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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               ________________

                                   FORM 10-K
(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, 2000

                                      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 Identification No.)
 Incorporation or Organization)


   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 March 26, 2001, was
$57,344,658, 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
March 26, 2001, was 39,678,346 shares of Common Stock, $.001 par value.

                     Documents Incorporated by Reference:
     Portions of the Registrant's Definitive Proxy Statement for its 2001 Annual
Meeting of Stockholders are incorporated by reference into Part III of this
report.

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                                    PART I

ITEM 1.   DESCRIPTION OF BUSINESS

Overview

     We deploy, own and operate state-of-the-art, fiber-optic networks designed
to provide comprehensive broadband connectivity for data, voice and video
transmission to service providers in major metropolitan areas. These networks
provide an advanced, high bandwidth fiber-optic solution to support the growing
demand for network capacity in the local loop. We provide optical transport
within and between carrier hotels, which are facilities where service providers
exchange and route communications traffic, as well as optical transport from
carrier hotels to tenants in commercial office buildings. Our networks support
multiple transmission protocols including synchronous optical network, or SONET,
Ethernet, Frame Relay, asynchronous transfer mode, or ATM, and Internet
Protocol, or IP. We are currently operating in the three gateway markets of New
York, Chicago and Los Angeles.

Industry Background

Increased Communications Traffic and Demand for Network Capacity

     Over the past several years, there has been significant growth in the use
of communications services, including Internet access, electronic commerce,
streaming video and virtual private networks. As a result of the deregulation of
the communications industry, these broadband applications are being provided by
a growing number of service providers. This rapid increase in bandwidth
intensive data applications and providers of these services is driving demand
for additional transmission capacity on communications networks. In addition,
more businesses are relying on communications services to conduct mission
critical operations, increasing the need for greater network reliability,
security and speed.

     Further, as quickly as network capacity becomes available, new bandwidth
intensive applications are being developed and deployed. As a result, bandwidth
capacity is being consumed almost as rapidly as it is being made available,
requiring carriers to continually expand their network capacity.

The Local Loop Bottleneck

     The deployment of communications network infrastructure consists of two
separate segments.

     Long-Haul Networks.  Demand for transmission capacity was initially most
acute between metropolitan areas. As a result, long-haul fiber-optic networks
were built to function as transport links for vast amounts of traffic between
metropolitan locations worldwide. Communications traffic is aggregated at the
edge of metropolitan networks and transferred onto long-haul networks for
transmission to other metropolitan points. These long-haul networks typically
terminate at carrier hotels in metropolitan locations, where traffic is routed
onto local metropolitan networks.

     Local Loop Networks. The role of networks in metropolitan areas is to
transport large volumes of traffic delivered by long-haul networks, as well as
traffic generated in the local loop, between carrier interconnection points and
buildings. Existing metropolitan networks mainly consist of copper
infrastructure installed by incumbent local exchange carriers, or ILECs, and
regional Bell operating companies, or RBOCs. These legacy networks were built
for voice traffic and cannot support the increasing volumes of data intensive
traffic being generated in the local loop. This same infrastructure was deployed
to connect the central equipment rooms of commercial office buildings to
metropolitan networks and to provide connectivity within buildings, from central
equipment rooms to the individual tenant offices. In contrast to this legacy
infrastructure, most tenants within individual commercial offices have deployed
high-capacity local area networks, or LANs, which have abundant network
capacity.

     There are numerous technically complex issues involved in building out
local loop networks to increase capacity and extend connectivity in metropolitan
areas:

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     .    Diverse traffic. Data on local loop networks is generated by a large
          number of end-users served by a variety of service providers. As a
          result, metropolitan traffic is transmitted in multiple protocols
          using different technology platforms.

     .    Complex architecture. The infrastructure of local loop networks must
          reach a multitude of locations to access end-users in dense urban
          areas.

     .    Rights of way. Installing fiber-optic networks requires the use of
          numerous rights of way, which are controlled by many different public
          and private entities in each metropolitan area.

     These complexities have impeded the deployment of additional bandwidth
capacity in the local loop. As a result, a bottleneck has developed in many
major metropolitan areas. This bottleneck is the result of insufficient network
capacity starting at the carrier interconnection point, which is the entry point
to the local loop, and extending all the way to the tenants' LANs in office
buildings.

Needs of Metropolitan Service Providers

     Service providers are seeking a local loop network that allows them to
rapidly and cost-effectively provide their communications services to end-users.
In particular, they seek:

     End-to-End Fiber Connectivity. Service providers establish points of
presence for their networking equipment in metropolitan areas. Network
connectivity must extend from these points of presence directly to the end-users
of their communications services. In addition, service providers need to
interconnect with other service providers to exchange communications traffic.

     Carrier Neutral Transport Services. Traditionally, service providers have
relied on ILECs and RBOCs for metropolitan transport. However, in addition to
providing network transport, both the ILECs and RBOCs provide communications
services directly to end-users. This puts service providers at a competitive
disadvantage. Unless these service providers undertake the time-consuming and
costly construction of their own proprietary networks, they are dependent on
their competitors' networks for transport.

     Advanced, High-Capacity Network. Service providers desire a broadband
network with the highest possible transmission capacity to ensure the speed of
their service. Further, in order to offer a full range of services, providers
are seeking a network that can incorporate multiple transmission protocols and
new technologies. To ensure the quality of these services, providers also
require reliable and secure connectivity.

     Rapid Provisioning of Services. Service providers need a network provider
that has lit network elements and the necessary advanced network management
systems to rapidly provision circuits. Currently, much of the fiber in
metropolitan networks is dark fiber, which is inoperative until lit by
installing optical networking equipment. Lighting dark fiber can be expensive
and time consuming. Service providers can significantly decrease the time and
cost to provision services to end-users by obtaining capacity from a network
provider that offers lit network capacity.

Needs of Building Owners

     In-Building Communications Infrastructure. We believe that having
technologically advanced communications infrastructure in a commercial office
building gives property owners a sales advantage in attracting and retaining
quality tenants and increases the market value of the building. Many tenants in
commercial office buildings are sophisticated, bandwidth-intensive enterprises.
We believe that building owners need to provide state-of-the-art communications
infrastructure capable of delivering high-bandwidth communications services for
these tenants. The communications infrastructure should be readily accessible to
all tenants without limiting their choice of service providers.

     Overall Management of Communications Infrastructure. While upgrading the
communications infrastructure and maximizing tenant choice for broadband
services is a priority for building owners, the overall management of this
process


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is time consuming and complicated. Building owners desire a partner to manage
the process of upgrading the infrastructure and the relationships with
individual service providers seeking access to the tenants in the building.

     Some service providers have provided a partial solution to building owners'
needs by entering into contractual agreements to upgrade existing in-building
communications infrastructures. These arrangements typically allow the service
provider to install its proprietary network in the building and provide retail
communications services to the tenants. While this is one method of developing
in-building infrastructure, it can potentially make tenants captive to a single
broadband service provider, which may be undesirable for both tenants and the
building owners. We believe that it would be preferable for a third party to
install an in-building communications infrastructure, accessible to all service
providers wanting to provide communications services to the building's tenants.

Our Solution

     We are focused on owning and operating fiber-optic networks that provide
superior carrier neutral capacity to service providers in metropolitan areas,
replicating and expanding the geographic and physical penetration of the ILECs'
networks. We are designing, installing and operating local loop networks to
provide wholesale end-to-end, broadband connectivity that is scalable, reliable
and secure. In these and other markets, we also enter into strategic
partnerships with building owners and managers pursuant to which we manage the
communications access and infrastructure in their buildings. The following are
key elements of our solution:

     Full Range of Services. In our target markets, our carrier point
facilities, metropolitan transport networks and FiberNet in-building networks,
or FINs, will offer service providers cost-effective access to complete optical
local loop networks. Our carrier-to-carrier transport services provide fiber-
optic connectivity to carriers between and within carrier hotels. Our carrier-
to-customer transport services provide fiber-optic transport between carrier
points and on-net buildings in which we have deployed our FINs. By offering both
of these transport services, we believe that we can meet a service providers'
end-to-end connectivity needs.

     In addition, we provide access management services to property owners and
managers of buildings that are not on our metropolitan transport network, which
we refer to as our off-net buildings. In these buildings we deploy network
infrastructure and coordinate service providers' access to that infrastructure.
In addition, we provide ongoing management services that enable building owners
to outsource the management of their communications infrastructure and services.

     We also offer colocation services at certain of our carrier point
facilities and on-net and off-net buildings. Colocation refers to the ability of
a carrier to locate its networking equipment in another carrier's facilities.
These colocation facilities provide service providers with a network
interconnection point where they can terminate their traffic and transfer it
onto our high-capacity networks.

     State-of-the-Art Network Architecture. In order to provide high quality
local loop network services to our customers, we are deploying what we believe
to be the most advanced all-optical local loop network architecture available.
Features of this state-of-the-art network architecture include:

 .    the use of optical networking equipment which can transmit data at the
     highest speeds currently commercially available;

 .    dense wave division multiplexing equipment that is capable of increasing
     the transmission capacities of each fiber-optic strand in our networks;

 .    an open architecture that supports new broadband technologies and multiple
     transmission protocols, including SONET, Ethernet, Frame Relay, ATM and IP,
     to meet our service provider customers' evolving demands;

 .    multiple fibers laid in interconnecting circles, or ring architectures,
     over which traffic can be routed in a different direction or to a different
     fiber if there is a break in one of the rings, creating networks that are
     fully redundant and self-healing; and

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 .    optical networks that enable our customers to provision and monitor
     services on our networks as if the networks were their own.

     Rapid Provisioning of Services. Our optical local loop network gives us the
ability to remotely provision new circuits within ten business days through our
centralized network operations center, or NOC. As a result, we are able to
allocate network capacity rapidly to meet our customers' growing bandwidth
requirements. Our customers can order capacity with minimal lead time enabling
them to quickly provision new services to their end-users. We believe that this
provisioning capability is a key factor in our customers' decisions to work with
us.

     Superior Value Proposition for Property Owners. We manage the
communications infrastructure in our on-net and off-net buildings. We provide
significant value to property owners by ensuring that each of these buildings
has a readily accessible communications infrastructure that supports broadband
communications solutions, such as high-speed Internet access and streaming
video. Our in-building communications infrastructure and access management
services are appropriate for properties of varying size, class and location and
provide a comprehensive solution to owners of real estate portfolios. Owners of
both our on-net and off-net buildings benefit from the increased desirability of
their buildings to existing and prospective tenants. Further, offering our
services on a wholesale basis allows tenants a range of alternatives in their
choice of service providers.

Our Strategy

     Our goal is to be the preferred facilities-based provider of wholesale
metropolitan fiber-optic network capacity in our target markets. We intend to
serve select, commercial office properties and major carrier hotels in our
target markets with carrier neutral, end-to-end, optical connectivity that
enables our customers to provide next generation services and applications to
end-users. In addition, we plan to establish our presence as a leading manager
of communications access and infrastructure in buildings nationwide. Our
strategy for achieving these goals includes the following key elements:

     Establish our position as a leading provider of connectivity to carrier
hotels. We intend to establish a presence in multiple carrier hotels in each of
our target cities by contracting or partnering with a select group of owners and
operators of carrier hotels in those markets. To date, we have deployed fiber
optic transport infrastructure in six major carrier hotels in New York City,
three major carrier hotels in Los Angeles and one major carrier hotel in
Chicago.

     By establishing our presence in multiple carrier hotels, we will expand the
geographic reach of our networks and increase the size of our addressable
market. In addition, this will increase our ability to interconnect with other
service providers, thereby increasing our potential customer base and revenue
opportunities with existing customers.

     Strengthen and expand upon our relationships with customers. We believe
that our local loop end-to-end fiber-optic connectivity is a compelling service
offering to our carrier customers. We intend to promote:

 .  our carrier-neutral position;

 .  our open architecture that supports multiple transmission protocols;

 .  our ability to provide services to multiple broadband carriers, including
   long-haul fiber providers, wireless carriers and building local exchange
   carriers, or BLECs, in our on-net and off-net buildings;

 .  our rapid provisioning time;

 .  our ability to increase transport capacity rapidly to meet our customers'
   needs; and

 .  the carrier-class reliability of our networks.

     We believe that due to our wholesale strategy we have a broader potential
customer base than our competitors. Our potential customers include ILECs,
RBOCs, competitive local exchange carriers, or CLECs, BLECs, inter-exchange
carriers, or IXCs, Internet service providers, or ISPs, application service
providers, or ASPs, and integrated

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communications providers, or ICPs. We intend to strengthen our relationships
with our existing customers and actively market our service offerings to this
broad range of new customers. As of December 31, 2000, we had 45 customers,
including 360networks, AT&T, Broadwing, Cogent Communications, Deutsche Telekom,
Enron Broadband Services, France Telecom, Level 3, Qwest, Sprint, Winstar, XO
Communications and Yipes.

     Partner with real estate owners to expand our portfolio of buildings. We
intend to grow our business aggressively and expand our geographic reach by
continuing to bring additional buildings into our portfolio under exclusive
license agreements. As of December 31, 2000, we had approximately 225 buildings
in our portfolio. We have installed FINs in 16 of these buildings and have
license agreements to install FINs in an additional 20 of these buildings.

     We intend to establish ourselves as the preferred in-building
communications facilities provider and manager by emphasizing:

 .  our unique offering of carrier-neutral access and transport;

 .  our ability to install and manage a state-of-the-art-network in on-net
   buildings at no cost to the building owner; and

 .  our ability to manage all aspects of communications access and infrastructure
   in buildings.

     In addition, we plan to leverage our existing relationships with key
partners, including Teachers Insurance and Annuity Association and Tishman
Speyer Properties, L.P.

     To date, our license agreements for our buildings have typically given us
the exclusive right, subject to certain limitations, to resell our network
capacity on a wholesale basis within the building. Moreover, in certain other of
our buildings we have secured the right to be the exclusive manager of all
communications access in the building. We intend to continue to establish
mutually beneficial relationships with major institutional property owners to
secure the exclusive rights to manage communications access and deploy
infrastructure in their buildings.

     Develop the platforms that enable our customers to offer new revenue-
generating communications services to their end-users. We believe that the
demand for new services will drive our customers' growth. To keep pace with this
growth, we intend to ensure that our network architecture continues to offer the
connectivity, scalability, performance and flexibility necessary for the rapid
introduction of new services. We are currently serving as a beta site for
several next generation optical networking equipment providers. Being involved
in beta testing gives us insights into the next-generation of equipment that
will be made commercially available. We test equipment with the intention of
adopting new technologies that can be integrated into our networks to improve
performance and decrease the cost of operating our network.

Our Services

     Our services are designed to provide communications transport and
colocation within our target markets, and communications access management and
infrastructure in markets nationwide:

Transport. Our transport services consist of T-1 through OC-192 circuits, 10
Base-T, 100 Base-T and gigabit Ethernet connections and optical wavelengths. We
also offer vertical dark fiber in certain of our carrier hotel facilities and
our on-net and off-net buildings.

     Carrier-to-Carrier Transport. We provide carrier-to-carrier transport by
building optical transport facilities within and between carrier hotels. We
offer carrier-to-carrier connectivity ranging from transport between floors of a
carrier hotel, to comprehensive connectivity between carrier hotels within a
metropolitan area.

     Carrier-to-Customer Transport. Our carrier-to-customer transport services
provide our customers with connectivity from the carrier hotels where their
communications traffic is aggregated, to their end-user customers in our on-net
buildings. We transport their data from carrier hotels, via our metropolitan
transport networks, to the central equipment rooms that we establish in the
basements of our on-net buildings. Once in the central equipment room, the data

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is transferred from our metropolitan transport network onto our FIN and routed
to the appropriate floor of the on-net building, where the end-user is located.

Colocation

     In select carrier hotels and buildings, we offer our customers racks,
cabinets, or cages where they can locate their networking equipment. We also
offer ancillary services, including AC/DC power, fire protection, security, and
heating, ventilation and air conditioning, or HVAC.

Communications Access Management

     In certain on-net and off-net buildings, we obtain the exclusive right to
manage the communications access and infrastructure for the buildings. We then
enter into agreements with service providers giving them non-exclusive rights to
provide services to tenants in the buildings. The term of our contracts with
service providers typically ranges from three to five years.

Network Design and Architecture

     We have and will continue to design, develop and construct networks for
carrier-to-carrier and carrier-to-customer transport in our target markets. Our
networks have four components: carrier point facilities, metropolitan transport
networks, FINs and a NOC.

Carrier Point Facilities

     Carrier point facilities are environmentally controlled, secure sites
within a carrier hotel, designed to house carrier transmission and networking
equipment. At these facilities we establish the interconnection of our
metropolitan transport networks with other service providers' networks. This
interconnection of networks enables us to transfer other carriers' traffic onto
our local loop networks and provide transport services to them. In addition to
utilizing our carrier point facilities to interconnect with service providers,
we also offer colocation and other ancillary services at certain of these
facilities.

     Our primary carrier point facilities in New York City are located in 60
Hudson Street and 111 8th Avenue, and we offer colocation at both of these
sites. We have deployed and will establish other carrier point facilities in New
York City, Long Island and New Jersey, which we will connect to both 60 Hudson
Street and 111 8th Avenue via our metropolitan transport networks. Our primary
carrier point facility in Chicago is located at 600 South Federal Street, and
our primary carrier point facility in Los Angeles is located at 707 Wilshire
Boulevard. By establishing our presence in multiple carrier hotels we will
increase our ability to interconnect with other service providers, thereby
increasing our potential customer base and revenue opportunities with existing
customers.

     In each of our target cities, we intend to establish at least two primary
carrier point facilities within major carrier hotels and multiple secondary
carrier point facilities. At our primary sites we will offer colocation
facilities in addition to transport and interconnection services. The cost of
constructing a primary carrier point facility generally ranges from $3 million
to $5 million, and a secondary carrier point facility, without colocation
facilities, generally ranges from $500,000 to $1.5 million. In certain of our
secondary carrier point facilities we may colocate in other carriers'
facilities.

Metropolitan Transport Networks

     We acquire dark fiber rights, install our own optical transmission
equipment to light the fiber and then provide lit circuits to carriers for the
transport of traffic in the out-of-building local loop. We light the dark fiber
in ring configurations with optical networking gear, establishing connectivity
between carrier point facilities and our on-net buildings.

     Our existing metropolitan transport networks consists of OC-48 SONET rings
deployed in midtown Manhattan, downtown Manhattan, New York/Long Island, New
York/New Jersey, Chicago and Los Angeles. We intend to expand this existing
network and, in the future, may establish metropolitan transport networks in
additional markets.

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     Our networks can transmit data at 2.5 gigabits per second or Gbps, (OC-48)
and are scalable to 10.0 Gbps (OC-192). We use dense wave division multiplexing
technology to increase capacity on our networks. Dense wave division
multiplexing can increase the bandwidth of a single fiber-optic strand by
transmitting signals on up to 32 different wavelengths of light on a single
fiber, therefore enabling the transmission of up to 32 times more information on
an existing fiber-optic strand.

FiberNet In-Building Networks

     Our FIN is an advanced central distribution network that we deploy in our
on-net buildings to provide communications transport within the building. We
have a team of highly trained and experienced communications professionals and
engineers that design and oversee the installation of our FINs. This team
performs a thorough analysis of each commercial building that we have targeted,
including an assessment of available space to house equipment in the building
and install fiber cables in the vertical shafts, or risers, the adequacy of the
power supply, and the diversity of fiber-optic entrance conduits from our
metropolitan transport network. The standard design specifications for our FINs
are then tailored to each building. After a thorough evaluation process we
select a bonded and licensed general contractor to perform construction. A
member of our engineering staff oversees all of the construction in order to
maintain and enforce our strict construction standards.

     The total cost for installing a FIN typically ranges from approximately
$400,000 to $1,000,000. We are committed to building the most secure, reliable
fiber-optic systems that adhere to the highest technical standards in the
industry. We strive to provide a system that is flexible and expandable and able
to meet the needs of our customers.

    To date, we have constructed our FINs in 16 buildings in New York and
Chicago. We have also entered into, and are in the process of negotiating,
additional license agreements for in-building networks in buildings located in
our gateway markets.

    Our in-building fiber-optic network infrastructure consists of:

 .  Direct and diverse routing to metropolitan transport network. Our
   metropolitan transport network enters an on-net building at one or two
   discrete points and interconnects with the FIN in our central equipment room
   in the basement of the building. Diverse routing and interconnection in the
   building basement enables the seamless transfer of traffic between the FIN
   and our high-bandwidth metropolitan transport network. We offer dedicated
   bandwidth without over-subscription directly between the tenants' premises
   and the carrier point facilities, so that our customers avoid congestion or a
   bottleneck, as traffic is transmitted from our FINs to our out-of-building
   metropolitan transport networks.

 .  Central equipment room. We usually lease approximately 100 to 1,500 square
   feet in the basement of our on-net buildings to establish a central equipment
   room, where we install and manage communications networking equipment. Here
   we connect the FIN to our metropolitan transport network, linking the on-net
   building to all of our other points of presence. The equipment in this
   facility aggregates and disseminates traffic to and from the building. The
   central equipment rooms are built to our carrier point specifications with
   power supplies and HVAC systems for environment control.

 .  Redundant, vertical riser system. We configure, install, own and manage a
   fiber-optic network in the building's vertical riser system. We believe our
   FINs are designed to ensure reliability and scalability. By deploying over
   one hundred strands of fiber in dual risers, our FINs allow for redundant
   fiber paths in a ring architecture. Our FINs generally extend from the
   central equipment room in the basement of the building throughout the
   building, with a termination point on each floor.

 .  Points of presence on each floor of the on-net building. Typically, we
   install secure communications closets on each floor of the building to house
   the network equipment and redundant power supplies. This footprint on every
   floor facilitates the rapid provisioning of transmission capacity to tenants,
   the scalability for growth in bandwidth and the flexibility to accommodate
   new technologies.

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Network Operations Center

     We monitor and manage traffic on our networks from our NOC located in
Newark, New Jersey using Portal, Preside and MetaSolv TBS software. Our NOC
enables us to remotely provision circuits to any point on our networks and to
provide timely customer support and maintenance from a centralized location. Our
networks are monitored and maintained 24 hours a day, 7 days a week. Our
customers are also able to monitor their traffic on our networks using the
latest technology in network management.

Real Estate

     We have highly experienced professionals, familiar with the commercial real
estate markets nationwide, who are dedicated to identifying and securing access
to portfolios of commercial office buildings. We typically target portfolios of
class A commercial office properties with multiple tenants. Other factors
considered in selection include:

 .  location;

 .  occupancy levels;

 .  proximity to our metropolitan transport networks, carrier point facilities
   and other on-net buildings;

 .  feasibility of installation of network infrastructure;

 .  cost-effectiveness of construction; and

 .  existing broadband communications infrastructure in the building.

     We also identify whether a building will become an on-net or off-net
building. This decision is based on a number of factors. First, we determine if
the building is located in a city where we have a metropolitan transport
network. If so, we then analyze the size of the building, tenant mix and cost-
effectiveness of construction to determine if it is economically feasible to
establish connectivity to our metropolitan transport networks.

     On-net buildings. In buildings that we have identified as on-net buildings,
we sign a license agreement with the building owner or manager for the
installation of a FIN. Our licenses generally give us the exclusive right to
install and operate a central distribution system to provide wholesale transport
services in the building. However, ILECs and RBOCs may resell their existing
infrastructure, which they have the right to upgrade, in the building, and other
communications providers may deploy their own infrastructure to provide retail
services to any tenant requesting services from the provider. In addition, in
some instances service providers may have pre-existing license agreements in our
buildings, which allow these providers to install and possibly expand their
network infrastructure in our buildings. Our typical on-net license agreement
has an initial term of 15 years, with renewal options of up to 10 years. We have
installed FINs in 16 on-net buildings and are currently deploying FINs in four
additional buildings. We have licenses to build FINs in a total of 36 buildings.

     Off-net buildings. In buildings that we select as off-net buildings, we
enter into license agreements with the owners or managers for the exclusive
right to manage access and infrastructure in the building. The agreement does,
however, allow for the continuation of any pre-existing communications service
agreements between the building owner or manager and other communications
providers for the installation of communications networks in the building. Our
typical off-net license agreement is for an initial term of five years, with
renewal options of up to 15 years. Once the license agreement has been executed,
we enter into agreements with communications service providers, giving them non-
exclusive access to provide services in the building. Our agreements with
service providers are typically for an initial term of three to five years, with
a renewal option of up to five years. We currently have contracts to manage the
communications infrastructure in approximately 185 off-net buildings.

Sales and Marketing Strategy

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     Sales. We sell network access to other service providers through our direct
sales force. Our sales team is comprised of representatives that have
significant expertise in, and knowledge of, the wholesale communications market.
Several of our sales representatives have had extensive work experience with
British Telecom, AT&T, and other major carriers. By using a direct sales
strategy, we provide the personal attention and high quality of service that our
customers require.

     Marketing. Our marketing strategy is focused on building relationships with
our customers, our real estate partners, and tenants in our on-net and off-net
buildings. We believe that all segments benefit from targeted advertising,
public relations efforts, promotional materials, event marketing, and personal
selling techniques. In addition, we have marketing activities directed
specifically to each of our constituent markets. These activities include:

 .  Service Providers. We support industry organizations, participate in
   conferences, tradeshows and seminars, prepare personalized presentations and
   engage in direct marketing.

 .  Real Estate Community. We belong to and sponsor membership associations,
   trade shows, conferences, and other special events.

 .  Tenant Appreciation Programs. We circulate a quarterly newsletter to tenants
   in our buildings, and co-sponsor in-building events with carriers that sell
   directly to tenants. We believe that if tenants are aware of the capacity,
   reliability and security of our FINs, they will be more likely to select
   carriers using our networks to provide their communications services.

Customers

     We have a broad target customer base that includes ILECs, RBOCs, CLECs,
IXCs, ISPs, ASPs and ICPs. Our technologically advanced fiber-optic
infrastructure meets the needs not just of small- and medium-sized business end-
users, but also large corporate end-users. This expands the size of our
addressable market beyond that of traditional CLECs, which are generally focused
on the small- and medium-sized business market opportunity. We enter into long-
term contracts with our customers, which are typically three to five years in
length.

Transport and Colocation Customers

     We target service providers seeking cost-effective, flexible, reliable,
broadband network connectivity in the local loop. The increase in communications
traffic and data intensive applications and the deregulation of the
telecommunications industry has resulted in rapid growth in the number of
service providers operating in the local loop market. Many of these providers do
not have their own metropolitan networks and rely on us for transport in the
local loop. Our customer base also includes providers that have their own local
networks, but do not have sufficient bandwidth to meet their customers' needs or
are seeking shorter installation intervals and will benefit from our faster
provisioning times. We also generate transport-traffic through agreements with
our colocation customers. Typically, if a service provider colocates its
networking equipment at our facilities, our agreement with them will include a
minimum commitment to use our transport services.

     Our transport and colocation customers are typically:

 .  service providers that have significant bandwidth demands between carrier
   points for the aggregation of their network traffic. These customers need to
   interconnect high-capacity circuits with other service providers' networks.
   These carriers typically include national and international long-haul
   carriers;

 .  service providers requiring connectivity to their retail customers in our on-
   net buildings; and

 .  service providers requiring a secure technical operating environment in which
   to locate their communications and networking equipment.

As of December 31, 2000, our transport and colocation customers included:

                                      10
<PAGE>

 .  360networks

 .  Broadwing

 .  Deutsche Telekom

 .  Enron Broadband Services

 .  France Telecom

 .  Level 3

 .  Qwest

 .  Sprint

 .  XO Communications

Access Management Customers

     Our access management customers include facilities-based providers that
want access to our on-net and off-net buildings to provide communications
services to tenants in the building. As of December 31, 2000, our access
customers included:

 .  AT&T

 .  Cogent Communications

 .  Davnet

 .  Qwestlink

 .  Winstar

 .  XO Communications

 .  Yipes

Competition

     The market for our services is very competitive. Our competitors include
traditional and new communications companies.

     Local Telephone Companies. In New York City, Chicago and Los Angeles, we
face significant competition from ILECs and RBOCs, which currently dominate
local communications markets, and CLECs, which are increasing their market
penetration for local communications services. ILECs, including Verizon
Communications and Ameritech, have several competitive advantages over us, which
include established brand names, reputation and significant capital. As a result
of the Telecommunications Act of 1996, ILECs are required to provide other
carriers with access to end users via their existing networks. This type of
access is in direct competition to our services. Moreover, ILECs also sell
wholesale connectivity in the local loop, which competes with our local loop
transport services. Various other competitive communications providers also own
communications infrastructure in the local loop. Some of these carriers
currently compete with us in the market for providing broadband transmission
capacity in the local loop, and such competition may increase in the future.

                                      11
<PAGE>

     Other In-Building Communications Providers. Certain integrated
communications providers are deploying their own network infrastructure in
commercial office properties in our target markets to provide communications
services to tenants. These include, but are not limited to, Advanced Radio
Telecom, Allied Riser Communications, Cypress Communications, Intermedia, RCN
Telecom Services, Riser Management Corporation, Teligent, Winstar and XO
Communications. These companies build out networks on which they offer only
their own services. Consequently, they could indirectly compete against us by
not utilizing our FIN to gain connectivity to tenants. Additionally, many of
these companies are seeking to establish license agreements with building owners
to gain access to the buildings. Some companies have agreements whereby the
building owners will not allow other communications providers to install a
central distribution system in their buildings. These type of agreements reduce
the number of buildings available for installation of our FINs. We have competed
and will continue to compete with some of these companies for license agreements
with owners of target buildings.

     Metropolitan Network Providers. Many of the leading communications
companies, including AT&T, WorldCom, Sprint, Level 3, Qwest and Time Warner
Telecom, have constructed or are constructing fiber-optic networks nationwide,
including within metropolitan areas. These companies utilize their networks for
their own transmission requirements and in certain circumstances provide excess
network capacity to other carriers. Other communications companies, such as
Metromedia Fiber Network and Telergy, build metropolitan dark fiber networks
that are leased or sold to other carriers and large corporate users. In
addition, these companies could begin to build their own in-building networks.
We compete directly and indirectly with these companies in New York City,
Chicago and Los Angeles.

     Fixed Wireless Service Providers. We may lose potential customers to fixed
wireless service providers. Fixed wireless service providers can provide high-
speed inter-building communications services using microwave or other facilities
or satellite earth stations on building rooftops. Some of these providers have
targeted small- and medium-sized business customers and have business strategies
that are similar to ours. These providers include Winstar, Teligent, Advanced
Radio Telecom, Sprint, WorldCom and XO Communications.

Our History

     FiberNet Telecom, Inc. was organized under the laws of the State of
Delaware on August 10, 1994. On November 24, 1997, Desert Native Designs Inc.,
an existing public company incorporated in the State of Nevada, acquired
FiberNet Telecom, Inc. pursuant to an agreement and plan of merger dated as of
the same date. Upon consummation of the merger, FiberNet Telecom, Inc. became a
wholly owned subsidiary of Desert Native Designs, Inc., which subsequently
changed its name to FiberNet Telecom Group, Inc. On February 4, 2000, we
reincorporated in Delaware.

     On July 31, 2000, we consummated a corporate reorganization in order to
acquire Devnet L.L.C. As a result of this reorganization, we became a holding
company that directly owns all of the outstanding common stock of FiberNet
Operations, Inc., a Delaware corporation and Devnet L.L.C., a Delaware limited
liability company. FiberNet Operations directly owns all of the outstanding
common stock of FiberNet Telecom, Inc., a Delaware corporation. FiberNet
Telecom, Inc. owns all of the outstanding membership interests in Local Fiber,
L.L.C. and FiberNet Equal Access, LLC, both New York limited liability
companies. We conduct our primary business operations through our operating
subsidiaries, Local Fiber, FiberNet Equal Access and Devnet.

Regulation of FiberNet

General Regulatory Environment

     We are subject to federal, state and local regulations that affect our
product offerings, competition, demand, costs and other aspects of our
operations. The regulation of the communications industry varies from state to
state and is changing rapidly. To the extent that our offerings are treated as
telecommunications services, federal and state regulation would apply to those
offerings. Our operations are also subject to a variety of environmental,
safety, health and other governmental regulations. We cannot guarantee that
current or future regulatory, judicial or legislative activities will not have a
material adverse effect on our operations or financial condition, or that
domestic or international regulators or third parties will not raise material
issues with regard to our compliance or noncompliance with applicable
regulations.

Federal Regulation

                                      12
<PAGE>

     Federal regulation has a great impact on the communications industry and
has undergone major changes in the last five years as the result of the
enactment of the Telecommunications Act of 1996. The Telecommunications Act is
the most comprehensive reform of the nation's communications laws since the
Communications Act was enacted in 1934.

     Our services are provided through our operating subsidiaries, Local Fiber,
Equal Access and Devnet. The services offered by our subsidiaries fall into one
of two categories:

 .  telecommunications services or common carriage; and

 .  non-telecommunications services.

     Certain regulations associated with each type of offering are described
below. Although the law establishing regulatory requirements is often unclear,
we expect that our telecommunications services are subject to a lower degree of
federal regulation than those of dominant carriers such as the RBOCs.

Telecommunications Services

     One of our subsidiaries, Local Fiber, is regulated as a telecommunications
carrier because it provides telecommunications services directly to the public
on a nondiscriminatory basis subject to standardized rates, terms and
conditions. A telecommunications service, as defined by the Communications Act,
means the offering of telecommunications for a fee directly to the public, or to
such class of users as to be effectively available to the public, regardless of
the facilities used. Telecommunications is defined, as the transmission between
and among points specified by the user of information of the user's choosing
without change in the form or content of the information as sent.
Telecommunications carriers are subject to extensive federal, state and local
telecommunications regulation that may impose substantial administrative and
other burdens on operations.

     General Obligations of All Telecommunications Carriers. As a competitive
provider of local telecommunications services, Local Fiber is subject to federal
telecommunications regulation, including, but not limited to:

 .  rate regulation;

 .  reporting requirements;

 .  special assessments;

 .  access charges;

 .  the obligation not to charge unreasonable rates or engage in unreasonable
   practices;

 .  the obligation to not unreasonably discriminate in service offerings; and

 .  the obligation to allow resale of regulated telecommunications services.

     In addition, telecommunications carriers must contribute to the FCC's
universal service fund, a fund that was established to ensure the availability
of affordable basic telecommunications services. The rate of assessment is
approximately 5.8% of gross interstate end-user telecommunications revenues for
the year 2000, is expected to be approximately 6.6% for the year 2001 and may be
higher in subsequent years. FCC rules also require that telecommunications
carriers contribute to various other funds.

     Local Fiber is also required to comply with a number of other federal
regulatory requirements. Third parties may file complaints against us at the FCC
for violations of the Communications Act or the FCC's regulations. Certain
statistical reporting requirements may also apply. Although compliance with
these regulatory requirements imposes certain administrative burdens, similarly
situated competitors are subject to comparable regulatory obligations.

                                      13
<PAGE>

     Local Exchange Carrier Regulation. The Telecommunications Act imposes a
number of access and interconnection requirements on telecommunications carriers
and on all local exchange providers, including CLECs, and imposes additional
requirements on ILECs. CLECs compete with the ILECs for local subscribers of
telecommunications services. As discussed under our state regulation section,
Local Fiber provides only local transport services and has obtained
authorization as a CLEC to provide telecommunications services in the state of
New York. However, because of the nature of Local Fiber's service offerings, not
all CLEC obligations will apply to us. As a CLEC in New York, Local Fiber is
subject to the FCC's regulatory structure favoring CLEC entry into the local
market, however, it is also subject to any requirement imposed by the FCC that
is generally applicable to local exchange carrier, or LECs. In addition, LEC
regulations affect us to the extent that they have a direct affect on our
carrier customers.

     All telecommunications carriers must interconnect with the facilities of
other telecommunications carriers and may not install features that will
interfere with the interoperability of networks. Accordingly, all ILECs must
permit their competitors to interconnect with their facilities directly and all
CLECs must permit any other telecommunications carrier to interconnect with
their facilities either directly or indirectly. All LECs, including CLECs, also
have a duty to:

 .  not unreasonably limit the resale of their services;

 .  provide number portability, if technically feasible, which will allow a
   customer to retain its existing phone number if it switches its local
   exchange carrier;

 .  provide dialing parity to competing providers and nondiscriminatory access to
   telephone numbers, directory assistance, operator services and directory
   listings;

 .  provide access to poles, ducts, conduits and rights-of-way; and

 .  establish reciprocal compensation arrangements for the transport and
   termination of communications.

     Other Federal Communications Regulations. In addition to the general duties
of all LECs, ILECs have the following additional duties:

 .  interconnect with any requesting telecommunications carrier at any
   technically feasible point within their networks, on nondiscriminatory terms,
   at prices based on cost (which may include a reasonable profit) and provide
   service equal in quality to that provided to their customers or the ILEC
   itself;

 .  provide any requesting telecommunications carrier unbundled access to network
   elements at any technically feasible point at just, reasonable and
   nondiscriminatory rates, terms and conditions;

 .  offer retail services to a requesting telecommunications carrier at wholesale
   prices;

 .  provide reasonable public notice of changes in the network or the information
   necessary to use the network or which affect interoperability; and

 .  provide for physical co-location for requesting telecommunications carriers.
   Physical co-location is an offering by an ILEC that enables another
   telecommunications carrier to enter the ILEC's premises to install, maintain
   and repair its own equipment that is necessary for interconnection or access
   to the ILEC's network elements.

     The FCC also adopted guidelines for implementing the interconnection and
local competition provisions of the Telecommunications Act. In order to foster
competition in the local exchange market, the FCC required ILECs to offer access
to their communications networks to CLECs at cost-based rates. All of these
regulations affect the growth opportunities for some of our customers and thus
the demand for our services.

     Appeal of the FCC's decision implementing the interconnection and local
competition provisions of the Telecommunications Act have resulted in the review
of certain FCC rules by the U.S. Supreme Court. On January 25, 1999, the Supreme
Court largely reversed an Eighth Circuit Decision and reestablished the validity
of many of the FCC rules that earlier had been vacated by the Eighth Circuit.

                                      14
<PAGE>

     On remand from the Supreme Court, the Eighth Circuit issued a decision on
July 18, 2000. The Eighth Circuit's decision, among other things, vacated and
remanded the FCC's rule that forward-looking costs used to calculate the rates
at which ILECs may charge CLECs for network elements be based on the most
efficient network model. The use of a forward-looking cost model was affirmed,
however. The Supreme Court has agreed to hear the appeal of the decision.

     The Supreme Court's January 25, 1999 decision also remanded the list of
network elements ILECs must offer to CLECs to the FCC for further consideration
of the necessity of each one under the statutory standard. On November 5, 1999,
the FCC released an order largely retaining its list of unbundled network
elements, but eliminating the requirement that ILECs provide unbundled access to
local switching for customers with four or more lines in the densest parts of
the top 50 Metropolitan Statistical Areas in most circumstances, and the
requirement to provide operator services and directory assistance.

     The FCC further required ILECs to offer dark fiber as an unbundled network
element on both a local loop and interoffice transport basis. This availability
of dark fiber from ILECs as an unbundled network element could be in addition to
other sources of dark fiber already available in the market. In the event we
offer dark fiber service, it is possible that the availability of dark fiber
from ILECs as an unbundled network element could affect the demand for our
services and the pricing of our services.

     As part of its ongoing examination of unbundled network elements, the FCC
is currently looking at whether combinations of unbundled network elements
should be made available for the sole or primary purpose of providing exchange
access service.  To the extent our customers buy unbundled network elements from
the ILEC, any court or FCC revisions of the interconnection and local
competition provisions of the Telecommunications Act, including access to
unbundled network elements or pricing, could affect the growth opportunities for
some of our customers and thus demand for our services.

     On December 9, 1999, the FCC ordered ILECs to offer line sharing
arrangements that will permit competing carriers to offer digital subscriber
line services over the same copper loop facilities used by the ILECs to provide
voice telephone service. On January 19, 2001, the FCC clarified that line
sharing applies to the entire loop, even where a portion of the loop consists of
fiber facilities.  The FCC also ordered ILECs to permit competing carriers to
self-provision or partner with a data carrier.  The FCC is currently considering
issues related to line sharing over fiber facilities. The prices that carriers
charge for these line sharing arrangements will be determined by state utility
commissions. If these prices are set at low levels, it could allow our
competitors to offer low-cost alternatives to our service and put downward
pressure on our prices for transport services.

     In addition to the numerous decisions to implement the Telecommunications
Act, in August 1999, the FCC issued an Order that provided substantial new
pricing flexibility to ILECs. The pricing flexibility applies primarily to
special access and dedicated transport.  An appeals court recently upheld the
FCC's decision. This ruling will ultimately permit ILECs to utilize contract
arrangements for the provision of dedicated services similar to the way in which
we offer these same types of services. As a result of this new pricing
flexibility for ILECs, we could face greater competition with respect to the
services we provide.

State Regulation

     The Communications Act generally prohibits state and local governments from
enforcing any law, rule or legal requirement that prohibits or has the effect of
prohibiting any person from providing any interstate or intrastate
telecommunications service. However, states retain jurisdiction to adopt
regulations necessary to preserve universal service, protect public safety and
welfare, ensure the continued quality of telecommunications services and
safeguard the rights of consumers.

     Local Fiber must obtain and maintain certificates of authority from
regulatory bodies in states where it offers intrastate telecommunications
services on a common carrier basis. In most states, telecommunications providers
must also file and obtain prior regulatory approval of tariffs for its regulated
intrastate services. Certificates of authority can generally be conditioned,
modified or revoked by state regulatory authorities for failure to comply with
state law or regulations. Fines and other penalties also may be imposed for such
violations. Local Fiber is currently authorized as a CLEC to provide intrastate
services in New York and may seek additional authority in other states. Delays
in receiving

                                      15
<PAGE>

required regulatory approvals in other states could also have a material adverse
effect on us. We cannot assure you that regulators or third parties will not
raise material issues with regard to our compliance or non-compliance with
applicable laws or regulations.

     State regulatory commissions generally regulate the rates RBOCs charge for
intrastate services, including intrastate access services paid by providers of
intrastate long distance services. Intrastate access rates affect the costs of
carriers providing intrastate long distance services and demand for our services
and those that other carriers provide. Under the Communications Act, state
commissions have jurisdiction to arbitrate and review negotiations between local
telephone companies and CLECs regarding the prices local telephone companies
charge CLECs for interconnection and resale. In setting these prices, state
commissions must use a forward-looking cost methodology as required by the FCC,
and later upheld by the Supreme Court. A state may also impose
telecommunications taxes and fees for state-level universal service and other
programs on providers of services within that state.

Local Regulation

     In addition to federal and state laws, local governments exercise legal
authority that may affect Local Fiber's operations. For example, local
governments retain the authority to license public rights-of-way, subject to the
limitation that local governments may not prohibit the provision of
telecommunications services. Local authorities affect the timing and costs
associated with the use of public rights-of-way. These regulations may have an
adverse effect on our business to the extent Local Fiber requires access to such
public rights-of-way.

Non-Telecommunications Services

     Our subsidiaries, Equal Access and Devnet are not subject to
telecommunications carrier regulation. Unlike a telecommunications carrier,
Equal Access and Devnet do not hold their offerings out to the public generally
for a fee. Moreover, Equal Access and Devnet do not use public rights-of-way
which may trigger local regulation. Equal Access and Devnet generally enter into
exclusive agreements with building owners to provide or manage intra-building
fiber capacity to telecommunications carriers on a private contractual basis. As
such, Equal Access and Devnet merely provide the in-building capacity over which
telecommunications service providers may provide telecommunications services,
including access to the public telephone system which enables a tenant to reach
any point on the public telephone system. However, certain proposals have been
made before Congress and the FCC that could have an adverse impact on Equal
Access' and Devnet's exclusive contractual rights, in certain buildings, to
provide such capacity.

Regulation of Equal Access and Devnet

     Equal Access and Devnet are subject to numerous local regulations such as
building and electrical codes, licensing requirements and construction
requirements. These regulations vary on a city-by-city and county-by-county
basis.

     Equal Access and Devnet generally secure multi-year license agreements with
real estate owners for the exclusive right to lease intra-building fiber
capacity to third parties. Under current FCC regulations, commercial real estate
owners have the right to control wiring within their premises, beyond the
demarcation point at which telecommunications carriers terminate their
facilities. The demarcation point is typically at a minimum point of entry to
the building such as the basement. These rules allow the real estate owners or
managers to install and maintain their own inside wiring, or to contract with
companies, such as Equal Access or Devnet, to maintain wiring on their behalf.
If laws or regulations are enacted that effectively require building owners to
give inside wiring access to all requesting telecommunications providers on
nondiscriminatory terms, Equal Access' and Devnet's ability to secure and
maintain exclusive inside wiring contracts may be inhibited.

     As of December 31, 2000, there is no federal legal requirement that owners
or managers of commercial office buildings give access to competitive providers
of telecommunications services. However, the FCC is currently considering such a
requirement and these types of requirements have been adopted in certain states.
For example, requirements in California, Connecticut, Texas and Massachusetts
generally require commercial real estate owners to provide nondiscriminatory
access to requesting telecommunications providers that have customers within a
building, and limit what the real estate owner may charge for such access.
Massachusetts recently added new rules that also require owners or controllers
of rights-of-way, including owners of commercial buildings and certain multi-
tenant dwellings, to provide

                                      16
<PAGE>

non-discriminatory access to a carrier upon a tenant's request. The California
Public Utilities Commission recently ruled that carriers cannot enter, on a
prospective basis, into exclusive access agreements with property owners that
would restrict the access of other carriers to the property or discriminate
against the facilities of other carriers. Other states, such as Nebraska and
Ohio, have adopted similar exclusive contract prohibitions. Although these
requirements generally permit telecommunications carriers to install their own
inside wiring, there is no requirement that real estate owners allow such
carriers to use existing inside wiring. Thus, in certain states,
telecommunications carriers are permitted to construct inside wiring within
buildings even if a provider such as Equal Access or Devnet already have
existing facilities.

     Federal laws and regulations concerning building access have been
considered in the past and may be adopted in the future. On June 10, 1999, the
FCC initiated an inquiry into riser access in multiple tenant environments and
requested comment on the following issues:

 .  the FCC's tentative conclusion that utilities must allow telecommunications
   and cable service providers access to rooftop and other rights-of-way and
   utility shaft conduits in multiple tenant environments on just, reasonable
   and nondiscriminatory rates, terms and conditions; and

 .  whether incumbent local telephone companies should make available unbundled
   access to riser cable and wiring within multiple tenant environments.

     On October 25, 2000, the FCC released its decision to promote competition
between telecommunication carriers by regulating access to multiple tenant
buildings. The FCC's decision will bar telecommunications carriers from entering
into exclusive contracts with commercial building owners in the future. Because
Equal Access and Devnet are not "telecommunications carriers", the FCC's
decision does not apply to them or their dealings with building owners. The
FCC's decision will also require local exchange carriers and other utilities
already within multiple tenant buildings to provide other telecommunications
carriers and cable service providers reasonable and non-discriminatory access to
conduits and rights-of-way located in customer buildings and campuses, to the
extent such conduits and rights-of-way are owned or controlled by the utility.
This requirement will not apply directly to Equal Access or Devnet because they
are not telecommunications carriers or utilities. However, this requirement may
apply to telecommunications carriers and utilities holding separate access
rights to those of Equal Access and Devnet in FiberNet buildings, and it may
also apply to Equal Access' and Devnet's telecommunications carrier customers.
Depending on how these rules are interpreted, these requirements may facilitate
our competitors' entry into buildings in which we offer our services by
permitting our competitors to gain access through the separate access rights
currently held by local exchange carriers or other utilities in the same
buildings. We cannot predict how the FCC's rules will be interpreted regarding
this requirement or what, if any, effect such an interpretation would have on
Equal Access or Devnet. The FCC also established procedures to enable building
owners to request that the incumbent local exchange carrier move the demarcation
point, the point at which the telecommunications network wiring under the
incumbent local exchange carrier's control ends and wiring under building
owner/end-user control begins, to the minimum point of entry. The minimum point
of entry is defined as either the closest practicable point to where the wiring
crosses a property line or the closest practicable point to where the wiring
enters a multi-tenant building or buildings. The FCC's procedures to clarify the
demarcation point in multi-tenant buildings do not place an obligation on Equal
Access, Devnet or Local Fiber, because none of these entities are incumbent
local exchange carriers. However, we cannot predict the FCC's implementation of
its demarcation point procedures or the consequences resulting from a building
owner's decision to locate the demarcation point at the minimum point of entry.

     Many parties have petitioned the FCC for reconsideration of its building
access order and the FCC is currently considering those requests.  In addition,
the FCC has also issued a further notice requesting comments on, among other
things, whether:

 .  the prohibition on exclusive access contracts in commercial buildings should
   be extended to residential buildings;

 .  to apply retroactively the bar on exclusive contracts in commercial or
   residential buildings;

 .  to prevent carriers from obtaining other preferential benefits from building
   owners, such as exclusive marketing; and

                                      17
<PAGE>

 .  it has authority to prevent a local exchange carrier from providing service
   to a building, if the owner of the building unreasonably prevents competing
   carriers from gaining access to potential customers located in the building.

     In addition, legislation has recently been introduced in the U.S. House of
Representatives that covers similar issues concerning access to building risers
and rights-of-way. Legislation was enacted on October 23, 2000, which increases
access for competitive carriers in buildings where the federal government is the
owner or tenant. We cannot predict the outcome of the FCC's proceeding or of any
legislation, nor what effect, if any, it may have on our business.

Liability for Internet Content

     There have been various statutes, regulations and court cases relating to
liability of Internet service providers and other on-line service providers for
information carried on or through their services or equipment, including in the
areas of copyright, indecency, obscenity, defamation and fraud. The laws in this
area are unsettled and there may be new legislation and court decisions that may
affect our services and expose us to liability.

Other Regulations

     Our operations are subject to various federal, state, local and foreign
environmental, safety and health laws and governmental regulations. These laws
and regulations govern matters such as the generation, storage, handling, use
and transportation of hazardous materials, the emission and discharge of
hazardous materials into the atmosphere, the emission of electromagnetic
radiation, the protection of wetlands, historic sites and endangered species and
the health and safety of our employees.

     Although we monitor compliance with environmental, safety and health laws
and regulations, we cannot ensure that our operations have been or will be in
complete compliance with these laws and regulations. We may be subject to fines
or other sanctions imposed by governmental authorities if we fail to obtain
certain permits or violate the laws and regulations. We do not expect any
capital or other expenditures for compliance with laws, regulations or permits
relating to the environment, safety and health to be material in 2001.

     In addition, our business may be subject to environmental laws requiring
the investigation and cleanup of contamination at sites we own or operate or at
third party waste disposal sites. These laws often impose liability even if the
owner or operator did not know of, or was not responsible for, the
contamination. Although we operate numerous sites in connection with our
operations, we are not aware of any liability relating to contamination at these
sites or third party waste disposal sites that could have a material adverse
effect on our business or financial condition.

Employees

     As of December 31, 2000, we had 194 employees, including 21 in engineering,
90 in network operations, 9 in network construction, 42 in sales and marketing,
13 in real estate services, and 19 in finance and administration. We have not
experienced any work stoppages and consider our relations with our employees to
be good.


ITEM 2. DESCRIPTION OF PROPERTIES

     Our principal offices are located at 570 Lexington Avenue, in New York, New
York where we lease an aggregate of approximately 12,195 square feet. The term
for these premises expires in 2008. Our subsidiary, Devnet, is located at 325
Riverside Avenue, Westport, Connecticut. We lease 4,930 square feet under a
lease that expires in 2001, with an option to extend the lease to 2006, and
3,260 square feet under a lease that expires in 2002, with an option to extend
the lease to 2007. We also lease additional office space in Garden City, New
York consisting of 3,800 square feet under a lease that expires in 2005. In
addition, we have office space in Rochester, New York, our former headquarters,
which we are currently subleasing. We lease 15,000 square feet under a lease
that expires in 2005. Our NOC is located at Gateway Center in Newark, New
Jersey, where we occupy 7,987 square feet under a lease that expires in 2010.
Our warehouse facility is located in Long Island City, New York. We lease 6,500
square feet under a lease that expires in 2005. We have also leased two
facilities at major carrier hotels in New York, New York. These facilities are
located at 60

                                      18
<PAGE>

Hudson Street and at 111 Eighth Avenue. The lease for the 15,239 square feet
facility at 60 Hudson Street extends through 2008 and the lease for the 5,672
square feet facility at 111 Eighth Avenue extends through 2015. Additionally, we
lease space in carrier hotels at 600 South Federal Street in Chicago consisting
of 6,588 square feet under a lease which expires in 2015, and at 707 Wilshire
Boulevard in Los Angeles consisting of 7,465 square feet under a lease which
expires in 2010. We also lease space for other network-related facilities and in
the basements of our on-net buildings for our central equipment rooms. We intend
to lease additional space in the next 12 months.

ITEM 3. LEGAL PROCEEDINGS

     We are not currently a party to any material legal proceedings.


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

     None.

                                    PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCK HOLDER MATTERS

Price Range of Our Common Stock

   On April 27, 2000, our common stock began trading on the Nasdaq National
Market System under the ticker symbol "FTGX". Prior to that time, our common
stock was quoted on the OTC Bulletin Board under the same ticker symbol.

     The following table sets forth the high and low sales prices for each
quarter for our common stock as reported on the NASD Electronic Bulletin Board
during 1999 and through April 27, 2000 and as reported on the Nasdaq National
Market System from April 28, 2000 through December 31, 2000:

<TABLE>
<CAPTION>
                                            2000                1999
                                      ------------------   ----------------
                                        High       Low       High     Low
                                      -------    -------   -------   ------
<S>                                   <C>        <C>       <C>       <C>
Quarter ending March 31.............  $25.500    $13.250   $ 3.250   $1.250
Quarter ending June 30..............  $18.000    $ 8.750   $ 5.313   $2.938
Quarter ending September 30.........  $18.750    $12.125   $ 7.500   $4.250
Quarter ending December 31..........  $16.250    $ 3.750   $17.438   $4.875
</TABLE>

     As of March 26, 2001, there were approximately 189 holders of record of our
common stock and, according to our estimates, approximately 3,005 beneficial
owners of our common stock.

     We have not paid any dividends with respect to our common stock and do not
expect to pay dividends on our common stock in the foreseeable future. Any
future dividends will be declared at the discretion of our Board of Directors
and will depend, among other things, upon our financial condition, capital
requirements, earnings and liquidity. Our credit facility currently prohibits,
and future debt agreements and preferred stock will likely restrict, the payment
of cash dividends on our common stock.

Recent Sales of Unregistered Securities

     Devnet. On July 31, 2000, we acquired the remaining 97% of Devnet L.L.C.,
which we previously did not own, giving us control of 100% of Devnet. In
connection with this acquisition, we issued 3,461,162 shares of our common
stock.

     Nortel Networks Inc. Preferred Stock.  On June 30, 2000, we sold 2,000,000
shares of our series G preferred stock to Nortel Networks Inc. in a private
placement for aggregate gross proceeds of $20 million. On July 31, 2000, Nortel
surrendered its series G preferred stock and accrued dividends on that stock and
invested an additional $22.5

                                      19
<PAGE>

million in a second private placement in exchange for 426,333 shares of our
series H preferred stock. On August 11, 2000, Nortel invested $7.5 million by
purchasing 62,500 of our series I preferred stock.

     Credit Facility Warrants. On April 11, 2000, we issued warrants to purchase
1,513,842 shares of our common stock, and on July 31, 2000, we issued warrants
to purchase 425,000 shares of our common stock, both with an exercise price of
$18.062 per share, in connection with entering into our $75 million senior
secured credit facility. On December 18, 2000, we issued an additional 504,614
warrants with an exercise price of $17.062 and re-priced the warrants issued on
April 11, 2000 and July 31, 2000 from $18.062 to an exercise price of $17.062,
per the terms of our credit facility. On February 9, 2001, we amended this
credit facility, increasing it to $105 million, and issued warrants to purchase
an additional 454,409 shares of our common stock at an exercise price of $8.00
per share. In addition, as part of the amendment of our credit facility all
warrants previously issued to our lenders were replaced with warrants to
purchase an equivalent number of shares of our common stock at an exercise price
of $8.00 per share.

     Options and Warrants. During the year ended December 31, 2000, employees,
former employees and consultants exercised options to purchase 46,070 shares of
common stock with exercise prices ranging from $1.88 to $6.31 and a weighted
average exercise price of $4.57. During the year ended December 31, 2000,
holders of warrants exercised warrants for 1,275,015 shares of common stock with
exercise prices ranging from $4.00 to $17.75 and a weighted average exercise
price of $ 6.35. During the year ended December 31, 2000, we granted options to
purchase an aggregate of 6,351,964 shares of common stock to employees,
directors and consultants with exercise prices ranging from $3.75 to $18.75 and
at a weighted average exercise price of $9.56 per share.

     The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from the Securities Act of 1933
("Securities Act") registration requirements set forth in Sections 3(b) and 4(2)
of the Securities Act, and any regulations promulgated thereunder, relating to
sales by an issuer not involving any public offering, or (ii) in the case of
certain options to purchase shares of common stock and shares of common stock
issued upon the exercise of such options, such offers and sales were made in
reliance upon an exemption from registration under Rule 701 promulgated under
Section 3(b) of the Securities Act. No underwriters were involved in the
foregoing sales of securities.


ITEM 6. SELECTED FINANCIAL DATA

     You should read the selected financial data presented below, in conjunction
with our consolidated financial statements, the notes to those consolidated
financial statements and the management's discussion and analysis of financial
condition and results of operations section appearing elsewhere in this report
on Form 10-K. In particular, please refer to Note 4 - Acquisition of the notes
to the consolidated financial statements for information regarding our
acquistion of Devnet.

     The consolidated statement of operations data for the fiscal year ended
June 30, 1997 and the consolidated balance sheet data as of June 30, 1997 have
been derived from our consolidated financial statements, which have been audited
by Mendelsohn Kary Bell & Natoli, P.C., independent public accountants. The
consolidated statement of operations data for the years ended December 31, 1998,
1999 and 2000 and the consolidated balance sheet data as of December 31 1998,
1999 and 2000 have been derived from our consolidated financial statements which
have been audited by Arthur Andersen LLP, independent public accountants, and
appear elsewhere in this report on Form 10-K. The consolidated statement of
operations data for the six months ended December 31, 1997 and the consolidated
balance sheet data as of December 31, 1997 and as of June 30, 1996 have been
derived from unaudited consolidated financial statements. The statement of
operations data for the period from August 10, 1994, the date of our inception,
to June 30, 1996 has been derived from our unaudited consolidated financial
statements. Our historical results are not necessarily indicative of the
operating results to be realized in the future.

                                      20
<PAGE>

                          Consolidated Financial Data
                   (in thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                      Period from
                                                    August 10, 1994               Six Months
                                                    (inception) to   Year Ended     Ended           Year Ended December 31,
                                                       June 30,       June 30,    December 31,  -------------------------------
                                                         1996         1997 (1)        1997         1998       1999       2000
                                                    -------------    ----------  -------------  ---------   --------   --------
                                                     (unaudited)                  (unaudited)
<S>                                                 <C>              <C>          <C>           <C>         <C>        <C>
Statement of Operations Data:
Revenues..........................................     $    --        $    --        $    --      $    --   $     --   $ 13,117
Operating expenses:
 Direct costs.....................................          --             --             --           --         --      5,388
 Selling, general and administrative expense......           9            374            395        2,817      9,287     27,072
 Stock related expense............................          --             --             --          128      3,175      8,468
 Depreciation and amortization....................          --             --              2           28        520      7,652
                                                    ----------        -------        -------      -------   --------   --------
Total operating expenses..........................           9            374            397        2,973     12,982     48,580
                                                    ----------        -------        -------      -------   --------   --------
Loss from operations..............................          (9)          (374)          (397)      (2,973)   (12,982)   (35,463)
Interest income (expense), net....................          --             --             26          156     (9,216)    (5,657)
                                                    ----------        -------        -------      -------   --------   --------
Net loss..........................................          (9)          (374)          (371)      (2,817)   (22,198)   (41,120)
Preferred stock dividends.........................          --             --             --           --       (757)    (8,113)
Preferred stock - beneficial conversion...........          --             --             --           --    (49,246)   (27,766)
                                                    ----------        -------        -------      -------   --------   --------
Net loss applicable to common stockholders........     $    (9)       $  (374)       $  (371)     $(2,817)  $(72,201)  $(76,999)
                                                    ==========        =======        =======      =======   ========   ========

Net loss applicable to common stockholders per
share:
 Basic and diluted................................     $(0.001)       $(0.025)       $(0.025)     $ (0.18)  $  (4.30)  $  (2.60)

Weighted average common shares outstanding:
 Basic and diluted................................      15,000         15,000         15,000       15,847     16,798     29,651
</TABLE>


<TABLE>
<CAPTION>
                                                             As of June 30,                  As of December 31,
                                                      -----------------------  ------------------------------------------------
                                                         1996         1997         1997         1998        1999        2000
                                                      -----------  ----------  ------------- ----------- ----------  ----------
                                                      (unaudited)               (unaudited)
<S>                                                   <C>             <C>         <C>          <C>         <C>         <C>
Balance Sheet Data:
Cash and cash equivalents ........................       $  1         $   2       $5,146       $  257      $ 9,512     $  1,582
Other current assets..............................          1             1            4          309          160       14,990
Property, plant and equipment, net................         --            --           92        5,397       55,177      126,114
Total assets......................................        157           103        5,374        6,328       77,588      227,165
Long-term liabilities.............................         --            --           --           --          956       46,559
Total stockholders' equity........................         52          (241)       4,645        1,912       68,252      144,283
</TABLE>


(1) At the end of our fiscal year ended June 30, 1997, we changed our fiscal
year end to December 31, 1997.

                                      21
<PAGE>

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

Overview

     We deploy, own and operate state-of-the-art, 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 growing 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
target 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, 2000, we had accomplished the
following:

     .  We deployed fiber-optic transport infrastructure in six major carrier
        hotels in the New York metropolitan area, including 60 Hudson Street and
        111 Eighth Avenue, three major carrier hotels in Los Angeles and one
        major carrier hotel in Chicago.

     .  We have deployed our advanced, vertical in-building networks, known as
        FiberNet In-Building Networks, or FINs, in 10 office buildings in New
        York City and six in Chicago.

     .  We entered into exclusive license agreements that give us the right to
        build and operate our FINs in 36 office buildings in our target markets.

     .  We had exclusive license agreements that give us the right to manage
        communications access and infrastructure in approximately 185 other
        office buildings nationwide.

     .  We had 45 customers and entered into 69 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 deploy our network
infrastructure and expand our business operations. As a result of our limited
operating history, prospective investors have limited operating history and
financial data upon which to evaluate our performance.

Factors Affecting Future Operations

     Revenues. We generate revenues from selling network capacity and related
services to other communications service providers. The majority of our revenues
are generated on a monthly recurring basis under long-term contracts, typically
three to five years in length. Certain of our customers are obligated to make
minimum payments for the utilization of our 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. 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

                                      22
<PAGE>

     our carrier point facilities to another carrier point facility or to an on-
     net 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 will 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 on-
     net and our 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 their retail
     customers.

     The growth of our revenues is dependent upon our ability to add more
carrier point facilities and on-net buildings as points of connectivity on our
networks. We believe that an increase in the number of locations where we can
deliver traffic for our customers provides us with a broader addressable market
to offer our services. Within each carrier point facility, on-net and off-net
building, 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. In addition, we typically require our customers
to make minimum commitments for transport services to utilize the inherent
operating leverage in our networks.

     We recognize revenues under the completed contract method on a monthly
basis over the period that services are provided. Pursuant to the terms of
certain of our sales agreements, we submit invoices to customers for the full
contract value at the inception of the contract term. We must recognize the
revenues ratably over the full contract term, regardless of when a customer is
invoiced for our services. As a result, we record deferred revenues for amounts
invoiced but not yet recognized as revenues.

     Direct Costs. Direct costs are associated with the operation of our
networks and facilities. These costs typically include maintenance and repair
costs and utility costs. Other specific costs include occupancy expenses at our
carrier point facilities, on-net buildings and off-net buildings. Our license
agreements for our on-net and off-net buildings require us to pay license fees
to the owners of these properties. 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 direct costs are generally fixed in nature.
After the significant capital for our networks and facilities is expended, we do
not anticipate that direct costs will grow commensurately with the growth of our
revenues.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses generally include all of our personnel costs, including
wages and benefits, occupancy costs for our corporate offices, professional
fees, and other miscellaneous expenses. Sales and marketing expenses, including
advertising and promotions, are also included.

                                      23
<PAGE>

     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.

     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.

Results of 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.

     Direct Costs.  Direct costs for fiscal 2000 were $5.4 million, associated
with the operation of our networks and facilities. These costs 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. During
fiscal 1999, we did not record any direct costs because we were not offering
services during that period.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses for fiscal 2000 were $27.1 million compared to $9.3
million for fiscal 1999, an increase of $17.8 million or 191%. 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.

     Stock Related Expense. Stock related expense for fiscal 2000 was $8.5
million. This non-cash expense relates to the granting of stock options to
employees. We incured $3.2 million of stock related expense for fiscal 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 $9.2 million for fiscal 1999, an decrease of $3.6 million
or decrease of 38.0 %. Interest expense decreased as a result of $7.9 million in
interest expense on beneficial conversion in 1999 and none in 2000, offset
against additional interest expense in 2000 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
dividends of $35.9 million.  Of that amount we paid 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 beneficial conversion charges 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.  The amounts of the dividends
and the beneficial

                                      24
<PAGE>

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 $72.2 million for fiscal 1999, an increase of $4.8 million or 6.6%. 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, 1999 Compared to Fiscal Year Ended December 31,
1998

     Revenues. We did not have any commercial operations during fiscal 1999 or
fiscal 1998 and, therefore, did not generate any revenues.

     Direct Costs. We did not record any direct costs during fiscal 1999 or
fiscal 1998.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses for fiscal 1999 were $9.3 million compared to $2.8
million for fiscal 1998, an increase of $6.5 million or 230%.  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. Also included in
fiscal 1999 were $4.3 million of non-recurring charges, primarily consisting of
a $3.7 million non-cash charge for the settlement of litigation.

     Stock Related Expense. Stock related expense for fiscal 1999 was $3.2
million compared to $0.1 million in 1998. This non-cash expense relates to the
granting of stock options to employees.

     Depreciation and Amortization. Depreciation and amortization expense for
fiscal 1999 was $0.5 million compared to $0.03 million for fiscal 1998, an
increase of $0.47 million. This increase resulted from commencement of
the depreciation of certain network related fixed assets that were placed into
service.

     Interest Expense, Net. Interest expense, net for fiscal 1999 was $9.2
million as compared to interest income of $0.2 million for fiscal 1998, an
increase of $9.4 million. Interest expense in 1999 was generated as a result of
interest expense on beneficial conversion, in the amount of $7.9 million, and
borrowings under our outstanding capital lease obligations, in the amount of
$1.3 million.

     Preferred Stock Dividends. In fiscal 1999, we recorded $0.8 million in
preferred stock dividends related to our series D, E and F preferred stock. In
addition, we recorded a beneficial conversion charge of $49.2 million relating
to the issuance of the Series D, E and F preferred stock. We did not record any
preferred dividends or beneficial conversion charges during fiscal 1998.

     Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $72.2 million for fiscal 1999 compared to a
loss of $2.8 million for fiscal 1998, an increase of $69.4 million.
This increase is a result of the aforementioned changes in our operations.

Liquidity and Capital Resources

     As a result of  developmental activities and the deployment of 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 operations. Consequently, we have been dependent upon external sources of
capital to fund  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. Additionally, we have
no relevant operating history upon which an evaluation of performance and
prospects can be made. We are subject to unforeseen capital requirements,
failure of market acceptance, failure to establish business relationships, and
competitive disadvantages against larger and more established companies.

     To date, we have financed our operations through direct equity investments
from 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. Furthermore, we have issued our equity securities as
consideration for certain acquisitions and commercial agreements. We incurred an
EBITDA loss and a net loss applicable to common stockholders for fiscal 2000 and
1999 of $19.3 million and $9.3 million and $77.0 million and $72.2 million,
respectively. During fiscal 2000 and 1999, cash used to fund operating
activities was $12.6 million and $5.3 million, respectively, and cash purchases
of property, plant and equipment were $74.7 million and $10.8 million,
respectively. In addition, we invested $18.0 million in cash in Devnet during
fiscal 2000.

                                      25
<PAGE>

   During fiscal 2000, we received $97.2 million in net cash proceeds from
financing activities. The net borrowing under our senior secured credit facility
was $45.0 million. In addition, we received $3.3 million in cash proceeds from
the exercise of outstanding options to purchase shares of common stock and $50.0
million from the private placement of series G, H and I preferred stock to
Nortel. During fiscal 1999, we received $25.4 million in cash proceeds from
financing activities.

   Our planned operations may require additional capital to fund equipment
purchases, engineering and construction costs, marketing costs, administrative
expenses and other operating activities. We anticipate spending between $55.0
million and $75.0 million in capital expenditures during fiscal 2001 for the
deployment of FINs, expansion of our metropolitan transport networks, the
development of additional carrier point facilities and other network programs
and management systems.

   As a result, we may require additional financing to complete our networks. We
will continue to have on-going discussions with sources of additional financing.
From time to time, we may consider private or public sales of additional equity
or debt 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.

Subsequent Events

     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.  We may redeem the warrants when the stock trades at $11.48 or
above for 20 consecutive trading days.

     On February 9, 2001, we increased our existing credit facility with
Deutsche 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. 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.

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.

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Our exposure to financial market risk, including changes in interest rates,
relates primarily to our senior secured credit facility and marketable security
investments. Borrowings under our senior secured credit facility bear interest
at floating rates.  As a result, we are subject to fluctuations in interest
rates. 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 do not
believe that a 100 basis point increase or decrease in interest rates would
significantly impact our business.  We do not have any derivative instruments.
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.

                                      26
<PAGE>

ITEM 8. FINANCIAL STATEMENTS

                       CONSOLIDATED FINANCIAL STATEMENTS

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                      <C>
Report of Independent Public Accountants...............................       28

Consolidated Balance Sheets............................................       29

Consolidated Statements of Operations..................................       30

Consolidated Statements of Stockholders' Equity........................       31

Consolidated Statements of Cash Flows..................................       32

Notes to Consolidated Financial Statements.............................    33-47
</TABLE>

                                      27
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To FiberNet Telecom Group, Inc.:

     We have audited the accompanying consolidated balance sheets of FiberNet
Telecom Group, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2000 and December 31, 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2000, 1999 and 1998. 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.

     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, 2000 and December 31,
1999, and the results of their operations and their cash flows for the years
ended December 31, 2000, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States.


                                  /s/ Arthur Andersen LLP


New York, New York
February 23, 2001

                                      28
<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                          CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                                 December 31,     December 31,
                                                                                                     2000             1999
                                                                                                 -----------      ------------
<S>                                                                                              <C>              <C>
                                                              ASSETS
Current Assets:
      Cash and cash equivalents..............................................................     $   1,582        $  9,512
      Accounts receivable, net...............................................................        14,030              --
      Prepaid expenses and other.............................................................           960             160
                                                                                                  ---------        --------
            Total current assets.............................................................        16,572           9,672
Property, plant and equipment, net...........................................................       126,114          55,177
Other Assets:
      Goodwill, net..........................................................................        69,057           8,667
      Deferred charges, net..................................................................        14,293           3,698
      Other assets...........................................................................         1,129             374
                                                                                                  ---------        --------
            Total other assets...............................................................        84,479          12,739
                                                                                                  ---------        --------
TOTAL ASSETS.................................................................................     $ 227,165        $ 77,588
                                                                                                  =========        ========

                                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
      Accounts payable.......................................................................     $  11,119        $  3,733
      Accrued expenses.......................................................................        10,590           4,444
      Deferred revenues......................................................................        14,381              --
      Capital lease obligation--current portion..............................................           233             203
                                                                                                  ---------        --------
            Total current liabilities........................................................        36,323           8,380
Long-Term Liabilities:
     Notes payable, less original issue discount.............................................        45,836              --
     Capital lease obligation................................................................           723             956
                                                                                                  ---------        --------
            Total liabilities................................................................        82,882           9,336
Stockholders' Equity:
     Common stock, $.001 par value, 150,000,000 and 50,000,000 shares authorized and
      33,238,346 and 25,932,464  shares issued and outstanding...............................            33              26
     Series C voting preferred stock $.001 par value, 83,688 and 133,333 shares issued
      and outstanding, respectively (Preference in involuntary liquidation value, $1.50
      per share).............................................................................           126             200
     Series D preferred stock $.001 par value, 322,704 and 310,173 shares issued and
      outstanding, respectively (Preference in involuntary liquidation value, $15.00 per
      share).................................................................................        23,971          22,553
     Series E preferred stock $.001 par value, 317,853 and 293,872 shares issued and
      outstanding, respectively (Preference in involuntary liquidation value, $15.00 per
      share).................................................................................        24,130          21,430
     Series F preferred stock $.001 par  value, 376,202 and 347,819 shares issued and
      outstanding, respectively (Preference in involuntary liquidation value, $30.00 per
      share).................................................................................        28,559          25,329
     Series H preferred stock $.001 par value, 440,544 and no shares issued and
      outstanding, respectively (Preference in involuntary liquidation value, $100.00
      per share).............................................................................        64,568              --
     Series I preferred stock $.001 par value, 64,431 and no shares issued and
      outstanding, respectively (Preference in involunatary liquidation value, $120.00
      per share).............................................................................         8,969              --
     Additional paid in capital and other....................................................       146,719          74,507
     Accumulated deficit.....................................................................      (152,792)        (75,793)
                                                                                                  ---------        --------
            Total stockholders' equity.......................................................       144,283          68,252
                                                                                                  ---------        --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................................     $ 227,165        $ 77,588
                                                                                                  =========        ========
</TABLE>

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


                                      29
<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                            Year Ended December 31,
                                                                            -----------------------------------------------------
                                                                              2000                  1999                   1998
                                                                            --------              --------                -------
<S>                                                                         <C>                   <C>                     <C>
Revenues.................................................................   $ 13,117              $     --                $    --
Operating expenses:
      Direct costs.......................................................      5,388                    --                     --
      Selling, general and administrative expense........................     27,072                 9,287                  2,817
      Stock related expense..............................................      8,468                 3,175                    128
      Depreciation and amortization......................................      7,652                   520                     28
                                                                            --------              --------                -------
Total operating expenses.................................................     48,580                12,982                  2,973
                                                                            --------              --------                -------
Loss from operations.....................................................    (35,463)              (12,982)                (2,973)
Interest (expense)/income, net...........................................     (5,657)               (9,216)                   156
                                                                            --------              --------                -------
Net loss.................................................................    (41,120)              (22,198)                (2,817)
Preferred stock dividends................................................     (8,113)                 (757)                    --
Preferred stock - beneficial conversion..................................    (27,766)              (49,246)                    --
                                                                            --------              --------                -------
Net loss applicable to common
   stockholders..........................................................   $(76,999)             $(72,201)               $(2,817)
                                                                            ========              ========                =======
Net loss applicable to common stockholders per share
   -- basic and diluted..................................................   $  (2.60)             $  (4.30)               $ (0.18)
Weighted average shares
   outstanding...........................................................     29,651                16,798                 15,847
</TABLE>

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

                                      30
<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                             Additional Paid
                                                                 Preferred Stock          Common Stock       in Capital and
                                                             -----------------------  --------------------
                                                               Shares       Amount      Shares     Amount         Other
                                                             -----------  ----------  -----------  -------  -----------------
<S>                                                          <C>          <C>         <C>          <C>      <C>
Balance at December 31, 1997...............................   1,080,000    $      1   15,000,000      $15           $  5,383
Conversion of 1,000,000 shares Series A
 Preferred Stock, $.001 par value, into
 common stock, February 24, 1998...........................  (1,000,000)         (1)   1,000,000        1                 --
Dividends paid.............................................          --          --           --       --                (45)
Earned compensation, executive stock
 options...................................................          --          --           --       --                128
Net loss applicable to common stockholders.................          --          --           --       --                 --
                                                             ----------    --------   ----------      ---           --------
Balance at December 31, 1998...............................      80,000           -   16,000,000       16              5,466
                                                             ==========    ========   ==========      ===           ========
Redemption of Series B Preferred Stock.....................     (80,000)         --           --       --                 --
Issuance of Series C Preferred Stock.......................     133,333         200           --       --                 --
Conversion of Senior Secured Convertible
 Notes to common stock, net................................          --          --   13,826,868       14             34,528
Exchange of common stock for preferred stock
 and beneficial conversion feature:
  Issuance of Series D Preferred Stock.....................     309,143      22,413   (3,091,430)      (3)            (4,634)
  Issuance of Series E Preferred Stock.....................     291,926      21,165   (2,919,260)      (3)            (4,376)
  Issuance of Series F Preferred Stock.....................     345,515      25,050   (3,455,243)      (3)           (10,362)
Series D Preferred Stock dividends.........................       1,030         140           --       --                 --
Series E Preferred Stock dividends.........................       1,946         265           --       --                 --
Series F Preferred Stock dividends.........................       2,304         279           --       --                 --
Beneficial conversion feature on preferred stock
 dividends.................................................          --          --           --       --                 72
Exercise of warrants to common stock.......................          --          --      220,000       --                147
Issuance of common stock for purchase of
 MFN dark fiber, minority interest and
 Other.....................................................          --          --    5,351,529        5             43,972
Deferred compensation......................................          --          --           --       --             (4,290)
Stock compensation to consultants and
 employees.................................................          --          --           --       --             13,764
Other......................................................          --          --           --       --                220
Net loss applicable to common stockholders.................          --          --           --       --                 --
                                                             ----------    --------   ----------      ---           --------
Balance at December 31, 1999...............................   1,085,197      69,512   25,932,464       26             74,507
                                                             ==========    ========   ==========      ===           ========
Redemption of Series C Preferred Stock.....................     (49,645)        (74)      49,645       --                 74
Issuance of common stock, net..............................          --          --    4,150,342        4             46,213
Issuance of Series H Preferred Stock, net..................     426,333      63,799           --       --              4,836
Issuance of Series I Preferred Stock, net..................      62,500       8,850           --       --                 --
Series D Preferred Stock dividends.........................      12,531       1,418           --       --                 --
Series E Preferred Stock dividends.........................      23,981       2,700           --       --                 --
Series F Preferred Stock dividends.........................      28,383       3,230           --       --                 --
Series H Preferred Stock dividends.........................      14,211         769           --       --                 --
Series I Preferred Stock dividends.........................       1,931         119           --       --                 --
Exercise of options and warrants to common stock...........          --          --    3,105,895        3              6,345
Issuance of warrants in connection with bank financing.....          --          --           --       --              6,139
Stock compensation to employees............................          --          --           --       --              4,040
Deferred compensation......................................          --          --           --       --              2,732
Other......................................................          --          --           --       --              1,833
Net loss applicable to common stockholders.................          --          --           --       --                 --
                                                             ----------    --------   ----------      ---           --------
Balance at December 31, 2000...............................   1,605,422    $150,323   33,238,346      $33           $146,719
                                                             ==========    ========   ==========      ===           ========

<CAPTION>
                                                                   Accumulated
                                                                     Deficit       Total
                                                                   -----------  -----------
<S>                                                                <C>           <C>
Balance at December 31, 1997...............................        $      (751)   $  4,648
Conversion of 1,000,000 shares Series A
 Preferred Stock, $.001 par value, into
 common stock, February 24, 1998...........................                 --          --
Dividends paid.............................................                 --         (45)
Earned compensation, executive stock
 options...................................................                 --         128
Net loss applicable to common stockholders.................             (2,817)     (2,817)
                                                                   -----------    --------
Balance at December 31, 1998...............................             (3,568)      1,914
                                                                   ===========    ========
Redemption of Series B Preferred Stock.....................                 --          --
Issuance of Series C Preferred Stock.......................                 --         200
Conversion of Senior Secured Convertible
 Notes to common stock, net................................                 --      34,542
Exchange of common stock for preferred stock
 and beneficial conversion feature:
  Issuance of Series D Preferred Stock.....................                 --      17,776
  Issuance of Series E Preferred Stock.....................                 --      16,786
  Issuance of Series F Preferred Stock.....................                 --      14,685
Series D Preferred Stock dividends.........................                 --         140
Series E Preferred Stock dividends.........................                 --         265
Series F Preferred Stock dividends.........................                 --         279
Beneficial conversion feature on preferred stock
 dividends.................................................                 --          72
Exercise of warrants to common stock.......................                 --         147
Issuance of common stock for purchase of
 MFN dark fiber, minority interest and
 Other.....................................................                 --      43,977
Deferred compensation......................................                 --      (4,290)
Stock compensation to consultants and
 employees.................................................                 --      13,764
Other......................................................                (24)        196
Net loss applicable to common stockholders.................            (72,201)    (72,201)
                                                                   -----------    --------
Balance at December 31, 1999...............................            (75,793)     68,252
                                                                   ===========    ========
Redemption of Series C Preferred Stock.....................                 --          --
Issuance of common stock, net..............................                 --      46,217
Issuance of Series H Preferred Stock, net..................                 --      68,635
Issuance of Series I Preferred Stock, net..................                 --       8,850
Series D Preferred Stock dividends.........................                 --       1,418
Series E Preferred Stock dividends.........................                 --       2,700
Series F Preferred Stock dividends.........................                 --       3,230
Series H Preferred Stock dividends.........................                 --         769
Series I Preferred Stock dividends.........................                 --         119
Exercise of options and warrants to common stock...........                 --       6,348
Issuance of warrants in connection with bank financing.....                 --       6,139
Stock compensation to employees............................                 --       4,040
Deferred compensation......................................                 --       2,732
Other......................................................                 --       1,833
Net loss applicable to common stockholders.................            (76,999)    (76,999)
                                                                   -----------    --------
Balance at December 31, 2000...............................        $  (152,792)   $144,283
                                                                   ===========    ========
</TABLE>

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

                                      31
<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                     ----------------------------------------------------------
                                                                       2000                       1999                  1998
                                                                     --------                   --------             ----------
<S>                                                                  <C>                        <C>                  <C>
Cash flows from operating activities:
 Net loss applicable to common stockholders...............           $(76,999)                  $(72,201)            $   (2,817)
 Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and Amortization...........................              7,652                        520                     28
  Beneficial conversion and preferred stock dividends.....             35,879                     58,864                     --
  Stock related expense...................................              8,468                      3,175                    127
  Other non-cash expenses.................................              3,193                      4,009                     61
 Change in assets and liabilities:
  (Increase) decrease in accounts receivable, prepaid
   expenses and other assets..............................            (15,386)                       171                   (669)
  Increase (decrease) in accounts payable and accrued
   expenses...............................................             24,630                        157                  1,533
                                                                     --------                   --------             ----------
Cash used in operating activities.........................            (12,563)                    (5,305)                (1,737)
                                                                     --------                   --------             ----------
Cash flows from investing activities:
 Capital expenditures.....................................            (74,677)                   (10,827)                (3,077)
 Investment in Devnet, net of cash........................            (17,896)                        --                     --
                                                                     --------                   --------             ----------
Cash used in investing activities.........................            (92,573)                   (10,827)                (3,077)
                                                                     --------                   --------             ----------
Cash flows from financing activities:
 Net proceeds from issuance of debt financing.............             45,016                     25,331                     --
 Net proceeds from issuance of equity securities..........             52,393                        200                     --
 Repayment of capital lease obligation....................               (203)                      (144)                    --
 Payment of dividends.....................................                 --                         --                    (75)
                                                                     --------                   --------             ----------
Cash provided from (used in) financing activities.........             97,206                     25,387                    (75)
                                                                     --------                   --------             ----------
Net increase (decrease) in cash...........................             (7,930)                     9,255                 (4,889)
Cash at beginning of period...............................              9,512                        257                  5,146
Cash at end of period.....................................           $  1,582                   $  9,512             $      257
                                                                     ========                   ========             ==========

Supplemental disclosures of cash flow information:
 Interest paid............................................           $  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.

                                      32
<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 growing 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 a holding 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 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, LLC ("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 is materially dependant on certain existing agreements with
other entities, including telecommunications license agreements with building
landlords, interconnection agreements with other telecommunications service
providers and leases with carrier hotel property owners. FiberNet also has
entered into material 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.

     On April 27, 2000, the Company began trading its common stock on the Nasdaq
National Market System under the ticker symbol "FTGX". Previously, the Company's
common stock was quoted on the OTC Bulletin Board under the same ticker symbol.

                                      33
<PAGE>

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 L.L.C.,
FiberNet Telecom, Inc., FiberNet Equal Access, LLC and Local Fiber, LLC 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.

     The Company's operations and ability to grow may be affected by numerous
factors, including the fact that the Company is an early-stage company operating
in a new and rapidly evolving market; has experienced and will continue to
experience operating losses, net losses and cash flow deficits; must make
significant capital expenditures before generating operating profits, which may
prove insufficient to justify those expenditures; must obtain additional carrier
hotel lease agreements and maintain existing agreements in major carrier hotels;
must obtain additional license agreements and leases with building owners for
the installation of in-building network infrastructure; may require additional
capital to complete the build-out of networks and fund other needs; and depends
heavily on a limited number of real estate owners and developers. The Company
cannot assure the successful completion of network construction; must increase
the volume of traffic on the network; may need to expand or adapt its networks
in the future in order to remain competitive; may be unable to obtain licenses
for key third party software on commercially acceptable terms in the future;
depends on key personnel; must attract and retain qualified professionals in a
tight labor market; may not be able to compete effectively in its highly
competitive sector; and has outstanding debt which may limit its ability to
borrow additional funds, restrict the use of cash flows, constrain its business
strategy and cause the Company to be unable to meet its debt obligations.

     Additionally, there might not be sufficient demand for the Company's
services. If the Company cannot maintain the scalability, reliability and speed
of the network, potential customers will not use FiberNet's services.
Service interruptions on networks could expose the Company to liability, or
cause it to lose customers. The Company's failure to manage the growth of its
operations or development of its information support systems could harm its
business. Alternative technologies pose competitive threats. Continued
competition or excess network capacity could cause prices for FiberNet's
services to decline, and legislation and government regulation could adversely
affect the Company.

Cash and Cash Equivalents

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

                                      34
<PAGE>

Property, Plant and Equipment

   Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is provided 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 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, deferred charges 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 carring value, an impairment loss would be
recognized equal to an amount by which the carrying value exceeds the fair value
of the assets.

Revenue Recognition

     FiberNet generates revenues from selling network capacity and related
services to other communications service providers. The majority of the
Company's revenues are generated on a monthly recurring basis under long-term
contracts, typically three to five years in length. 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.
The Company has entered into certain reciprocal agreements during the year. The
services provided and obtained through these agreements are priced at fair
value, and are included in revenues and direct costs in the accompanying
statements of operations.

   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. Over its metropolitan transport networks, the Company can provision
circuits from one of its carrier point facilities to another carrier point
facility or to an on-net building via an interconnection with its in-building
network in that building. The Company can also provision circuits vertically
between floors in a carrier point facility or an on-net building.

  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 commercial office 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

                                      35
<PAGE>

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.

     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. The net
effect of SAB 101, when applicable, could defer revenue recognition for certain
payments previously received into future accounting periods. On June 26, 2000,
the SEC deferred the implementation of SAB 101 from the second calendar quarter
of 2000 until no later than the fourth calendar quarter of 2000, to provide
companies with additional time to determine the effect that a change in
accounting policy under SAB 101 has on their revenue recognition practices. The
implementation of SAB 101 requires companies to report any changes in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion No. 20, "Accounting Changes". 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
associated debt obligation.

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 2000 as they were anti-dilutive.

Concentration of Credit Risk

  The Company has some concentration of credit risk among its customer base. The
Company performs ongoing credit evaluations of its customers' financial
condition. As of December 31, 2000, two customers in the aggregate accounted for
25.6% of the Company's total accounts receivable. For the year ended December
31, 2000, two customers in the aggregate accounted for 61.5% of the Company's
total revenue. The Company recorded an allowance for doubtful accounts of $0.5
million as of December 31, 2000.

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

                                      36
<PAGE>

Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". The compensation expense is charged against
operations ratably over the vesting period of the options.

Accounting for Income Taxes

   The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), 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.

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 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133", which deferred SFAS 133's
effective date to January 2001. SFAS 133 establishes new standards of accounting
and reporting for derivatives 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 reported in earnings. The adoption of SFAS 133, will not have a
material impact on the Company's consolidated financial statements as the
Company has not entered into any derivative instrument contracts.

  In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation."  FIN 44
addresses certain issues where the FASB believed diversity in practice has
developed with respect to APB 25. Among other issues, FIN 44 clarifies (a) the
definition of employee for purposes of applying APB 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination.

                                      37
<PAGE>

                         FIBERNET TELECOM GROUP, INC.


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


3. PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                    December 31,   December 31,
                                                        2000           1999
                                                        ----           ----
          <S>                                       <C>            <C>
          Computer software........................   $  2,963        $   307
          Computer equipment.......................      1,926            235
          Leasehold improvements...................      1,111            298
          Office equipment and furniture...........        810            381
          Construction in progress.................     52,876         54,392
          Network equipment and infrastructure.....     71,322             --
                                                      --------        -------
          Total....................................    131,008         55,613
          Accumulated depreciation.................     (4,894)          (436)
                                                      --------        -------
          Property, plant and equipment, net.......   $126,114        $55,177
                                                      ========        =======
</TABLE>

4. 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 manages the communications access and infrastructure
in commercial office properties 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 has preliminarily allocated the
purchase price of approximately $60 million to the assets and liabilities of
Devnet and will complete the allocation within one year from the date of
acquisition. The amount allocated to goodwill is being amortized over 15 years
using the straight-line method. In connection with the acquisition, the Company
paid an aggregate of $500,000 to related parties for financial advisory
services.

   FiberNet's proforma results of operations assuming the Devnet acquisition
occured on January 1, 1999, would have been as follows (dollars in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                                                2000           1999
                                                                            ------------    ------------
               <S>                                                          <C>             <C>
               Revenues..................................................     $ 14,606        $  1,865
               Net loss applicable to common stockholders................     $(82,597)       $(83,620)
               Net loss applicable to common stockholders per share -
                      basic and diluted..................................     $  (2.55)       $  (4.13)
</TABLE>

5.    NOTES PAYABLE

                                      38
<PAGE>

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
Networks Inc. In addition to the initial lenders, First Union National Bank,
FNBC Leasing Corporation and IBM Credit Corporation are currently lenders under
the Credit Facility. As of December 31, 2000, $50.0 million was outstanding
under the Credit Facility. This amount is included in notes payable in the
accompanying balance sheet net of an original issue discount of $4.2 million.
This discount represents the 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 issued to the lenders in connection with the Credit Facility. In
addition, on December 18, 2000, the Company issued 504,614 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 an acceptable pricing
model.

     On February 9, 2001, the Company amended this credit facility and issued
warrants to purchase an additional 454,409 shares of its common stock at an
exercise price of $8.00 per share.  In addition, as part of the amendment of its
credit facility all warrants previously issued to its lenders were replaced with
warrants to purchase an equivalent amount of its common stock at an exercise
price of $8.00 per share.

     FiberNet intends to use the funds available under the Credit Facility for
the acquisition and construction of its network infrastructure and for general
corporate purposes. The Credit Facility has a term of six years and bears
interest at LIBOR + 4.5%. 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.

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 Series C preferred stock is convertible into shares of the
Company's common stock at a conversion price of $1.50 per share, which
represented the approximate fair market value of the Company's common stock when
the conversion price of the Securities was determined. 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.

   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 $5.4 million. 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.

September Convertible Notes

                                      39
<PAGE>

     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 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.

   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 9 - Preferred Stock).

6. 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, 2000 and December 31, 1999.

   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, 2000, 1999 and 1998 was approximately $6.0
million, $0.8 million and $0.3 million, respectively.

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

<TABLE>
<CAPTION>
                                               Operating       Capital
                                               ---------       -------
          <S>                                  <C>             <C>
          2001...............................    $ 7,200         $ 354
          2002...............................      7,131           337
          2003...............................      5,121           314
          2004...............................      4,060           107
          2005 and thereafter................      8,437            --
          Less: interest component...........         --          (270)
                                                 -------         -----
          Total..............................    $31,949         $ 842
                                                 =======         =====
</TABLE>

   On June 22, 2000, the Company amended its master purchase agreement with
Nortel Networks Inc. 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. On December 31,
1999, the Company entered into this master purchase agreement giving

                                      40
<PAGE>

it the right to purchase optical networking equipment and related services at
predetermined volume-based pricing.

   The Company and its subsidiaries in the normal course of business may become
party to a 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.

7. 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) were 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.

   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.
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, 2000, the Company granted
approximately 6.4 million options under the Equity Incentive Plan, at an
average exercise price of approximately $9.56 per share, with a vesting period
of up to three years. The Company's previous Employee Equity Participation
Program was terminated during 1999.

   The Company accounts for stock options under APB Opinion No. 25. During the
years ended December 31, 2000, 1999 and 1998, the Company granted stock options
to employees with exercise prices below the market price on the date of the
grant. As such the Company recorded compensation expense to employees of
approximately $8.5 million, $0.8 million and $0.1 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
(dollars in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                                2000          1999          1998
                                                                              -------        -------       ------
<S>                                                       <C>                 <C>            <C>           <C>
Net loss applicable to common stockholders.............   As reported         $76,999        $72,201       $2,817
                                                          Pro forma           $82,505        $74,081       $3,111

Net loss per share applicable to common stockholders
 --basic and diluted...................................   As reported         $ (2.60)       $ (4.30)      $(0.18)
                                                          Pro forma           $ (2.78)       $ (4.41)      $(0.20)
</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, 2000, 1999 and 1998: risk-free

                                      41
<PAGE>

interest rates of 5.2%, 5.50% and 5.62%, respectively, expected dividend yields
of 0%, expected lives of remaining years to experation and expected volatility
of 96.0%, 88.0% and 88.0%, repectively.

Transactions during the years ended December 31, 2000, 1999 and 1998,
respectively, involving stock options are summarized as follows:

During 2000, the company granted 4,337,000 options at fair market value,
1,170,125 options above fair market value and 844,839 below fair market value.

<TABLE>
<CAPTION>
                                                         2000                       1999                        1998
                                                ----------------------    ------------------------      --------------------------
                                                              Weighted                   Weighted                      Weighted
                                                              Average                     Average                       Average
                                                              Option                      Option                        Option
                                                Number of      Price      Number of        Price        Number of        Price
                                                 Shares      Per Share     Shares        Per Share        Shares       Per Share
                                                 ------      ---------     ------        ---------        ------       ---------
<S>                                            <C>           <C>          <C>          <C>              <C>            <C>
Options outstanding at the begin-
 ning of the period.........................    6,171,001      $ 3.59      1,273,000        $2.98          600,000       $1.95
Granted.....................................    6,351,964        9.56      5,332,833         3.78          673,000        4.64
Exercised...................................      (59,667)       4.68             --           --               --          --
Terminated..................................   (2,318,333)      10.20       (434,832)        4.37               --          --
                                               ----------      ------      ---------        -----        ---------       -----
Options outstanding at the end of
 Year.......................................   10,144,866        7.38      6,171,001         3.59        1,273,000        2.98
                                               ----------      ------      ---------        -----        ---------       -----
Exercisable at end of year..................    2,868,811        3.80      3,336,126         2.52          120,000        1.95
                                               ----------      ------      ---------        -----        ---------       -----
Weighted average fair value of
 options granted............................                   $ 6.93                       $4.32                        $2.63
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING                                                OPTIONS EXERCISABLE

-------------------------------------------------------------------------------        ----------------------------------
                          Outstanding     Weighted-Average                             Exercisable
   Range of                 as of            Remaining         Weighted-Average           as of          Weighted-Average
Exercise Prices           12/31/2000     Contractual Life       Exercise Price         12/31/2000         Exercise Price
<S>                      <C>             <C>                   <C>                     <C>               <C>
$ 0.00 - $ 2.01            930,000             8.9                  $ 1.00               930,000              $ 1.00
$ 2.02 - $ 4.02          2,046,339             9.0                  $ 3.70               899,840              $ 3.61
$ 4.03 - $ 6.04          3,396,902             8.8                  $ 5.22               810,679              $ 4.97
$ 6,05 - $ 8.05             81,500             9.9                  $ 7.76                     0              $ 0.00
$ 8.06 - $10.08          1,576,625             8.4                  $ 9.22               132,292              $ 8.74
$10.09 - $12.09            182,000             8.5                  $11.37                20,000              $11.00
$12.10 - $14.11            650,000             9.6                  $13.13                25,400              $13.12
$14.12 - $16.13            999,500             9.6                  $14.98                     0              $ 0.00
$16.14 - $18.14            217,000             9.4                  $16.60                     0              $ 0.00
$18.15 - $20.17             65,000             9.4                  $19.44                50,600              $19.45
                        ----------           -----               ---------             ---------             -------
                        10,144,866             9.0                  $ 7.38             2,868,811              $ 3.80
</TABLE>

Stock options expire 10 years after they are granted and vest over service
periods that range from 1 to 5 years.

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. During
1999, the Company granted 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
recognized costs of approximately $3.3 million that were capitalized and
included in property, plant and equipment. The Company also granted stock
options to Tishman Speyer Properties, L.P. As a result, the Company recognized
costs of approximately $3.8 million that were capitalized and included in
deferred charges. 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
Tishman Speyer Properties, L.P. ("TSP"). 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, 2000, 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.


                                      42
<PAGE>

8. 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,
2000, the Company had outstanding (i) warrants exercisable into approximately
9.9 million shares of common stock at exercise prices ranging from $0.50 to
$17.062 per share and (ii) convertible preferred stock convertible into
approximately 15.3 million shares of common stock with conversion prices of
$1.50, $3.00, $10.00 and $12.00 per share.

9. 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 stockholders. 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.

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 not 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. 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.

   In connection with the issuance of the Series D, E and F preferred stock, in
1999 the Company recorded a non-recurring, non-cash charge for a beneficial
conversion charge in the amount of $49.2 million, to reflect the market price as
of the date thereof.

Series G, H and I Preferred Stock

   On June 30, 2000, FiberNet issued and sold 2,000,000 shares of Series G
preferred stock to Nortel Networks Inc. ("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


                                      43
<PAGE>

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 FiberNet issued and sold 426,333 shares of Series H
preferred stock, $.001 par value per share, 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 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 an acceptable 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, $.001 par value per share, 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.

10. 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. Other consulting fees to related parties included approximately: (i)
$71,000 to Richard D. Sayers, a director, (ii) $104,000 to Frank Chiaino, a
former officer and (iii) $129,000 to Landtel Telecommunications, an affiliated
entity (iv) $250,000 to Signal Equity Management Corp. (v) $250,000 to
Waterview Advisors L.L.C.

    The Company capitalized in property, plant and equipment services from
Petrocelli Electrical Services, a related party, of approximately $70,000 and
$140,000 during 2000 and 1999, respectively. Additionally, the Company expensed
approximately $140,000 of consultant fees from this related party during 1999
and nothing in 2000. As of December 31, 2000 and 1999, the Company had a payable
to Petrocelli Electrical Services of approximately $31,000 and $1.2 million,
respectively.

    The Company capitalized services of approximately $57,000 of consulting
services from Landtel Telecommunications during 1999 and nothing in 2000.
Additionally, the Company expensed approximately $129,000 and $57,000 of
consultant fees from this related party during 2000 and 1999, respectively. As
of December 31, 1999, the Company had a payable to Landtel Telecommunications
approximately $163,000. As of December 31, 2000 the Company had no payables
outstanding to Landtel Telecommunications.

    As of June 18, 1999, the Company converted certain accounts payable to
related parties, totaling $0.5 million, into shares of common stock and
warrants.

                                      44
<PAGE>

11. 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 net loss applicable to
common stockholders, before income taxes for the three years ended December 31,
2000 follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                          2000              1999             1998
                                                                      --------          --------          -------
<S>                                                                   <C>               <C>               <C>
Computed tax at statutory federal rate.............................   $(26,950)         $(25,432)         $  (986)
State and local, net of federal income tax benefit.................         --                 1               --
Preferred stock dividends..........................................      2,840               265               --
Debt conversion....................................................      9,719            17,150               --
Minority interest..................................................         --               (38)             (83)
Other..............................................................        541                 8               --
Change in valuation allowance......................................     13,850             8,046            1,069
                                                                      --------          --------          -------
                                                                      $     --          $     --          $    --
                                                                      ========          ========          =======
</TABLE>

     The principal components of FiberNet's deferred income tax liability at
December 31, 2000 reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax reporting. The principal components of
FiberNet's net deferred income taxes at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
Deferred Income Taxes:                                                    2000              1999             1998
                                                                      --------          --------          -------
<S>                                                                   <C>               <C>               <C>
Deferred expenses..................................................   $  1,700          $  4,466          $ 1,294
Stock options......................................................      4,828             1,441               --
Depreciation.......................................................       (180)              (14)              (4)
Net operating loss.................................................     13,820             3,862              419
Bad debts..........................................................        188                --               --
Change in valuation allowance......................................    (20,356)           (9,755)          (1,709)
                                                                      --------          --------          -------
Net deferred tax asset.............................................   $     --          $     --          $    --
                                                                      ========          ========          =======
</TABLE>

    As of December 31, 2000, the Company has federal income tax net operating
loss carryforwards of approximately $34.5 million. The federal tax loss
carryforwards begin expiring in 2012. Full valuation allowances have been
recorded against all temporary differences.

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


12. EMPLOYMENT CONTRACTS

    The Company has various employment contracts with key executive employees.
The total compensation under these contracts for 2001 and future years is as
follows (dollars in thousands):

                                                            Amount
                                                            ------
           2001..........................................     $804
           2002 and thereafter...........................       92
                                                              ----
                    Total................................     $896
                                                              ====

                                      45
<PAGE>

13. NON-RECURRING EXPENSES

    During 1999, the Company recorded non-recurring expenses of $4.3 million,
comprised of a $3.7 million non-cash charge in selling, general and
administrative costs, 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 Company did not record any significant non-
recurring expenses during 2000.

14. QUARTERLY INFORMATION (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                 March 31,         June 30,        September 30,        December 31,
                                    2000             2000               2000                 2000
                                    ----             ----               ----                 ----
<S>                              <C>               <C>             <C>                   <C>
Revenues                          $    111          $  1,656          $  4,599            $  6,751
Net loss applicable to
 common stockholders               (10,056)          (24,189)          (26,167)            (16,587)

Net loss applicable to
 common stockholders
 per share - basic and
 diluted                          $  (0.38)         $  (0.86)         $  (0.84)           $  (0.51)
</TABLE>

<TABLE>
<CAPTION>
                                 March 31,         June 30,        September 30,        December 31,
                                    1999             1999               1999                 1999
                                    ----             ----               ----                 ----
<S>                              <C>               <C>             <C>                   <C>
Revenues                          $   --            $     --          $     --            $     --
Net loss applicable to
 common stockholders                (721)             (2,574)           (4,772)            (64,134)

Net loss applicable to
 common stockholders
 per share - basic and
 diluted                          $(0.04)           $  (0.16)          $ (0.29)           $  (3.42)
</TABLE>

15. 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 issues 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 Agreements, 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 is
being amortized over a period of 15 years.

16. SUBSEQUENT EVENTS


                                      46
<PAGE>

     On February 2, 2001, FiberNet completed a $28 million directed public
offering of its common stock. FiberNet issued 6,440,000 shares of common stock
at $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. The Company may redeem the
warrants when the stock trades at $11.48 or above for 20 consecutive trading
days.

     On February 9, 2001, FiberNet increased its existing credit facility from
$75 million to $105 million. In connection with this amended credit facility,
the Company issued warrants to purchase an additional 454,409 shares of its
common stock at an exercise price of $8.00 per share. In addition, as part of
the amendment of its credit facility, all warrants issued under the original
credit agreement were replaced with new warrants to purchase an equivalent
amount of its common stock at an exercise price of $8.00 per share.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

  None.


                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Management" and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in our Proxy Statement for the
2001 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Executive Compensation" in our Proxy
Statement for the 2001 Annual Meeting of Stockholders.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Share Ownership" in our Proxy Statement
for the 2001 Annual Meeting of Stockholders.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Certain Relationships and Related
Transactions" and "Executive Compensation--Employment Agreements, Termination of
Employment and Change of Control Arrangements" in our Proxy Statement for the
2001 Annual Meeting of Stockholders.


                                      47
<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

<TABLE>
<CAPTION>
 Exhibit
   No.                                                  Exhibit Name
---------  ------------------------------------------------------------------------------------------------------
<S>        <C>
   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 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     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).
</TABLE>


                                      48
<PAGE>

<TABLE>
   <S>     <C>
   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.
           (incorported 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., Dutsche Bank Securities Inc. and Tornotno 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).

  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     Employment Agreement, dated as of May 7, 1999 between us and Michael S. Liss (incorporated by
           reference to Exhibit 10.4 to our Annual Report on Form 10-KSB, filed on March 30, 2000).

  10.5     Employment Agreement, dated as of May 7, 1999 between us and Roy (Trey) D. Farmer III (incorporated
           by reference to Exhibit 10.5 to our Annual Report on Form 10-KSB, filed on March 30, 2000).

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

  10.7     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).
</TABLE>

                                      49
<PAGE>

<TABLE>
 <S>       <C>
  10.8     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).

  10.9     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).

  10.10    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).

  10.11    Employment Agreement, dated as of October 4, 1999 between us and Les Hankinson (incorporated by
           reference to Exhibit 10.7 to our Annual Report on Form 10-KSB filed on March 30, 2000).

  10.12    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).

 *10.13    Privae 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).

  10.14    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).

  10.15    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).

  10.16    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).

  10.17    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).

  10.18    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).

  10.19    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).

  10.20    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).

  10.21    Employment Agreement, dated as of May 23, 2000 between us and Allan Zendle (incorporated by reference
           to Exhibit 10.34 to our Registration Statement on Form S-1, filed on September 8, 2000).

  10.22    Employment Agreement, dated as of June 17, 2000 between us and Warren Miller (incorporated by
           reference to Exhibit 10.24 to our Registration Statement on Form S-1, filed on September 8, 2000).

  10.23    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).

  10.24    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).
</TABLE>

                                      50
<PAGE>

<TABLE>
  <S>      <C>
  10.25    Employment Agreement, dated as of June 17, 2000 between us and Philip DiGennaro (incorporated by
           reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on August 4, 2000).

  10.26    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).

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

  10.28    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).

  10.29    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).

  10.30    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).

  10.31    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).

  10.32    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).

  10.33    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).

  10.34    Amended and Restated Subsidiary Security Agreement (FiberNet Telecom), dated as of February 9, 2001
           betwenn 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).

  10.35    Amended and Restated Subsidiary Security Agreement (Equal Access), dated as of February 9, 2001
           betwenn 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).

  10.36    Amended and Restated Subsidiary Security Agreement (Local Fiber), dated as of February 9, 2001
           betwenn 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).

  10.37    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).
</TABLE>

                                      51
<PAGE>

<TABLE>
  <S>      <C>
  10.38    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).

  10.39    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).

  10.40    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).

  10.41    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).

  10.42    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).

  10.43    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).

  10.44    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).

  10.45    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).

  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.

  23.2     Consent of Mendelsohn Kary Bell & Natoli LLP.
</TABLE>
__________
* Confidential treatment has been requested for portions of this exhibit. These
  portions have been omitted and filed separately with the Commission.

     (b) We did not file any reports on Form 8-K during the quarter ended
         December 31, 2000.

                                      52
<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: March 30, 2001

    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.

<TABLE>
<CAPTION>
              Name                                 Title                                    Date
      ----------------------               ----------------------                     ---------------
<S>                                    <C>                                            <C>
       /s/ Michael S. Liss             Director, President and Chief                   March 30, 2001
----------------------------------
          Michael S. Liss              Executive Officer
                                       (Principal Executive Officer)


       /s/ Jon A. DeLuca               Chief Financial Officer                         March 30, 2001
----------------------------------
           Jon A. DeLuca               (Principal Accounting Officer)


      /s/ Timothy P. Bradley           Director                                        March 30, 2001
----------------------------------
         Timothy P. Bradley


        /s/ Steven G. Chrust           Director                                        March 30, 2001
----------------------------------
         Steven G. Chrust

     /s/ Philip L. DiGennaro           Director                                        March 30, 2001
----------------------------------
       Philip L. DiGennaro

   /s/ Roy (Trey) D. Farmer III        Director and Executive Vice                     March 30, 2001
----------------------------------
    Roy (Trey) D. Farmer III           President


     /s/ Charles J. Mahoney            Director                                        March 30, 2001
----------------------------------
      Charles J. Mahoney


      /s/ Richard D. Sayers            Director                                        March 30, 2001
----------------------------------
        Richard D. Sayers


      /s/ William Vrattos              Director                                        March 30, 2001
----------------------------------
         William Vrattos
</TABLE>

                                      53
<PAGE>


                                 EXHIBIT INDEX

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

<TABLE>
<CAPTION>
 Exhibit
   No.                                                  Exhibit Name
---------  ------------------------------------------------------------------------------------------------------
<S>        <C>
   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 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     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).
</TABLE>

                                      54
<PAGE>

<TABLE>
   <S>     <C>
   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.
           (incorported 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., Dutsche Bank Securities Inc. and Tornotno 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).

  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     Employment Agreement, dated as of May 7, 1999 between us and Michael S. Liss (incorporated by
           reference to Exhibit 10.4 to our Annual Report on Form 10-KSB, filed on March 30, 2000).

  10.5     Employment Agreement, dated as of May 7, 1999 between us and Roy (Trey) D. Farmer III (incorporated
           by reference to Exhibit 10.5 to our Annual Report on Form 10-KSB, filed on March 30, 2000).

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

  10.7     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).
</TABLE>

                                      55
<PAGE>

<TABLE>
 <S>       <C>
  10.8     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).

  10.9     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).

  10.10    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).

  10.11    Employment Agreement, dated as of October 4, 1999 between us and Les Hankinson (incorporated by
           reference to Exhibit 10.7 to our Annual Report on Form 10-KSB filed on March 30, 2000).

  10.12    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).

 *10.13    Privae 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).

  10.14    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).

  10.15    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).

  10.16    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).

  10.17    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).

  10.18    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).

  10.19    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).

  10.20    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).

  10.21    Employment Agreement, dated as of May 23, 2000 between us and Allan Zendle (incorporated by reference
           to Exhibit 10.34 to our Registration Statement on Form S-1, filed on September 8, 2000).

  10.22    Employment Agreement, dated as of June 17, 2000 between us and Warren Miller (incorporated by
           reference to Exhibit 10.24 to our Registration Statement on Form S-1, filed on September 8, 2000).

  10.23    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).

  10.24    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).
</TABLE>

                                      56
<PAGE>

<TABLE>
  <S>      <C>
  10.25    Employment Agreement, dated as of June 17, 2000 between us and Philip DiGennaro (incorporated by
           reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on August 4, 2000).

  10.26    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).

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

  10.28    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).

  10.29    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).

  10.30    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).

  10.31    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).

  10.32    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).

  10.33    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).

  10.34    Amended and Restated Subsidiary Security Agreement (FiberNet Telecom), dated as of February 9, 2001
           betwenn 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).

  10.35    Amended and Restated Subsidiary Security Agreement (Equal Access), dated as of February 9, 2001
           betwenn 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).

  10.36    Amended and Restated Subsidiary Security Agreement (Local Fiber), dated as of February 9, 2001
           betwenn 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).

  10.37    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).
</TABLE>

                                      57
<PAGE>

<TABLE>
  <S>      <C>
  10.38    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).

  10.39    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).

  10.40    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).

  10.41    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).

  10.42    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).

  10.43    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).

  10.44    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).

  10.45    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).

  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.

  23.2     Consent of Mendelsohn Kary Bell & Natoli LLP.
</TABLE>
__________
* Confidential treatment has been requested for portions of this exhibit. These
  portions have been omitted and filed separately with the Commission.

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