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================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
                                (Amendment No. 2)

(Mark One)

  [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.

      For the fiscal year ended December 31, 2001

                                       OR

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

      Commission file number 000-24661

                          FiberNet Telecom Group, Inc.
                       (Name of Registrant in Its Charter)


                  Delaware                                 52-2255974
---------------------------------------------       ----------------------------
       (State or other jurisdiction of                    (I.R.S. Employer
       incorporation or organization)                  Identification No.)

     570 Lexington Avenue, New York, NY                        10022
---------------------------------------------       ----------------------------
  (Address of Principal Executive Offices)                   (Zip Code)

                                 (212) 405-6200

                (Issuer's Telephone Number, Including Area Code)

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:
                     Common Stock, par value $.001 per share

                                (Title of Class)

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for past 90 days. Yes [X] No [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

     The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant (without admitting that any person whose shares
are not included in such calculation is an affiliate) on May 22, 2002, was
$8,991,222, based on the last sale price as reported by the Nasdaq National
Market System.

     The number of shares outstanding of the registrant's common stock, as of
May 22, 2002, was 63,498,389 shares of Common Stock, $.001 par value.

================================================================================








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                                EXPLANATORY NOTE

      The purpose of this amendment is to amend and restate in their entirety
Items 7, 7a and 8 contained in Part II and Item 14 contained in Part IV of our
Form 10-K, which was originally filed on March 1, 2002. Additional disclosure
has been included in Management's Discussion and Analysis of Financial Condition
and Results of Operations and in the footnotes to the consolidated financial
statements.

<PAGE>

                                    PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Overview

     We deploy, own and operate fiber-optic networks designed to provide
comprehensive wholesale, broadband connectivity for data, voice and video
transmission in major metropolitan areas. These networks provide an advanced,
high-bandwidth, fiber-optic solution to support the demand for network capacity
in the local loop. We believe that our end-to-end connectivity, carrier-neutral
position, rapid provisioning time and carrier-class reliability will make us the
preferred carrier's carrier for transport services in our markets.

     From our inception through December 31, 1999, we were a development stage
enterprise. During this period, we had no commercial operations and did not
record any revenues. We engaged principally in organizational and developmental
activities, including formulating our business plan, developing strategic
relationships with vendors and property owners, gaining access to capital for
future growth, hiring personnel, purchasing equipment, and deploying our
communications networks. In the first quarter of fiscal 2000, we began providing
services in the New York City market. We are no longer a development stage
enterprise for financial reporting purposes.

     We began operating our first metropolitan network in January 2000 in New
York City, and we began deploying our infrastructure in Chicago and Los Angeles
in the fourth quarter of 2000. As of December 31, 2001, we had accomplished the
following:

         .    We can provide fiber-optic transport services in ten major
              carrier hotels in the New York metropolitan area, including 60
              Hudson Street and 111 Eighth Avenue, four major carrier hotels in
              Los Angeles and one major carrier hotel in Chicago.

         .    We are operating our advanced, vertical in-building networks,
              known as FiberNet In-Building Networks, or FINs, in 13 office
              buildings in New York City and seven in Chicago.

         .    We had exclusive license agreements that give us the right to
              manage communications access and infrastructure in approximately
              165 other office buildings nationwide.

         .    We had 88 customers and entered into 114 interconnection
              agreements with existing and potential customers, establishing
              the basis for purchase orders from them.

     We have experienced significant operating losses, net losses and negative
cash flows from operating activities. We expect to continue to experience such
losses and negative cash flows as we continue to operate our business. We also
have a limited operating history. Consequently, prospective investors have
limited operating history and financial data upon which to evaluate our
performance.

     The telecommunications industry is currently experiencing a period of
uncertainty and rationalization. Many companies in our industry are in financial
distress, and some of our largest customers have filed for bankruptcy. We have
been negatively impacted by the general economic environment and by the
difficulties that are impacting our industry. Most significantly, customer
contracts and services have been cancelled, resulting in a loss of recurring
revenues to us. We are unable to determine the extent to which additional
contracts or services that we provide to our customers will be cancelled, and we
cannot forecast our ability to replace those cancelled contracts with new
contracts. As a result, our revenues, business operations and liquidity may
continue to be negatively affected by the market environment.

Factors Affecting Future Operations

     Revenues. We generate revenues from selling network capacity and related
services to other communications service providers. Revenues are derived from
three general types of services:

         .    Transport services. Our transport services include the offering of
              broadband circuits on our metropolitan transport networks and
              FINs. Over our metropolitan transport networks, we can provision
              circuits from one of our carrier point facilities to another
              carrier point facility or to an on-net

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               building via an interconnection with our FIN in that building. We
               can also provision circuits vertically between floors in a
               carrier point facility or an on-net building.

          .    Colocation services. Our colocation services include providing
               customers with the ability to locate their communications and
               networking equipment at our carrier point facilities in a secure
               technical operating environment. We can also provide our
               customers with colocation services in the central equipment rooms
               of certain of our on-net and off-net buildings. Typically, if a
               customer colocates its equipment at our facilities, our agreement
               with them may include a minimum commitment to use our transport
               services.

          .    Communications access management services. Our access management
               services include providing our customers with the non-exclusive
               right to market and provide their retail services to tenants in
               our on-net and off-net buildings. Customers typically enter into
               an agreement with us to gain access to all or a significant
               number of our properties. For certain of our on-net and off-net
               buildings, we have the exclusive right to manage communications
               access. Once a customer has entered into an agreement with us for
               access services, we typically require that customer to utilize
               our in-building networking infrastructure for connectivity to its
               retail customers, if such networking infrastructure is available.

     Our revenues are generated on a monthly recurring basis under contracts
with our customers. These terms of these contracts can range from month-to-month
to five years in length. During 2001 we experienced a trend of entering into
shorter term contracts with our customers. Previously, our customers typically
entered into contracts with terms of three to five years. Increasingly, our
customers are electing to purchase services on a month-to- month basis or for a
contracted period of only one year.

     Our services are typically sold under fixed price agreements. In the case
of transport services, we provide an optical circuit or other means of
connectivity for a fixed price. Revenues from transport services are not
dependent on customer usage or the distance between the origination point and
termination point of a circuit. The pricing of colocation services is based upon
the size of the colocation space or the number of colocation units, such as
cabinets, provided to the customer. Revenues from access management services are
typically determined by the square footage of the commercial office properties
to which a customer purchases access. The pricing of all of our services have
declined significantly over the past year, although we believe not to the extent
that the pricing in other segments of the telecommunications market.

     The growth of our revenues is dependent upon our ability to provide
additional services in our existing facilities. We also believe that the
majority of the growth in our revenues will come from our existing customers.
Consequently, our growth in revenues is dependent on the underlying growth of
our customers' businesses and their need for our services within the facilities
that we already operate. We continue to add additional customers. However, we
believe the number of companies that are potential customers is decreasing, due
to the industry environment. In addition, we currently do not anticipate
expanding our network infrastructure to other carrier point facilities or on-net
buildings and off-net buildings. Within each of our existing facilities, our
revenues will depend upon the demand for our services, the competition that we
face and our customer service.

     We typically begin our sales cycle by entering into a non-binding business
services agreement with a customer. This agreement establishes our mutual
interest in exploring a business relationship and the general parameters upon
which we will proceed. As a next step, we execute a telecommunications services
agreement, also known as an interconnection agreement. This is a technical
document that outlines the engineering specifications and operating standards
that are required of us by the customer. With the technical requirements
complete, we finalize a sales contract. Customers can order a specific circuit
or colocation space, or, alternatively, they can purchase general availability
on our networks or in our facilities by establishing minimum revenue commitments
on a recurring basis.

     Currently our colocation and access services produce approximately
one-third of our revenues. In the future we anticipate generating significantly
more of our revenues from transport services than from colocation or access
management services. The scalability of our network architecture allows us to
increase transport capacity to a greater degree than is possible with our
colocation and access services.

     Cost of Services. Cost of services is associated with the operation of our
networks and facilities. The largest component of our cost of services is the
occupancy expenses at our carrier point facilities, on-net buildings and off-net
buildings. Because we have entered into long-term leases or colocation
agreements for the facilities, we do not expect to experience a significant
change in occupancy expenses based upon our current deployment of network
infrastructure. Other specific costs include maintenance and repair costs and
utility costs. Our license agreements for

                                       3

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our on-net and off-net buildings require us to pay license fees to the owners of
these properties. In addition, our lease for our meet-me-room at 60 Hudson
Street in New York City also requires us to pay a license fee. These license
fees typically are calculated as a percentage of the revenues that we generate
in each particular building. Other than our license fees, our cost of services
is generally fixed in nature. We do not anticipate that cost of services will
change commensurately with any change in our revenues.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses generally include all of our personnel costs, occupancy
costs for our corporate offices, insurance costs, professional fees, sales and
marketing expenses and other miscellaneous expenses. Personnel costs, including
wages, benefits and sales commissions, are our largest component of selling,
general and administrative expenses. We have reduced the number of our employees
from 194 at the beginning of 2001 to 108 as of December 31, 2001, and our
personnel costs have decreased significantly. Prospectively, we do not
anticipate significant changes in headcount, and we believe that our personnel
costs will increase moderately. We do expect our insurance costs to increase
materially upon our annual renewals as a result of increases in coverage
premiums.

     Stock Related Expense. Stock related expense relates to the granting of
stock options to our employees. We grant stock options to our employees as a
form of equity-based compensation to attract, retain and incentivize qualified
personnel. These costs are non-cash charges that are amortized over the vesting
term of each employee's option agreement. Certain options granted to employees
are accounted for using variable plan accounting. Under variable plan
accounting, the stock related expense is adjusted for changes in the market
price of the underlying common stock.

     Depreciation and Amortization. Depreciation and amortization expense
includes the depreciation of our network equipment and infrastructure, computer
hardware and software, furniture and fixtures, and leasehold improvements, as
well as the amortization of goodwill and certain deferred charges. We commence
the depreciation of network related fixed assets when they are placed into
service and depreciate those assets over periods ranging from three to 20 years.
As a result of the impairments to goodwill and fixed assets that we recorded
during 2001, depreciation and amortization expense may decrease going forward.

Significant Accounting Policies

     Our significant accounting policies are described in Note 2 to the
consolidated financial statements included in Item 8 of this Form 10-K. Our
discussion and analysis of financial condition and results from operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of the financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues,
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate the estimates that we have made. These estimates
have been based upon historical experience and on various other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from these estimates under difference assumptions or conditions. We believe our
most critical accounting policies include revenue recognition, an allowance for
doubtful accounts, the impairment of long-lived assets including goodwill and
the recognition of deferred tax assets and liabilities.

     We recognize revenues when earned as services are provided throughout the
life of each contract with a customer. The majority of our revenues are invoiced
on a monthly recurring basis under long-term contracts, typically one to five
years in length. Certain of our contracts require us to invoice our customers
for the periods ranging from one year to the full term of the contract. We
record deferred revenue for the amount of an invoice that has not been
recognized as revenue. Deferred revenue is recorded for the full value of the
contract at contract inception, only if we are contractually entitled to invoice
the customer for the full value of the contract and the customer is obligated to
pay such invoice, thereby creating a corresponding account receivable for us.

     We have in the past entered into reciprocal agreements with four of our
customers, whereby we purchase services from them. The services provided and
obtained through these agreements are priced at fair value as of the date of the
agreement. We recognized the transport and colocation revenues from these
agreements in accordance with our stated revenue recognition policy, and we
concurrently recorded the expenses for colocation services as cost of services
in our statements of operations. None of the expenses associated with our
reciprocal agreements are capitalized. All of the costs are expensed as
incurred. Reciprocal agreements accounted for $2.2 million, or 17%, of revenues
in 2000 and $2.2 million of our cost of services. In 2001 reciprocal agreements
accounted for $5.2 million, or 17%, of revenues and $5.4 million of our cost of
services. In 2001, we terminated two of our reciprocal

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agreements, and in 2002 we anticipate terminating one additional reciprocal
agreement. Consequently, we believe that revenues and expenses recorded under
reciprocal agreements will decrease significantly in 2002.


     We continuously monitor collections and payments from our customers and
maintain allowances for doubtful accounts based upon our historical experience
and any specific customer collection issues that we have identified. While such
credit losses have historically been within our expectations, there can be no
assurance that we will continue to experience the same level of credit losses
that we have in the past. A significant number of our customers have filed for
bankruptcy or are otherwise in significant financial distress. In addition, our
revenues and accounts receivable are concentrated in a relatively few number of
customers. A significant change in the liquidity or financial position of any
one of these customers or a further deterioration in the economic environment or
telecommunications industry, in general, could have a material adverse impact on
the collectability of our accounts receivable and our future operating results,
including a reduction in future revenues and additional allowances for doubtful
accounts. If we determine that collection of a receivable is not reasonably
assured, we defer the revenue and recognize it at the time collection becomes
reasonably assured, which is generally upon receipt of cash.

     We assess the fair value and recoverability of our long-lived assets,
including goodwill, whenever events and circumstances indicate the carrying
value of an asset may not be recoverable from estimated future cash flows
expected to result from its use and eventual disposition. In doing so, we make
assumptions and estimates regarding future cash flows and other factors to make
our determination. The fair value of our long-lived assets and goodwill is
dependent upon the forecasted performance of our business, changes in the
telecommunications industry and the overall economic environment. When we
determine that the carrying value of our long-lived assets and goodwill may not
be recoverable, we measure any impairment based upon a forecasted discounted
cash flow method. If these forecasts are not met, we may have to record
additional impairment charges not previously recognized.

     During 2001, we performed an assessment of the goodwill related to our
acquisition of Devnet, LLC, pursuant to SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Devnet had entered into exclusive license agreements to manage communications
access to commercial office properties, and we associated the goodwill resulting
from the acquisition primarily to those agreements. We made this determination
based upon significant negative industry and economic trends. In 2001, a change
in the business environment resulted in significantly less demand for
telecommunications access to commercial office properties, and the number of
potential customers seeking these services diminished greatly. Consequently, we
revised our forecasted cash flows from Devnet and determined that the decline in
the market conditions within this market segment was material and other than
temporary. After using an undiscounted cash flow model of the future cash flows
forecasted to be generated from business activities in the commercial office
properties underlying the license agreements and determining there was an
impairment, we used a discounted cash flow model to determine the size of the
impairment. As a result, we recorded a charge of $56.5 million during the third
quarter of 2001 to reduce goodwill associated with the purchase of Devnet. The
charge was based on the amount by which the carrying amount of these assets
exceeded their fair value. During 2001, we recorded approximately $3.1 million
of amortization of goodwill relating to Devnet.

     In the fourth quarter of 2001, we determined that our forecasts for
revenues for certain of our facilities would not be achieved due to the
significant adverse change in the business climate. We further determined that
the dramatic change in the operating environment for the telecommunications
industry resulted in significantly less demand for our services in these
facilities. We believe that the decrease in demand was a result of the
significant number of bankruptcies of telecommunications companies that were
existing or potential customers of ours and the overall economic recession. We
also determined that a rebound in demand for our services would not occur in the
near term. As a result, we revised our business plan and conducted extensive
reviews of our assets and operations. The revisions to the business plan
primarily included reductions in forecasts of revenues and capital expenditures.
The projected amounts of certain costs of services and overhead expenses were
reduced as well to reflect the decrease in our expected business activity. We
also determined that certain financial covenants in our credit facility would
need to reflect the revised business plan, including our reduced revenue
forecasts. Consequently, we amended our credit facility in December 2001.



     We used an undiscounted forecasted cash flow model to determine if there
was an impairment based on the cash flows expected to be generated from these
assets, and used a discounted cash flow model to measure the impairment. As a
result of this analysis, we recorded an asset impairment of approximately $51.8
million based on the amount by which the carrying amount of these assets
exceeded their fair value. Of this amount, $40.4 million relates to assets held
for use, and $11.4 million represents assets to be disposed of.


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     The assets that we identified for disposition were abandoned, as we
determined that these assets had no value. Consequently, there was no cost to us
for this abandonment, nor do we expect to receive any proceeds or other
consideration from this abandonment. We recorded no reserves, accruals or other
liabilities related to this abandonment. These assets primarily related to
engineering and network architecture design costs and general contracting and
project management costs for facilities that we are no longer pursuing.

     We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance based upon historical losses, projected future
taxable income and the expected timing of the reversals of existing temporary
differences. As a result of this review, we have established a full valuation
allowance against our deferred tax assets.

Restatement of Financial Statements

     We restated our consolidated financial statements for the year ended
December 31, 1999 to record a beneficial conversion feature of $7.9 million in
connection with the issuance of our senior secured convertible notes on May 7,
1999 and to reduce the beneficial conversion feature on the conversion of our
series D, E and F preferred stock to zero. In 1999, we were a development-stage
company and did not record any revenue. Other than with respect to the
consolidated financial statements for the year ended December 31, 1999, this
restatement has no impact on our assets or total stockholders' equity, and it
resulted in a corresponding increase to additional paid-in-capital and a
decrease in preferred stock and accumulated deficit. The change increased net
loss by $7.9 million and decreased net loss applicable to common shareholders by
$41.2 million. These changes decreased net loss applicable to common
stockholders per share by $2.45. The change has no impact on our cash flows. We
originally did not record a beneficial conversion relating to the issuance of
the senior secured convertible notes, assuming a $1.50 market value per share.
The restatement assumes a $4.94 market value per share. Also, we incorrectly
recorded a beneficial conversion of $49.2 million on the subsequent conversion
of our senior secured convertible notes issued during 1999 into preferred stock.
The restated financial statements include the correction of these errors.

Results of Operations

Fiscal Year Ended December 31, 2001 Compared to Fiscal Year Ended December 31,
2000

     Revenues. Revenues for the fiscal year ended December 31, 2001 were $31.2
million as compared to $13.1 million for the fiscal year ended December 31,
2000. Revenues were generated by providing transport, colocation and
communications access management services to our customers. We recognized $19.6
million in transport services in 2001, up from $9.3 million in 2000. This
increase was primarily a result of strong demand for high bandwidth circuits
within and between our carrier hotel facilities. Revenues from colocation and
other services increased to $5.5 million in 2001 from $2.2 million in 2000, and
revenues from communications access management services grew to $6.1 million in
2001 from $1.6 million in 2000. Prospectively, we expect transport services to
grow at a faster rate than colocation and access management services. Our
network infrastructure has significant capacity to provide additional broadband
transport connectivity. However, our colocation facilities are approaching more
stabilized utilization rates. We do not expect our access management services to
grow significantly. Many companies that would have potentially purchased these
services from us are in financial distress, and the demand for those companies'
services has not met with industry expectations.

     During 2001, three customers, 360networks, Network Plus and Qwest,
accounted for approximately 53.3% of our revenues. In 2000, these customers
accounted for 70.8% of revenues. Two of those companies, 360networks and Network
Plus, have filed for bankruptcy. Once a customer has filed for bankruptcy, we
recognize revenues from that customer only upon the receipt of payment. Our
revenues for 2001 were not impacted by the bankruptcy of Network Plus because
the company filed for bankruptcy subsequent to year end. Prospectively, we
expect these customers to represent a significantly lower percentage of our
revenues.

     Reciprocal agreements accounted for $5.2 million, or 17%, of revenues in
2001, up from $2.2 million, or 17%, of revenues in 2000. In 2001, we terminated
two of our reciprocal agreements, and in 2002 we anticipate terminating one
additional reciprocal agreement. We believe that revenues under reciprocal
agreements will decrease significantly in 2002.

     Cost of Services. Cost of services, associated with the operation of our
networks and facilities, were $13.8 million in 2001, compared to $5.4 million in
2000. The majority of our cost of services is occupancy


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expenses, consisting of rent and utility costs, for our carrier hotel
facilities, on-net buildings and off-net buildings. Other cost of services
includes license fees, maintenance and repair costs, and professional fees. The
increase in cost of services was primarily the result of the addition of new
facilities in 2001 and incorporating a full year's expenses for facilities added
in 2000. We do not expect cost of services to increase significantly in 2002
since we do not anticipate adding many new facilities. Reciprocal agreements
accounted for $5.4 million of our cost of services in 2001 and $2.2 million of
our cost of services in 2000.


     Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 2001 were $32.9 million compared to $27.1 million
for 2000. The initial increase in expenses resulting from the expansion of our
operations in the first half of 2001 was partially offset in the second half of
the year by our aggressive cost savings initiatives to reduce corporate overhead
in line with our current outlook for business activity. Cost reductions were
realized in nearly all components of selling, general and administrative
expenses, including advertising and marketing costs, professional fees and
travel and entertainment expenses. The greatest decrease in overhead came in
personnel costs, as we reduced headcount from 194 employees at the beginning of
2001 to 108, as of December 31, 2001. In accordance with EITF Issue 94-03,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (Including Certain Costs Incurred in a Restructuring), an
accrual of approximately $62,000 for severance benefits not yet paid at December
31, 2001 was recorded. Based upon the realization of these cost savings, we
expect selling, general and administrative expenses to decrease in 2002.

     Stock Related Expense. Stock related expense for 2001 was $(1.2) million,
compared to $8.5 million for 2000. This non-cash expense relates to the granting
of stock options to employees. The amount for the current period reflects a
reversal of a previously recorded expense. This reversal is due to a decline in
the price per share of our common stock since the beginning of the current
period.

     In December 2000 we repriced stock options for certain of our executive
officers, resulting in variable plan accounting in accordance with FASB
Interpretation (FIN) No. 44, Accounting for Certain Transactions Involving Stock
Compensation, from the date of modification. The additional intrinsic value was
determined on the date of modification using the then market price of the common
stock. The additional compensation cost was recognized over the period from the
date of modification to the date the awards vest. The additional compensation
cost has been adjusted in subsequent periods for changes in the market price.
After the awards vested, adjustments to compensation cost for changes in the
market price were recognized immediately. In subsequent periods, the market
price declined, resulting in negative compensation cost being recognized. In
accordance with FIN 44, illustration 3(g), income (negative expense) has been
recognized up to the amount of expense previously recognized in prior periods
relating specifically to the modified awards.

     Impairment of property, plant and equipment. In December 2001, the Company
recorded an asset impairment of $51.8 million to reflect the Company's revised
business plan and the current state of the market. No impairment of property,
plant and equipment was recorded in 2000.

     Impairment of goodwill. In 2001, we recorded a non-cash, non-recurring
charge for the impairment of goodwill, relating to our acquisition of Devnet,
LLC in the amount of $56.5 million. We recorded this write down of goodwill in
accordance with Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." No impairment of goodwill was recorded in 2000.

     Depreciation and Amortization. Depreciation and amortization expense for
2001 was $15.3 million, compared to $7.7 million for 2000. This increase
resulted from the commencement of the depreciation of certain network related
fixed assets that were placed into service, as well as amortization of goodwill
from the purchase of Devnet.

     Interest Expense, Net. Interest expense, net for 2001 was $8.6 million,
compared to $5.7 million in 2000. Interest expense increased due to additional
borrowings under our senior secured credit facility to fund the buildout of our
networks, operating losses and working capital.

     Extraordinary loss on early extinguishment of debt. In 2001, we recorded a
non-cash charge of $7.4 million related to an early extinguishment of debt from
the modification of our credit facility on February 9, 2001. We did not record
such a charge in 2000.

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     Preferred Stock Dividends. In 2001, we paid non-cash dividends on our
series D, E, F, H and I preferred stock of $1.1 million in the form of
additional shares of each respective series of preferred stock, which are
convertible into shares of common stock, compared to $8.1 million of dividends
in 2000. We also recorded beneficial conversion charges of $23.1 million and
$27.8 million upon the issuance of three new series of preferred stock issued
during fiscal 2001 and 2000, respectively. The amounts of the dividends and the
beneficial conversion charge assume the market price per share of the underlying
common stock, as of the date the dividends are paid or the charge is incurred,
in accordance with EITF Issue 98-05, "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratio." The
significant decrease in the amount of preferred dividends was therefore a result
of a decline in the public market price of our common stock. The liquidation
value of the dividends paid in 2001 was $5.3 million, compared to $3.0 million
for dividends paid in 2000.

     Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $178.2 million in 2001 compared to a loss
of $77.0 million in 2000. The increase in the net loss applicable to common
stockholders is a result of the aforementioned changes in our operations.

Fiscal Year Ended December 31, 2000 Compared to Fiscal Year Ended December 31,
1999


     Revenues. Revenues for the fiscal year ended December 31, 2000 were $13.1
million as compared to the fiscal year ended December 31, 1999 in which we had
no commercial operations and did not generate any revenues. Revenues were
generated by providing transport, colocation and communications access
management services to our customers. We recognized $9.3 million in transport
services, $2.2 million in colocation services and $1.6 million in communications
access management and other services during the period. During this period, two
customers, 360networks and Qwest, accounted for approximately 61.5% of our
revenues. We expect such customer concentration to diminish as we expand our
operations. Reciprocal agreements accounted for $2.2 million, or 17%, of
revenues in 2000.


     Cost of Services. Cost of services for fiscal 2000 was $5.4 million,
associated with the operation of our networks and facilities. These cost of
services included building license fees, maintenance and repair costs, rent
expense at carrier point facilities and on-net and off-net buildings, and
related utility costs. Reciprocal agreements accounted for $2.2 million of our
cost of services during fiscal 2000. During fiscal 1999, we did not record any
cost of services because we were not offering services during that period.

   Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 2000 were $27.1 million compared to $7.4 million for
1999. This increase was the result of the rapid expansion of our operations. We
have experienced significant growth in personnel costs, marketing and
advertising expenses, and network construction overhead to support our business
strategy. The number of significant transactions that we undertook during fiscal
2000 also resulted in significant professional fees.

     Non-recurring Expenses. During 1999, we recorded non-recurring expenses of
$4.3 million, comprised of a $3.7 million non-cash charge, relating to a
prospective settlement of certain litigation, and $0.6 million, relating to the
decommission of our Lucent 5ESS-2000 telecommunication switch located at our
facility at 60 Hudson Street in New York, New York. The prospective settlement
related to litigation between us and certain of the investors in the financing
transaction that occurred in 1999. In 1999, we agreed to issue additional
securities to these investors to settle such claims. The securities were
actually issued in 2000. We elected to decommission the telecommunication switch
because the equipment was no longer necessary for our business operations. We
did not record any significant non-recurring expenses for fiscal 2000.

   Stock Related Expense. Stock related expense for 2000 was $8.5 million.
This non-cash expense relates to the granting of stock options to employees. We
incurred $0.8 million of stock related expense for 1999.

     Depreciation and Amortization. Depreciation and amortization expense for
fiscal 2000 was $7.7 million, compared to $0.5 million for fiscal 1999, an
increase of $7.2 million. This increase resulted from the commencement of the
depreciation of certain network related fixed assets that were placed into
service, as well as amortization of goodwill from the purchase of Devnet. During
fiscal 2000, we aggressively deployed our network assets to execute our business
strategy.

     Interest Expense, Net. Interest expense, net for fiscal 2000 was $5.7
million, compared to $1.4 million for fiscal 1999, an increase of $4.3 million.
Interest expense increased as a result of additional interest expense in 2000

                                        8

<PAGE>

due to borrowings under our senior secured credit facility to fund the buildout
of our networks, operating losses and working capital.

     Preferred Stock Dividends. During fiscal 2000, we recorded preferred stock
dividends of $8.1 million in non-cash dividends on the series D, E, F, H and I
preferred stock of $8.1 million in the form of additional shares of each
respective series of preferred stock, which are convertible into shares of
common stock. The liquidation value of the dividends paid was $3.0 million. We
also recorded a preferred stock-beneficial conversion charge of $27.8 million
upon the issuance of three new series of preferred stock issued during fiscal
2000. During 1999, we recorded $0.8 million of preferred dividends related to
our series D, E and F preferred stock. We also recorded a preferred
stock-beneficial conversion charge of $0.1 million related to the issuance of
the series C preferred stock. The amounts of the dividends and the beneficial
conversion charge assume the market price per share of the underlying common
stock, as of the date the dividends are paid or the charge is incurred.

     Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $77.0 million for fiscal 2000 compared to a
loss of $31.1 million for fiscal 1999, an increase of $45.9 million. The
increase in the net loss applicable to common stockholders is a result of the
aforementioned changes in our operations and the beneficial conversion charge of
$27.8 million.

Liquidity and Capital Resources

     As a result of our developmental activities and the deployment of our
networks and facilities, we have incurred significant losses from inception to
date. We expect such losses to continue, as we further execute our business plan
and expand our operations. Consequently, we have been dependent upon external
sources of capital to fund our operations. Prospectively, we will continue to
incur losses and will not be able to fund our operations with internally
generated funds. Therefore, we will require additional, external capital. We are
subject to unforeseen capital requirements, failure of market acceptance,
failure to establish and maintain business relationships, competitive
disadvantages against larger and more established companies and negative trends
in our industry and the economy.


     To date, we have financed our operations through direct equity investments
from our stockholders, the issuance of additional debt and equity securities in
private transactions and by arranging a senior secured credit facility with a
group of lenders. We incurred an EBITDA (as defined) loss and a net loss
applicable to common stockholders for fiscal 2001 of $15.5 million and $178.2
million, respectively, compared to $19.3 million and $77.0 million,
respectively, for fiscal 2000. During fiscal 2001, cash used to fund operating
activities was $22.0 million, and cash purchases of property, plant and
equipment were $46.7 million, compared to $12.6 million and $74.7 million,
respectively, for fiscal 2000.


     During fiscal 2001, we received $70.5 million in net cash proceeds from
financing activities. Net proceeds from the issuance of equity securities during
fiscal 2001 were $25.8 million. On February 2, 2001, we completed a $28.2
million directed public offering of our common stock under our existing shelf
registration statement. We issued 6,440,000 shares of common stock at a purchase
price of $4.375 per share as well as warrants to purchase an additional
1,288,000 shares at an exercise price of $6.56 per share with a term of three
years.


     On December 7, 2001, we completed another directed public offering under
our existing shelf registration statement. We issued 360 shares of our series J
preferred stock at a purchase price of $10,000 per share, as well as warrants to
purchase up to 10,212,701 shares of common stock at an exercise price of $0.30
per share with a term of five years. The total proceeds to us from this offering
were $3.6 million, before offering expenses. In addition, subject to certain
conditions, the stock purchase agreement for this offering of series J preferred
stock contemplated two additional closings in which we could sell in the
aggregate an additional $5.7 million of series J preferred stock to the initial
purchasers. We could opt out of one or both of these subsequent closings upon
payment of cash consideration and upon approval of our lenders under our senior
secured credit facility.



     The purchasers of our series J preferred stock were not obligated to
participate in the second or third closings contemplated by the stock purchase
agreement between us and them if, among other things, our existing shelf
registration statement was no longer effective, we have breached any of our
representations or warranties contained in the stock purchase agreement, we have
failed to maintain EBITDA (as defined) positive results on a monthly basis
beginning in December 2001, or we have not obtained stockholder approval
authorizing upon conversion of the issued and outstanding series J preferred
stock the issuance of in excess of 19.99% of the number of shares of common
stock outstanding on the closing date of the first series J preferred stock
closing.


                                        9

<PAGE>


     As of February 28, 2002 we were eligible to sell an additional $118.2
million of common stock, preferred stock, debt securities and warrants under our
existing shelf registration statement. When we filed our initial Form 10-K for
the fiscal year ended December 31, 2001 on March 1, 2002, our then existing
shelf registration statement on Form S-3 was deemed post-effectively amended and
no longer effective. As of March 1, 2002, we were no longer eligible to use Form
S-3 for shelf registrations since we did not satisfy an eligibility requirement
of Form S-3 for primary issuances which requires that the aggregate market value
of voting common stock held by non-affiliates be at least $75 million.
Accordingly, no further issuances of our securities may be made pursuant to that
shelf registration statement. As a result, we will be required to file new
registration statements with regard to any further registered issuances, if any,
of our securities, and there can be no assurance that such registration
statements will be declared effective.


     On February 9, 2001, we increased our existing credit facility with
Deutsche Bank AG New York Branch, Deutsche Banc Alex. Brown Inc., First Union
Investors, Inc., First Union Securities, Inc., Toronto Dominion (USA) Securities
Inc. and other lenders from $75.0 million to $105.0 million. The maturity of the
credit facility was extended to six years from four and one-half years, and the
initial interest rate was lowered to LIBOR + 4.5% from LIBOR + 6.0%. In
connection with this amended credit facility, we issued warrants to purchase an
additional 454,409 shares of our common stock at a purchase price of $8.00 per
share with a term expiring April 11, 2005. In addition, as part of the amendment
of our credit facility, all warrants issued under the original credit agreement
were replaced with new warrants to purchase an equivalent amount of our common
stock at a purchase price of $8.00 per share. On April 27, 2001, in connection
with a waiver and agreement under our credit facility, warrants to purchase
300,000 shares of our common stock at a purchase price of $8.00 per share held
by Deutsche Banc Alex. Brown were replaced with new warrants to purchase an
equivalent amount of our common stock at a purchase price of $0.01 per share.
Also, on December 10, 2001 we amended the credit facility to reflect the
issuance of the series J preferred stock and related matters. In connection with
this amendment, all warrants previously issued under the credit agreement were
replaced with new warrants to purchase an equivalent amount of our common stock
at a purchase price of $0.50 per share.


     As of March 31, 2002, the outstanding borrowings under our credit facility
were $96.0 million, and the weighted average interest rate on our outstanding
borrowings under the facility was 6.6%. Outstanding letters of credit under the
credit facility totaled $7.4 million. We were in full compliance with all of the
covenants contained in the credit agreement underlying the facility. Our access
to the additional availability under the credit facility is subject to our
compliance with the covenants, and other terms and conditions, in the credit
agreement. Material financial covenants monitored on a quarterly basis include
minimum requirements for cumulative revenues and EBITDA (as defined), a maximum
limitation on capital expenditures, and compliance with ratios of total debt to
consolidated capitalization and total debt to property, plant and equipment, net
of accumulated depreciation. Non-compliance with any of these covenants,
requirements, or other terms and conditions, constitutes an event of default
under the credit agreement, prohibiting access to any additional funds available
under the credit facility and potentially accelerating the outstanding balance
for immediate payment.



     On January 2, 2002 we entered into an interest rate swap transaction with
Deutsche Bank AG for a notional amount of $25.0 million and a term of two years.
Pursuant to this transaction, we are obligated to make quarterly interest
payments at a fixed, annual interest rate of 3.7%. Because such interest rate
excludes the applicable margin of 4.5% that we pay on our credit facility, the
total interest rate for us on this swap transaction is 8.2%. As part of this
agreement, Deutsche Bank AG is obligated to pay to us on a quarterly basis a
floating rate of interest based upon LIBOR with a designated maturity of three
months. On March 20, 2002, we terminated this interest rate swap transaction
with Deutsche Bank AG with no payments or other amounts owed by either party. As
a result, all of our outstanding borrowings under our credit facility bear
interest at a floating rate.



     On December 7, 2001 we issued a promissory note in the amount of $2.3
million to Nortel Networks Inc., a related party, as consideration for accounts
payable previously due and owing for equipment and services. The note bears
interest at an annual rate of 14% and is payable in eight monthly installments
of approximately $300,000 beginning in January 2002. As of March 31, 2002 the
outstanding balance on the note was $1.8 million. We believe the terms of this
transaction are no less favorable than could be received from an independent,
third party.



     On March 15, 2002, we received gross proceeds of $2.0 million from the
issuance of a subordinated note to an existing investor. The issuance of the
note was in lieu of a second closing on our series J convertible preferred
stock, as was previously contemplated. The subordinated note has a maturity date
of June 14, 2002 and bears interest, which is due and payable on the maturity
date, at an annual rate of 8%. The subordinated note may be converted into


                                       10

<PAGE>

equity in our company, on terms to be determined, as part of a larger equity
financing and in connection with a broader recapitalization that we are
pursuing. Additionally, in connection with this financing, the lenders under our
credit facility agreed to extend the due date of the current quarterly interest
payment to April 15, 2002. On April 15, 2002, in connection with our ongoing
efforts to seek additional financing and to undertake this broader
recapitalization, the lenders agreed to further extend the due date of the
current quarterly interest payment to May 6, 2002, and possibly, depending on
the satisfaction of certain conditions, to May 27, 2002.



     On May 6, 2002 the lenders again agreed to extend the due date of the
current quarterly interest payment to May 28, 2002, and we reached a conditional
agreement with the lenders to convert $25 million of indebtedness into
convertible preferred stock with a conversion price of $0.40 per share. Under
the arrangement the lenders would convert $25 million of indebtedness into a
minimum of 2,500 shares of new series K preferred stock. The closing of this
transaction is subject to a number of conditions, including, but not limited to
final credit approval of each of the lenders, the completion of an acceptable
equity financing and the conversion of all of our currently outstanding
convertible securities, excluding certain options and warrants. Each share of
series K preferred stock would have a stated value of $10,000 per share and
would convert into 25,000 shares of common stock.



     Concurrently with the consummation of the transaction and the related
equity issuance and conversions, the holders of the series K preferred stock
would be issued a sufficient number of warrants to purchase shares of common
stock to ensure that they would hold on an aggregate basis a fully-diluted
ownership position in the company of at least 30%. The exercise price of such
warrants issued to the holders of the series K preferred stock would be the
lower of 125% of the market price as of the closing date or 110% of the exercise
price of any warrants issued to investors in the concurrent equity financing,
and the term of the warrants would be five years.



     This arrangement would also involve certain amendments to the provisions of
the senior secured credit facility, including the reduction of the maximum
availability to approximately $77 million and the reduction in the interest rate
currently from LIBOR + 4.5% to LIBOR + 3.75%. It is anticipated that, if these
conditions are met, the closing of these transactions will occur as soon as
practicable. However, there can be no assurance that we will be able to
successfully effectuate any or all of the transactions described above. In
addition, any financing or broader recapitalization we undertake will be
substantially dilutive to our existing stockholders.


     We anticipate spending approximately between $7.0 and $9.0 million in
capital expenditures during 2002, primarily for the implementation of customer
orders. We have substantially completed the deployment of our FINs, carrier
hotel facilities and metropolitan transport networks. We may expend additional
capital for the selected expansion of our network infrastructure, depending upon
market conditions, customer demand and our liquidity and capital resources.

     Our obligations and commitments to make future payments under contracts
primarily include scheduled reductions in the availability of our credit
facility, principal payments on our note payable and capital lease obligations,
and payments under our operating leases.

     The chart below identifies our outstanding contractual obligations and
commitments as of February 25, 2002.

<TABLE>
<CAPTION>
                                                                  Payments Due by Period (in thousands)
                                                   ------------------------------------------------------------------
              Contractual Obligation                 Total       2002       2003       2004        2005    Thereafter
                                                   ---------  ---------  ---------  ---------   ---------  ----------
<S>                                                <C>        <C>        <C>        <C>         <C>        <C>
Mandatory Repayments and Reductions of
   Indebtedness ................................   $ 107,321  $   2,321  $   7,875  $  28,875   $  28,875  $  39,375
Capital Lease Obligations ......................         873        347        314        212          --         --
Operating Leases ...............................     110,385     11,644     10,574      9,383       9,320     69,464
Other Obligations ..............................          49         49         --         --          --         --
                                                   =========  =========  =========  =========   =========  =========
Total Contractual Obligations ..................   $ 218,628  $  14,361  $  18,763  $  38,470   $  38,195  $ 108,839
</TABLE>

     Our planned operations continue to require additional capital to fund
equipment purchases, engineering and construction costs, marketing costs,
administrative expenses and other operating activities. Although we reported
that we generated positive EBITDA (as defined) for the month of December 2001
and expect to continue to do so in 2002, there can be no assurance that we will
be able to achieve such a result prospectively. We cannot fund our operating and
investing activities with internally generated cash flows. We continue to
require external sources of capital. The availability of funds from our credit
facility and the expected closings of our series J preferred stock are critical
to our liquidity. From time to time, we may consider private or public sales of
additional equity or debt

                                       11

<PAGE>


securities and other financings, depending upon market conditions, in order to
finance the continued operations of our business. There can be no assurance that
we will be able to successfully consummate any such financing on acceptable
terms, or at all. We do not have any off-balance sheet financing arrangements,
nor do we anticipate entering into any.



     EBITDA (as defined), as discussed above, is defined as net loss before
income taxes and minority interest, interest expense, interest income,
depreciation and amortization, stock related expense and other non-cash,
non-recurring charges. EBITDA (as defined) is commonly used in the
communications industry and by financial analysts, and others who follow the
industry, to measure operating performance. EBITDA (as defined) should not be
construed as an alternative to operating income or cash flows from operating
activities, both of which are determined in accordance with generally accepted
accounting principles, or as a measure of liquidity. Because it is not
calculated under generally accepted accounting principles, our EBITDA (as
defined) may not be comparable to similarly titled measures used by other
companies.


<TABLE>
<CAPTION>
                                                                                  Consolidated Financial Data
                                                                                        (in thousands)

                                                                  Six Months
                                                     Year Ended     Ended
                                                      June 30,   December 31,               Year Ended  December 31,
                                                    -------------------------------------------------------------------------------
                                                     1997 (1)        1997          1998          1999          2000          2001
                                                    ---------     ---------     ---------     ---------     ---------     ---------
                                                                 (unaudited)                (restated)(1)
<S>                                                 <C>          <C>            <C>         <C>             <C>           <C>
Calculation of EBITDA (as defined):

Net loss .......................................    $    (374)    $    (371)    $  (2,817)    $ (30,208)    $ (41,120)    $(153,977)

Plus:
Operating expenses:
  Stock related expense for selling,
  general, and administrative matters ..........           --            --           128           803         8,468        (1,172)
  Non-recurring expenses .......................           --            --            --         4,304            --            --
  Impairment of property, plant and
  equipment ....................................           --            --            --            --            --        51,848
  Impairment of goodwill .......................           --            --            --            --            --        56,467
  Depreciation and amortization ................           --             2            28           520         7,652        15,319

Interest expense from beneficial
conversion .....................................           --            --            --        15,870            --            --
Extraordinary loss on early
extinguishments of debt ........................           --            --            --            --            --         7,398

Less:
Interest income (expense), net .................           --            26           156        (1,356)       (5,657)       (8,594)

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

EBITDA (as defined) ............................    $    (374)    $    (395)    $  (2,817)    $  (7,355)    $ (19,343)    $ (15,523)
</TABLE>

(1)  See Footnote 16 to the notes of the consolidated financial statements for a
     discussion of the restatement of our financial results for the fiscal year
     ended December 31, 1999.

Certain Facts That May Affect Future Results of Operations

     This report contains certain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Investors are cautioned
that there can be no assurance that actual results or business conditions will
not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
following: the difficulty inherent in operating an early-stage company in a new
and rapidly evolving market; our history of operating losses and accumulated
deficit; our limited financial resources and uncertainty as to the availability
of additional capital to fund our operations on acceptable terms, if at all; our
success in obtaining additional carrier hotel lease agreements and license
agreements with building owners; growth in demand for our services; the
frequency of service interruptions on our networks; the potential development by
competitors of competing products and technologies; restrictions imposed on us
as a result of our debt; and changes in the regulatory environment. As a result,
our future operations involve a high degree of risk. Except as required by law,
we undertake no obligation to update any forward- looking statement, whether as
a result of new information, future events or otherwise.

                                       12

<PAGE>

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     Our exposure to financial market risk, including changes in interest rates,
relates primarily to our credit facility and marketable security investments.
Borrowings under our credit facility bear interest at floating rates, based upon
LIBOR or a base rate plus an applicable margin. As a result, we are subject to
fluctuations in interest rates. A 100 basis point increase in LIBOR would
increase our annual interest expense by less than $1.0 million per year. As of
March 31, 2002, we had borrowed $96.0 million under our credit facility, with a
current weighted average interest rate of 6.6%.


     On January 2, 2002 we entered into an interest rate swap transaction with
Deutsche Bank AG for a notional amount of $25.0 million and a term of two years.
Pursuant to this transaction, we are obligated to make quarterly interest
payments at a fixed, annual interest rate of 3.7%. Because such interest rate
excludes the applicable margin of 4.5% that we pay on our credit facility, the
total interest rate for us on this swap transaction is 8.2%. As part of this
agreement, Deutsche Bank AG is obligated to pay to us on a quarterly basis a
floating rate of interest based upon LIBOR with a designated maturity of three
months. On March 20, 2002, we terminated this interest rate swap transaction
with Deutsche Bank AG with no payments or other amounts owed by either party. As
a result, all of our outstanding borrowings under our credit facility bear
interest at a floating rate.


     We generally place our marketable security investments in high credit
quality instruments, primarily U.S. government obligations and corporate
obligations with contractual maturities of less than one year. We operate only
in the United States, and all sales have been made in U.S. dollars. We do not
have any material exposure to changes in foreign currency exchange rates.

                                       13

<PAGE>

ITEM 8. FINANCIAL STATEMENTS

                        CONSOLIDATED FINANCIAL STATEMENTS

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                                Page
                                                                                                                ----
<S>                                                                                                              <C>
Report of Independent Public Accountants .....................................................................   15
Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000 ....................................   16
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 ...................   17
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999 .........   18
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 ...................   20
Notes to Consolidated Financial Statements ...................................................................   21
</TABLE>


                                       14

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To FiberNet Telecom Group, Inc.:

     We have audited the accompanying consolidated balance sheets of FiberNet
Telecom Group, Inc. and subsidiaries (a Delaware corporation) as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2001, 2000
and 1999, as restated-See Note 16. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     We have also audited the adjustments described in Note 16 that were applied
to restate the 1999 financial statements. In our opinion, such adjustments are
appropriate and have been properly applied.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FiberNet
Telecom Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for the years ended December
31, 2001, 2000 and 1999, as restated, in conformity with accounting principles
generally accepted in the United States.

                                     /s/ Arthur Andersen LLP
                                         Arthur Andersen LLP

New York, New York
February 28, 2002 (except with respect to the matters discussed in Note 17, as
to which the date is May 16, 2002)

                                       15

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)

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

Current Assets:
   Cash and cash equivalents .............................................................................   $   3,338   $   1,582
   Accounts receivable, net of allowance of $2,245 and $454 at December 31, 2001 and 2000, respectively ..       2,659      14,030
   Prepaid expenses and other ............................................................................         700         960
                                                                                                             ---------   ---------

      Total current assets ...............................................................................       6,697      16,572
Property, plant and equipment, net .......................................................................     109,837     126,114
Other Assets:
   Goodwill, net of accumulated amortization of $1,159 and $2,696 at December 31, 2001 and 2000,
      respectively .......................................................................................       7,509      69,057
   Deferred charges, net of accumulated amortization of $1,937 and $679 at December 31, 2001 and 2000,
      respectively .......................................................................................      12,099      14,293
   Other assets ..........................................................................................         445       1,129
                                                                                                             ---------   ---------

      Total other assets .................................................................................      20,053      84,479
                                                                                                             ---------   ---------

TOTAL ASSETS .............................................................................................   $ 136,587   $ 227,165
                                                                                                             =========   =========

                                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable ......................................................................................   $   6,742   $  11,119
   Accrued expenses ......................................................................................       7,452      10,590
   Deferred revenues .....................................................................................       6,071      14,381
   Capital lease obligation--current portion .............................................................         250         233
   Note payable, affiliate ...............................................................................       2,321          --
                                                                                                             ---------   ---------

   Total current liabilities .............................................................................      22,836      36,323
Long-Term Liabilities:
   Notes payable, less original issue discount of $6,071 and $4,164 at December 31,
      2001 and 2000, respectively ........................................................................      88,929      45,836
   Capital lease obligation ..............................................................................         474         723
                                                                                                             ---------   ---------

      Total liabilities ..................................................................................     112,239      82,882
Stockholders' Equity:
   Common stock, $.001 par value, 150,000,000 and 50,000,000 shares authorized
      and 61,572,613 and 33,238,346 shares issued and outstanding at December
      31, 2001 and 2000, respectively ....................................................................          62          33
   Series C voting preferred stock $.001 par value, none and 83,688 shares issued
      and outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $1.50 per share) ....................................................          --         135
   Series D preferred stock $.001 par value, none and 322,704 shares issued and
      outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $15.00 per share) ...................................................          --       6,195
   Series E preferred stock $.001 par value, none and 317,853 shares issued and
      outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $15.00 per share) ...................................................          --       7,344
   Series F preferred stock $.001 par value, none and 376,202 shares issued and
      outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $30.00 per share) ...................................................          --      13,874
   Series H preferred stock $.001 par value, 100,556 and 440,544 shares issued and
      outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $100.00 per share) ..................................................      17,096      64,568
   Series I preferred stock $.001 par value, none and 64,431 shares issued and
      outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $120.00 per share) ..................................................          --       8,969
   Series J preferred stock $.001 par value, 356 and no shares issued and
      outstanding at December 31, 2001 and 2000, respectively (Preference in
      involuntary liquidation value, $10,000.00 per share) ...............................................       7,063          --
   Subscription receivable from Series J preferred stock .................................................      (5,700)         --
   Additional paid-in-capital and other ..................................................................     295,649     154,821
   Accumulated deficit ...................................................................................    (289,822)   (111,656)
                                                                                                             ---------   ---------

      Total stockholders' equity .........................................................................      24,348     144,283
                                                                                                             ---------   ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...............................................................   $ 136,587   $ 227,165
                                                                                                             =========   =========
</TABLE>

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

                                       16

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                               --------------------------------------
                                                                                  2001         2000          1999
                                                                               ----------   ----------  -------------
                                                                                                        As restated -
                                                                                                         see Note 16
<S>                                                                            <C>          <C>         <C>
Revenues ...................................................................   $  31,195    $  13,117    $      --
Operating expenses:
   Cost of services (exclusive of items shown
      separately below) ....................................................      13,801        5,388           --
   Selling, general and administrative expense
      excluding stock related expense ......................................      32,917       27,072        7,355
   Stock related expense for selling, general,
      and administrative matters ...........................................      (1,172)       8,468          803
   Non-recurring expenses ..................................................          --           --        4,304
   Impairment of property, plant and equipment .............................      51,848           --           --
   Impairment of goodwill ..................................................      56,467           --           --
   Depreciation and amortization ...........................................      15,319        7,652          520
                                                                               ---------    ---------    ---------
Total operating expenses ...................................................     169,180       48,580       12,982
                                                                               ---------    ---------    ---------
Loss from operations .......................................................    (137,985)     (35,463)     (12,982)
Interest expense, net ......................................................      (8,594)      (5,657)      (1,356)
Interest expense from beneficial conversion ................................          --           --      (15,870)
                                                                               ---------    ---------    ---------
Loss from operations before income taxes ...................................    (146,579)     (41,120)     (30,208)
Income taxes ...............................................................          --           --           --
                                                                               ---------    ---------    ---------
Loss before extraordinary item .............................................    (146,579)     (41,120)     (30,208)
Extraordinary loss on early extinguishment of debt .........................      (7,398)          --           --
                                                                               ---------    ---------    ---------
Net loss ...................................................................    (153,977)     (41,120)     (30,208)
Preferred stock dividends ..................................................      (1,080)      (8,113)        (757)
Preferred stock-beneficial conversion ......................................     (23,109)     (27,766)        (100)
                                                                               ---------    ---------    ---------
Net loss applicable to common stockholders .................................   $(178,166)   $ (76,999)   $ (31,065)
                                                                               =========    =========    =========
Net loss applicable to common stockholders per
   shared - basic and diluted ..............................................   $   (4.34)   $   (2.60)   $   (1.85)
Weighted average common shares
   outstanding - basic and diluted .........................................      41,065       29,651       16,798
</TABLE>

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

                                       17

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                    (in thousands, except per share amounts)
                           (as restated--see Note 16)

<TABLE>
<CAPTION>
                                                                                                Additional
                                                  Preferred Stock           Common Stock         Paid in
                                                  ---------------           ------------         Capital      Accumulated
                                                Shares     Amount        Shares       Amount     and Other      Deficit      Total
                                                ------   ---------     ---------     -------     ---------   ------------  --------
<S>                                              <C>     <C>          <C>            <C>         <C>         <C>           <C>
Balance at December 31, 1998 ................    80,000  $       0    16,000,000     $    16     $   5,466   $  (3,568)    $  1,914
                                              ---------  ---------    ----------     -------     ---------   ---------     --------
Redemption of Series B Preferred Stock ......   (80,000)        --            --          --            --          --           --
Issuance of Series C Preferred Stock ........   133,333        210            --          --            --          --          210
Issuance of warrants and beneficial
   conversion in connection with May
   1999 Notes ...............................        --         --            --          --        13,990          --       13,990
Beneficial conversion from issuance of
   September and October 1999 Notes .........        --         --            --          --         7,930          --        7,930
Conversion of Senior Secured Convertible
   Notes to common stock, net ...............        --         --    13,826,868          14        20,709          --       20,723
Exchange of common stock for preferred
   stock:
   Issuance of Series D Preferred Stock .....   309,143      4,637    (3,091,430)         (3)       (4,634)         --           --
   Issuance of Series E Preferred Stock .....   291,926      4,379    (2,919,260)         (3)       (4,376)         --           --
   Issuance of Series F Preferred Stock .....   345,515     10,365    (3,455,243)         (3)      (10,362)         --           --
Series D Preferred Stock dividends ..........     1,030        140            --          --            --          --          140
Series E Preferred Stock dividends ..........     1,946        265            --          --            --          --          265
Series F Preferred Stock dividends ..........     2,304        279            --          --            --          --          279
Beneficial conversion on preferred stock
   dividends ................................        --         --            --          --            72          --           72
Exercise of warrants to common stock ........        --         --       220,000          --           147          --          147
Issuance of common stock for purchase of
   MFN dark fiber, minority interest and
   Other ....................................        --         --     5,351,529           5        43,972          --       43,977
Deferred compensation .......................        --         --            --          --        (4,290)         --       (4,290)
Stock compensation to consultants and
   employees ................................        --         --            --          --        13,764          --       13,764
Other .......................................        --         --            --          --           220         (24)         196
Net loss applicable to common stockholders ..        --         --            --          --            --     (31,065)     (31,065)
                                              ---------  ---------    ----------     -------     ---------   ---------     --------
Balance at December 31, 1999 ................ 1,085,197     20,275    25,932,464          26        82,608     (34,657)      68,252
                                              =========  =========    ==========     =======     =========   =========     ========
Redemption of Series C Preferred Stock ......   (49,645)       (75)       49,645          --            75          --           --
Issuance of common stock, net ...............       --         --     4,150,342           4        46,213          --       46,217
Issuance of Series H Preferred Stock, net ...   426,333     63,799            --          --         4,836          --       68,635
Issuance of Series I Preferred Stock, net ...    62,500      8,850            --          --            --          --        8,850
Series D Preferred Stock dividends ..........    12,531      1,418            --          --            --          --        1,418
Series E Preferred Stock dividends ..........    23,981      2,700            --          --            --          --        2,700
Series F Preferred Stock dividends ..........    28,383      3,230            --          --            --          --        3,230
Series H Preferred Stock dividends ..........    14,211        769            --          --            --          --          769
Series I Preferred Stock dividends ..........     1,931        119            --          --            --          --          119
Exercise of options and warrants to
   purchase common stock ....................        --         --     3,105,895           3         6,345          --        6,348
Issuance of warrants in connection with
   bank financing ...........................        --         --            --          --         6,139          --        6,139
Stock compensation to employees .............        --         --            --          --         4,040          --        4,040
Deferred compensation .......................        --         --            --          --         2,732          --        2,732
Other .......................................        --         --            --          --         1,833          --        1,833
Net loss applicable to common
   stockholders .............................        --         --            --          --            --     (76,999)     (76,999)

                                              --------- ----------    ----------    --------     ---------  ----------   ----------
Balance at December 31, 2000 ................ 1,605,422    101,085    33,238,346          33       154,821    (111,656)     144,283
                                              ========= ==========    ==========    ========     =========  ==========   ==========
</TABLE>

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

                                       18

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(Continued)

                    (in thousands, except per share amounts)
                           (as restated--see Note 16)

<TABLE>
<CAPTION>
                                                                                                   Additional
                                                    Preferred Stock          Common Stock           Paid in
                                                    ---------------          ------------           Capital    Accumulated
                                                 Shares        Amount     Shares        Amount     and Other     Deficit     Total
                                                 ------        ------     ------        ------     ---------   -----------  -------
<S>                                              <C>        <C>        <C>            <C>          <C>         <C>         <C>
Direct issuance of common stock, Feb 2001 ...         --    $     --   6,440,000      $     6      $ 24,800   $      --    $ 24,806
Issuance of warrants in connection with
   bank financing ...........................         --          --          --           --         7,148          --       7,148
Series D Preferred Stock dividends ..........     12,123          96          --           --            --          --          96
Series E Preferred Stock dividends ..........     22,802         184          --           --            --          --         184
Series F Preferred Stock dividends ..........     27,445         219          --           --            --          --         219
Series H Preferred Stock dividends ..........     33,959         264          --           --            --          --         264
Series I Preferred Stock dividends ..........      4,885          38          --           --            --          --          38
Exercise of options and warrants to
   purchase common stock ....................         --          --     110,580            1            --          --           1
Beneficial conversion on Repricing of
   Series H .................................         --      16,254          --           --            --          --      16,254
Beneficial conversion on Repricing of
   Series I .................................         --       4,766          --           --            --          --       4,766
Issuance of warrants in connection with
   conversions ..............................         --          --          --           --           279          --         279
Conversion of Series C Preferred Stock ......    (83,688)       (135)     83,688           --           135          --          --
Conversion of Series D Preferred Stock ......   (334,827)     (6,291)  3,348,268            3         6,288          --          --
Conversion of Series E Preferred Stock ......   (340,655)     (7,528)  3,406,563            3         7,525          --          --
Conversion of Series F Preferred Stock ......   (403,647)    (14,093)  4,036,477            4        14,089          --          --
Conversion of Series H Preferred Stock ......   (373,947)    (63,990)  8,547,360            9        63,982          --          --
Conversion of Series I Preferred Stock ......    (69,316)    (13,773)   1,901,253            2        13,771          --          --
Issuance of Series J Preferred Stock, Net ...        360       7,094     327,273            1         1,861          --       8,956
Subscription Receivable on Series J
   Preferred Stock ..........................         --      (5,700)         --           --            --          --      (5,700)
Beneficial conversion on Series J ...........         --          --          --           --          2091          --       2,091
Conversion of Series J Preferred Stock ......         (4)        (31)    132,805           --            31          --          --
Stock compensation to employees .............         --          --          --           --        (1,172)         --      (1,172)
Net loss applicable to common
   stockholders .............................         --          --          --           --            --    (178,166)   (178,166)
                                               ---------   ---------  ----------     --------     ---------   ---------    --------
Balance at December 31, 2001 ................    100,912    $ 18,459  61,572,613      $    62      $295,649   $(289,822)   $ 24,348
                                               =========   =========  ==========     ========     =========   =========    ========
                                                                                                   Additional

</TABLE>

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

                                       19

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                                     Year Ended December 31,
                                                                                              --------------------------------------
                                                                                                 2001         2000         1999
                                                                                              ----------   ----------  -------------
                                                                                                                       As restated--
                                                                                                                        see Note 16
<S>                                                                                           <C>          <C>         <C>
Cash flows from operating activities:
   Net loss applicable to common stockholders .............................................   $(178,166)   $ (76,999)   $ (31,065)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and Amortization .......................................................      15,319        7,652          520
      Preferred stock dividends ...........................................................       1,080        8,113          757
      Interest expense from beneficial conversion .........................................          --           --       15,870
      Preferred stock beneficial conversion ...............................................      23,109       27,766          100
      Stock related expense for selling, general and administrative matters ...............      (1,172)       8,468          803
      Non-recurring expense ...............................................................          --           --        3,704
      Impairment of Property, plan and equipment ..........................................      51,848           --           --
      Impairment of Goodwill ..............................................................      56,467           --           --
      Extraordinary loss on early extinguishment of debt ..................................       7,398           --           --
      Other non-cash expenses .............................................................       4,545        3,193        3,709
   Change in assets and liabilities:
      (Increase) decrease in accounts receivable, prepaid expenses and other assets .......       9,686      (15,386)         140
      Increase (decrease) in accounts payable and accrued expenses ........................     (12,144)      24,630          157
                                                                                              ---------    ---------    ---------
Cash used in operating activities .........................................................     (22,030)     (12,563)      (5,305)
                                                                                              ---------    ---------    ---------
Cash flows from investing activities:
   Capital expenditures ...................................................................     (46,737)     (74,677)     (10,827)
   Investment in Devnet, net of cash ......................................................          --      (17,896)          --
                                                                                              ---------    ---------    ---------
Cash used in investing activities .........................................................     (46,737)     (92,573)     (10,827)
                                                                                              ---------    ---------    ---------
Cash flows from financing activities:
   Net proceeds from issuance of debt financing ...........................................      45,000       45,016       25,331
   Net proceeds from issuance of equity securities ........................................      25,756       52,393          200
   Repayment of capital lease obligation ..................................................        (233)        (203)        (144)
                                                                                              ---------    ---------    ---------
Cash provided from financing activities ...................................................      70,523       97,206       25,387
                                                                                              ---------    ---------    ---------
Net increase (decrease) in cash ...........................................................       1,756       (7,930)       9,255
Cash at beginning of period ...............................................................       1,582        9,512          257
Cash at end of period .....................................................................   $   3,338    $   1,582    $   9,512
                                                                                              ---------    ---------    ---------
                                                                                              =========    =========    =========
Supplemental disclosures of cash flow information:
   Interest paid ..........................................................................   $   6,732    $   2,589    $     110
   Income taxes paid ......................................................................          --           --           --
Non-cash financing activities: ............................................................
   Issuance of common stock and options to acquire Devnet .................................          --    $  39,842           --
   Issuance of common stock to acquire MFN dark fiber and minority interest ...............          --           --    $  43,450
   Issuance of capitalized stock options ..................................................          --           --    $   7,115
   Capital expenditures financed through capital leases ...................................          --           --    $   1,303
</TABLE>


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

                                       20

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND OPERATIONS

      FiberNet Telecom, Inc. ("Original FiberNet") was organized under the laws
of the State of Delaware on August 10, 1994. On November 24, 1997, an existing
public company, Desert Native Design, Inc. ("DND"), acquired Original FiberNet,
pursuant to an agreement and plan of merger dated that date (the "Original
Merger"). To effect the Original Merger, DND effectuated a 3.5 for 1 forward
stock split, which entitled DND shareholders to 3.5 shares of DND stock for
every one share held by them and issued 11,500,000 shares of common stock and
80,000 Series B Preferred Stock in exchange for all of the outstanding shares of
Original FiberNet. Upon consummation of the Original Merger, Original FiberNet
became a wholly-owned subsidiary of DND, which subsequently changed its name to
FiberNet Telecom Group, Inc., a Nevada corporation ("FiberNet Nevada"). For
accounting purposes, the acquisition was treated as a recapitalization of DND
with Original FiberNet as the acquirer (reverse acquisition). On December 9,
1999, FiberNet Nevada changed its state of incorporation to Delaware
(hereinafter referred to as "FiberNet" or the "Company").

      FiberNet is an all-optical facilities-based communications provider
focused on providing wholesale broadband connectivity for data, voice and video
transmission on its state-of-the-art fiber optic networks in major metropolitan
areas. The Company offers an advanced high bandwidth, fiber optic solution to
support the demand for network capacity in the intra-city market, or local loop.
The Company has established operations in the New York, Chicago and Los Angeles
metropolitan areas.

      FiberNet is holding a company that owns all of the outstanding common
stock of FiberNet Operations Inc., a Delaware corporation and an intermediate
level holding company, and Devnet L.L.C. ("Devnet"), a Delaware limited
liability company. FiberNet Telecom Operations, Inc. owns all of the outstanding
common stock of FiberNet Telecom Inc., a Delaware corporation. FiberNet Telecom,
Inc. owns all of the outstanding membership interests of Local Fiber, L.L.C.
("Local Fiber"), a New York limited liability company, and all of the
outstanding membership interests of FiberNet Equal Access, LLC ("Equal Access"),
also a New York limited liability company. The Company conducts its primary
business operations through its operating subsidiaries, Devnet, Local Fiber and
Equal Access.

      The Company was a development stage enterprise through December 31, 1999.
During the fiscal quarter ended March 31, 2000, the Company began offering its
services to customers and recognizing revenues.

      The Company has agreements with other entities, including
telecommunications license agreements with on-net building landlords,
interconnection agreements with other telecommunications service providers and
leases with carrier hotel property owners. FiberNet also has entered into
contracts with suppliers for the components of its telecommunications networks.
These contracts and agreements are critical to the Company's ability to execute
its business strategy and operating plan.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

      The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, FiberNet Operations, Inc., Devnet, FiberNet
Telecom, Inc., FiberNet Equal Access and Local Fiber and have been prepared in
accordance with generally accepted accounting principles in the United States.
All significant intercompany balances and transactions have been eliminated.

Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

                                       21

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The Company's operations and ability to grow may be affected by numerous
factors, including the difficulty inherent in operating an early-stage company
in a new and rapidly evolving market; its history of operating losses and
accumulated deficit; its limited financial resources and uncertainty as to the
availability of additional capital to fund its operations on acceptable terms,
if at all; its success in obtaining additional carrier hotel lease agreements
and license agreements with building owners; growth in demand for its services;
the frequency of service interruptions on its networks; the potential
development by competitors of competing products and technologies; restrictions
imposed on it as a result of its debt; and changes in the regulatory
environment. The failure of the Company to achieve certain operational results
would violate certain debt covenants thereby potentially accelerating the
outstanding balance for immediate payment.

Cash and Cash Equivalents

      Cash and cash equivalents include highly liquid investments with an
original maturity of three months or less when purchased. The carrying amount
approximates fair value because of the short maturity of the instruments.

Property, Plant and Equipment

      Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, once placed in service. The estimated
lives are as follows:

             Computer software ............................   3-5  Years
             Computer equipment ...........................   3-5  Years
             Office and equipment and fixtures ............   5-10 Years
             Leasehold improvements .......................   9-15 Years
             Network equipment ............................   5-10 Years
             Network infrastructure .......................   5-20 Years


      Maintenance and repairs are expensed as incurred. Long-term improvements
are capitalized as additions to property, plant and equipment.

Impairment of Long-Lived Assets

      The Company reviews the carrying value of long-lived assets including
goodwill and property, plant and equipment for impairment whenever events and
circumstances indicate the carrying value of an asset may not be recoverable
from the estimated future cash flows expected to result from its use and
eventual disposition. In cases where undiscounted expected future cash flows are
less than the carrying value, an impairment loss would be recognized equal to an
amount by which the carrying value exceeds the fair value of the assets. See
Notes 4 and 6.

Revenue Recognition

      FiberNet generates revenues from selling network capacity and related
services to other communications service providers. The Company recognizes
revenues when earned as services are provided throughout the life of each
contract with a customer. The majority of the Company's revenues are generated
on a monthly recurring basis under contracts of various lengths, ranging from
one month to five years. Revenue is recognized over the service contract period
for all general services. Deferred revenues consist primarily of payments
received in advance of revenue being earned under the service contracts. Most of
its customers are obligated to make minimum payments for the utilization of its
networks and facilities. Customers may elect to purchase additional services in
excess of minimum contractual requirements.

      Revenues are derived from three general types of services:

      Transport services. FiberNet's transport services include the offering of
broadband circuits on its metropolitan transport networks and in-building
networks. The Company also offers vertical dark fiber in certain of its carrier
hotel facilities and on-net and off-net buildings. The meet-me-room facility
offers customers a single room within the carrier hotel to cross connect.

                                       22

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Colocation facility services. FiberNet's colocation services include
providing customers with the ability to locate their communications and
networking equipment at its carrier point facilities in a secure technical
operating environment. The Company also can provide its customers with
colocation services in the central equipment rooms of certain of its on-net
buildings. If a customer purchases colocation services, the Company typically
requires the customer to make a minimum commitment for transport services, as
well.

      Communications access management services. FiberNet's access management
services include providing its customers with the non-exclusive right to market
and provide their retail services to tenants in its on-net and off- net
buildings. Customers typically enter into an agreement with the Company to gain
access to all or a significant number of its properties. For all of its off-net
buildings and some of its on-net buildings, the Company has the exclusive right
to manage communications access. Once a customer has entered into an agreement
with the Company for access services, FiberNet typically requires that customer
to utilize its in-building network infrastructure for connectivity to end-user
tenants.

      The Company has four reciprocal agreements. The services provided and
obtained through these agreements were priced at fair market value as of the
date of the agreements and are included in revenues and cost of services in the
accompanying consolidated statements of operations. The Company leased
colocation facilities under these agreements and the total amount expensed for
services rendered under the reciprocal agreements in fiscal 2001 was
approximately $5,383,000, compared to approximately $2,240,000 in fiscal 2000.
The Company recorded revenues for the provision of metropolitan transport
services and colocation space in carrier hotels of approximately $5,240,000 in
fiscal 2001 from these reciprocal agreements, compared to approximately
$2,186,000 in fiscal 2000.

      In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101 ("SAB 101"), which addresses accounting policies
to be applied in the recognition, presentation and disclosure of revenues from
contract partnerships, in financial statements filed with the SEC. SAB 101
defers revenue recognition for certain payments previously received into future
accounting periods. The Company's financial statements reflect the accounting
guidance in SAB 101 for all periods presented.

Fair Value of Financial Instruments

      The Company estimates that the carrying value of its financial instruments
approximates fair value.

Goodwill and Intangibles

      Cost in excess of net assets of acquired business, principally goodwill,
is amortized on the straight-line method over 15 years. Other intangible assets
include the cost to access buildings and deferred financing costs. Costs to
access buildings are amortized over 15 years, which represents the term of the
related contracts. Deferred financing costs are amortized over the term of the
credit facility. Please see Note-6, Impairment of Goodwill for a discussion of
the impairment of the goodwill associated with the Company's acquisition of
Devnet.

Earnings Per Share

      Basic earnings per share have been computed using the weighted average
number of shares during the period. Diluted earnings per share is computed by
including the dilutive effect on common stock that would be issued assuming
conversion of stock options, warrants and other dilutive securities. Dilutive
options, warrants and other securities did not have an effect on the computation
of diluted earnings per share in 2001, 2000 and 1999, as they were
anti-dilutive.

Concentration of Credit Risk

      The Company has concentration of credit risk among its customer base. The
Company performs ongoing credit evaluations of its larger customers' financial
condition. As of December 31, 2001 and 2000, one customer accounted for 19.4%
and two customers in the aggregate accounted for 25.6% of the Company's total
accounts receivable, respectively.

      For the year ended December 31, 2001 and 2000, three customers in the
aggregate accounted for 53.3% and two customers in the aggregate accounted for
61.5% of the Company's total revenue, respectively. In 2001 and 2000 the Company
recorded $2.6 million and $0.5 million of bad debt expense; $0.9 million was
written off in 2001.

                                       23

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company has an allowance for doubtful accounts of $2.2 million and $0.5
million as of December 31, 2001 and 2000, respectively.

Stock Option Plan

      The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25), and, accordingly, recognizes expense for stock option grants to the extent
that the estimated fair value of the stock exceeds the exercise price of the
option at the measurement date. Stock option grants to non-employees are
accounted in accordance with Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation". The resulting
expense is charged against operations ratably over the vesting period of the
options.

Accounting for Income Taxes

      The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires the use of the liability method of accounting for deferred income
taxes. Under this method, deferred income taxes represent the net tax effect of
temporary differences between carrying amount of assets and liabilities for
financial reporting purposes and the amount used for income tax purposes.
Additionally, if it is more likely than not that some portion or all of a
deferred tax asset will not be realized, a valuation allowance is required to be
recognized.

Accounting for Derivative Instruments

      The Company accounts for derivative instruments in accordance with SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended. SFAS No. 133 establishes standards of accounting and reporting for
derivative instruments and hedging activities, and requires that all derivatives
be recognized on the balance sheet at fair value. Changes in the fair value of
derivatives that do not meet the hedge accounting criteria are to be reporting
in earnings. The adoption of SFAS No. 133 did not have a material impact on the
Company's consolidated financial statements, as the Company has not entered into
any derivative instrument contracts for the years ended December 31, 2001, 2000
and 1999.

Reclassifications

      Certain balances have been reclassified in the consolidated financial
statements to conform to current year presentation.

Segment Reporting

      The Company is a single segment operating company providing
telecommunications services.

Recent Accounting Pronouncements

      In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations", applicable for fiscal years beginning after
December 15, 2001. SFAS No. 141 establishes new standards of accounting for
business combinations, eliminating the use of the pooling-of-interests method
and requires that the purchase method be used for business combinations
initiated at June 30, 2001.

      In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", applicable for fiscal years beginning after December 15, 2001. SFAS No.
142 establishes new standards of accounting for goodwill and intangible assets
obtained in an acquisition. The amortization of goodwill for previous
acquisitions will cease upon adoption of SFAS Nos. 141 and 142 on January 1,
2002. We do not expect the adoption of SFAS No. 142 to have a material impact on
the consolidated financial statements of the Company.

      In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The Statement requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity capitalizes
a cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its then present value, and the capitalized
cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, an entity either settles the obligation for its recorded
amount or incurs a gain or loss upon settlement. The Statement is effective for
fiscal

                                       24

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

years beginning after June 15, 2002, with earlier application encouraged. The
Company does not expect the adoption of the Statement to have a material impact
on its results of operations.

     In October, 2001 the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." The Statement replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," although it retains the impairment testing
methodology used in SFAS No. 121. The accounting and reporting provisions of
Accounting Principals Board Opinion (APB) 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," are
superceded by SFAS No. 144, except that the Statement preserves the requirement
of APB 30 to report discontinued operations separately from continuing
operations. The Statement covers a variety of implementation issues inherent in
SFAS No. 121, unifies the framework used in accounting for assets to be disposed
of and discontinued operations, and broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. The Statement is
effective for fiscal years beginning after December 15, 2001. FiberNet adopted
SFAS No. 144 on January 1, 2002. The Company does not expect the adoption of
SFAS No. 144 to have a material impact on our financial statements.

3.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following (dollars in
thousands):

                                                   December 31,     December 31,
                                                       2001            2000
                                                   ------------     ------------
Computer software ............................     $       178      $     2,963
Computer equipment ...........................             293            1,926
Leasehold improvements .......................              30            1,111
Office and equipment and furniture ...........             146              810
Network equipment and infrastructure .........         120,523           71,322
                                                   -----------      -----------
Total ........................................         121,170           78,132
Accumulated depreciation .....................         (15,758)          (4,894)
                                                   -----------      -----------
                                                       105,412           73,238
Construction in progress .....................           4,425           52,876
                                                   -----------      -----------
Property, plant and equipment, net ...........     $   109,837      $   126,114
                                                   ===========      ===========

     Depreciation expense on property, plant and equipment was $10.9 million,
$4.5 million and $0.4 million for the years ended December 31, 2001, 2000 and
1999, respectively.

4.   IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

     The Company reviews the carrying value of these assets for impairment
whenever events and circumstances indicate the carrying value of an asset may
not be recoverable from the estimated future cash flows expected to result from
its use and eventual disposition.

     In the fourth quarter of 2001, the Company determined that its forecasts
for revenues for certain of its facilities would not be achieved due to the
significant adverse change in the business climate. The Company further
determined that the dramatic change in the operating environment for the
telecommunications industry resulted in a significantly less demand for its
services in these facilities. The Company believes that the decrease in demand
was a result of the significant number of bankruptcies of telecommunications
companies that were existing or potential customers of the Company and the
overall economic recession. The Company also determined that a rebound in demand
for its services would not occur in the near term. As a result, the Company
revised its business plan and conducted extensive reviews of its assets and
operations. The revisions to the business plan primarily included reductions in
forecasts of revenues and capital expenditures. The projected amounts of certain
costs of services and overhead expenses were reduced as well to reflect the
decrease in expected business activity for the Company. The Company also
determined that certain financial covenants in its Credit Facility would need to
reflect the revised business plan, including its reduced revenue forecasts.
Consequently, the Company amended its Credit Facility in December 2001 (See Note
7).

                                       25

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The Company used an undiscounted forecasted cash flow model to determine if
there was an impairment based on the cash flows expected to be generated from
these assets, and used a discounted cash flow model to measure the impairment.
As a result of this analysis, the Company has recorded an asset impairment of
approximately $51.8 million based on the amount by which the carrying amount of
these assets exceeded their fair value. Of this amount, $40.4 million relates to
assets held for use, and $11.4 million represents assets to be disposed of.

     The assets that the Company identified for disposition were abandoned, as
the Company determined that these assets had no value. Consequently, there was
no cost to the Company for this abandonment, nor does the Company expect to
receive any proceeds or other consideration from this abandonment. The Company
recorded no reserves, accruals or other liabilities related to this abandonment.
These assets primarily related to engineering and network architecture design
costs and general contracting and project management costs for facilities that
the Company is no longer pursuing.

5.   ACQUISITION

     On April 2, 2000, FiberNet acquired approximately 3% of the Devnet
membership interests for a purchase price of $3 million. On July 31, 2000,
FiberNet acquired the remaining 97% of the membership interests of Devnet not
already beneficially owned by the Company pursuant to the Agreement and Plan of
Reorganization, dated as of June 2, 2000. Devnet's operations are included in
FiberNet's results of operations for the period from July 31, 2000 through
December 31, 2000. Devnet managed the communications access and infrastructure
for approximately 40 million square feet of class A commercial real estate in
major markets nationwide. In connection with the acquisition, the Company issued
3,461,162 shares of its common stock and paid approximately $15 million in
exchange for approximately 97% of the membership interests in Devnet. The
acquisition was accounted for under the purchase method of accounting. The
Company allocated the purchase price of approximately $60 million to the assets
and liabilities of Devnet. Initially, the amount allocated to goodwill was being
amortized over 15 years using the straight-line method, however, see Note
6-Impairment of Goodwill for a discussion of the impairment of the goodwill
associated with this acquisition. In connection with the acquisition, the
Company paid an aggregate of $500,000 to related parties for financial advisory
services.

     FiberNet's pro forma results of operations assuming the Devnet acquisition
occurred on January 1, 2000, would have been as follows (dollars in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                                    2000
                                                                                 ------------
         <S>                                                                     <C>
         Revenues .............................................................  $    14,606
         Net loss applicable to common shareholders ...........................  $    82,597)
         Net loss applicable to common shareholders per share-basic and diluted  $     (2.55)
</TABLE>

6.   IMPAIRMENT OF GOODWILL

     During 2001, the Company evaluated the carrying value of certain long-lived
assets and acquired equity investments, consisting primarily of goodwill
resulting from the Company's acquisition of Devnet. Pursuant to APB Opinion No.
16, "Business Combinations", the purchase price was determined and goodwill was
recorded based on the stock price at the time the merger agreement was executed
and announced. The Company reviews the carrying value of long-lived assets
including goodwill and property, plant and equipment for impairment whenever
events and circumstances indicate the carrying value of an asset may not be
recoverable from the estimated future cash flows expected to result from its use
and eventual disposition.

     An assessment of the goodwill related to the Devnet acquisition was
performed pursuant to SFAS No. 121, due to the negative industry and economic
trends affecting certain of the Company's current operations and expected future
sales, as well as the general decline in the valuations of telecommunications
companies. The conclusion of that assessment was that the decline in market
conditions within the telecommunications industry was significant and other than
temporary.

     Devnet had entered into exclusive license agreements to manage
communications access to commercial office properties, and the company
associated the related goodwill primarily to those agreements. The Company used
an undiscounted forecasted cash flow model to determine if there was an
impairment based on the cash flows expected to be generated from business
activities in the commercial office properties underlying the license agreements
and

                                       26

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

used a discounted cash flow model to measure the impairment. As a result, the
Company recorded a charge of $56.5 million during the third quarter of 2001 to
reduce goodwill associated with the purchase of Devnet. The charge was based on
the amount by which the carrying amount of the asset exceeded its fair value.

7.   NOTES PAYABLE NOTE PAYABLE-AFFILIATE

Note Payable-Affiliate

     On December 7, 2001 the Company issued a promissory note in the amount of
$2.3 million to Nortel Networks Inc., a related party, as consideration for
accounts payable previously due and owing for equipment and services. The note
bears interest at an annual rate of 14% and is payable in eight monthly
installments of approximately $300,000 beginning in January 2002. The Company
believes the terms of this transaction are no less favorable than could be
received from an independent, third party.

Senior Secured Credit Facility

     On April 11, 2000, the Company entered into a $75.0 million Senior Secured
Credit Facility (the "Credit Facility") with Deutsche Bank AG New York Branch,
Deutsche Bank Securities Inc., Toronto Dominion (Texas), Inc. and Nortel. In
addition to the initial lenders, First Union National Bank, Bank One Capital
Corporation and IBM Credit Corporation are currently lenders under the Credit
Facility. FiberNet used the funds available under the Credit Facility for the
acquisition and construction of its network infrastructure and for general
corporate purposes. The Credit Facility had a term of four and one-half years,
consisting of revolving credit availability for the first 18 months and a term
loan for the remaining three years. The Credit Facility is secured by the
Company's assets, except for the assets pledged in connection with its capital
lease obligations, and contains certain restrictive covenants customary for a
financing of this type. As of December 31, 2001 and 2000, $95.0 and $50.0
million was outstanding under the Credit Facility, respectively. This amount is
included in notes payable in the accompanying balance sheet net of an original
issue discount of $6.1 million and $4.2 million at December 31, 2001 and 2000,
respectively. This discount represents the fair value of warrants to purchase
approximately 1.5 million shares of common stock of the Company at an exercise
price of $18.062 per share, with an expiration date of April 11, 2005, issued to
the lenders in connection with the Credit Facility.

     On December 18, 2000, the Company issued 504,614 additional warrants to its
lending group at an exercise price of $17.062 and re-priced the warrants issued
on April 11, 2000 from $18.062 to an exercise price of $17.062. The discount is
being amortized over the term of the Credit Facility. The fair value of the
warrants was estimated on the date of issuance using the Black-Scholes option
pricing model. The transaction was evaluated in accordance with the guidance in
EITF Issue 96-19, "Debtor's Accounts for a Modification or Exchange of Debt
Instruments." The value on December 18, 2000 of the cash flows under the terms
of the revised debt instrument as compared to the cash flows under the original
debt instrument resulted in a difference that was "not substantially" different.
An adjustment was made to the original issue discount, initially recorded in
connection with the issuance of the warrants, and to additional paid-in-capital
(APIC) to reflect the new exercise price of those warrants.

     On February 9, 2001, the Company amended the Credit Facility to increase
the availability thereunder to $105.0 million and to the extend the maturity
thereof to six years. In connection with this amended credit facility, the
Company issued warrants to purchase an additional 454,409 shares of its common
stock, with an expiration date of April 11, 2005, at an exercise price of $8.00
per share. In addition, all warrants issued under the original credit agreement
were replaced with warrants to purchase an equivalent amount of the Company's
common stock, with an expiration date of April 11, 2005, at an exercise price of
$8.00 per share. The transaction was evaluated in accordance with EITF 96-19,
and it was determined that a substantial modification of terms had been made. As
such, the transaction was accounted for, and reported in the same manner as, an
extinguishment, and the Company recorded a $7.4 million charge for the
extraordinary loss from extinguishment of debt, representing deferred financing
fees and the original issue discount relating to the previous Credit Facility.

     Also, on April 27, 2001, in connection with a waiver and agreement under
our credit facility, warrants to purchase 300,000 shares of our common stock at
a purchase price of $8.00 per share held by Deutsche Banc Alex. Brown were
replaced with new warrants to purchase an equivalent amount of our common stock
at a purchase price of $0.01 per share.

     The Company valued the warrants at each issuance and pricing date using the
Black-Scholes valuation model and recorded a debit to original issue discount
with a credit to APIC for the warrant's value.

                                       27

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     In connection with the Company's sale of its Series J preferred stock, on
December 7, 2001, it entered into an amendment of its Credit Facility with its
lenders pursuant to which the lenders consented to the sale of the series J
preferred stock and adjusted certain covenants contained in the credit agreement
underlying the Credit Facility. Additionally, all warrants outstanding issued to
the lenders under the Credit Facility were replaced with warrants with identical
terms other than with respect to a reduction of the exercise price to $0.50.

     Material financial covenants monitored on a quarterly basis include minimum
requirements for cumulative revenues and EBITDA (as defined in the credit
facility), a maximum limitation on capital expenditures, and compliance with
ratios of total debt to consolidated capitalization and total debt to property,
plant and equipment, net of accumulated depreciation. In addition, the second
and third closings for the issuance of the Series J preferred are required under
the credit agreement. Non-compliance with any of these covenants, requirements,
or other terms and conditions, constitutes an event of default under the credit
agreement, prohibiting access to any additional funds available under the credit
facility and potentially accelerating the outstanding balance for immediate
payment.

     Minimum Cumulative Net Revenues ("Net Revenues") which is defined as GAAP
revenue plus deferred revenue recorded on the balance sheet requires the Company
to have Net Revenues from January 1, 2000 to December 31, 2001 of $49.1 million.
The Company's Net Revenues from January 1, 2000 to December 31, 2001 was $50.4
million. The covenant requires Net Revenues from January 1, 2000 to March 31,
2002, June 30, 2002, September 30, 2002, and December 31, 2002 to be at least
$55.3 million, $63.4 million, $73.2 million and $84.9 million, respectively.

May Convertible Notes

     On May 7, 1999 (the "Closing Date"), the Company entered into a securities
purchase agreement with certain investors, including Signal Capital Partners,
L.P., Trident Telecom Partners LLC and Concordia Telecom Management, L.L.C., for
the sale of $14.1 million of securities, consisting of $13.9 million aggregate
amount of 4% to 8% Senior Secured Convertible Notes due 2004 (the "May
Convertible Notes") and 133,333 shares of convertible Series C preferred stock
with an aggregate redemption value of $0.2 million, or $1.50 per share, (the
"Series C preferred stock," together with the May Convertible Notes, the
"Securities"). The Securities were convertible into shares of the Company's
common stock at a conversion price of $1.50 per share. The May Convertible Notes
were secured by, among other things, a pledge by the Company of the shares of
common stock of its wholly-owned subsidiaries. Together with the sale of the May
Convertible Notes, the Company issued approximately 7.9 million warrants to
purchase common stock to the purchasers of the May Convertible Notes (the
"Warrants"). The Warrants are exercisable at $0.67 to $1.50 per share and expire
five years after the Closing Date.

     The Series C preferred stock, May Convertible Notes and the Warrants were
recorded at $0.1 million, $8.0 million, and $6.0 million, respectively. The
proceeds allocated to the Securities and Warrants were based on the relative
fair value of each security. The fair values of the Securities were determined
based upon the then quoted stock price of $4.94, and the number of common shares
that the Securities are convertible into. The Warrants were valued using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate of 4.8%, expected dividend yield of 0%, expected life of 5 years,
and expected volatility of 88%.

     In connection with the issuance of the May Convertible Notes and the
related Warrants, the Company recorded an original issue discount on the May
Convertible Notes in the amount of approximately $6.0 million, which represents
the proceeds allocated based on the relative fair value of the Warrants. The
original issue discount was amortized over the five-year life of the May
Convertible Notes. Certain financing costs related to the issuance of the May
Convertible Notes were capitalized as deferred charges and amortized over the
five-year life of the May Convertible Notes.

     In connection with this transaction, the Company recorded a non-recurring,
non-cash charge for a beneficial conversion feature in the amount of
approximately $7.9 million, to reflect the market price of the common stock on
the date of issuance. See Note 16.

September Convertible Notes

     On September 28, 1999, the Company entered into another securities purchase
agreement with certain investors, including Signal Equity Partners, L.P.
(formerly Signal Capital Partners, L.P.) and Waterview Partners, L.P., an
affiliate of Georgica Advisors LLC, for the sale of $7.8 million of 8% Senior
Secured Convertible Notes due 2004. On October 19, 1999, the Company issued an
additional $4.7 million of 8% Senior Secured Convertible

                                       28

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Notes due 2004 to certain other investors, for a total of $12.5 million (the
"September Convertible Notes"). The September Convertible Notes were convertible
into shares of the Company's common stock at a conversion price of $3.00 per
share, subject to anti-dilution adjustments. The September Convertible Notes
were secured by, among other things, a pledge by the Company of the shares of
common stock of its wholly-owned subsidiaries. In connection with this
transaction, the Company recorded a non-recurring, non-cash charge for a
beneficial conversion feature in the amount of $7.9 million, to reflect the
market price of the common stock as of the dates of issuance thereof.

     In connection with the issuance of $7.8 million of the September
Convertible Notes on September 28, 1999, certain financing costs, totaling
approximately $135,000, were capitalized as deferred charges and amortized over
the five-year life of those September Convertible Notes.

Conversion of May and September Convertible Notes

     On November 30, 1999, holders of the Company's May Convertible Notes and
September Convertible Notes converted their principal and accrued interest into
shares of common stock. Subsequently, certain holders of the 4% May Convertible
Notes exchanged their common stock for Series D preferred stock, certain holders
of the 8% May Convertible Notes exchanged their common stock for Series E
preferred stock and certain holders of the September Convertible Notes exchanged
their common stock for Series F preferred stock (See note 11- Preferred Stock).

     The Company did not record any beneficial conversion charge related to the
conversion of the May and September Convertible Notes into common shares and
then into preferred stock because the fair value of the common shares of $7.25
per share, the quoted market price on the date of conversion, equals the fair
value of the common shares into which the Series D preferred stock, Series E
preferred stock and Series F preferred stock can be converted.

8.   COMMITMENTS AND CONTINGENCIES

     The Company has entered into an equipment leasing agreement requiring the
payment of $1.0 million over a five-year period that commenced August 1999. The
present value of this amount has been included as capital lease obligation on
the consolidated balance sheets as of December 31, 2001 and 2000.

     The Company also entered into various operating lease agreements for office
space and other space relating to the Company's operations. Occupancy expense
for the years ended December 31, 2001, 2000 and 1999 was approximately $14.2
million, $6.0 million, and $0.8 million, respectively.

     Estimated future minimum operating and capital lease payments are as
follows (in thousands):

                                                       Operating      Capital
                                                      -----------    ---------
         2002 ......................................  $    11,644    $     347
         2003 ......................................       10,574          314
         2004 ......................................        9,383          212
         2005 ......................................        9,320           --
         2006 and thereafter .......................       69,464           --
         Less: interest component ..................            -         (149)
                                                      -----------    ---------
         Total .....................................  $   110,385    $     724
                                                      ===========    =========

     On December 31, 1999, the Company entered into a master purchase agreement
with Nortel Networks Inc., a related party, giving it the right to purchase
optical networking equipment and related services at predetermined volume-based
pricing. On June 22, 2000, the Company amended its master purchase agreement
with Nortel to expand the scope of this agreement from $60.0 million to $260.0
million and to extend the term of the agreement to 2002.

     The Company and its subsidiaries in the normal course of business may
become party to any number of judicial, regulatory and administrative
proceedings. The Company's management does not believe that any material
liability will be imposed as a result of any of these matters.

                                       29

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.    STOCK OPTIONS

      In December 1999, the Company adopted an employee equity participation
program (the "1999 Stock Option Plan") covering 4,500,000 shares of common stock
of the Company to advance the growth and success of FiberNet by enabling
employees, directors and consultants to acquire a proprietary interest in the
Company. The Board of Directors administered the 1999 Stock Option Plan. All
employees were eligible to receive awards under the 1999 Stock Option Plan, at
the Board's discretion. Options granted pursuant to the 1999 Stock Option Plan
(i) are either nonqualified options and/or incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, (ii)
have a term of ten years and (iii) typically vest on an annual basis over three
years. The Company's previous Employee Equity Participation Program was
terminated during 1999.

      On May 23, 2000, FiberNet's board of directors approved, and on July 27,
2000 the Company's stockholders ratified, the adoption of an equity incentive
plan (the "Equity Incentive Plan"), which amends and restates the Company's 1999
Stock Option Plan, covering 10,000,000 shares of common stock of the Company. On
June 5, 2001, the Company's stockholders ratified an increase in the number of
shares available under the Equity Incentive Plan to 12,644,000. The Equity
Incentive Plan provides for the grant of incentive stock options, non-qualified
stock options and other performance and non-performance based equity awards,
including restricted stock, performance awards, stock appreciation rights, or
SARs, and other types of awards based on the Company's common stock. During the
fiscal year ended December 31, 2001, the Company granted approximately 6.4
million options under the Equity Incentive Plan, at an average exercise price of
approximately $0.40 per share, with a vesting period of up to three years.

      The Company accounts for stock options under APB Opinion No. 25. During
the years ended December 31, 2001, 2000 and 1999, the Company granted stock
options to employees with exercise prices below the market price on the date of
the grant. Additionally, on December 21, 2000, the Company repriced certain
options previously granted to three of its executive officers, resulting in
variable plan accounting in accordance with FASB Interpretation No. 44,
Accounting for Certain Transactions Involving Stock Compensation (FIN 44), from
the date of modification. These options were originally granted in 1999 and 2000
at exercise prices of $4.00, $3.75, $6.00 and $9.31 per share, and were repriced
at an exercise price of $1.00 per share for certain members of the senior
management team and $6.00 per share for all other options repriced. The
additional intrinsic value was determined on the date of modification using the
then market price of the common stock. The additional compensation cost was
recognized over the period from the date of modification to the date the awards
vest. The additional compensation cost has been adjusted in subsequent periods
for changes in the market price. After the awards vested, adjustments to
compensation cost for changes in the market price were recognized immediately.
In subsequent periods, the market price declined resulting in negative
compensation cost being recognized. In accordance with FIN 44, expense reduction
has been recognized up to the amount of the expense previously recognized in
prior periods relating specifically to the modified awards. As such the Company
recorded compensation expense to employees of approximately $(1.2) million, $8.5
million, and $0.8 million for those years, respectively.

      If the Company had calculated stock option compensation expense as
prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company's net loss and net loss per share would have been the following pro
forma amounts:

<TABLE>
<CAPTION>
                                                                               2001            2000           1999
                                                                           -----------------------------------------
<S>                                                                          <C>             <C>            <C>
Net loss applicable to common stockholders ...............   As reported     $178,166        $76,999        $31,065
                                                             Pro forma       $181,019        $85,688        $32,945
Net loss per share applicable to common stockholders basic   As reported     $  (4.34)       $ (2.60)       $ (1.85)
   and diluted ...........................................   Pro forma       $  (4.41)       $ (2.89)       $ (1.96)
</TABLE>

      The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for grants in December 31, 2001, 2000 and 1999: risk-free interest rates of
4.875%, 5.2% and 5.5%, respectively, expected dividend yields of 0%, expected
life of six years to expiration and expected volatility of 159%, 96% and 88%,
respectively.

      Transactions during the years ended December 31, 2001, 2000 and 1999,
respectively, involving stock options are summarized as follows:

                                       30

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
                                                            2001                       2000                       1999
                                                  -------------------------   -----------------------   -----------------------
                                                                  Average                   Average                    Average
                                                                  Option                    Option                     Option
                                                   Number of     Price Per    Number of    Price Per     Number of    Price Per
                                                    Shares         Share       Shares        Share        Shares        Share
                                                  ----------    ----------    ---------   ----------    ----------    ---------
<S>                                               <C>            <C>          <C>          <C>           <C>          <C>
Options outstanding at the beginning of
   the period ..................................    9,775,727    $  6.42       5,870,167    $  2.92       1,268,834    $  3.05
Granted ........................................    7,673,929       0.40       5,969,893       9.16       5,969,333       3.30
Exercised .....................................      (103,452)      3.95      (1,600,000)      2.06              --         --
Terminated .....................................   (2,092,942)      9.41        (464,333)     12.35      (1,368,000)      4.67
                                                   ----------       ----       ---------   --------       ---------    -------
Options outstanding at the end of Year .........   15,253,262       3.00       9,775,727       6.42       5,870,167       2.92
                                                   ----------       ----       ---------   --------       ---------    -------
Exercisable at end of year .....................    7,833,182       3.64       4,894,904       3.70       5,004,834       2.69
                                                   ----------       ----       ---------   --------       ---------    -------
Weighted average fair value of options
   granted .....................................                 $  0.38                    $  9.76                    $  3.76
</TABLE>

      The following table summarizes information about stock options outstanding
as of December 31, 2001:

<TABLE>
<CAPTION>
                                 Options Outstanding                                               Options Exercisable
-------------------------------------------------------------------------------------    --------------------------------------
                             Outstanding     Weighted-Average                              Exercisable
         Range of               as of            Remaining        Weighted-Average            as of          Weighted-Average
      Exercise Price          12/31/2001     Contractual Life      Exercise Price          12/31/2001         Exercise Price
-------------------------    -----------     ----------------     -------------------    ----------------   -------------------
<S>  <C>                     <C>             <C>                  <C>                    <C>                <C>
$     0.0000-$ 2.0170 .....    9,665,858           9.4                       $ 0.5729           4,034,536              $ 0.9211
$     2.0171-$ 4.0340 .....    1,532,517           8.0                       $ 3.6003             995,217              $ 3.5837
$     4.0341-$ 6.0510 .....    2,026,668           7.7                       $ 5.2107           1,820,837              $ 5.1651
$     6.0511-$ 8.0680 .....       44,167           7.6                       $ 7.6800              18,503              $ 7.7956
$     8.0681-$10.0850 .....      917,169           7.7                       $ 9.2687             424,187              $ 9.2254
$    10.0851-$12.1020 .....       88,000           8.4                       $11.3928              42,668              $11.2896
$    12.1021-$14.1190 .....      380,048           6.0                       $13.0870             234,722              $13.1041
$    14.1191-$16.1360 .....      476,501           8.1                       $14.9204             178,841              $14.9309
$    16.1361-$18.1530 .....       58,334           1.3                       $16.4029              19,671              $16.4154
$    18.1531-$20.1700 .....       64,000           6.9                       $19.4550              64,000              $19.4550
                             -----------     ----------------     -------------------    ----------------   -------------------
                              15,253,262           8.7                       $ 2.9989           7,833,182              $ 3.6436
</TABLE>

Stock Option Grants to Non-Employees

      During 2000, the Company granted 76,000 stock options to certain
consultants for services rendered in connection with the design, development and
construction of the Company's telecommunications network infrastructure. As a
result, the Company recorded approximately $3.3 million of property, plant and
equipment for the year ended December 31, 2000, which represents the fair value
of the options granted. The Company also granted stock options to Tishman Speyer
Properties, L.P. ("TSP") in connection with the master license agreement. As a
result, the Company recorded approximately $3.8 million of deferred charges for
the year ended December 31, 1999, which represents the fair value of the options
granted. In addition, the Company granted stock options with a one-year vesting
period to outside consultants for pre-acquisition due diligence services. As a
result, the Company recognized approximately $658,000 of compensation expense,
which is included in general and administrative expense in the accompanying
statement of operations for the year ended December 31, 1999.

      On May 26, 2000, FiberNet entered into an amended and restated agreement
with TSP. As partial consideration for this amended and restated agreement, TSP
terminated the prior master license agreement and surrendered the warrant in
equal access. Under the agreement, the Company will issue up to 1.6 million
shares of its Common Stock to TSP as the Company enters into license agreements
for the deployment and operation of its in-building networks in certain
commercial office properties owned or managed by TSP. As of December 31, 2001,
approximately 700,000 shares have been issued under the agreement for a total
value of $6.4 million, based on fair market value on the date of issuance. This
amount is included in deferred charges on the accompanying balance sheet and is
being amortized over 15 years, the term of the underlying license agreement. In
a related transaction, TSP exchanged a warrant it held for membership interests
in Equal Access, an indirect wholly- owned subsidiary of FiberNet. This exchange
had no impact on the financial statements of the Company since TSP did not
perform

                                       31

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

under the master license agreement, and the Company received no benefit from
the agreement. Consequently, TSP never earned any portion of the warrant and no
costs were capitalized related to this warrant.

10.   STOCK RESERVED FOR FUTURE ISSUANCE

      In addition to shares of common stock underlying outstanding stock
options, the Company has reserved for future issuance additional shares of
common stock, relating to outstanding warrants and convertible securities. As of
December 31, 2001, the Company had outstanding (i) warrants exercisable into
approximately 20.0 million shares of common stock at exercise prices ranging
from $0.01 to $6.56 per share and (ii) convertible preferred stock convertible
into approximately 19.7 million shares of common stock with a conversion price
of $1.31 for Series H preferred stock and a conversion price for the Series J
preferred stock equal to 90% of the average of the five lowest volume weighted
average prices for the Company's common stock during the 15 trading days
immediately prior to the date of conversion, provided that such average price
shall not be less than $.20 nor greater than $.50.

11.   PREFERRED STOCK

Series C Voting Preferred Stock

      On May 7, 1999 the Company issued approximately 133,000 shares of Series C
voting preferred stock. Each share is entitled to 117.03 votes to be voted at
any meeting of shareholders. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the corporation, the holders of
shares of the Series C voting preferred stock then outstanding, shall be
entitled to be paid, out of the assets of the Company available for distribution
to its stockholders, whether from capital, surplus or earnings, before any
payment shall be made in respect of the Company's common stock in an amount
equal to $1.50 per share. Each holder of each share of Series C voting preferred
stock shall have the right to convert such share for one share of common stock
at a conversion price of $1.50 per share, subject to adjustment. The holders of
the Series C voting preferred stock shall be entitled to share in any dividends
declared and paid by the Company to the common stock on a ratable basis. In
connection with this transaction, the Company recorded a non-recurring, non-cash
charge for a beneficial conversion feature in the amount of $0.1 million, to
reflect the market price of the common stock on the date of issuance.

Series D, E and F Preferred Stock

      On November 30, 1999 the Company issued approximately (i) 309,000 shares
of Series D preferred stock, (ii) 292,000 shares of Series E preferred stock and
(iii) 346,000 shares of Series F preferred stock. The shares of Series D, E and
F preferred stock are entitled to voting rights at any meeting of shareholders.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the corporation, the holders of shares of the Series D, E and F
preferred stock then outstanding, will be entitled to be paid, out of the assets
of the Company available for distribution to its stockholders, whether from
capital, surplus or earnings, before any payment shall be made in respect of the
Company's common stock an amount equal to $15.00, $15.00 and $30.00 per share,
respectively. Each holder of each share of Series D, E and F preferred stock
will have the right to convert such share for ten shares of common stock at
conversion prices of $1.50, $1.50 and $3.00 per share, respectively, subject to
adjustment. However upon the date of issuance, the effective conversion price of
these series of preferred stock ($7.25 per share) is equal to the value of the
common stock that was exchanged for each share of preferred stock, and into
which the preferred stock is convertible. The holders of the Series D, E and F
preferred stock are entitled to receive dividends at a rate of 4%, 8% and 8% per
annum, respectively. Such dividends are payable semi-annually, and at the option
of the Company, in cash or in additional shares of the respective series of
Series D, E or F preferred stock.

Series G, H and I Preferred Stock

      On June 30, 2000, the Company issued and sold 2,000,000 shares of Series G
preferred stock to Nortel in a private placement for an aggregate purchase price
of $20.0 million. Each share of Series G preferred stock was convertible into
one share of common stock of FiberNet at $10.00 per share, subject to
anti-dilution adjustments. In connection with this transaction, the Company
recorded a nonrecurring non-cash charge for a beneficial conversion feature in
the amount of $14.0 million to reflect the market price of the common stock as
of the date of the issuance.

      On July 31, 2000 the Company issued and sold 426,333 shares of Series H
preferred stock, $.001 par value per share (the "Series H preferred stock") to
Nortel in a private placement for an aggregate purchase price consisting of
$22.5 million in cash plus the cancellation by Nortel of the 2,000,000 shares of
the Series G preferred stock, including all accrued and unpaid dividends
thereon. Each share of Series H preferred stock is convertible into ten

                                       32

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

shares of common stock at $10.00 per share, subject to anti-dilution
adjustments. This amount is reflected in the accompanying balance sheet net of
the value of warrants to purchase 425,000 shares of common stock of the Company
issued in connection with this transaction. The value of these warrants was
estimated on the date of issuance using the Black-Scholes option pricing model.
In connection with this transaction, the Company recorded a nonrecurring
non-cash charge for the beneficial conversion feature in the amount of $12.3
million to reflect the market price of the common stock as of the date of the
issuance.

      On August 11, 2000 FiberNet issued and sold 62,500 shares of Series I
preferred stock to Nortel in a private placement for an aggregate purchase price
of $7.5 million. Each share of Series I preferred stock is convertible into ten
shares of common stock at $12.00 per share, subject to anti-dilution
adjustments. The Company recorded a beneficial conversion charge of $1.5 million
in connection with this issuance. To date, Nortel has invested a total of $50.0
million in preferred stock of the Company.

      On December 6, 2001, all of the Company's outstanding shares of Series C,
D, E and F preferred stock were converted into shares of the Company's common
stock. In addition, the holder of the Company's Series H and I preferred stock
converted all of its Series I preferred stock and 373,947 shares, or 79%, of its
Series H preferred stock into shares of the Company's common stock.

      Accordingly, as a result of the conversion of the Series C, D, E, F, H and
I preferred stock into common stock, the Company issued an aggregate of
20,647,551 shares of common stock to stockholders who held shares of Series C,
D, E, F, H and I preferred stock and cancelled an aggregate of 1,534,221 shares
of Series C, D, E, F, H and I preferred stock. The common stock issued pursuant
to such conversion is not registered under the Securities Act of 1933 and,
therefore, may only be sold pursuant to an applicable exemption from
registration, if any, under the Securities Act of 1933. In connection with the
conversion of the Series C, D, E and F preferred stock, the holders of such
preferred stock received, in the aggregate, warrants to purchase 985,000 shares
of the Company's common stock. The Company recorded a non-cash preferred stock
dividend of $0.3 million, representing the fair value of the warrants issued, as
determined using the Black-Scholes option model. These warrants have an exercise
price of $0.55 and an expiration date of 5 years from the date of issuance.

      In February 2001, the conversion price of the Series H and Series I was
reduced to $4.38, in accordance with the original terms of the issuance
transactions. The certificates of designation of the Series H and Series I
include provisions requiring the conversion prices to be lowered to the per
share price at which the Company issues any shares of common stock, subject to
certain exceptions, subsequent to the initial issuance of the Series H and
Series I. In February 2001, the Company issued shares of common stock in a
directed public offering at a price of $4.38 per share, resulting in the
reduction of the conversion price. The Company recorded a beneficial conversion
charge of $21.0 million as a result of the reduction of the conversion price.
Additionally, in connection with the conversion of the Series H and I preferred
stock, the conversion price of the remaining 100,000 shares of Series H
preferred stock was reduced to $1.31. However, as all of the proceeds from the
issuances of the Series H and Series I had been allocated to beneficial
conversion features, no additional proceeds were allocated upon the reset of the
conversion price of the Series H preferred stock to $1.31.

Series J Preferred Stock

      On December 7, 2001, the Company consummated a directed public offering of
360 shares of a new series of preferred stock, designated Series J preferred
stock for an aggregate purchase price of $3.6 million, under the Company's
existing shelf registration statement. Pursuant to the stock purchase agreement,
the Company also issued to the purchasers two series of warrants, Series A and
B, to purchase up to 10,211,701 shares of the Company's common stock having an
expiration date five years from the date of issuance and at an exercise price of
$0.30 per share, all of which are subject to adjustment in certain circumstances
and 4,509,902 of which, representing the Series B warrants, are subject to
certain vesting conditions. In addition, subject to certain conditions, the
stock purchase agreement includes two additional closings for the sale of an
additional $5.7 million of the Company's Series J preferred stock to the
purchasers. The Company may opt out of one or both of these subsequent closings
upon payment of cash consideration and upon approval of the Company's lenders
under its senior secured credit facility. The Company also paid $0.3 million and
issued 327,273 shares of its common stock to the placement agent for the sale of
the Series J preferred stock.

      The Company may redeem any or all of the currently outstanding shares of
Series J preferred stock for 150% of the purchase price of such stock. In
addition, under certain circumstances, the Company must redeem any outstanding
Series J preferred stock in exchange for either 100% or 150% of the purchase
price, depending upon the

                                       33

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

event that transpires. Furthermore, subject to certain adjustments, the Series J
preferred stock is convertible into the number of shares of common stock equal
to 90% of the average of the five lowest volume weighted average prices for the
Company's common stock during the 15 trading days immediately prior to the date
of conversion, provided that such average price shall not be less than $0.20 nor
greater than $0.50 for the Series J preferred stock issued at the first closing.
Other than with respect to matters directly affecting the rights, preferences
and privileges of the Series J preferred stock, the terms of the Series J
preferred stock do not provide voting rights to the holders thereof.

      As the purchasers have made a firm commitment to participate in the two
additional closings totaling $5.7 million, the transaction has been accounted
for as a subscription receivable from Series J preferred stock. The Series J
preferred stock is reflected in the accompanying balance sheet net of the
relative fair value of warrants to purchase 10.2 million shares of common stock
of the Company issued in connection with this transaction. The value of these
warrants was estimated on the date of issuance using the Black-Scholes option
pricing model and determined to be $3 million. However, as the value assigned to
the warrants is based on the relative fair value of the warrants and the
preferred stock, a valuation of $1.8 million was assigned to the warrants, based
upon their relative fair value. In connection with this transaction, the Company
recorded a non-recurring non-cash charge for a beneficial conversion feature in
the amount of $2.1 million to reflect the market price of the common stock as of
the date of the issuance.

12.   RELATED PARTY TRANSACTIONS

      During 2000, the Company made payments to Petrocelli Electric Co., a
related party, of approximately $38,000 for consulting and contracting services
rendered, respectively. Mr. Santo Petrocelli, former Chairman of the Company, is
the President and Chief Executive Officer of Petrocelli Electric Co. and
Petrocelli Electrical Services and the principal of SMFS, Inc., a stockholder in
the Company. Other consulting fees to related parties for the years ended
December 31, 2001 and 2000 included approximately: (i) none and $70,665 to
Richard D. Sayers, a director of the Company, (ii) $10,417 and $103,957 to Frank
Chiaino, a former officer of the Company, (iii) none and $250,000 to Signal
Equity Management Corporation, of which Timothy P. Bradley, a director of the
Company, is the president, and (iv) none and $250,000 to Waterview Advisors
L.L.C., of which William Vrattos, a former director of the Company, was the
managing director, respectively.

      The Company capitalized in property, plant and equipment amounts paid for
services from Petrocelli Electrical Services, a related party, of approximately
$628,000 and $70,000 during 2001 and 2000, respectively. Additionally, the
Company expensed approximately $140,000 of consultant fees from this related
party during 1999. As of December 31, 2001 and 2000, the Company had a payable
to Petrocelli Electrical Services of approximately $268,000 and $31,000,
respectively.

      The Company capitalized services of approximately $57,000 of consulting
services from Landtel Telecommunications, a related party, during 1999.
Additionally, the Company expensed approximately $120,000, $128,831 and $57,000
of consultant fees from this related party during 2001, 2000 and 1999,
respectively. Mr. Joseph Tortoretti is the majority stockholder of Landtel
Telecommunications and a principal of LTJ Group, Inc., a stockholder of the
Company.

      The Company capitalized in property, plant and equipment amounts paid for
services from Nortel, a shareholder, of approximately $7.4 million and $31.4
million during 2001 and 2000, respectively. As of December 31, 2001 the Company
had a Note Payable to Nortel for approximately $2.3 million. See Note 7. As of
December 31, 2000, the Company had a trade payable to Nortel Networks Inc. of
approximately $2.3 million.

13.   INCOME TAXES

      A reconciliation of the actual income tax (provision) benefit and the tax
computed by applying the U.S. federal rate (35%) to the loss from continuing
operations, before income taxes for the three years ended December 31, 2001,
2000 and 1999 follows (dollars in thousands):

                                       34

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

<TABLE>
<CAPTION>
                                                                                    2001          2000           1999
                                                                                ----------    ----------     ----------
<S>                                                                             <C>           <C>            <C>
         Computed tax at statutory rate ......................................  $  (51,303)   $  (14,392)    $  (10,573)
         State and local, net of federal income tax benefit ..................      (7,329)           --         (1,510)
         Interest expense from beneficial conversion .........................          29        (2,056)         6,348
         Other ...............................................................          --           614            (30)
         Change in valuation allowance .......................................      58,603        15,834          5,765
                                                                                ----------    ----------     ----------
                                                                                $       --    $       --     $       --
                                                                                ==========    ==========     ==========

<CAPTION>
                                                                                   2001           2000          1999
                                                                                ----------    ----------     ----------
<S>                                                                             <C>           <C>            <C>
         Deferred Taxes:
         Deferred expenses ...................................................  $      933    $    1,700     $    4,466
         Stock options .......................................................       4,359         4,828          1,441
         Depreciation and impairment of property, plant and
            equipment ........................................................      12,163          (180)           (14)
         Goodwill impairment .................................................      29,319            --             --
         Net operating loss ..................................................      35,447        13,820          3,862
         Bad debts ...........................................................         898           188             --
         Valuation allowance .................................................     (83,119)      (20,356)        (9,755)
                                                                                ----------    ----------     ----------
         Net deferred tax asset ..............................................
                                                                                $       --    $       --     $       --
                                                                                ==========    ==========     ==========
</TABLE>

      As of December 31, 2001, the Company has federal income tax net operating
loss carryforwards of approximately $89 million. The federal tax loss
carryforwards begin expiring in 2012. Full valuation allowances have been
recorded against all temporary differences.

      During 2001, 2000 and 1999 the Company did not record a current or
deferred federal tax provision.

14.   METROMEDIA FIBER NETWORK SERVICES, INC. PRIVATE NETWORK AGREEMENT

      Pursuant to a Private Network Agreement dated as of December 17, 1999 and
other related agreements by and between Metromedia Fiber Network Services, Inc.
("MFN") and the Company ("the Network Agreement"), the Company issued five
million shares at an assumed price of $8.69 per share. As part of the Network
Agreement, the Company issued four million shares (of the total five million) to
acquire an exclusive right of use of dark fiber in multiple markets for a total
price of approximately $34.8 million. This amount has been reflected in the
accompanying consolidated financial statements as property, plant and equipment.
As part of the remaining part of the Network Agreement, the Company issued one
million shares (of the total five million) to repurchase a 10% membership
interest in Local Fiber, LLC held by MFN. The transaction was recorded as a
purchase business combination. The Company recorded approximately $8.7 million
of goodwill in the accompanying consolidated financial statements, which will be
amortized over a period of 15 years.

                                       35

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

15.   QUARTERLY INFORMATION (dollars in thousands, except per share data)
      (unaudited)

<TABLE>
<CAPTION>
                                                                        March 31,     June 30,   September 30,   December 31,
                                                                         2001(a)        2001        2001(b)         2001(c)
                                                                        ---------    ---------   -------------   ------------
<S>                                                                     <C>          <C>          <C>            <C>
Revenues .............................................................  $  7,374     $  8,156     $   7,674      $    7,991
Loss from Operations .................................................    (8,410)      (7,724)      (65,616)        (56,235)
Net loss before extraordinary item ...................................   (10,536)      (9,807)      (67,905)        (58,331)
Net loss .............................................................   (17,934)      (9,807)      (67,905)        (58,331)
Net loss applicable to common shareholders                               (39,684)      (9,690)      (67,976)        (60,816)
Net loss applicable to common shareholders per share-basic              $  (1.06)    $  (0.24)    $   (1.70)     $    (1.49)
    and diluted .....................................................

<CAPTION>
                                                                        March 31,     June 30,   September 30,   December 31,
                                                                          2000        2000(d)       2000(e)          2000
                                                                        ---------    ---------   -------------   ------------
<S>                                                                     <C>          <C>          <C>            <C>
Revenues .............................................................  $    111     $  1,656     $   4,599      $    6,751
Loss from Operations .................................................    (7,254)      (6,236)       (7,024)        (14,949)
Net loss before extraordinary item ...................................    (7,205)      (7,509)       (8,650)        (17,756)
Net loss .............................................................    (7,205)      (7,509)       (8,650)        (17,756)
Net loss applicable to common shareholders                               (10,056)     (24,189)      (26,167)        (16,587)
New loss applicable to common shareholders per share-basic              $  (0.38)    $  (0.86)    $   (0.84)     $    (0.51)
    and diluted .....................................................
</TABLE>

_____________
(a)  The Company recorded a charge of $7.4 million related to an early
     extinguishment of debt related to the modification of its Credit Facility.
     In addition, the Company recorded a charge for a beneficial conversion
     feature of $21.7 million in connection with the reset of the conversion
     price of the Series H and Series I preferred stock from $10 and $12 per
     share, respectively, to $4.38 per share. See Note 11. This beneficial
     conversion feature was not reflected in the Form 10-Q filed for the first
     quarter of 2001. On February 2, 2001, the Company completed a $28.2 million
     directed public offering of common stock under the shelf registration
     statement. The Company issued 6,440,000 shares of common stock at a
     purchase price of $4.375 per share as well as warrants to purchase an
     additional 1,288,000 shares at an exercise price of $6.56 per share with a
     term of three years. The fair value of the warrants was calculated using
     the Black-Scholes option pricing model.

(b)  The Company recorded a $56.5 million charge for the impairment of goodwill
     relating to the acquisition of Devnet.

(c)  The Company recorded a $51.8 million charge for the impairment of certain
     long-lived assets. In addition, the Company recorded a beneficial
     conversion feature of $2.1 million related to the issuance of Series J
     preferred stock.

(d)  The Company recorded a $14.0 million beneficial conversion feature related
     to the issuance of Series G preferred stock.

(e)  The Company acquired Devnet on July 31, 2000. The acquisition was
     accounted for under the purchase method of accounting. The Company also
     recorded a beneficial conversion feature of $13.8 million in connection
     with the issuance of Series H and Series I preferred stock.

16.  RESTATEMENT

     The Company restated its consolidated financial statements for the year
ended December 31, 1999 to record a beneficial conversion feature of $7.9
million in connection with the issuance of the May Convertible Notes and to
reduce the beneficial conversion feature on the conversion of the Series D, E
and F preferred stock to zero. In 1999, the Company was a development-stage
company and did not record any revenue. Other than with respect to the
consolidated financial statements for the year ended December 31, 1999, this
restatement has no impact on the Company's assets or total stockholders' equity
and it resulted in a corresponding increase to additional paid-in-capital and a
decrease in preferred stock and accumulated deficit. The change increased net
loss by $7.9 million and decreased net loss applicable to common shareholders by
$41.2 million. These changes decreased net loss applicable to common
stockholders per share by $2.45. The change has no impact on the Company's cash
flows. The Company originally did not record a beneficial conversion relating to
the issuance of the May 1999 convertible notes, assuming a $1.50 market value
per share. The restatement assumes a $4.94 market value per share. Also, the
Company incorrectly recorded a beneficial conversion of $49.2 million on the
subsequent conversion of the May Convertible Notes and the September Convertible
Notes into preferred stock in 1999. The restated financial statements include
the correction of these errors.

                                       36

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

17.   SUBSEQUENT EVENTS

      On January 2, 2002, the Company entered into an interest rate swap
transaction with Deutsche Bank AG for a notional amount of $25.0 million and a
term of two years. Pursuant to this transaction, the Company is obligated to
make quarterly interest payments at a fixed, annual interest rate of 3.7%.
Because such interest rate excludes the applicable margin of 4.5% that is paid
on the Credit Facility, the total interest rate on this swap transaction is
8.2%. As part of this agreement, Deutsche Bank AG is obligated to pay the
Company on a quarterly basis, a floating rate of interest based upon LIBOR with
a designed maturity of three months. On March 20, 2002, the Company terminated
this interest rate swap transaction with Deutsche Bank AG with no payments of
other amounts owed by either party. As a result, all of the Company's
outstanding borrowings under its credit facility bear interest at a floating
rate.

      On March 15, 2002, the Company received gross proceeds of $2.0 million
from the issuance of a subordinated note to an existing investor. The issuance
of the note was in lieu of a second closing on our series J convertible
preferred stock, as was previously contemplated. Due to this change in the
contractual obligation of our series J convertible preferred stock, the
subscription receivable at December 31, 2001 of $5.7 million was reversed in the
first quarter of 2002. The subordinated note has a maturity date of June 14,
2002 and bears interest, which is due and payable on the maturity date, at an
annual rate of 8%. The subordinated note may be converted into equity, on terms
to be determined, upon the occurrence of certain events. Additionally, in
connection with this financing, the lenders under the Company's credit facility
agreed to extend the due date of the current quarterly interest payment to April
15, 2002.

      On April 15, 2002, in connection with the Company's ongoing efforts to
seek additional financing and to undertake a recapitalization, the lenders under
the Company's credit facility agreed to further extend the due date of the
current quarterly interest payment to May 6, 2002, and, depending on the
satisfaction of certain conditions, to May 27, 2002.

      On May 6, 2002 the lenders again agreed to extend the due date of the
current quarterly interest payment to May 28, 2002, and the Company reached a
conditional agreement with the lenders to convert $25 million of indebtedness
into convertible preferred stock with a conversion price of $0.40 per share.
Under the arrangement the lenders would convert $25 million of indebtedness into
a minimum of 2,500 shares of new series K preferred stock. The closing of this
transaction is subject to a number of conditions, including, but not limited to
final credit approval of each of the lenders, the completion of an acceptable
equity financing and the conversion of all of the Company's currently
outstanding convertible securities, excluding certain options and warrants. Each
share of series K preferred stock would have a stated value of $10,000 per share
and would convert into 25,000 shares of common stock.

      Concurrently with the consummation of the transaction and the related
equity issuance and conversions, the holders of the series K preferred stock
would be issued a sufficient number of warrants to purchase shares of common
stock to ensure that they would hold on an aggregate basis a fully-diluted
ownership position in the company of at least 30%. The exercise price of such
warrants issued to the holders of the series K preferred stock would be the
lower of 125% of the market price as of the closing date or 110% of the exercise
price of any warrants issued to investors in the concurrent equity financing,
and the term of the warrants would be five years.

      This arrangement would also involve certain amendments to the provisions
of the senior secured credit facility, including the reduction of the maximum
availability to approximately $77 million and the reduction in the interest rate
currently from LIBOR + 4.5% to LIBOR + 3.75%.

      It is anticipated that, if these conditions are met, the closing of these
transactions will occur as soon as practicable. However, there can be no
assurance that the Company will be able to successfully effectuate any or all of
the transactions described above. In addition, any financing or broader
recapitalization the Company undertakes will be substantially dilutive to the
Company's existing stockholders.

18.   NON-RECURRING EXPENSES

      During 1999, the Company recorded non-recurring expenses of $4.3 million,
comprised of a $3.7 million non-cash charge, relating to a prospective
settlement of certain litigation, and $0.6 million, relating to the decommission
of the Company's Lucent 5ESS-2000 telecommunication switch located at its
facility at 60 Hudson Street in New York, New York. The prospective settlement
related to litigation between the Company and certain of the investors in the
financing transaction that occurred in 1999. In 1999, the Company agreed to
issue additional securities to these investors to settle such claims. The
securities were actually issued in 2000. The Company elected to

                                       37

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

decommission the telecommunication switch because the equipment was no longer
necessary for the Company's business operations. The Company did not record any
significant non-recurring expenses for fiscal 2000 or fiscal 2001.

                                       38

<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)   Financial Statements

      (1) and (2) See "Index to Consolidated Financial Statements and
Supplemental Schedules" at Item 8 of this Annual Report on Form 10-K. Schedules
not included herein are omitted because they are not applicable or the required
information appears in the Consolidated Financial Statements or Notes thereto.

      (3) Exhibits

  Exhibit
    No.                                  Exhibit Name
----------                               ------------

    2.1        Agreement and Plan of Reorganization, dated as of June, 2, 2000,
               by and among us, FiberNet Holdco, Inc., FiberNet Merger Sub,
               Inc., Devnet Merger Sub, LLC, Devnet L.L.C. and FP Enterprises
               L.L.C. (excluding the annexes, schedules and exhibits thereto)
               (incorporated by reference to Exhibit 2.1 to our Current Report
               on Form 8-K, filed on June 8, 2000).

    3.1        Certificate of Incorporation, dated May 17, 2000 (incorporated by
               reference to Exhibit 3.1 to our Registration Statement on Form
               S-1, filed on August 15, 2001).

    3.2        Certificate of Amendment to Certificate of Incorporation, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.2 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.3        Certificate of Designation of Series C Preferred Stock, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.3 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.4        Certificate of Designation of Series D Preferred Stock, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.4 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.5        Certificate of Designation of Series E Preferred Stock, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.5 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.6        Certificate of Designation of Series F Preferred Stock, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.6 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.7        Certificate of Designation of Series H Preferred Stock, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.7 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.8        Certificate of Designation of Series I Preferred Stock, dated
               July 31, 2000 (incorporated by reference to Exhibit 3.8 to our
               Registration Statement on Form S-1, filed on August 15, 2001).

    3.9        Certificate of Designation of Series J Preferred Stock, dated
               December 6, 2001 (incorporated by reference to Exhibit 4.1 to our
               Current Report on Form 8-K, filed on December 7, 2001).

   3.10        Amended and Restated By-Laws of the Company adopted August 17,
               2000 (incorporated by reference to Exhibit 3.9 to our
               Registration Statement on Form S-1, filed on September 8, 2000).

    4.1        Form of Certificate for our Common Stock (incorporated by
               reference to Exhibit 4.1 to our Registration Statement on Form
               S-1, filed on August 15, 2000).

    4.2        Form of Warrant to purchase our Common Stock at a purchase price
               of $0.67 per share, issued in connection with a private placement
               on May 7, 1999 (incorporated by reference to Exhibit 4.2 to our

<PAGE>

Exhibit
  No.                                 Exhibit Name
-------                               ------------

               Registration Statement on Form S-1, filed on August 15, 2000).

    4.3        Form of Warrant to purchase our Common Stock at a purchase price
               of $1.50 per share, issued in connection with a private placement
               on May 7, 1999 (incorporated by reference to Exhibit 4.3 to our
               Registration Statement on Form S-1, filed on August 15, 2000).

    4.4        Amended and Restated Stockholders Agreement, dated as of January
               31, 2001, between us, Signal Equity Partners, L.P. (formerly
               known as Signal Capital Partners, L.P.), as the Majority in
               Interest of the Purchasers, and Nortel Networks Inc., amending
               and restating the Stockholders Agreement dated as of May 7, 1999,
               by and among us and the stockholders listed therein (incorporated
               by reference to Exhibit 4.1 to our Current Report on Form 8-K,
               filed on February 2, 2001).

    4.5        Registration Rights Agreement, dated as of May 7, 1999 by and
               among us and the stockholders listed therein (incorporated by
               reference to Exhibit I of Schedule 13D, filed on May 17, 1999
               with respect to our Common Stock).

    4.6        Registration Rights Agreement, dated as of June 30, 2000, between
               us and Nortel Networks Inc. (incorporated by reference to Exhibit
               4.1 to our Form 8-K filed on July 11, 2000).

    4.7        Third Limited Waiver and Agreement, dated February 9, 2001,
               between us, Deutsche Banc Alex. Brown Inc., Deutsche Bank
               Securities Inc. and Toronto Dominion (Texas), Inc. (incorporated
               by reference to Exhibit 4.1 to our Current Report on Form 8-K,
               filed on February 15, 2001).

    4.8        Warrant Agreement, dated February 9, 2001, between us and First
               Chicago Investment Corporation (incorporated by reference to
               Exhibit 4.2 to our Current Report on Form 8-K, filed on February
               15, 2001).

    4.9        First Limited Waiver and Agreement, dated as of February 9, 2001,
               between us and First Union Investors, Inc. (incorporated by
               reference to Exhibit 4.3 to our Current Report on Form 8-K, filed
               on February 15, 2001).

   4.10        Form of Warrant Agreement to purchase our Common Stock at a
               purchase price of $6.56 per share, issued in connection with a
               public offering on February 1, 2001 (incorporated by reference to
               Exhibit 4.1 to our Current Report on Form 8-K, filed on February
               5, 2001).

   4.11        Form of Series A Warrant to purchase our Common Stock at a
               purchase price of $.30 per share, issued in connection with a
               public offering on December 7, 2001 (incorporated by reference to
               Exhibit 4.2 to our Current Report on Form 8-K, filed on December
               7, 2001).

   4.12        Form of Series B Warrant to purchase our Common Stock at a
               purchase price of $.30 per share, issued in connection with a
               public offering on December 7, 2001 (incorporated by reference to
               Exhibit 4.3 to our Current Report on Form 8-K, filed on December
               7, 2001).

   4.13        Form of Promissory Note between us and SDS Merchant Fund, L.P.
               (incorporated by reference to Exhibit 4.1 to our Current Report
               on Form 8-K, filed on March 18, 2002).

   10.1        Office Lease Agreement, between Hudson Telegraph Associates and
               us, dated as of February 17, 1998 (incorporated by reference to
               our Quarterly Report on Form 10-QSB, filed on November 16, 1998).

   10.2        Agreement of Lease, between 570 Lexington Company, L.P. and us,
               dated as of August 3, 1998 (incorporated by reference to Exhibit
               10.5 to our Quarterly Report on Form 10-QSB filed on May 15,
               1998).

   10.3        Securities Purchase Agreement, dated as of May 7, 1999 by and
               among us and the purchasers listed therein (incorporated by
               reference to Exhibit A of Schedule 13D, filed on May 17, 1999
               with respect to our Common Stock).

<PAGE>

Exhibit
  No.                                 Exhibit Name
-------                               ------------


   10.4        Securities Purchase Agreement, dated as of September 28, 1999 by
               and among us and the purchasers listed therein (incorporated by
               reference to Exhibit N of Schedule 13D/A, filed on October 14,
               1999 with respect to our common stock).


   10.5        First Amendment, dated as of September 28, 1999 to the Security
               Agreement dated as of May 7, 1999 from us and our subsidiaries to
               the Collateral Agent listed therein (incorporated by reference to
               Exhibit 4.5 of our Current Report on Form 8-K, filed on October
               5, 1999).

   10.6        First Amendment, dated as of September 28, 1999 to the Guaranty
               Agreement dated as of May 7, 1999 made by us, FiberNet Equal
               Access, L.L.C. and Local Fiber, LLC (incorporated by reference to
               Exhibit 4.6 of our Current Report on Form 8-K, filed on October
               5, 1999).

   10.7        First Amendment, dated as of September 28, 1999 to the Pledge
               Agreement dated as of May 7, 1999 between us and the Collateral
               Agent listed therein (incorporated by reference to Exhibit 4.7 of
               our Current Report on Form 8-K, filed on October 5, 1999).

   10.8        First Amendment, dated as of September 28, 1999 to the Parent
               Pledge Agreement dated as of May 7, 1999 between us and the
               Collateral Agent listed therein (incorporated by reference to
               Exhibit 4.8 of our Current Report on Form 8-K, filed on October
               5, 1999).

   10.9        Conversion and Exchange Agreement, dated as of November 30, 1999
               (incorporated by reference to Exhibit S of Schedule 13D, filed on
               December 2, 1999 with respect to our common stock).

 *10.10        Private Network Agreement, dated as of November 30, 1999 between
               us and Metromedia Fiber Network Services, Inc.(incorporated by
               reference to Exhibit 10.9 to our Annual Report on 10-KSB, filed
               on March 30, 2000).

  10.11        Master Purchase Agreement, dated as of December 31, 1999 between
               us and Nortel Networks Inc. (incorporated by reference to Exhibit
               10.16 to our Registration Statement on Form S-1, filed on
               September 8, 2000).

  10.12        Lease Agreement, dated February 29, 2000 between 111 Eighth
               Avenue LLC and us (incorporated by reference to Exhibit 10.11 to
               our Annual Report on 10-KSB, filed on March 30, 2000).

  10.13        Employment Agreement, dated as of January 18, 2000 between us and
               Lance L. Mickel (incorporated by reference to Exhibit 10.17 to
               our Registration Statement on Form S-1, filed on September 8,
               2000).

  10.14        Note in favor of Deutsche Bank AG New York Branch, dated as of
               April 11, 2000 (incorporated by reference to Exhibit 4.15 to our
               Quarterly Report on Form 10-QSB, filed on May 15, 2000).

  10.15        Note in favor of Nortel Networks Inc., dated as of April 11, 2000
               (incorporated by reference to Exhibit 4.16 to our Quarterly
               Report on Form 10-QSB, filed on May 15, 2000).

  10.16        Note in favor of Toronto Dominion (Texas), dated as of April 11,
               2000 (incorporated by reference to Exhibit 4.17 to our Quarterly
               Report on Form 10-QSB, filed on May 15, 2000).

  10.17        Note in favor of First Union National Bank, dated as of July 31,
               2000 (incorporated by reference to Exhibit 10.23 to our
               Registration Statement on Form S-1, filed on September 8, 2000).

  10.18        Securities Purchase Agreement, dated as of June 30, 2000 between
               us and Nortel Networks Inc. (incorporated by reference to Exhibit
               10.1 to our Current Report on Form 8-K, filed on July 11, 2000).

  10.19        Securities Purchase Agreement, dated as of July 28, 2000 between
               us and Nortel Networks Inc. (incorporated by reference to Exhibit
               10.2 to our Current Report on Form 8-K, filed on August 4, 2000).

  10.20        Securities Purchase Agreement, dated as of August 11, 2000
               between us and Nortel Networks Inc. (incorporated by reference to
               Exhibit 10.1 to our Current Report on Form 8-K, filed on August
               15,

<PAGE>

Exhibit
  No.                                 Exhibit Name
-------                               ------------

               2000).

 10.21         Assignment and Assumption Agreement, dated as of August 11, 2000
               by and between us and FiberNet Operations, Inc. (incorporated by
               reference to Exhibit 10.2 to our Current Report on Form 8-K,
               filed on August 15, 2000).

 10.22         Amendment Number 1 to Master Purchase Agreement, effective as of
               June 22, 2000 between us and Nortel Networks Inc. (incorporated
               by reference to Exhibit 10.50 to our Registration Statement on
               Form S-1, filed on September 8, 2000).

 10.23         Common Stock and Warrant Purchase Agreement, dated as of February
               1, 2001 by and among us and the Purchasers listed therein
               (incorporated by reference to Exhibit 10.1 to our Current Report
               on Form 8-K, filed on February 5, 2001).

 10.24         Amended and Restated Credit Agreement, dated February 9, 2001
               among FiberNet Operations, Inc., Devnet L.L.C., Deutsche Bank AG
               New York Branch, First Union Investors, Inc., Toronto Dominion
               (USA) Securities Inc. and Deutsche Banc Alex. Brown (incorporated
               by reference to Exhibit 10.1 to our Current Report on Form 8-K,
               filed on February 15, 2001).

 10.25         Amended and Restated FiberNet Security Agreement, dated as of
               February 9, 2001 between FiberNet Operations, Inc. and Deutsche
               Bank AG New York Branch (incorporated by reference to Exhibit
               10.2 to our Current Report on Form 8-K, filed on February 15,
               2001).

 10.26         Amended and Restated Devnet Security Agreement, dated as of
               February 9, 2001 between Devnet L.L.C. and Deutsche Bank AG New
               York Branch (incorporated by reference to Exhibit 10.3 to our
               Current Report on Form 8-K, filed on February 15, 2001).

 10.27         Amended and Restated Parent Security Agreement, dated as of
               February 9, 2001 between us and Deutsche Bank AG New York Branch
               (incorporated by reference to Exhibit 10.4 to our Current Report
               on Form 8-K, filed on February 15, 2001).

 10.28         Amended and Restated Subsidiary Security Agreement (FiberNet
               Telecom), dated as of February 9, 2001 between FiberNet Telecom,
               Inc. and Deutsche Bank AG New York Branch (incorporated by
               reference to Exhibit 10.5 to our Current Report on Form 8-K,
               filed on February 15, 2001).

 10.29         Amended and Restated Subsidiary Security Agreement (Equal
               Access), dated as of February 9, 2001 between FiberNet Equal
               Access, L.L.C. and Deutsche Bank AG New York Branch (incorporated
               by reference to Exhibit 10.6 to our Current Report on Form 8-K,
               filed on February 15, 2001).

 10.30         Amended and Restated Subsidiary Security Agreement (Local Fiber),
               dated as of February 9, 2001 between Local Fiber L.L.C. and
               Deutsche Bank AG New York Branch (incorporated by reference to
               Exhibit 10.7 to our Current Report on Form 8-K, filed on February
               15, 2001).

 10.31         Amended and Restated Parent Pledge Agreement (Devnet), dated as
               of February 9, 2001 between us and Deutsche Bank AG New York
               Branch with respect to 96.386% of the membership interests of
               Devnet L.L.C. (incorporated by reference to Exhibit 10.8 to our
               Current Report on Form 8-K, filed on February 15, 2001).

 10.32         Amended and Restated Parent Pledge Agreement (FiberNet
               Operations), dated as of February 9, 2001 between us and Deutsche
               Bank AG New York Branch with respect to all of the capital stock
               of FiberNet Operations, Inc. (incorporated by reference to
               Exhibit 10.9 to our Current Report on Form 8-K, filed on February
               15, 2001).

 10.33         Amended and Restated Parent Pledge Agreement (FiberNet
               Telecom/Devnet), dated as of February 9, 2001 between FiberNet
               Operations, Inc. and Deutsche Bank AG New York Branch with
               respect to 3.614% of the membership interests of Devnet L.L.C.
               and all of the capital stock of FiberNet Telecom, Inc.
               (incorporated by reference to Exhibit 10.10 to our Current Report
               on Form 8-K, filed on February


<PAGE>

Exhibit
  No.                                 Exhibit Name
-------                               ------------

               15, 2001).

 10.34         Amended and Restated FiberNet Telecom Pledge Agreement (Equal
               Access), dated as of February 9, 2001 between FiberNet Telecom,
               Inc. and the Administrative Agent with respect to all of the
               membership interests of FiberNet Equal Access, L.L.C.
               (incorporated by reference to Exhibit 10.11 to our Current Report
               on Form 8-K, filed on February 15, 2001).

 10.35         Amended and Restated FiberNet Telecom Pledge Agreement (Local
               Fiber), dated as of February 9, 2001 between FiberNet Telecom,
               Inc. and Deutsche Bank AG New York Branch with respect to all of
               the membership interests of Local Fiber L.L.C. (incorporated by
               reference to Exhibit 10.12 to our Current Report on Form 8-K,
               filed on February 15, 2001).

 10.36         Amended and Restated Parent Guaranty Agreement, dated as of
               February 9, 2001 executed and delivered by us to Deutsche Bank AG
               New York Branch (incorporated by reference to Exhibit 10.13 to
               our Current Report on Form 8-K, filed on February 15, 2001).

 10.37         Amended and Restated Subsidiary Guaranty Agreement (FiberNet
               Telecom), dated as of February 9, 2001 executed and delivered by
               FiberNet Telecom, Inc. to Deutsche Bank AG New York Branch
               (incorporated by reference to Exhibit 10.14 to our Current Report
               on Form 8-K, filed on February 15, 2001).

 10.38         Amended and Restated Subsidiary Guaranty Agreement (Equal
               Access), dated as of February 9, 2001 executed and delivered by
               FiberNet Equal Access, L.L.C. to Deutsche Bank AG New York Branch
               (incorporated by reference to Exhibit 10.15 to our Current Report
               on Form 8-K, filed on February 15, 2001).

 10.39         Amended and Restated Subsidiary Guaranty Agreement (Local Fiber),
               dated as of February 9, 2001 executed and delivered by Local
               Fiber L.L.C. to Deutsche Bank AG New York Branch (incorporated by
               reference to Exhibit 10.16 to our Current Report on Form 8-K,
               filed on February 15, 2001).

 10.40         Stock Purchase Agreement, dated as of December 7, 2001, by and
               among us and the Purchasers listed therein (incorporated by
               reference to our Current Report on Form 8-K, filed on December 7,
               2001).

 10.41         Third Amendment, dated as of December 10, 2001,among FiberNet
               Operations, Inc. Devnet L.L.C. and Deutsche Bank AG New York
               Branch, to the Amended and Restated Credit Agreement, dated as of
               February 9, 2001 (incorporated by reference to Exhibit 10.41 to
               our Annual Report on Form 10-K, filed on March 1, 2002).

 10.42         Promissory Note, dated December 7, 2001, between the Company and
               Nortel Networks Inc. (incorporated by reference to Exhibit 10.42
               to our Annual Report on Form 10-K, filed on March 1, 2002).

  21.1         Our Subsidiaries (incorporated by reference to Exhibit 21.1 to
               our Registration Statement on Form S-1, filed on August 15,
               2000).

  23.1         Consent of Arthur Andersen LLP. (incorporated by reference to
               Exhibit 23.1 to our Annual Report on Form 10-K, filed on March 1,
               2002).

  23.2         Consent of Mendelsohn Kary Bell & Natoli LLP. (incorporated by
               reference to Exhibit 23.1 to our Annual Report on Form 10-K,
               filed on March 1, 2002).

  23.3         Consent of Arthur Andersen LLP.

  23.4         Consent of Mendelsohn Kary Bell & Natoli LLP.

_____________________

<PAGE>

  *  Confidential treatment has been requested for portions of this exhibit.
     These portions have been omitted and filed separately with the Commission.


 (b) Reports on Form 8-K

     On December 7, 2001, we filed a Current Report on Form 8-K under Item 5
     regarding the conversion by certain of our stockholders of their Series
     C,D,E,F,H and I Preferred Stock and our sale of Series J Preferred Stock.


<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                FIBERNET TELECOM GROUP, INC.


                                By: /s/    Michael S. Liss
                                    --------------------------------------------
                                    Name:  Michael S. Liss
                                    Title: President and Chief Executive Officer

      Date:  May 24, 2002

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

               Name                            Title                        Date
               ----                            -----                        ----

                                                                   May 24, 2002
   /s/   Michael S. Liss               Director, President and
------------------------------------
         Michael S. Liss                 Chief Executive Officer
                                         (Principal Executive
                                         Officer)

                                                                   May 24, 2002
   /s/   Jon A. DeLuca                 Chief Financial Officer
------------------------------------
         Jon A. DeLuca                   (Principal Accounting
                                         Officer)
                                                                   May 24, 2002
   /s/   Timothy P. Bradley            Director
------------------------------------
         Timothy P. Bradley

                                                                   May 24, 2002
   /s/   Philip L. DiGennaro           Director
------------------------------------
         Philip L. DiGennaro

                                                                   May 24, 2002
   /s/   Roy (Trey) D. Farmer III      Director
------------------------------------
         Roy (Trey) D. Farmer III
                                                                   May 24, 2002
   /s/   Charles J. Mahoney            Director
------------------------------------
         Charles J. Mahoney

                                                                   May 24, 2002
   /s/   Richard E. Sayers             Director
------------------------------------
         Richard E. Sayers

<PAGE>

                                  EXHIBIT INDEX

      The following exhibits are filed with this Annual Report on Form 10-K:

Exhibit
  No.                             Exhibit Name
-------                           ------------

  2.1     Agreement and Plan of Reorganization, dated as of June, 2, 2000, by
          and among us, FiberNet Holdco, Inc., FiberNet Merger Sub, Inc., Devnet
          Merger Sub, LLC, Devnet L.L.C. and FP Enterprises L.L.C. (excluding
          the annexes, schedules and exhibits thereto) (incorporated by
          reference to Exhibit 2.1 to our Current Report on Form 8-K, filed on
          June 8, 2000).

  3.1     Certificate of Incorporation, dated May 17, 2000 (incorporated by
          reference to Exhibit 3.1 to our Registration Statement on Form S-1,
          filed on August 15, 2001).

  3.2     Certificate of Amendment to Certificate of Incorporation, dated July
          31, 2000 (incorporated by reference to Exhibit 3.2 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.3     Certificate of Designation of Series C Preferred Stock, dated July 31,
          2000 (incorporated by reference to Exhibit 3.3 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.4     Certificate of Designation of Series D Preferred Stock, dated July 31,
          2000 (incorporated by reference to Exhibit 3.4 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.5     Certificate of Designation of Series E Preferred Stock, dated July 31,
          2000 (incorporated by reference to Exhibit 3.5 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.6     Certificate of Designation of Series F Preferred Stock, dated July 31,
          2000 (incorporated by reference to Exhibit 3.6 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.7     Certificate of Designation of Series H Preferred Stock, dated July 31,
          2000 (incorporated by reference to Exhibit 3.7 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.8     Certificate of Designation of Series I Preferred Stock, dated July 31,
          2000 (incorporated by reference to Exhibit 3.8 to our Registration
          Statement on Form S-1, filed on August 15, 2001).

  3.9     Certificate of Designation of Series J Preferred Stock, dated December
          6, 2001 (incorporated by reference to Exhibit 4.1 to our Current
          Report on Form 8-K, filed on December 7, 2001).

 3.10     Amended and Restated By-Laws of the Company adopted August 17, 2000
          (incorporated by reference to Exhibit 3.9 to our Registration
          Statement on Form S-1, filed on September 8, 2000).

  4.1     Form of Certificate for our Common Stock (incorporated by reference to
          Exhibit 4.1 to our Registration Statement on Form S-1, filed on August
          15, 2000).

  4.2     Form of Warrant to purchase our Common Stock at a purchase price of
          $0.67 per share, issued in connection with a private placement on May
          7, 1999 (incorporated by reference to Exhibit 4.2 to our Registration
          Statement on Form S-1, filed on August 15, 2000).

  4.3     Form of Warrant to purchase our Common Stock at a purchase price of
          $1.50 per share, issued in connection with a private placement on May
          7, 1999 (incorporated by reference to Exhibit 4.3 to our Registration
          Statement on Form S-1, filed on August 15, 2000).

  4.4     Amended and Restated Stockholders Agreement, dated as of January 31,
          2001, between us, Signal Equity Partners, L.P. (formerly known as
          Signal Capital Partners, L.P.), as the Majority in Interest of the
          Purchasers, and Nortel Networks Inc., amending and restating the
          Stockholders Agreement dated as of May 7, 1999, by and among us and
          the stockholders listed therein (incorporated by reference to Exhibit
          4.1 to our Current Report on Form 8-K, filed on February 2, 2001).

<PAGE>

Exhibit
  No.                             Exhibit Name
-------                           ------------

  4.5     Registration Rights Agreement, dated as of May 7, 1999 by and among us
          and the stockholders listed therein (incorporated by reference to
          Exhibit I of Schedule 13D, filed on May 17, 1999 with respect to our
          Common Stock).

  4.6     Registration Rights Agreement, dated as of June 30, 2000, between us
          and Nortel Networks Inc. (incorporated by reference to Exhibit 4.1 to
          our Form 8-K filed on July 11, 2000).

  4.7     Third Limited Waiver and Agreement, dated February 9, 2001, between
          us, Deutsche Banc Alex. Brown Inc., Deutsche Bank Securities Inc. and
          Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit
          4.1 to our Current Report on Form 8-K, filed on February 15, 2001).

  4.8     Warrant Agreement, dated February 9, 2001, between us and First
          Chicago Investment Corporation (incorporated by reference to Exhibit
          4.2 to our Current Report on Form 8-K, filed on February 15, 2001).

  4.9     First Limited Waiver and Agreement, dated as of February 9, 2001,
          between us and First Union Investors, Inc. (incorporated by reference
          to Exhibit 4.3 to our Current Report on Form 8-K, filed on February
          15, 2001).

 4.10     Form of Warrant Agreement to purchase our Common Stock at a purchase
          price of $6.56 per share, issued in connection with a public offering
          on February 1, 2001 (incorporated by reference to Exhibit 4.1 to our
          Current Report on Form 8-K, filed on February 5, 2001).

 4.11     Form of Series A Warrant to purchase our Common Stock at a purchase
          price of $.30 per share, issued in connection with a public offering
          on December 7, 2001 (incorporated by reference to Exhibit 4.2 to our
          Current Report on Form 8-K, filed on December 7, 2001).

 4.12     Form of Series B Warrant to purchase our Common Stock at a purchase
          price of $.30 per share, issued in connection with a public offering
          on December 7, 2001 (incorporated by reference to Exhibit 4.3 to our
          Current Report on Form 8-K, filed on December 7, 2001).

 4.13     Form of Promissory Note between us and SDS Merchant Fund, L.P.
          (incorporated by reference to Exhibit 4.1 to our Current Report on
          Form 8-K, filed on March 18, 2002).

 10.1     Office Lease Agreement, between Hudson Telegraph Associates and us,
          dated as of February 17, 1998 (incorporated by reference to our
          Quarterly Report on Form 10-QSB, filed on November 16, 1998).

 10.2     Agreement of Lease, between 570 Lexington Company, L.P. and us, dated
          as of August 3, 1998 (incorporated by reference to Exhibit 10.5 to our
          Quarterly Report on Form 10-QSB filed on May 15, 1998).

 10.3     Securities Purchase Agreement, dated as of May 7, 1999 by and among us
          and the purchasers listed therein (incorporated by reference to
          Exhibit A of Schedule 13D, filed on May 17, 1999 with respect to our
          Common Stock).

 10.4     Securities Purchase Agreement, dated as of September 28, 1999 by and
          among us and the purchasers listed therein (incorporated by reference
          to Exhibit N of Schedule 13D/A, filed on October 14, 1999 with respect
          to our common stock).

 10.5     First Amendment, dated as of September 28, 1999 to the Security
          Agreement dated as of May 7, 1999 from us and our subsidiaries to the
          Collateral Agent listed therein (incorporated by reference to Exhibit
          4.5 of our Current Report on Form 8-K, filed on October 5, 1999).

 10.6     First Amendment, dated as of September 28, 1999 to the Guaranty
          Agreement dated as of May 7, 1999 made by us, FiberNet Equal Access,
          L.L.C. and Local Fiber, LLC (incorporated by reference to Exhibit 4.6
          of our Current Report on Form 8-K, filed on October 5, 1999).

<PAGE>

Exhibit
  No.                             Exhibit Name
-------                           ------------

  10.7    First Amendment, dated as of September 28, 1999 to the Pledge
          Agreement dated as of May 7, 1999 between us and the Collateral Agent
          listed therein (incorporated by reference to Exhibit 4.7 of our
          Current Report on Form 8-K, filed on October 5, 1999).

  10.8    First Amendment, dated as of September 28, 1999 to the Parent Pledge
          Agreement dated as of May 7, 1999 between us and the Collateral Agent
          listed therein (incorporated by reference to Exhibit 4.8 of our
          Current Report on Form 8-K, filed on October 5, 1999).

  10.9    Conversion and Exchange Agreement, dated as of November 30, 1999
          (incorporated by reference to Exhibit S of Schedule 13D, filed on
          December 2, 1999 with respect to our common stock).

*10.10    Private Network Agreement, dated as of November 30, 1999 between us
          and Metromedia Fiber Network Services, Inc.(incorporated by reference
          to Exhibit 10.9 to our Annual Report on 10-KSB, filed on March 30,
          2000).

 10.11    Master Purchase Agreement, dated as of December 31, 1999 between us
          and Nortel Networks Inc. (incorporated by reference to Exhibit 10.16
          to our Registration Statement on Form S-1, filed on September 8,
          2000).

 10.12    Lease Agreement, dated February 29, 2000 between 111 Eighth Avenue LLC
          and us (incorporated by reference to Exhibit 10.11 to our Annual
          Report on 10-KSB, filed on March 30, 2000).

 10.13    Employment Agreement, dated as of January 18, 2000 between us and
          Lance L. Mickel (incorporated by reference to Exhibit 10.17 to our
          Registration Statement on Form S-1, filed on September 8, 2000).

 10.14    Note in favor of Deutsche Bank AG New York Branch, dated as of April
          11, 2000 (incorporated by reference to Exhibit 4.15 to our Quarterly
          Report on Form 10-QSB, filed on May 15, 2000).

 10.15    Note in favor of Nortel Networks Inc., dated as of April 11, 2000
          (incorporated by reference to Exhibit 4.16 to our Quarterly Report on
          Form 10-QSB, filed on May 15, 2000).

 10.16    Note in favor of Toronto Dominion (Texas), dated as of April 11, 2000
          (incorporated by reference to Exhibit 4.17 to our Quarterly Report on
          Form 10-QSB, filed on May 15, 2000).

 10.17    Note in favor of First Union National Bank, dated as of July 31, 2000
          (incorporated by reference to Exhibit 10.23 to our Registration
          Statement on Form S-1, filed on September 8, 2000).

 10.18    Securities Purchase Agreement, dated as of June 30, 2000 between us
          and Nortel Networks Inc. (incorporated by reference to Exhibit 10.1 to
          our Current Report on Form 8-K, filed on July 11, 2000).

 10.19    Securities Purchase Agreement, dated as of July 28, 2000 between us
          and Nortel Networks Inc. (incorporated by reference to Exhibit 10.2 to
          our Current Report on Form 8-K, filed on August 4, 2000).

 10.20    Securities Purchase Agreement, dated as of August 11, 2000 between us
          and Nortel Networks Inc. (incorporated by reference to Exhibit 10.1 to
          our Current Report on Form 8-K, filed on August 15, 2000).

 10.21    Assignment and Assumption Agreement, dated as of August 11, 2000 by
          and between us and FiberNet Operations, Inc. (incorporated by
          reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on
          August 15, 2000).

 10.22    Amendment Number 1 to Master Purchase Agreement, effective as of June
          22, 2000 between us and Nortel Networks Inc. (incorporated by
          reference to Exhibit 10.50 to our Registration Statement on Form S-1,
          filed on September 8, 2000).

 10.23    Common Stock and Warrant Purchase Agreement, dated as of February 1,
          2001 by and among us and the Purchasers listed therein (incorporated
          by reference to Exhibit 10.1 to our Current Report on Form 8-K,

<PAGE>

Exhibit
  No.                             Exhibit Name
-------                           ------------

          filed on February 5, 2001).

 10.24    Amended and Restated Credit Agreement, dated February 9, 2001 among
          FiberNet Operations, Inc., Devnet L.L.C., Deutsche Bank AG New York
          Branch, First Union Investors, Inc., Toronto Dominion (USA) Securities
          Inc. and Deutsche Banc Alex. Brown (incorporated by reference to
          Exhibit 10.1 to our Current Report on Form 8-K, filed on February 15,
          2001).

 10.25    Amended and Restated FiberNet Security Agreement, dated as of February
          9, 2001 between FiberNet Operations, Inc. and Deutsche Bank AG New
          York Branch (incorporated by reference to Exhibit 10.2 to our Current
          Report on Form 8-K, filed on February 15, 2001).

 10.26    Amended and Restated Devnet Security Agreement, dated as of February
          9, 2001 between Devnet L.L.C. and Deutsche Bank AG New York Branch
          (incorporated by reference to Exhibit 10.3 to our Current Report on
          Form 8-K, filed on February 15, 2001).

 10.27    Amended and Restated Parent Security Agreement, dated as of February
          9, 2001 between us and Deutsche Bank AG New York Branch (incorporated
          by reference to Exhibit 10.4 to our Current Report on Form 8-K, filed
          on February 15, 2001).

 10.28    Amended and Restated Subsidiary Security Agreement (FiberNet Telecom),
          dated as of February 9, 2001 between FiberNet Telecom, Inc. and
          Deutsche Bank AG New York Branch (incorporated by reference to Exhibit
          10.5 to our Current Report on Form 8-K, filed on February 15, 2001).

 10.29    Amended and Restated Subsidiary Security Agreement (Equal Access),
          dated as of February 9, 2001 between FiberNet Equal Access, L.L.C. and
          Deutsche Bank AG New York Branch (incorporated by reference to Exhibit
          10.6 to our Current Report on Form 8-K, filed on February 15, 2001).

 10.30    Amended and Restated Subsidiary Security Agreement (Local Fiber),
          dated as of February 9, 2001 between Local Fiber L.L.C. and Deutsche
          Bank AG New York Branch (incorporated by reference to Exhibit 10.7 to
          our Current Report on Form 8-K, filed on February 15, 2001).

 10.31    Amended and Restated Parent Pledge Agreement (Devnet), dated as of
          February 9, 2001 between us and Deutsche Bank AG New York Branch with
          respect to 96.386% of the membership interests of Devnet L.L.C.
          (incorporated by reference to Exhibit 10.8 to our Current Report on
          Form 8-K, filed on February 15, 2001).

 10.32    Amended and Restated Parent Pledge Agreement (FiberNet Operations),
          dated as of February 9, 2001 between us and Deutsche Bank AG New York
          Branch with respect to all of the capital stock of FiberNet
          Operations, Inc. (incorporated by reference to Exhibit 10.9 to our
          Current Report on Form 8-K, filed on February 15, 2001).

 10.33    Amended and Restated Parent Pledge Agreement (FiberNet
          Telecom/Devnet), dated as of February 9, 2001 between FiberNet
          Operations, Inc. and Deutsche Bank AG New York Branch with respect to
          3.614% of the membership interests of Devnet L.L.C. and all of the
          capital stock of FiberNet Telecom, Inc. (incorporated by reference to
          Exhibit 10.10 to our Current Report on Form 8-K, filed on February 15,
          2001).

 10.34    Amended and Restated FiberNet Telecom Pledge Agreement (Equal Access),
          dated as of February 9, 2001 between FiberNet Telecom, Inc. and the
          Administrative Agent with respect to all of the membership interests
          of FiberNet Equal Access, L.L.C. (incorporated by reference to Exhibit
          10.11 to our Current Report on Form 8-K, filed on February 15, 2001).

 10.35    Amended and Restated FiberNet Telecom Pledge Agreement (Local Fiber),
          dated as of February 9, 2001 between FiberNet Telecom, Inc. and
          Deutsche Bank AG New York Branch with respect to all of the membership
          interests of Local Fiber L.L.C. (incorporated by reference to Exhibit
          10.12 to our Current Report on Form 8-K, filed on February 15, 2001).

<PAGE>

Exhibit
  No.                             Exhibit Name
-------                           ------------

 10.36    Amended and Restated Parent Guaranty Agreement, dated as of February
          9, 2001 executed and delivered by us to Deutsche Bank AG New York
          Branch (incorporated by reference to Exhibit 10.13 to our Current
          Report on Form 8-K, filed on February 15, 2001).

 10.37    Amended and Restated Subsidiary Guaranty Agreement (FiberNet Telecom),
          dated as of February 9, 2001 executed and delivered by FiberNet
          Telecom, Inc. to Deutsche Bank AG New York Branch (incorporated by
          reference to Exhibit 10.14 to our Current Report on Form 8-K, filed on
          February 15, 2001).

 10.38    Amended and Restated Subsidiary Guaranty Agreement (Equal Access),
          dated as of February 9, 2001 executed and delivered by FiberNet Equal
          Access, L.L.C. to Deutsche Bank AG New York Branch (incorporated by
          reference to Exhibit 10.15 to our Current Report on Form 8-K, filed on
          February 15, 2001).

 10.39    Amended and Restated Subsidiary Guaranty Agreement (Local Fiber),
          dated as of February 9, 2001 executed and delivered by Local Fiber
          L.L.C. to Deutsche Bank AG New York Branch (incorporated by reference
          to Exhibit 10.16 to our Current Report on Form 8-K, filed on February
          15, 2001).

 10.40    Stock Purchase Agreement, dated as of December 7, 2001, by and among
          us and the Purchasers listed therein (incorporated by reference to our
          Current Report on Form 8-K, filed on December 7, 2001).

 10.41    Third Amendment, dated as of December 10, 2001, among FiberNet
          Operations, Inc. Devnet L.L.C. and Deutsche Bank AG New York Branch,
          to the Amended and Restated Credit Agreement, dated as of February 9,
          2001 (incorporated by reference to Exhibit 10.41 to our Annual Report
          on Form 10-K, filed on March 1, 2002).

 10.42    Promissory Note, dated December 7, 2001, between the Company and
          Nortel Networks Inc. (incorporated by reference to Exhibit 10.42 to
          our Annual Report on Form 10-K, filed on March 1, 2002).

 21.1     Our Subsidiaries (incorporated by reference to Exhibit 21.1 to our
          Registration Statement on Form S-1, filed on August 15, 2000).

 23.1     Consent of Arthur Andersen LLP. (incorporated by reference to Exhibit
          23.1 to our Annual Report on Form 10-K, filed on March 1, 2002).

 23.2     Consent of Mendelsohn Kary Bell & Natoli LLP. (incorporated by
          reference to Exhibit 23.1 to our Annual Report on Form 10-K, filed on
          March 1, 2002).

 23.3     Consent of Arthur Andersen LLP.

 23.4     Consent of Mendelsohn Kary Bell & Natoli LLP.

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

*     Confidential treatment has been requested for portions of this exhibit.
      These portions have been omitted and filed separately with the Commission.