reorganization
value of the Company on a going  concern  basis was estimated to be between $250
million  and  $325  million.   The  Modified   Plan  as  submitted   reflects  a
reorganization value of $287.5 million, which would result in a valuation of the
new common equity and outstanding warrants totaling $82.6 million.  However, the
Modified Plan assumptions may differ from the actual business  conditions on the
Effective Date. Therefore, the fair values assigned to assets and liabilities on
the  Effective  Date may also be  different.  The valuation is based on numerous
assumptions, including, among other things, the achievement of certain operating
results, market values of publicly-traded securities of other similar companies,
and general economic and industry conditions.

     No  assurance  can  be  given  that  the  Company  will  be  successful  in
reorganizing   its  affairs  within  the  Chapter  11  bankruptcy   proceedings.
Notwithstanding   the  foregoing,   based  on  discussions  with  the  Company's
creditors,  the  Company  anticipates  that  both the  Bankruptcy  Court and the
requisite number of the Company's creditors will approve the Modified Plan.

     The  ability of the Company to  continue  as a going  concern is  dependent
upon,  but not limited to,  successfully  emerging  from  Chapter 11  bankruptcy
protection,  access to  adequate  sources  of  capital,  customer  and  employee
retention,  the  ability to provide  high  quality  services  and the ability to
sustain  positive results of operations and cash flows sufficient to continue to
fund operations.

CRITICAL ACCOUNTING POLICIES

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The preparation of these financial statements
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting period.

     On an ongoing  basis,  management  evaluates its  estimates and  judgments,
including  those  related  to  revenue   recognition,   uncollectible   accounts
receivable,  long-lived  assets,  operating  costs and accruals,  reorganization
costs,  litigation  and  contingencies.   Management  bases  its  estimates  and
judgments on historical experience, current economic and industry conditions and
on  various  other  factors  that  are  believed  to  be  reasonable  under  the
circumstances.  This forms the basis for  making  judgments  about the  carrying
values of assets  and  liabilities  that are not  readily  apparent  from  other
sources.  Actual  results  may  differ  from  these  estimates  under  different
assumptions or conditions. Management believes the following critical accounting
policies  affect  the  more  significant  judgments  and  estimates  used in the
preparation of its consolidated financial statements.

     Revenue Recognition and Accounts Receivable

     Revenue  for  dedicated  transport,  data,  Internet,  and the  majority of
switched services,  exclusive of switched access, is generally billed in advance
on a fixed rate basis and recognized  over the period the services are provided.
Switched access revenue,  including reciprocal  compensation and carrier access,
is generally  billed on a transactional  basis determined by customer usage. The
transactional  elements of switched  access  services  are billed in arrears and
estimates  are used to recognize  revenue in the period  earned.  Fees billed in
connection with customer installations and other up front charges are recognized
ratably over the estimated customer life.

     The  Company   records   inter-carrier   compensation  in  accordance  with
regulatory  authority approval and pursuant to  interconnection  agreements with
incumbent  local  exchange  carriers  ("ILEC"s)  and   inter-exchange   carriers
("IXC"s).  The Company recognizes  inter-carrier revenue as it is earned, except
in those cases where the revenue is under  dispute and  collection is uncertain.
The  Company  pays  reciprocal  compensation  expense  to other  local  exchange
carriers  ("LEC"s)  for  local  exchange  traffic  it  terminates  on the  LECs'
facilities and such costs are recognized as incurred.

                                       20
<PAGE>
     Revenue   attributable   to   leases  of   metropolitan   fiber  and  other
infrastructure pursuant to indefeasible  rights-of-use  agreements ("IRU"s) that
qualify for sales-type lease accounting, and were entered into prior to June 30,
1999, were recognized at the time of delivery and acceptance of the fiber by the
customer.  Certain  sale and  long-term  IRU  agreements  of fiber and  capacity
entered into after June 30, 1999 are  required to be  accounted  for in the same
manner as sales of real estate with property  improvements or integral equipment
which  results  in the  deferral  of  revenue  recognition  over the term of the
agreement (currently up to 20 years).

     The Company establishes  valuation  allowances for: i) customer billings if
realization of the billing is not assured;  ii) billing and service adjustments;
and iii) uncollectible accounts receivable. Valuation allowances for billings in
dispute or at risk of  realization  and for  billing  and  service  credits  are
established  through  a  charge  to  revenue,  while  valuation  allowances  for
uncollectible  accounts  receivable are established through a charge to selling,
general and administrative  expenses. The Company assesses the adequacy of these
reserves  periodically,  evaluating general factors;  such as the length of time
individual  receivables  are past due,  historical  collection  experience,  the
economic and competitive  environment,  and changes in the credit  worthiness of
customers.  The Company also assesses the ability of specific  customers to meet
their financial  obligations and establishes specific valuation allowances based
on the amount the Company expects to collect from these customers, as considered
necessary.  If circumstances  relating to specific  customers change or economic
conditions improve or worsen such that past collection experience and assessment
of the  economic  environment  are  no  longer  relevant,  the  estimate  of the
recoverability of the Company's trade receivables may change.

     Operating Costs and Accrued Liabilities

     The Company leases certain network  facilities,  primarily  circuits,  from
LECs and  CLECs to  augment  its  owned  infrastructure.  The  Company  issued a
significant  number of disconnect  orders to LECs and CLECs for leased  circuits
throughout  2001 as a result  of the  curtailment  of the  Company's  expansions
plans, as well as the rationalization of its network. In addition, many of these
facilities-providers changed the Company's billing account numbers in an attempt
to segregate the Company's pre- and post-Chapter 11 petition  billing  activity.
Disconnected  services  are  frequently  not  reflected on a timely basis on the
Company's invoices,  resulting in inaccurate invoices and disputes. In addition,
the assignment of new billing account numbers  frequently  resulted in incorrect
balances being carried forward on invoices. As a result of these and other types
of billing disputes,  the Company is in negotiations with certain providers.  In
determining the amount of line cost expenses and related accrued  liabilities to
reflect in its  financial  statements,  the Company  considers  the  adequacy of
documentation  of disconnect  notices and disputes,  as well as compliance  with
prevailing  contractual  requirements for submitting such disconnect notices and
disputes to the provider of the facilities.  Significant judgment is required in
estimating the ultimate outcome of the dispute  resolution  process,  as well as
any other  amounts that may be incurred to conclude the  negotiations  or settle
any litigation.

     Long-Lived Assets

     The Company  provides for the  impairment of long-lived  assets,  including
goodwill,  pursuant to Statement of Financial  Accounting Standards ("SFAS") No.
144,  "Accounting  for the Impairment or Disposal of Long-Lived  Assets",  which
requires that long-lived  assets and certain  identifiable  intangibles held and
used by an entity be  reviewed  for  impairment  whenever  events or  changes in
circumstances  indicate  that  the  carrying  value  of  an  asset  may  not  be
recoverable. Such events include, but are not limited to, a significant decrease
in the market value of an asset,  a significant  adverse  change in the business
climate that could affect the value of an asset or a current period operating or
cash flow loss  combined  with a history of operating  or cash flow  losses.  An
impairment  loss is recognized  when  estimated  undiscounted  future cash flows
expected  to be  generated  by the  asset  are  less  than its  carrying  value.
Measurement of the  impairment  loss is based on the estimated fair value of the
asset,  which is generally  determined  using  valuation  techniques such as the
discounted  present  value of expected  future cash flows,  appraisals  or other
pricing models as appropriate.

     The Company  recognized  impairments of long-lived  assets of approximately
$1.7 billion and $28 million  during the years ended December 31, 2000 and 2001,
respectively.  The Company  recorded an impairment of long-lived  assets of $0.6
million in the six months ended June 30, 2002. The Company performed an analysis
pursuant to the requirements of SFAS No. 144 as of June 30, 2002 to determine if
a further  impairment  of its  long-lived  assets  was  required.  The  analysis
compared the Company's  estimate of future  undiscounted cash flows that will be
generated  by the  existing  long-lived  assets to their net book  value of $503
million.  The basis for the  estimate  of future  cash  flows was the  financial
projections  included in the  Modified  Plan.  The  analysis  indicated  that no
impairment  was required.  The Company  expects to recognize a write-down in the
value of  long-lived  assets of up to $270 million  under Fresh Start  reporting
(defined below) upon emergence from bankruptcy.

                                       21
<PAGE>
     Financial Reporting by Entities in Reorganization under the Bankruptcy Code

     These  consolidated  financial  statements have been prepared in accordance
with AICPA Statement of Position ("SOP") 90-7,  "Financial Reporting by Entities
in Reorganization under the Bankruptcy Code." Pursuant to SOP 90-7, an objective
of  financial  statements  issued by an entity in Chapter  11 is to reflect  its
financial  evolution during the proceeding.  For that purpose,  the consolidated
financial  statements for periods including and subsequent to filing the Chapter
11  petition  should  distinguish  transactions  and  events  that are  directly
associated with the reorganization  from the ongoing operations of the business.
Expenses  and  other  items not  directly  related  to  ongoing  operations  are
reflected   separately   in  the   consolidated   statement  of   operations  as
reorganization  expense, net. Reorganization expense, net was $10 million and $5
million  during the three  months  ended June 30,  2001 and 2002,  respectively.
Reorganization  expense,  net was $28  million  and $29  million  during the six
months ended June 30, 2001 and 2002, respectively.

     On the Effective Date, the Company will apply Fresh Start reporting ("Fresh
Start") in accordance with GAAP and the  requirements  of SOP 90-7.  Under Fresh
Start, the Company and its financial  advisors will determine the reorganization
value of the Company, which generally represents the going concern value. On the
Effective  Date,  a new capital  structure  will be  established  and assets and
liabilities,  other than deferred  taxes,  will be stated at their relative fair
values.  Deferred  taxes will be  determined  in  conformity  with SFAS No. 109,
"Accounting for Income Taxes."

     As of the Effective Date, it is anticipated that approximately $2.5 billion
of unsecured  creditor and debt  liabilities  will be discharged in exchange for
new common  stock and  warrants  to  purchase  additional  common  stock with an
estimated  value  of  approximately  $83  million.  In  addition,  the  existing
outstanding preferred and common stock,  including warrants and options, will be
extinguished.

LIQUIDITY AND CAPITAL RESOURCES

Capital Resources

     Reorganized Capital Structure

     Under  the  terms  of the  Modified  Plan,  the  Senior  Facility  will  be
restructured  and new notes (the  "Secured  Notes") will be issued to the Senior
Secured Lenders.  In addition,  the Modified Plan contemplates the issuance of a
$25 million  Senior  Subordinated  Term Loan.  Proceeds from the issuance of the
Senior  Subordinated  Term Loan will be utilized to pay down the Secured  Notes,
concurrent with the Effective Date.  Accordingly,  the remaining  balance due on
the Secured Notes on a projected,  pro forma, reorganized basis is approximately
$60 million.

     The New Exit  Financing is  contingent  upon the Company  consummating  the
Modified  Plan,  which will include  obtaining the necessary  approvals from the
Bankruptcy  Court and the  Company's  creditors.  The Modified Plan contains the
endorsement of the Company's Creditors  Committee and their  recommendation that
the creditors vote to accept the Modified Plan;  however,  there is no assurance
that the Bankruptcy Court and the Company's  creditors will approve the proposed
Plan.  Notwithstanding  the foregoing,  based on discussions  with the Company's
creditors,  the  Company  anticipates  that  both the  Bankruptcy  Court and the
requisite number of the Company's creditors will approve the Modified Plan.

     The  following  table  compares the capital  structure of the Company as of
June  30,  2002,  as  reported  in the  Company's  interim  unaudited  financial
statements,  with the projected pro forma  reorganized  capital structure of the
reorganized ICG upon confirmation of the Modified Plan.  Amounts presented below
as the Projected Pro Forma elements of the reorganized  ICG's capital  structure
are taken from the Modified  Plan that assumes an Effective  Date of October 31,
2002.

                                       22

<PAGE>
                           Condensed Capital Structure

                                                                    Projected
                                                                    Pro Forma
                                                   Actual          Reorganized
                                                June 30, 2002   October 31, 2002
                                               ---------------  ----------------
                                                         (in thousands)
Debt:
  Capital lease obligations                    $      225,563   $        95,013
  Senior Facility                                      84,574                 -
  Secured Notes                                             -            59,574
  Senior Subordinated Term Loan, net of $5
    million of debt discount                                -            19,711
  Other secured debt                                      929            15,900
  Unsecured debt                                    1,968,781            14,696
                                               ---------------  ----------------
Total debt                                          2,279,847           204,894

Preferred stock                                     1,289,789                 -

Stockholders' equity (deficit)                     (3,457,121)           82,589
                                               ---------------  ----------------
Total debt and stockholders' equity            $      112,515   $       287,483
                                               ===============  ================

     Capital lease  obligations  at the Effective  Date will  primarily  include
long-term  leases for certain fiber  facilities  and the corporate  headquarters
building.  The effective interest rate is assumed to average 14.8% per annum for
fiber leases and 11.7% per annum for the building.

     The  Secured  Notes  will be  secured  by  substantially  all assets of the
Company and are  projected  to have a  principal  balance of  approximately  $60
million  outstanding as of the Effective Date. Interest will accrue as a premium
over LIBOR or the bank's  prime rate and is assumed at 11% per annum  until loan
maturity,  payable  quarterly in arrears.  The principal  balance of the Secured
Notes is projected to begin amortizing in 2003 and will mature in 2005.

     The $25 million Senior  Subordinated Term Loan will be arranged by CCM. The
Senior Subordinated Term Loan will be subordinated to the Secured Notes and will
be secured by liens on  substantially  all assets of the Company.  The loan will
accrue interest at 14% per annum,  will be payable monthly in arrears,  and will
mature four years from the Effective Date. In addition,  two separate  issuances
of warrants to purchase a total of 673,684 New Common shares of the  reorganized
ICG will be  issued  in  connection  with the  Senior  Subordinated  Term  Loan.
Warrants to purchase 200,000 New Common shares will have an exercise price equal
to the reorganization  value per share.  Warrants to purchase 473,684 New Common
shares will have an exercise price of $0.01. Both warrant issues will expire, if
unexercised,  on the fifth  anniversary of the Effective Date. The warrants have
an estimated  fair market value of $5 million,  which has been  established as a
debt discount with a  corresponding  increase to additional  paid-in  capital of
stockholders' equity in the accompanying table.

     The Secured  Notes and the Senior  Subordinated  Term Loan will require the
Company to meet  certain  financial  covenants.  The  financial  covenants  will
include minimum EBITDA  requirements and capital  expenditure  limitations.  The
covenants  will also  require  that the Company  maintain a minimum cash balance
calculated as a ratio to the outstanding  balance of the Secured Notes.  Certain
of these  financial  covenants  have  been  established  based on the  Company's
projected  financial  results set forth in the Modified Plan. The Modified Plan,
however,  is based on the good faith  assumptions and projections of management,
which are inherently uncertain.  Actual results could differ materially from the
Modified Plan,  which in turn could negatively  impact the Company's  compliance
with the financial covenants.

     Based on the Company's current EBITDA projections, and assuming the Company
does not raise  additional  funds, or cut its projected  capital  spending,  the
Company  would  need to request a  modification  or waiver  with  respect to the
minimum cash coverage  ratio  covenant by the first quarter of 2004.  Management
anticipates that the Company's business plan provides sufficient  flexibility to
reduce spending as appropriate to remain in compliance  with this covenant.  New
sources  of  capital  may also be  available  beyond  that  which  is  currently
projected by management.  There is no assurance,  however, that these objectives
can be realized,  or that the Company will be able to secure additional  capital
or  alternative  financing.  In such event,  the Senior  Secured  Lenders  could
declare a default and take  certain  actions  that would  require the Company to
accelerate repayment.

     Other  secured  and  unsecured  debt  as of  the  Effective  Date  consists
primarily  of notes  issued to  vendors,  taxing  authorities  and  professional
services  providers,  and are projected to have a principal balance totaling $31
million.  Associated  interest  expense  is  projected  at 7% to 10% per  annum,
payable monthly.

                                       23
<PAGE>
     Other Sources of Funding

     The Company had cash and cash equivalents of $102 million at June 30, 2002.
The Company is  projected to have $70 million in cash on the  Effective  Date to
fund capital expenditures,  debt principal and interest obligations, and working
capital requirements.  The Company anticipates that it will need $12 million and
$57  million  of new debt  financing  in 2004 and  2005,  respectively,  to meet
funding requirements and to refinance the bank debt due in 2005.

     The Company  expects that the demand for  telecommunication  services  will
grow and,  notwithstanding  the  current  downturn  in the  general  economy and
specifically the telecommunications  industry,  that it will be able to increase
its relatively  small share of the markets it serves.  The Company also believes
that as the Company's revenues grow, cash provided by operating  activities will
increase.  The Company  anticipates  that it will be able to refinance  all or a
portion  of the  amounts  due at the  term of the  respective  debt  facilities,
although such refinancing is contingent upon market conditions and the Company's
results of operations and is therefore not assured.

Capital Commitments

     Contractual Cash Commitments

     The following table summarizes the Company's  contractual cash commitments.
The table  assumes  the  Bankruptcy  Court and the  creditors  will  confirm the
Modified Plan and that the final  provisions of the Exit  Financing will exhibit
terms and conditions  substantially  in agreement with the executed  commitments
discussed above.

<TABLE>
<CAPTION>
                            Four      Two        Six
                           Months    Months     Months          Years ended December 31,
                           Ended      Ended      Ended  -------------------------------------
                           Oct.31,   Dec. 31,   Dec.31,                             2006 and
                            2002      2002       2002     2003     2004     2005   thereafter
                          -------------------------------------------------------------------

Principal payments on
  debt and capital
  lease obligations(1):
  Capital lease
<S>                       <C>       <C>       <C>       <C>      <C>      <C>      <C>
    obligations           $  1,768  $     107 $   1,875 $  9,105  $ 9,251 $  9,353 $  98,424
  Senior Facility (2)       25,000          -    25,000        -        -        -         -
  Secured Notes                  -          -         -    2,979    7,447   49,148         -
  Senior Subordinated
    Term Loan                    -          -         -        -        -        -    25,000
  Other secured debt             -        925       925    5,821    5,864    3,290         -
  Unsecured debt                 -        576       576    2,665    2,894    2,902     5,659
                          -------------------------------------------------------------------
                            26,768      1,608    28,376   20,570   25,456   64,693   129,083
Other obligations
  Interest payments          7,845      1,752     9,597   19,376   20,896   24,534    97,999
  Restructuring fees (3)     9,887          -     9,887        -        -        -         -
  Operating leases,
    rents and other
    contracts                7,202      3,379    10,581   18,438   15,809   14,013    12,947
                          -------------------------------------------------------------------
                            24,934      5,131    30,065   37,814   36,705   38,547   110,946
                          -------------------------------------------------------------------
  Total Contractual
    Cash Obligations      $ 51,702  $   6,739 $  58,441 $ 58,384 $ 62,161 $103,240 $ 240,029
                          ===================================================================
</TABLE>
---------------------

(1)  Excludes the interest component - included in "Interest payments".

(2)  Will be paid using proceeds form the Senior Subordinated Term Loan.

(3)  Includes the estimated  settlement of Administrative  (Professional  fees),
     Convenience  and Priority Claims and cash disbursed with the affirmation of
     certain  executory  contracts  (as these terms are defined in the  Modified
     Plan).

                                       24
<PAGE>
     Capital Expenditures

     Capital expenditures in the Modified Plan are projected to be approximately
$73  million  in 2002 and  $351  million  through  2005.  Capital  expenditures,
exclusive  of amounts  required to maintain the current  network  functionality,
will be driven by customer demand for the Company's services. If customer demand
for new services does not meet the  expectation  of the Modified  Plan,  capital
expenditures  will be  proportionally  reduced.  The Company also has  available
capacity on its data backbone, intracity fiber and in its modem banks. It is the
Company's objective to use this capacity to generate future revenue streams.

Assessment of Risks and Uncertainty

     Availability of Financing

     The  Company  anticipates  that it will need $12 million and $57 million of
new debt financing in 2004 and 2005, respectively,  to meet funding requirements
and to  refinance  the  Secured  Notes due in 2005.  There can be no  assurance,
however,  that  refinancing  will be available on acceptable  terms,  or at all.
Further,  there is no  assurance  that such  resources  will be  sufficient  for
anticipated   or   unanticipated   working   capital  and  capital   expenditure
requirements,  or that the  Company  will  achieve or sustain  profitability  or
positive EBITDA in the future,  which will allow it to maintain cash reserves or
attract capital with which to refinance the Secured Notes.

     As stated above,  under the Modified  Plan,  the proceeds from the New Exit
Financing  will be released  from escrow on the  Effective  Date if the Debtors'
creditors  again vote in favor of the  Modified  Plan,  it is  confirmed  by the
Bankruptcy  Court,  and the  Company  certifies  that it is in  compliance  with
certain covenants, representations and warranties. In the event the Company does
not obtain such  financing,  the Company's  ability to execute its business plan
and meet future commitments may be materially adversely impacted.

     Business Environment

     The   general   economic   downturn   and  the  severe   downturn   in  the
telecommunications  industry  have  resulted  in  increased  exposure to several
risks,  including  customer  credit  risk,  increased  customer  disconnections,
pricing  pressure  created by an oversupply of backbone and other services,  and
possible  financial  difficulties  that  may be  experienced  by  the  Company's
suppliers.

     The slowing  economy has caused  customers to go out of business,  file for
bankruptcy  protection and look for opportunities to cut costs. As a result, the
Company has  experienced an acceleration  of customers  disconnecting  services,
which has resulted in downward pressure on revenue.  In addition,  customers are
taking longer to make buying decisions,  lengthening the sales cycle. During the
second  quarter of 2002, $2 million of recurring  revenue was  eliminated due to
customer disconnections.

     Management believes that such downward pressure on revenue will continue to
negatively impact financial performance for the remainder of 2002. Approximately
16% of the Company's June, 2002 recurring  revenue was earned from customers who
had filed for  Chapter 11  bankruptcy  protection  by July 31,  2002,  including
WorldCom, Inc. and its subsidiaries. The Company cannot predict how much of this
revenue  will be lost in the future to  disconnections.  Other  customers of the
Company have been adversely  affected by overall industry trends and may also be
experiencing   financial   difficulties.   The   Company   anticipates   further
disconnections due to customers  optimizing their existing  networks,  continued
cost cutting efforts,  and additional  customer  bankruptcies or other financial
difficulties.  There is no  assurance  that the Company  will be able to replace
lost revenue with new revenue from sales.

     While  bankruptcies  and financial  difficulties in the  telecommunications
industry  present a threat to revenue  growth,  the contraction in the number of
providers may benefit the Company in the following respects:

(i)  As some emerging providers go out of business,  their customers may seek to
     purchase services from the Company; and

(ii) The failure of some emerging  telecommunications  providers may reduce some
     of what the Company  believes is artificially  low pricing of services that
     exists in the market for certain telecommunications services.

     There is no assurance  that the Company will realize any benefits  from the
downturn in the  telecommunications  industry  or that the  Company  will not be
adversely affected by conditions in the industry or the economy in general.

                                       25
<PAGE>
     The immense capital  investments  made in the  telecommunications  industry
have created an oversupply of network  infrastructure.  This  oversupply,  rapid
technological  advancements and intense competition have resulted in significant
pricing pressure in each of the Company's main service areas.  While the Company
believes it is price competitive  overall, it cannot predict the impact that the
oversupply of network infrastructure will have on future operating results.

     The  Company's  suppliers  may also  become  adversely  affected by overall
industry trends and may experience financial difficulties. There is no assurance
that the Company will be able to replace  lost vendor  contracts  under  similar
terms.

     Reciprocal  compensation revenue is primarily associated with the Company's
Dial-Up revenue and represents  compensation  from other LECs for local exchange
traffic  originated on another LEC's  facilities and terminated on the Company's
facilities.  Reciprocal  compensation  rates are established by  interconnection
agreements  between the  parties.  In most states in which the Company  provides
services,  regulatory  bodies have established  lower traffic  termination rates
than the rates provided  under the Company's  interconnection  agreements.  As a
result,  future  rates will  likely be lower than the rates  under the  expiring
interconnection  agreements.  In  addition,  a 2001  FCC  ruling  on  reciprocal
compensation  for ISP-bound  traffic has reduced  rates and will further  reduce
rates in June 2003.  The ruling  also  capped the number of minutes  that can be
billed for ISP-bound traffic. Reciprocal compensation represented 13% of revenue
in the three  months  ended  June 30,  2001 and 2002,  respectively.  Reciprocal
compensation,   including  $5  million  from  a  settlement   reached  with  SBC
Communications, Inc., represented 13% and 14% of revenue in the six months ended
June 30,  2001 and 2002,  respectively.  The Company  believes  that the revenue
earned from  reciprocal  compensation  will be  significantly  reduced in future
years.

     Loss of significant customers

     The  Company  has  substantial  business  relationships  with  a few  large
customers.  For the three  months  ended June 30,  2001,  and 2002,  the top ten
customers accounted for 52% and 65%, respectively, of total revenue. For the six
months ended June 30, 2001,  and 2002,  the top ten customers  accounted for 48%
and  63%,  respectively,  of  total  revenue.  The  Company's  largest  customer
accounted  for 15% and 31% of total  revenue in the three  months ended June 30,
2001, and 2002,  respectively.  The Company's largest customer accounted for 12%
and 28% of total  revenue  in the six  months  ended  June 30,  2001,  and 2002,
respectively.  In the first  quarter and first half of 2002 the  companies  that
individually   represented   more   than  5%  of  total   revenue   were   Qwest
Communications,  Inc. UUNet (a division of WorldCom,  Inc.) and a large national
ISP.  MCI,  also a  subsidiary  of WorldCom,  was one of the top ten  customers,
although it individually  represented less than 5% of total revenue in the three
and six months  ended June 30,  2002.  Revenue  from all  WorldCom  subsidiaries
represented 11% and 12% of total revenue in the three months ended June 30, 2001
and 2002, respectively,  and 9% and 12% of total revenue in the six months ended
June 30, 2001 and 2002, respectively.

Off Balance Sheet Financing

     The  Company  has no off  balance  sheet  financing  other  than  long term
commitments for operating leases and rents.

Historical Cash Activities

Net Cash Used By Operating Activities

     The Company's operating  activities used $37 million and $16 million in the
six  months  ended  June  30,  2001 and  2002,  respectively.  Net cash  used by
operating activities is comprised primarily of net losses,  reorganization items
and fluctuations in operating assets and liabilities  (working capital),  offset
by  non-cash  items  included  in the  net  losses,  such  as  depreciation  and
amortization,   provision  for  uncollectible  accounts  and  deferred  interest
expense.

     The Company's operating activities before  reorganization items provided $2
million and $4 million in 2001 and 2002, respectively.  For the six months ended
June 30, 2002 working capital items used cash of $26 million, primarily due to a
$24 million  decrease in accounts payable and accrued  liabilities.  For the six
months ended June 30, 2001,  working capital items provided cash of $12 million,
primarily due to $19 million decrease in receivables.

     Reorganization  items included in cash flows from operating activities used
$39 million and $20 million in 2001 and 2002, respectively. Reorganization items
represent  primarily  reorganization  expense,  net, adjusted for non-cash items
recognized during the bankruptcy process, and are comprised primarily of changes
in  liabilities  subject to  compromise,  gains and losses  related to  contract
settlements  and  disposals of long-lived  assets,  and  post-petition  accruals
directly related to reorganization activities.

                                       26
<PAGE>
Net Cash Used By Investing Activities

     Investing  activities  used $7  million  and $21  million in the six months
ended  June  30,  2001  and  2002,  respectively.  Net  cash  used by  investing
activities is primarily  comprised of cash  purchases of property and equipment,
proceeds from disposition of property, equipment and other assets, purchases and
sales of short-term investments, and fluctuations in long-term deposit balances.

Net Cash Used By Financing Activities

     Financing  activities  used $18  million  and $8  million in the six months
ended June 30, 2001 and 2002, respectively. Cash used by financing activities in
2001  and  2002  represents   primarily  principal  payments  on  capital  lease
obligations that are subject to compromise.

     The Company continues to make interest-only payments on the Senior Facility
balance as approved by the Bankruptcy Court. The Bankruptcy Court has stayed the
payment of principal due under the Senior Facility. The Company anticipates that
in connection  with the Exit  Financing  proposed in its Plan (see  "Reorganized
Capital  Structure" under "Liquidity and Capital  Resources"),  the Company will
repay $25 million on or about the Effective  Date, and the remaining $60 million
will be replaced with the Secured Notes.

     As of June  30,  2002,  the  Company  had an  aggregate  accreted  value of
approximately $2 billion outstanding under the 13 1/2% Senior Discount Notes due
2005, the 12 1/2% Senior  Discount  Notes due 2006, the 11 5/8% Senior  Discount
Notes due 2007, the 10% Notes and the 9 7/8% Notes. It is anticipated  that this
debt will be discharged pursuant to the confirmation of the Modified Plan.

     As of June 30, 2002, an aggregate amount of approximately  $1.3 billion was
outstanding under the 6 3/4% Preferred Securities,  the 14% Preferred Stock, the
14 1/4% Preferred Stock and the 8% Series A Convertible  Preferred  Stock. It is
anticipated  that the  preferred  stock  will be  extinguished  pursuant  to the
confirmation of the Modified Plan.

Capital Expenditures

     The Company's  capital  expenditures,  which represent assets acquired with
cash and under  capital  leases,  were $67  million  and $24 million for the six
months ended June 30, 2001 and 2002, respectively.

                                       27
<PAGE>
RESULTS OF OPERATIONS

     The following  table provides a breakdown of revenue,  operating  costs and
selling,  general and  administrative  expenses  for the Company for the periods
indicated. The table also shows certain revenue,  expenses,  operating loss, and
EBITDA as a percentage of the Company's total revenue.

<TABLE>
<CAPTION>
                                                                      Financial Data
                                           Three months ended June 30,               Six months ended June 30,
                                     --------------------------------------- ---------------------------------------
                                             2000                2001                2000                2001
                                     ------------------- ------------------- ------------------- -------------------
                                         $          %         $         %        $          %         $         %
                                     ---------- -------- ---------- -------- ---------- -------- ---------- --------
                                                                       (unaudited)
                                                                 ($ values in thousands)

Statement of Operations Data:
<S>                                  <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>
Revenue                                121,252      100    102,780      100    257,649      100    214,951      100
Operating costs                         84,813       70     60,912       59    197,375       77    128,290       60
Selling, general and administrative     26,470       22     23,960       23     57,166       22     51,562       24
Depreciation and amortization           16,194       13     25,311       25     32,183       12     44,937       21
Loss on disposal of asset                7,562        6       (108)       -      7,633        3       (114)       -
Provision for impairment of
  long-lived assets                         -         -        643        1          -        -        643        -
                                     ---------- -------- ---------- -------- ---------- -------- ---------- --------
    Operating loss                     (13,787)     (11)    (7,938)      (8)   (36,708)     (14)   (10,367)      (5)

Other Data:
EBITDA (1)                               9,969        8     17,908       17      3,108        1     35,099       16
Net cash provided (used) by
  operating activities                  24,290              15,470             (37,354)            (15,866)
Net cash used by investing
  activities                            (1,536)             (4,122)             (6,547)            (21,219)
Net cash provided (used) by
  financing activities                 (15,980)             (7,270)            (17,783)             (7,970)
Capital expenditures (2)                59,376              16,614              67,274              24,223
--------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                             Statistical Data (unaudited) (3)
                                            June 30,   September 30,  December 31,    March 31,    June 30,
                                              2000         2000           2000          2001         2001
                                           ----------  -------------  ------------  ------------  -----------

<S>                                        <C>         <C>            <C>           <C>           <C>
Full time employees                            1,422          1,389         1,368         1,342        1,138
Telecom services:
Access lines in service, in thousands (4)        719            789           742           807          834
Buildings connected:
  On-net                                         881            902           901           911          912
  Hybrid (5)                                   7,264          6,315         5,727         5,189        4,748
                                           ----------  -------------  ------------  ------------  -----------
Total buildings connected                      8,145          7,217         6,628         6,100        5,660
  Operational switches:
  Circuit                                         44             43            43            47           46
  ATM                                             27             26            27            25           26
                                           ----------  -------------  ------------  ------------  -----------
Total operational switches                        71             69            70            72           72
  Operational regional fiber route
    miles (6):                                 5,577          5,542         5,542         5,542        5,542
Operational regional fiber strand
  miles (7):                                 166,498        165,847       165,847       165,847      165,927
Collocations with ILECs                          160            148           161           160          158
</TABLE>

(1)  EBITDA  consists of net income  (loss) from  continuing  operations  before
     interest,  income taxes,  reorganization  expense,  net,  depreciation  and
     amortization,  other  expenses,  net.  EBITDA is  presented  to  enhance an
     understanding  of the  Company's  operating  results and is not intended to
     represent  cash flows or results of operations in accordance  with GAAP for
     the periods  indicated.  EBITDA is not a measurement  under GAAP and is not
     necessarily  comparable with similarly  titled measures of other companies.
     Net cash  flows from  operating,  investing  and  financing  activities  of
     continuing  operations as determined using GAAP are also presented in Other
     Data. The following table is a  reconciliation  of the net loss reported by
     the Company to EBITDA:

                                       28
<PAGE>
<TABLE>
<CAPTION>
                                       Three months ended          Six months ended
                                             June 30,                  June 30,
                                    -------------------------  ------------------------
                                        2001          2002        2001         2002
                                    ------------  -----------  -----------  -----------
                                                      (in thousands)
<S>                                 <C>           <C>          <C>          <C>
     Net loss                       $   (33,321)  $  (18,035)  $  (86,678)  $  (49,319)
     Depreciation and amortization       16,194       25,311       32,183       44,937
     Interest expense                    11,081        4,599       23,799       10,303
     Reorganization expense, net          9,819        5,441       27,505       28,732
     Loss (gain) on disposal of
       assets                             7,562         (108)       7,633         (114)
     Provision for impairment of
       long-lived assets                      -          643            -          643
     Other expense (income), net         (1,366)          57       (1,334)         (83)
                                    ------------  -----------  -----------  -----------
     EBITDA                         $     9,969   $   17,908   $    3,108   $   35,099
                                    ============  ===========  ===========  ===========
</TABLE>

(2)  Capital  expenditures  include assets acquired with cash,  payables,  under
     capital leases, and pursuant to IRU agreements.

(3)  Amounts  presented are for  three-month  periods ended, or as of the end of
     the period presented.

(4)  Access lines in service include only provisioned lines generating revenue.

(5)  Hybrid buildings  connected  represent buildings connected to the Company's
     network via another carrier's facilities.

(6)  Regional  fiber  route  miles  refers to the number of miles of fiber optic
     cable,  including  leased fiber.  None of the regional fiber route miles at
     June 30, 2002 were leased under operating leases.

(7)  Regional  fiber strand  miles refers to the number of regional  fiber route
     miles,  including leased fiber, along a telecommunications  path multiplied
     by the number of fiber strands  along that path.  As of June 30, 2002,  the
     Company had  165,927  regional  fiber  strand  miles,  45,445 of which were
     leased under operating leases.

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001

Revenue
<TABLE>
<CAPTION>
                                          Three Months Ended June 30,
                              -------------------------------------------------
                                        2001                      2002
                              ------------------------ ------------------------
                                   $           %            $            %
                              ------------ ----------- ------------  ----------
                                            ($ values in thousands)
<S>                           <C>          <C>         <C>           <C>
  Dial-Up                        40,658        34         45,056         44
  Point-to-Point Broadband       38,981        32         27,009         26
  Corporate Services             25,877        21         17,445         17
  Reciprocal Compensation        15,736        13         13,270         13
                              ------------ ----------- ------------  ----------
    Total Revenue               121,252       100        102,780        100
                              ============ =========== ============  ==========
</TABLE>

     Total revenue decreased $18 million, or 15%, between the three months ended
June 30,  2001 and 2002,  respectively.  The  decrease  was due to a $12 million
decrease  in  Point-to-Point  Broadband  revenue,  an  $8  million  decrease  in
Corporate Services revenue and a $2 million decrease in Reciprocal  Compensation
revenue, offset by a $4 million increase in Dial-Up revenue.

     The   general   economic   downturn   and  the  severe   downturn   in  the
telecommunications   industry   have   resulted  in  an  oversupply  of  network
infrastructure.  In addition,  the slowing economy has resulted in the Company's
customers going out of business,  filing for bankruptcy protection,  and looking
for opportunities to cut costs. The effects on the Company include higher levels
of customer  disconnections  and increased  pricing pressure on new and existing
customer  contracts.  In addition,  customers  are taking  longer to make buying
decisions, lengthening the sales cycle.

     Dial-Up  revenue  is earned by  providing  PRI ports  (one and two way) and
managed modem (IRAS) services to ISPs and other communication service companies.
Dial-Up  revenue  increased 11% from $41 million in 2001 to $45 million in 2002,
due  primarily  to an 18%  increase  in the billed  line  count,  offset by a 6%
decrease in the average  monthly  revenue per customer port in service.  Dial-Up
revenue's  contribution  to total revenue rose from 34% in the second quarter of
2001 to 44% in the second quarter of 2002.

                                       29
<PAGE>
     Point-to-Point  Broadband  revenue is generated  from  service  provided to
inter-exchange  carriers ("IXCs") and end-user business customers.  This service
provides dedicated  bandwidth and offers DS1 to OC-192 capacity to connect:  (i)
long-haul carriers to local markets, large companies and other long-haul carrier
facilities;  and (ii) large companies to their long distance carrier  facilities
and other  facilities.  Point-to-Point  Broadband revenue decreased 31% from $39
million in 2001 to $27 million in 2002. The decrease in Point-to-Point Broadband
revenue was comprised of decreases in special  access,  switched  access and SS7
revenues of 24%, 65% and 62%,  respectively,  which  occurred  primarily  due to
customer churn. Point-to-Point Broadband revenue's contribution to total revenue
declined  from 32% in the first  quarter of 2001 to 26% in the first  quarter of
2002.

     Corporate  Services revenue includes local enhanced  telephony  (voice) and
data  (internet  access)  services to businesses  over its fiber optic  networks
located in major  metropolitan  areas.  Corporate Services revenue decreased 33%
from $26 million in 2001 to $17 million in 2002. The billed line count decreased
42% from the second  quarter of 2001 to the  second  quarter of 2002,  while the
average  monthly revenue per line increased 16%. The decrease in the billed line
count is primarily the result of customer  churn in the telephony  services,  as
well as planned  transition of customers in certain  service areas. In addition,
the Company  entered into an agreement  to transfer  its long  distance  revenue
stream in the fourth quarter of 2001. These customers  generated $1.3 million of
revenue in the three months ended June 30, 2001.  The lost  revenue's  impact on
EBITDA was not significant.  Corporate Services revenue's  contribution to total
revenue  declined  from 21% in the  second  quarter of 2001 to 17% in the second
quarter of 2002.

     Reciprocal   Compensation   revenue  is   primarily   earned   pursuant  to
interconnection agreements with ILECs for the transport and termination of calls
originated  by  ILEC  customers,  including  Internet  bound  calls.  Reciprocal
Compensation  revenue  decreased  16% from $16 million in 2001 to $13 million in
2002.  The decrease in revenue was due to a 12% decrease in the average  revenue
earned  per  minutes of use,  as well as a 5%  decrease  in the  minutes of use.
Reciprocal  Compensation's  contribution to total revenue remained consistent at
13% in 2001 and 2002.  The  Company  anticipates  that  Reciprocal  Compensation
revenue  will  decline  in the  future  based on  future  negotiated  rates  and
expiration of agreements beginning in the first quarter of 2003.

     The  Company  has  substantial  business  relationships  with  a few  large
customers.  For the three  months  ended June 30,  2001,  and 2002,  the top ten
customers  accounted  for 52% and  65%,  respectively,  of  total  revenue.  The
Company's  largest  customer  accounted  for 15% and 31% of total revenue in the
three months ended June 30, 2001, and 2002, respectively.  In 2002 the companies
that  individually  represented  more  than  5%  of  total  revenue  were  Qwest
Communications,  Inc., UUNet (a division of WorldCom, Inc.) and a large national
ISP. MCI, also a subsidiary of WorldCom, Inc., was one of the top ten customers,
although it individually represented less than 5% of total revenue. All WorldCom
subsidiaries  combined  represented  11% and 12% of total  revenue  in the three
months ended June 30, 2001 and 2002, respectively.

Operating costs

     Total  operating  costs decreased 28% from $85 million for the three months
ended June 30, 2001 to $61 million for the same period in 2002.  As a percentage
of revenue,  operating  costs also  decreased  from 70% in the second quarter of
2001 to 59% in the second quarter of 2002.  Operating costs consist primarily of
payments  to ILECs,  other  CLECs,  and long  distance  carriers  for the use of
network facilities to support local, special, switched access services, and long
distance services as well as internal network operating costs, right of way fees
and other operating costs.  Internal network operating costs include the cost of
engineering and operations personnel dedicated to the operations and maintenance
of the  network.  Since  filing for  bankruptcy,  the Company has  significantly
reduced excess network capacity,  eliminated  services in unprofitable  markets,
and reconfigured its network for better performance.  This has resulted in lower
operating costs for both internal and leased network facilities.

Selling, general and administrative ("SG&A") expenses

     Total SG&A  expenses  decreased  9% from $26 million  for the three  months
ended June 30, 2001 to $24 million for the same period in 2002.  As a percentage
of revenue,  SG&A expenses increased slightly from 22% for 2001 to 23% for 2002.
The average number of full-time  employees  during the period decreased 14% from
1,443 in 2001 to 1,243 in 2002.  The decrease in SG&A costs was due primarily to
reduced costs associated with the lower headcount, lower facilities costs as the
Company  consolidates  its locations  during the  restructuring  process,  lower
software maintenance costs, and lower bad debt expense. In addition, real estate
and personal property taxes decreased as a result of write downs in the value of
the Company's property and equipment.

     In the second  quarter of 2002 the Company  announced  that it would reduce
its workforce. As a result, the number of full-time employees decreased 15% from
March 31, 2002 to June 30, 2002.  Because the reduction did not become effective
until  June  2002,  the full  impact  on SG&A  will not be seen  until the third
quarter of 2002.

                                       30
<PAGE>
Depreciation and amortization

     Depreciation and amortization  increased 56% from $16 million for the three
months ended June 30, 2001 to $25 million for the same period in 2002, primarily
due to higher levels of property and equipment  placed in service and subject to
depreciation.

Interest expense

     Interest expense  decreased 58% from $11 million for the three months ended
June 30,  2001 to $5  million  for the same  period  in 2002,  primarily  due to
interest  expense  eliminated as a result of the Company's  rejection of certain
capital leases in connection with the bankruptcy process. In addition,  interest
expense in the three months ended June 30, 2001  included $2 million of deferred
financing  cost  amortization  relating  to the  Debtor-In-Possession  Revolving
Credit  Agreement.  The Company  terminated  the Revolving  Credit  Agreement on
November  7, 2001 and wrote off the  remaining  unamortized  deferred  financing
costs to interest expense at that time.

Reorganization expense, net

     Reorganization  expense,  net  decreased 45% from $10 million for the three
months  ended  June  30,  2001  to $5  million  for the  same  period  in  2002.
Reorganization  expense,  net consists of items  associated  with the bankruptcy
proceedings that are not directly  attributable to the ongoing operations of the
Company. The decrease is attributable  primarily to the $7 million gain recorded
in the quarter ended June 30, 2002 related to contract  settlements reached with
vendors.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001

Revenue

<TABLE>
<CAPTION>
                                         Six Months Ended June 30,
                              -------------------------------------------------
                                       2001                     2002
                              ------------------------ ------------------------
                                   $           %            $            %
                              ------------ ----------- ------------  ----------
                                          ($ values in thousands)
<S>                           <C>          <C>         <C>           <C>
     Dial-Up                     87,251        34         89,278          42
     Point-to-Point Broadband    78,517        30         56,970          26
     Corporate Services          59,097        23         37,686          18
     Reciprocal Compensation     32,784        13         31,017          14
                              ------------ ----------- ------------  ----------
       Total Revenue            257,649       100        214,951         100
                              ============ =========== ============  ==========
</TABLE>

     Total revenue  decreased $43 million,  or 17%, between the six months ended
June 30, 2001 and 2002,  respectively.  The decrease was due  primarily to a $22
million decrease in Point-to-Point  Broadband revenue, a $21 million decrease in
Corporate Services revenue, and a $2 million decrease in Reciprocal Compensation
revenue,  offset by a $2 million  increase in Dial-Up  revenue.  2002 Reciprocal
Compensation  revenue  includes $5 million  from a  settlement  reached with SBC
Communications, Inc.

     Dial-Up  revenue  increased  2% from $87  million in 2001 to $89 million in
2002,  due primarily to a 9% increase in the billed line count,  offset by an 6%
decrease in the average  monthly  revenue per customer port in service.  Dial-Up
revenue's  contribution to total revenue rose from 34% in the first half of 2001
to 42% in the first half of 2002.

     The decrease in Point-to-Point Broadband revenue was comprised of decreases
in  special  access,  switched  access  and SS7  revenues  of 22%,  56% and 50%,
respectively,  which occurred  primarily due to customer  churn.  Point-to-Point
Broadband revenue's contribution to total revenue declined from 30% in the first
quarter of 2001 to 26% in the first quarter of 2002.

     Corporate  Services  revenue  decreased 36% from $59 million in 2001 to $38
million in 2002,  primarily  due to a 43%  decrease  in the billed  line  count,
offset by a 12% increase in the average  monthly revenue per line from the first
half of 2001 to the first half of 2002. The decrease in the billed line count is
primarily  the result of customer  churn in the telephony  services,  as well as
planned  transition  of customers in certain  service  areas.  In addition,  the
Company  entered into an agreement to transfer its long distance  revenue stream
in the fourth quarter of 2001. These customers generated $3.8 million of revenue
in the six months ended June 30, 2001. The lost  revenue's  impact on EBITDA was
not  significant.  Corporate  Services  revenue's  contribution to total revenue
declined from 23% in the first half of 2001 to 18% in the first half of 2002.

                                       31
<PAGE>

     Reciprocal  Compensation  revenue  decreased 5% from $33 million in 2001 to
$31 million in 2002.  Reciprocal  Compensation's  contribution  to total revenue
increased from 13% in 2001 to 14% in 2002.  Reciprocal  Compensation  revenue in
2002 includes $5 million from a settlement reached with SBC Communications, Inc.
The revenue from the  settlement  was recorded in the first  quarter of 2002. If
the revenue from the  settlement  were to be excluded,  Reciprocal  Compensation
revenue  would  have  decreased  21% to $26  million,  or 12% of total  revenue.
Excluding the effect of the  settlement on revenue,  average  revenue earned per
minutes of use  decreased  15% and  minutes  of use  decreased  8%. The  Company
anticipates  that  Reciprocal  Compensation  revenue  will decline in the future
based on future  negotiated rates and expiration of agreements  beginning in the
first quarter of 2003.

     The  Company  has  substantial  business  relationships  with  a few  large
customers.  For the six  months  ended  June 30,  2001,  and  2002,  the top ten
customers  accounted  for 48% and  63%,  respectively,  of  total  revenue.  The
Company's largest customer accounted for 12% and 28% of total revenue in the six
months ended June 30, 2001, and 2002,  respectively.  In 2002 the companies that
individually   represented   more   than  5%  of  total   revenue   were   Qwest
Communications,  Inc., UUNet (a division of WorldCom, Inc.) and a large national
ISP. MCI, also a subsidiary of WorldCom, Inc., was one of the top ten customers,
although it individually represented less than 5% of total revenue. All WorldCom
subsidiaries  combined represented 9% and 12% of total revenue in the six months
ended June 30, 2001 and 2002, respectively.

Operating costs

     Total  operating  costs  decreased 35% from $197 million for the six months
ended June 30, 2001 to $128 million for the same period in 2002. As a percentage
of revenue, operating costs also decreased from 77% in the first half of 2001 to
60% in the first half of 2002.  Since  filing for  bankruptcy,  the  Company has
significantly   reduced  excess  network   capacity,   eliminated   services  in
unprofitable markets, and reconfigured its network for better performance.  This
has  resulted in lower  operating  costs for both  internal  and leased  network
facilities.

Selling, general and administrative ("SG&A") expenses

     Total SG&A expenses decreased 10% from $57 million for the six months ended
June 30, 2001 to $52 million for the same  period in 2002.  As a  percentage  of
revenue,  SG&A expenses increased from 22% for 2001 to 24% for 2002. The average
number of full-time employees during the period decreased 18% from 1,578 in 2001
to 1,300 in 2002.  The decrease in SG&A costs was due primarily to reduced costs
associated  with the lower  headcount,  lower  facilities  costs as the  Company
consolidates  its locations  during the  restructuring  process,  lower software
maintenance  costs,  and lower bad debt  expense.  In addition,  real estate and
personal property taxes decreased as a result of write downs in the value of the
Company's property and equipment.

     In the second  quarter of 2002 the Company  announced  that it would reduce
its workforce. As a result, the number of full-time employees decreased 15% from
March 31, 2002 to June 30, 2002.  Because the reduction did not become effective
until  June  2002,  the full  impact  on SG&A  will not be seen  until the third
quarter of 2002.

Depreciation and amortization

     Depreciation  and  amortization  increased 40% from $32 million for the six
months ended June 30, 2001 to $45 million for the same period in 2002, primarily
due to higher levels of property and equipment  placed in service and subject to
depreciation.

Interest expense

     Interest  expense  decreased  57% from $24 million for the six months ended
June 30,  2001 to $10  million  for the same  period in 2002,  primarily  due to
interest  expense  eliminated as a result of the Company's  rejection of certain
capital leases in connection with the bankruptcy process. In addition,  interest
expense in the six months  ended June 30,  2001  included $4 million of deferred
financing  cost  amortization  relating  to the  Debtor-In-Possession  Revolving
Credit  Agreement.  The Company  terminated  the Revolving  Credit  Agreement on
November  7, 2001 and wrote off the  remaining  unamortized  deferred  financing
costs to interest expense at that time.

Reorganization expense, net

     Reorganization  expense,  net  increased  4% from $28  million  for the six
months  ended June 30,  2001 to $29  million  for the same  period in 2002.  The
increase  is  primarily  attributable  to a $21  million  increase  in  contract
termination expenses, offset by an $8 million decrease in severance and employee
retention costs, a $6 million  decrease in legal and professional  fees and a $6
million  gain  from  contract  settlements  recorded  in  2002.  As  part of its

                                       32
<PAGE>
restructuring  activities,  including  reconciliation  of  pre-petition  claims,
during the six months ended June 30, 2002 the Company  recognized $23 million of
contract termination expenses,  which have been accrued as unsecured liabilities
subject to compromise. Severance and employee retention costs were lower because
the Company's reductions in workforce were more significant in the first half of
2001 than in 2002. In the first half of 2002, the number of full-time  employees
decreased by 230 employees, compared to a decrease of 632 employees in the first
half of 2001.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's financial position and cash flows are subject to a variety of
risks in the normal course of business,  which include  market risks  associated
with  movements  in interest  rates and equity  prices.  The  Company  routinely
assesses  these risks and has  established  policies and  business  practices to
protect against the adverse effects of these and other potential exposures.  The
Company does not, in the normal  course of business,  use  derivative  financial
instruments for trading or speculative purposes.

                                       33
<PAGE>
                                     PART II

ITEM 1. LEGAL PROCEEDINGS

          On November 14, 2000, the Company and most of its  subsidiaries  filed
          voluntary  petitions  for  protection  under  Chapter 11 of the United
          States Bankruptcy Code in the Federal District of Delaware (Joint Case
          Number  00-4238  (PJW)).  The  Company  is  currently  operating  as a
          debtor-in-possession  under the  supervision of the Bankruptcy  Court.
          The  bankruptcy  petition was filed in order to preserve cash and give
          the Company the opportunity to restructure its debt.

          During the third and fourth  quarters of 2000,  the Company was served
          with fourteen  lawsuits  filed by various  shareholders  in the United
          States  District  Court for the  District of Colorado  (the  "District
          Court").   The  complaints  sought  class  action   certification  for
          similarly  situated  shareholders.  All of the initial  suits named as
          defendants the Company,  the Company's former Chief Executive Officer,
          J.  Shelby  Bryan,  and the  Company's  former  President,  John Kane.
          Additionally,  one  of  the  complaints  named  the  Company's  former
          President,  William S. Beans, Jr., as a defendant. (Both Messrs. Bryan
          and Beans  remain on the  Company's  Board of  Directors.)  The claims
          against the Company were stayed  pursuant to the Company's  filing for
          bankruptcy.

          In October 2001, the District Court  consolidated  the various actions
          and  appointed  lead  plaintiffs'  counsel.  In  February  2002,  lead
          plaintiffs' counsel for the various  shareholders filed a consolidated
          amended  complaint.  In addition to naming Messrs.  Bryan and Beans as
          defendants,  the amended  complaint names as a defendant the Company's
          former chief  financial  officer,  Harry R. Herbst.  The  consolidated
          amended complaint does not name the Company's former  president,  John
          Kane. In addition,  the amended complaint does not name the Company as
          a defendant. The consolidated complaint,  however, indicates that, but
          for the fact that claims against ICG have been stayed  pursuant to the
          Bankruptcy  Code,  the  Company  would be named  as a  defendant.  The
          consolidated  amended complaint  alleges  violations of Sections 10(b)
          and 20(a) of the  Securities  and Exchange Act of 1934 and seeks class
          action  certification  under  Rule 23 of the  Federal  Rules  of Civil
          Procedure. The complaint seeks unspecified compensatory damages.

          The claims against the individual  defendants are proceeding and these
          defendants have retained  separate legal counsel to prepare a defense.
          Under  Section  510(b)  of  the  Bankruptcy   Code,  all  pre-petition
          securities claims against ICG are mandatorily subordinated and will be
          discharged  upon the  confirmation  of the Modified  Plan.  Holders of
          pre-petition  equity  securities  claims will not receive any recovery
          from the Company under the proposed Plan.

          In  January  2002,  SBC  Communications,  Inc.,  on behalf of  various
          subsidiaries  (collectively  "SBC")  filed a motion  in the  Company's
          Bankruptcy  case  seeking  permission  to  terminate  the  services it
          provides the Company pursuant to its interconnection  agreements.  SBC
          contended  that the Company owed SBC in excess of $24 million  related
          to past billing,  and, as a result, was entitled to terminate services
          and  pursue  an   administrative   claim  for  the  alleged  past  due
          receivable. The Company filed a response to SBC's motions stating that
          it did not owe a  significant  portion of the alleged past due amount.
          Additionally,  the  Company's  response  contended  that  SBC owed the
          Company considerably more than the Company owed SBC.

          On March  29,  2002 the  Company  and SBC  entered  into a  settlement
          agreement regarding wholesale services provided by SBC and the Company
          to each other pursuant to the interconnection agreements. On April 30,
          the  Bankruptcy  Court  issued  an order  approving  the  terms of the
          settlement.   On  May  10,   2002,   the   order   became   final  and
          non-appealable.  Only amounts  allegedly owed for the retail services,
          which are not governed by the interconnection  agreements, have yet to
          be resolved.  The Company believes that the ultimate resolution of the
          remaining  items relating to retail services will be immaterial to the
          Company's operating results.

          In  January  2001,  certain  shareholders  of ICG  Funding,  LLC ("ICG
          Funding") a wholly-owned subsidiary of the Company, filed an adversary
          proceeding in the United States  Bankruptcy  Court for the District of
          Delaware  (Case number  00-04238 PJW Jointly  Administered,  Adversary
          Proceeding  No.  01-000 PJW) against the Company and ICG Funding.  The
          shareholders in this adversary action sought to recover  approximately
          $2.3  million  from an  escrow  account  established  to fund  certain
          dividend payments to holders of the ICG Funding Exchangeable Preferred
          Securities.  Because ICG Funding filed for bankruptcy protection,  ICG
          Funding did not declare the last  dividend  that was to have been paid

                                       34
<PAGE>
          with the remaining proceeds of the escrow account.  In April 2001, the
          Company and ICG  Funding  finalized a  settlement  agreement  with the
          shareholders that has been approved by the Bankruptcy Court. Under the
          terms  of the  settlement,  the  shareholders  received  approximately
          two-thirds of the funds in the escrow account and the Company received
          the  remaining  one-third  of the escrowed  funds,  subject to certain
          contingencies  and  holdbacks  related  to  shareholders  that did not
          participate in the settlement.

          The Company is a party to certain other  litigation that has arisen in
          the ordinary  course of business.  In the opinion of  management,  the
          ultimate  resolution of these matters will not have a material adverse
          effect on the Company's financial condition,  results of operations or
          cash flows.  The  Company is not  involved  in any  administrative  or
          judicial proceedings relative to an environmental matter.

ITEM 2. CHANGES IN SECURITIES

          None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

          Due to the bankruptcy proceedings discussed in note 1 to the Company's
          unaudited consolidated financial statements for the three months ended
          June 30, 2002,  the Company is currently in default under the 13 1/2 %
          Notes, 12 1/2% Notes,  11 5/8% Notes,  10% Notes, 9 7/8% Notes and the
          Senior Facility.  In addition,  the Company is in default under the 14
          1/4% Preferred Stock, 14% Preferred Stock, 6 3/4% Preferred Securities
          and 8% Series A Convertible Preferred Stock.

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

          None.

ITEM 5. OTHER INFORMATION

          None.

                                       35
<PAGE>
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K

          (A)  Exhibits.

               2.4  Findings of Fact,  Conclusions of Law, and Order  Confirming
                    Second   Amended  Joint  Plan  of   Reorganization   of  ICG
                    Communications,  Inc. and its Affiliated Debtors and Debtors
                    in Possession dated May 21, 2002. [Incorporated by reference
                    to Exhibit 2.1 to ICG Communications,  Inc.'s Current Report
                    on Form 8-K dated May 21, 2002].

               2.5  Second   Amended  Joint  Plan  of   Reorganization   of  ICG
                    Communications,  Inc. and its Affiliated Debtors and Debtors
                    in  Possession   dated  April  3,  2002.   [Incorporated  by
                    reference  to  Exhibit  2.2  to ICG  Communications,  Inc.'s
                    Current Report on Form 8-K dated May 21, 2002].

               2.6  Disclosure  Statement  with Respect to Second  Amended Joint
                    Plan of Reorganization of ICG  Communications,  Inc. and its
                    Affiliated  Debtors and Debtors in Possession dated April 3,
                    2002.  [Incorporated  by  reference  to  Exhibit  2.3 to ICG
                    Communications,  Inc.'s Current Report on Form 8-K dated May
                    21, 2002].

               2.7  Modification   to  the   Second   Amended   Joint   Plan  of
                    Reorganization   of  ICG   Communications,   Inc.   and  its
                    Affiliated  Debtors and Debtors in Possession dated July 26,
                    2002.  [Incorporated  by  reference  to  Exhibit  2.7 to ICG
                    Communications,  Inc.'s  Current  Report  on Form 8-K  dated
                    August 9, 2002].

               2.8  Supplemental Disclosure With Respect to Second Amended Joint
                    Plan of Reorganization of ICG Communications, Inc. Regarding
                    Modification of ICG Communications,  Inc. and its Affiliated
                    Debtors  and  Debtors in  Possession  dated  July 26,  2002.
                    [Incorporated   by   reference   to   Exhibit   2.8  to  ICG
                    Communications,  Inc.'s  Current  Report  on Form 8-K  dated
                    August 9, 2002].

               2.9  Senior Financing  Agreement by and among ICG Communications,
                    Inc.  and  its  affiliated  debtor  subsidiaries  identified
                    herein, Royal Bank of Canada, as Administrative Agent and as
                    collateral agent, and Wachovia Bank,  National  Association,
                    as  documentation   agent,   dated  as  of  July  25,  2002.
                    [Incorporated   by   reference   to   Exhibit   2.9  to  ICG
                    Communications,  Inc.'s  Current  Report  on Form 8-K  dated
                    August 9, 2002].

               10.85Note  and  Warrant  Purchase  Agreement  by  and  among  ICG
                    Communications,  Inc., Madeleine L.L.C. and Morgan Stanley &
                    Co., Incorporated,  dated as of July 25, 2002. [Incorporated
                    by reference to Exhibit 10.85 to ICG Communications,  Inc.'s
                    Current Report on Form 8-K dated August 9, 2002].

               10.86Escrow  Agreement  by and  among ICG  Communications,  Inc.,
                    Madeleine  L.L.C.  and Morgan  Stanley & Co.,  Incorporated,
                    dated as of July 25,  2002.  [Incorporated  by  reference to
                    Exhibit 10.86 to ICG  Communications,  Inc.'s Current Report
                    on Form 8-K dated August 9, 2002].

               99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

               99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       36
<PAGE>
          (B)  Report on Form 8-K.

               The  following  reports on Form 8-K were filed by the  registrant
               during the three months ended June 30, 2002:

               (i)  Current  Report on Form 8-K dated May 21,  2002,  announcing
                    that ICG's Second Amended Joint Plan of  Reorganization  and
                    accompanying  Disclosure  Statement had been accepted by all
                    classes  of  creditors  entitled  to  vote on the  Plan  and
                    confirmed by the Bankruptcy Court.

               The  following  reports on Form 8-K were filed by the  registrant
               after June 30, 2002 but before the date of this Report:

               (i)  Current Report on Form 8-K dated August 9, 2002,  announcing
                    that:

                    a)   On July 25, 2002,  the Debtors  entered into the Senior
                         Facility,  the Note and Warrant Purchase  Agreement and
                         Escrow  Agreement,  pursuant  to which $25  million was
                         deposited  into an escrow  account.  The release of the
                         funds is contingent on approval by the Bankruptcy Court
                         of  the  Modified  Plan  and  satisfaction  of  certain
                         conditions  as  set  forth  in  the  Note  and  Warrant
                         Purchase Agreement.

                    b)   On July 26, 2002, the Company filed a  modification  to
                         ICG's Second Amended Joint Plan of Reorganization  with
                         the Bankruptcy Court.

                                       37
<PAGE>
                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) 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, on August 14, 2002.




                                          ICG COMMUNICATIONS, INC.





Date:  August 14, 2002                By:  /S/  RICHARD E. FISH, JR.
                                           -------------------------------------
                                           Richard E. Fish, Jr., Executive Vice
                                           President and Chief Financial Officer
                                           (Principal Financial Officer)





Date:  August 14, 2002                By:  /S/  JOHN V. COLGAN
                                           -------------------------------------
                                           John V. Colgan, Senior Vice President
                                           and Controller (Principal Accounting
                                           Officer)


                                       38
<PAGE>


                                                                    Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In  connection  with the  Quarterly  Report  of ICG  Communications,  Inc.  (the
"Company")  on Form 10-Q for the period  ended  June 30,  2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Randall
Curran, Chief Executive Officer of the Company,  certify,  pursuant to 18 U.S.C.
ss.  1350,  as adopted  pursuant to ss. 906 of the  Sarbanes-Oxley  Act of 2002,
that, to the best of my knowledge and belief:


(1)  The Report fully complies with the  requirements  of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and result of operations of the Company.


/S/  RANDALL E. CURRAN
---------------------------------------

Randall E. Curran
Chief Executive Officer
August 14, 2002

                                       39
<PAGE>
                                                                    Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In  connection  with the  Quarterly  Report  of ICG  Communications,  Inc.  (the
"Company")  on Form 10-Q for the period  ended  June 30,  2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Richard
E. Fish, Chief Financial Officer of the Company,  certify, pursuant to 18 U.S.C.
ss.  1350,  as adopted  pursuant to ss. 906 of the  Sarbanes-Oxley  Act of 2002,
that, to the best of my knowledge and belief:


(1)  The Report fully complies with the  requirements  of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and result of operations of the Company.


/S/  RICHARD E. FISH, JR.
--------------------------------------

Richard E. Fish, Jr.
Executive Vice President and Chief Financial Officer
August 14, 2002

                                       40