<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10 - KSB

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

For the fiscal year ended September 30, 1998

                                       OR

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

For the transition period from _____________ to __________________

                           Commission File No. 1-14168

                               Globix Corporation
           (Name of small business issuer as specified in its charter)

         New York                                             13-3781263
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

295 Lafayette Street, New York, New York    10012
(address of principal executive offices)  (Zip Code)
Issuer's Telephone number, including area code:    (212) 334-8500

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
         Title of Each Class        Name of Each Exchange on Which Registered
<S>                                 <C>
Common Stock,  $.01 par value                Boston Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:


Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                           Yes   X                   No
                                ---                      ---

Check if disclosure of delinquent filers pursuant to item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of the
Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.   [ ]

State issuer's revenues for its most recent fiscal year  - $20,594,933

State the aggregate market value of the voting stock held by non-affiliates of
the Issuer: $20,221,181 (based upon the closing price of Issuer's Common Stock,
$.01 par value, as of December 14, 1998.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.

<TABLE>
Common Stock, $.01 Par Value                                  4,140,116
----------------------------                         --------------------------
<S>                                                  <C>
(Title of Class)                                     (No. of Shares Outstanding
                                                        at December 14, 1998)
</TABLE>
<PAGE>   2
                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

                                     PART I

Item 1. Business

         (a)      General Development of Business. The Company was originally
                  incorporated in the state of New York in 1989 by Marc H. Bell
                  as NAFT International Ltd. ("NAFT"). In July 1993, Mr. Bell
                  formed Stellar Graphics Corp. (now called Bluestreak Digital,
                  Inc.,). In July 1994, the assets and liabilities of NAFT and
                  Stellar Graphics were acquired by PFM Technologies Corporation
                  ("PFMT") in a tax-free exchange of common stock. In September
                  1995, the Company was reincorporated by merger into Bell
                  Technology Group Ltd., a Delaware corporation. On June 1,
                  1998, the Company changed its name to Globix Corporation.

         (b)      In July 1994, in a private transaction, the Company received
                  financing from Harpoon Holdings Ltd. ("Harpoon") a British
                  Virgin Islands corporation wholly-owned by Tsuyoshi Shiraishi,
                  a director of the Company, pursuant to which Harpoon became a
                  principal stockholder of the Company.

         (c)      In January, 1996, the Company sold, in an initial public
                  offering, 1,150,000 shares of Common Stock at an initial
                  offering price of $7.00 per share, and 575,000 Redeemable
                  Purchase Warrants for $.10 per warrant (the "IPO Warrants").
                  Each IPO warrant entitled the holder to purchase one share of
                  the Company's common stock for $7.70 per share. The IPO
                  warrants were redeemable by the Company at $.10 per IPO
                  warrant at any time after January 24, 1997 if certain
                  conditions are met. The net proceeds that the Company received
                  from the public offering amounted to approximately $6,600,000.

         (d)      In March 1996, the underwriter of the initial public offering
                  exercised its over-allotment option to purchase 129,642 common
                  shares from the Company for $7.00 per share. The net proceeds
                  amounted to approximately $800,000.

         (e)      In September 1997, the Company sold 382,609 shares of its
                  common stock in a private transaction for total consideration
                  of $2,200,000. A registration statement on Form SB-2 was filed
                  with the Securities and Exchange Commission with respect to
                  these shares on November 6, 1997 and became effective on
                  November 20, 1997. A fee with respect to the sale of these
                  shares of $100,000 in cash and 17,391 shares of common stock
                  was paid to the investors and were offset against the proceeds
                  of the issuance.

         (f)      In April 1998, the Company successfully completed a private
                  offering for $160,000,000 consisting of 160,000 units, each
                  unit consisting of $1,000 principal amount of 13% Senior Notes
                  due 2005 and one warrant to purchase 3.52 shares of common
                  stock (total of 563,200 shares of common stock) at a purchase
                  price of $14.03 per share. The Notes will mature on May 1,
                  2005. Interest on the notes are payable semi-annually in
                  arrears on May 1 and November 1 of each year, commencing
                  November 1, 1998. The Company has deposited with an escrow
                  agent $57,000,000, that together with the interest received
                  thereon, will be sufficient to pay, when due, the first six
                  interest payments. The Notes are collateralized by a first
                  priority security interest in the escrow account. The Notes
                  are senior unsecured obligations of the Company and rank pari
                  passu in right of payment with all existing and future
                  unsecured and unsubordinated indebtedness and rank senior in
                  right of payment to any future subordinated indebtedness.

         (g)      On June 8, 1998, the Company called for redemption the IPO
                  Warrants. Prior to the redemption date of July 8, 1998,
                  581,472 of the 592,055 then outstanding IPO Warrants were
                  exercised at an exercise price of $7.44 per common share. The
                  remaining 10,483 Warrants were redeemed by the Company at a
                  price of $.10 per IPO Warrant. The net proceeds recognized by
                  the Company from the IPO warrant redemption amounted to
                  approximately $4.3 million.
<PAGE>   3


(h) Narrative Description of Business

     (1) General

         Globix is a leading provider of Internet connectivity and sophisticated
     Internet-based solutions to large and medium size businesses. Globix
     provides its customers with a comprehensive range of value-added products
     and services, designed to enable them to take full advantage of the
     Internet in order to more effectively carry out their business strategy.
     Components of Globix's "end-to-end" solutions include:

         -    high bandwidth dedicated Internet access

         -    Internet Data Center facilities for hosting customer web sites on
              our servers, (web hosting) and housing customer web servers and
              related equipment (co-location)

         -    Internet-related hardware and software sales and systems and
              network integration

         -    systems administration and web management, including network
              security solutions

         -    e-commerce, streaming media and web development solutions

         -    instructor-led corporate training

     Globix currently maintains a strong local market presence in the New York
     metropolitan area, where most of its customers have substantial operations.
     Globix markets its products through a locally based direct sales force
     consisting of over 42 Internet consultants. Globix supports its sales
     effort with system engineers, network technicians, application designers
     and customer care professionals, who are able to evaluate the needs of its
     customers and quickly respond with outsourcing support and tailored
     solutions which are scaleable, flexible, high performance and cost
     effective. Globix believes that its ability to offer a broad range of
     end-to-end Internet solutions in its local market differentiates Globix
     from most other Internet service providers, or ISPs.

         As of December 1, 1998, Globix had over 800 large and medium size
     business customer accounts for Internet products and services, many of
     which are multinational. Globix's customers are in a variety of
     data-intensive industries such as advertising, financial services,
     publishing, media and retail. Internet customers include Acclaim
     Entertainment, the American Red Cross, Bloomingdale's, BPI Communications
     (Billboard and Adweek), Dow Jones, General Media International (Penthouse),
     Microsoft, the National Hockey League, Nomura Securities, Ogilvy & Mather,
     Real Networks, Standard & Poors and Tishman Speyer Properties.

         In December 1995, Globix began offering Internet access from its
     initial "SuperPOP" facility in New York City. Globix is currently building
     new and substantially enhanced SuperPOP facilities in New York City, London
     and the San Francisco Bay area. Each new SuperPOP will feature:

         -    a high performance Internet Data Center featuring multiple,
              redundant, high-capacity fiber feeds, uninterruptable power
              supplies with back-up generators, dry fire suppression, raised
              floor and fault tolerant environmental controls

         -    a Network Operations Center, which provides 24 hour a day, 7 day a
              week (24 x 7) monitoring
<PAGE>   4
         -    on-site customer care, sales and marketing, systems administration
              and administrative operations

         -    In October 1998, Globix entered into an agreement with Qwest
              Communications giving it the exclusive right to use portions of
              Qwest's global fiber network for a 20 year period, including 6,500
              route miles of OC-3 capacity fiber coast-to-coast in the United
              States and a DS-3 fiber link from the United States to the United
              Kingdom. The fiber network will serve as the principal component
              of Globix's network backbone.

         -    In April 1998, Globix completed a $160 million debt financing to
              fund the acquisition and build-out of its network backbone and
              SuperPOP facilities

         -    Globix is in the process of establishing both public and private
              peering, or interconnection, relationships with major backbone
              providers. As part of this ongoing effort, Globix recently entered
              into a private peering relationship with America-On-Line ("AOL")
              that gives Globix' customers and AOL's customers a direct link to
              each other, allowing them to bypass the public Internet

         -    Globix is establishing Points of Presence, or POPs, in Washington,
              D.C., Chicago and Los Angeles, as part of a planned program of
              establishing POPs in other major business centers in the United
              States and Europe.

     INTERNET PRODUCTS AND SERVICES

         Globix's products and services include: (i) high bandwidth dedicated
     Internet access; (ii) Internet data center facilities for hosting customer
     web sites on its servers (web hosting) and housing customer web servers and
     related equipment (co-location); (iii) Internet-related hardware and
     software sales and systems and network integration; (iv) systems
     administration and web site management, including network security
     solutions; (v) e-commerce, streaming media and web development solutions;
     and (vi) instructor-led corporate training. Each of the Company's new
     SuperPOP facilities will offer substantially the same range of products and
     services.

     HIGH BANDWIDTH DEDICATED INTERNET ACCESS

              Globix offers a variety of connectivity solutions, including
     dedicated Internet access, hardware and software implementation and system
     and security consulting which provide businesses high-speed continuous
     access to the Internet. The Company's dedicated Internet access services
     are provided to customers at speeds ranging from 56Kpbs to 45Mbps. However,
     over 90% of the Company's connectivity customers take 1.5Mbps or higher
     levels of service. In addition, the Company provides turnkey configuration
     services, including domain name registration, telco line provisioning,
     Internet address assignment, router configuration, e-mail configuration,
     security planning and management technical consulting services. All of the
     Company's customers receive 24 hour per day, seven day per week technical
     support and most of the Company's customers have quality of service
     guarantees. The Company is currently participating in trials of new access
     technologies, such as xDSL, and expects to deploy additional
     connectivity-related enhanced services, such as Internet conference
     calling, during the first half of calendar 1999. Globix is currently
     building a nationwide OC-3 Internet backbone and a DS-3 fiber link from the
     United States to the United Kingdom. Globix's Internet backbone will
     connect the Company's three planned SuperPOPs in New York City, the San
     Francisco Bay area and London, and planned POPs in Washington, D.C.,
     Chicago and Los Angeles, enabling the Company to offer superior reliability
     and performance to most of the major business centers in the United States.
     The network is expected to be completed and operational by June 30, 1999.
<PAGE>   5
     WEB HOSTING AND CO-LOCATION

              The primary need for Internet access by many of Globix's customers
     is to distribute content. Web distribution is usually done via a web site,
     from which a customer can serve HTML pages, e-commerce solutions and
     streaming media. To this end, Globix offers two distinct services, web
     hosting and co-location, for providing the widespread dissemination of
     information over the Internet.

              Web hosting consists of housing a customer's web page on Globix's
     servers, located within its SuperPOP facility. Web hosting is a solution
     for customers who want to "publish" web pages on the Internet without
     purchasing, configuring, maintaining and administering the necessary
     sophisticated hardware and software. Due to economies of scale, Globix can
     generally offer far more sophisticated web hosted solutions than customers
     can cost-effectively provide for themselves. With its staff of Internet
     engineers and system administrators, Globix offers multiple platforms for
     web hosting and development, including both Unix and NT operating systems.
     File structure directories, domain name service and security privileges are
     set up for customers on Globix's hosting servers. Network and systems
     administration and maintenance, tape back-ups and security are also
     provided by Globix. Globix is continually seeking new and unique approaches
     to web hosting solutions for its customers. Web hosting generates recurring
     revenue through monthly fees to customers based upon the amount of data
     transferred to and from their web site. Data transfer amounts are
     associated with the size and complexity of a customer's web site, the
     popularity of and traffic to that site and the functionality of a site.

              Co-location services, in contrast to web hosting, allow a customer
     to establish and operate a web site on the Internet to house its own
     dedicated hardware and software within Globix's SuperPOP. Co-location
     customers typically are larger enterprises employing more sophisticated
     Internet solutions within their day-to-day operations. Globix provides its
     co-location customers with physical facilities, including web racks for
     housing servers, and high bandwidth dedicated Internet access. Customers
     have remote access to their servers to remotely distribute their web site
     content over the Internet. Globix's co-location customers have access to
     the Globix facility to administer and maintain their own equipment, or they
     may engage Globix to provide systems administration and maintenance.

              Globix is currently building new and substantially enhanced
     SuperPOP facilities in New York City, London and the San Francisco Bay
     area. The SuperPOPs under construction include:

              -        a 160,000 square foot facility located in New York City
                       containing a 25,000 square foot Internet Data Center
                       designed for co-location and web hosting;

              -        a 61,000 square foot facility located in Santa Clara,
                       California, containing a 24,000 square foot Internet Data
                       Center; and

              -        a 35,000 square foot facility, located in London's West
                       End district, containing a 14,000 square foot Internet
                       Data Center.

     The data centers will be connected by a Tier 1 network backbone, which is
     also currently under construction. All three facilities are expected to be
     completed and operational by June 30, 1999. Globix believes its ability to
     sell additional hosting and co-location services has been limited in the
     recent past because its present Internet Data Center, with capacity
     totaling 3,000 square feet, is fully utilized. The new and expanded
     SuperPOP will increase Globix's Internet Data Center capacity to
     approximately 68,000 square feet. This additional space, located at three
     geographical distributed facilities in major business centers, is expected
     to enable Globix to aggressively pursue more web hosting and co-location
     opportunities.
<PAGE>   6
     INTERNET-RELATED HARDWARE AND SOFTWARE SALES AND SYSTEMS AND NETWORK 
     INTEGRATION

              Product resales are an integral part of providing end to end
     solutions. Globix consults with its customers to identify the most
     appropriate hardware and software components for its customers' information
     technology infrastructure. In many cases, Globix sells the hardware and
     software to its customers under reseller agreements with major vendors.
     Globix is able to deliver the optimal server solution for the customer's
     application, including configuration, maintenance and service of that
     server. Globix also attempts to leverage product sales into opportunities
     to cross-sell its full line of end-to-end Internet solutions, such as
     security solutions and web hosting. Globix is authorized to sell servers
     from manufacturers such as Sun Microsystems, Compaq, Silicon Graphics and
     networking components, including routers and switches, from leading
     manufacturers such as Cisco Systems. Globix also provides
     application-specific software solutions from a variety of leading
     manufacturers, including Microsoft, Netscape and Oracle.

     SYSTEMS AND NETWORK INTEGRATION

              Globix's philosophy is to offer hardware, software and network
     components integrated into complete Internet solutions. Globix's primary
     integration activities include local and wide area network configuration,
     web and database server integration and application-specific software
     solutions. To deliver these solutions, Globix utilizes its expertise and
     familiarity with networking hardware, high end web and database servers and
     computer software. When requested by the customer, Globix will prepare all
     equipment it sells by loading customer programs, connecting equipment of a
     network, and servicing the customer's hardware and software. Globix is
     authorized to carry out warranty and other repairs on many of the products
     it sells. Globix's staff of experienced network consultants work closely
     with customers to design, assemble and configure a network architecture
     which meets their goals. Globix believes that its ability to provide
     value-added system and network integration is a key element of
     differentiating its complete Internet solutions in the increasingly
     competitive ISP market.

     SYSTEMS ADMINISTRATION AND WEB MANAGEMENT, INCLUDING NETWORK SECURITY 
     SOLUTIONS

              Globix's system administration and Web management solutions
     support its customers' Internet operations by providing the customer with
     detailed monitoring, reporting and management systems to control their
     Internet-related hardware, software and network applications. The Company's
     solutions can vary in functionality from delivering e-mail to an individual
     within a corporate LAN to delivering a sophisticated media-rich web site on
     the Internet to millions of viewers. The solutions are often staged to
     allow customers to outsource an increasing amount of their Internet
     operations. Globix's systems and Web management systems enable Globix and
     its customers to jointly manage Internet operations housed at the Company's
     Internet Data Center and at its customer's in-house facilities. The
     Company's comprehensive system administration and web management solutions
     enable it to identify and begin to resolve hardware, software, network and
     application problems almost immediately. As a result of its proactive
     service focus, Globix can usually identify and resolve a potential problem
     before it ever impacts an Internet site's availability or performance.

     Security Solutions. The proprietary nature of business Internet traffic
     demands protection from unauthorized access. Globix has a dedicated staff
     of trained security consultants who focus exclusively on the security needs
     of its customers and are certified in all security products Globix offers.
     The Globix security team works closely with customers to design and
     integrate a customized security solution which ensures network integrity
     while enabling users to perform business tasks in a secure, yet unhindered,
     environment. Globix's firewall solutions provide users with secure access
     to the Internet as well as segregate a customer's public servers (Web
     servers, FTP servers and database servers) from its internal network.
     Globix's firewalls can also restrict access between departments as well as
     track communications to ensure that these communications follow a company's
     established security procedures. Globix works with a variety of vendors,
     including Checkpoint Software. In addition to firewalls, Globix offers
     enhanced security services including virus scanning, active X and Java
     screening, content filtering and URL blocking. Globix also offers a Virtual
     Private Network, or VPN, solution which offers end-to-end security while
     greatly reducing the cost of leased line connectivity to remote offices,
     remote users and business partners.

     E-COMMERCE, STREAMING MEDIA AND WEB DEVELOPMENT SOLUTIONS

     E-Commerce Solutions. Globix's e-commerce services provide a turnkey
     solution to create and manage "Virtual Storefronts" and is designed to give
     shoppers the ability to make secure purchases using the web. A "shopping
     cart" program is available for Globix's web hosting and co-location
     customers looking to sell products in an environment similar to a retail
     store. Potential purchasers browse through several products and choose to
     put some in their "shopping cart" for purchase. This database driven
     technology is very flexible, allowing Globix's customers to change products
     and prices easily and cost-effectively. Globix also offers credit card
     authorization and processing solutions that enable its customers to accept
     payment directly over the Internet, through a Cybercash Server maintained
     by Globix.

     Web Development. Globix provides advanced web site development and
     implementation services. Its customers' web sites range from basic
     informational sites to complex interactive sites featuring sophisticated
     graphics, animation, sound and other multimedia content. Globix's
     interactive development capabilities utilize tools such as HTML, VRML,
     computer animation, compositing and motion capture. Globix works with
     content providers such as marketing firms, end users and production
     companies to provide technical, design and production services. Globix
     focuses on the design, development and establishment of web sites and is
     not typically involved in creating the content of its customer's web sites.
     Its dedicated team of expert production, design and management personnel
     are available for large-scale web development projects.

<PAGE>   7
     Streaming Media Products. Streaming is a technology that allows the end
     user to access a file, such as video or audio, while it is still
     downloading, eliminating significant waiting time. Globix is among the
     leading providers of streaming media solutions and offers complete,
     integrated services, including production, encoding and hosting. Globix's
     capacities include producing a video or audio recording of an event, such
     as music performance, sports competition or business meeting. Encoding is
     converting the recording into a form in which it can be sent over the
     Internet and hosting is placing the encoded file on a server where it can
     be accessed by Internet users. Globix has produced and hosted streaming
     media events for customers from a number of industries including N2K,
     SonicNet, CBS, Microsoft, CondeNast, Merck Pharmaceutical and Polygram
     Entertainment. The Company encodes data for applications from several
     software providers, including Microsoft, Apple, Real Networks, Macromedia,
     Liquid Audio and a2b. Besides production and encoding fees, the Company
     also earns recurring revenue from the customer when Internet users access
     the hosted file. Globix believes that it is the only company which offers
     all three phases of the streaming media production process.

     CORPORATE TRAINING

              Globix provides training services to complement its sophisticated
     Internet solutions. The Company's corporate training is conducted at its
     facility and ranges from one to five day programs. These customers usually
     maintain an on-going relationship with Globix's account managers and
     regularly schedule classes during the year. Training rooms are equipped
     with state-of-the-art hardware, projectors, computer desks and other
     appropriate classroom equipment.

              Globix offers instructor-led training on multiple platforms, such
     as Windows 98, Windows NT, Mac and Unix. Course materials and training
     methodology are customized for each customer's specific needs. Globix's
     fees depend upon the size of the class, the complexity of the topic and the
     equipment required. Subjects presented range from sophisticated Internet
     applications to basic computer skills. Globix markets its training on a
     value-added basis, often in conjunction with a sale including Internet
     services and hardware/software. Globix also provides off-site training
     sessions. Most recently, Globix has leveraged its Internet knowledge and
     instructional design expertise to develop web-based interactive training
     programs with rich multi-media content for delivery over corporate
     Intranets.
<PAGE>   8
     CUSTOMERS

              Globix has established a diversified base of Internet customers in
     a variety of data-intensive industries, such as advertising, financing
     services, publishing, media and retail. Since initiating Internet services
     in December 1995, Globix has grown its customer base to over 800 large and
     medium size business customer accounts, including Acclaim Entertainment,
     the American Red Cross, Bloomingdale's, BPI Communications (Billboard and
     Adweek), Dow Jones, General Media International (Penthouse), Microsoft, the
     National Hockey League, Nomura Securities, Ogilvy & Mather, Real Networks,
     Standard & Poors and Tishman Speyer Properties.

     GLOBIX NETWORK & INFRASTRUCTURE

     SuperPOP Infrastructure. Globix currently operates a 3,000 square foot
     Internet Data Center in its SuperPOP in New York City. This data center
     provides a high bandwidth, highly reliable facility connecting Globix's
     customers to the Internet and other companies located within the New York
     metropolitan area. Isolated from the rest of the Company's facilities and
     physically secured, the Internet Data Center is a controlled and regulated
     environment suitable for the storage and maintenance of high-end powerful
     computer and networking equipment. The entire Internet Data Center is under
     video surveillance and is recorded on tape and then archived. In addition
     to our 24 x 7 security personnel, the security system controls and monitors
     access, and reports breaches. The use of a biometric access system offers
     customers the highest level of security. A variety of additional security
     services, including access reporting, tamper alarms, and time restricted
     access control, are offered to customers.

              The Company's current network operates through diverse feeds from
     three major Internet backbone providers, UUNet, MCI/Cable & Wireless, and
     Sprint. Utilizing these diverse feeds, data enters or exits the Company's
     network over the backbone provider best able to deliver that data in the
     most timely and efficiently manner. The Company believes that direct
     connections to these major backbone providers enable its customers to enjoy
     unencumbered "fault tolerant" Internet access even when one of the carriers
     suffers delays, congestion or an outage. If such a problem develops, the
     customer's traffic is automatically routed over one of the other backbones.
     The Company connects to its customers with a similar redundant system.
     Connected to Bell Atlantic via redundant OC-3 level fiber optics terminated
     on three diverse fiber multiplexers, the Company provides leased line
     connectivity to customers via Bell Atlantic's OC-12 Synchronous Optical
     Network ("SONET") ring topology. The Company also maintains diverse ISDN
     circuits available to customers as a back-up to their leased lines.

     Network Operations Center. The Company's SuperPOP contains a Network
     Operation Center, staffed 24 x 7 by system engineers, who are responsible
     for monitoring the performance of both the Company's core equipment and
     customer's equipment. The system engineers continuously monitor the
     Internet Data Center support infrastructure, including power systems,
     generators, environmental systems, fire suppression systems and leak
     detection. In the event of a power outage or support system failure, the
     automatic system's seamlessly transfer operations to backup systems.
     Security personnel perform surveillance in addition to monitoring and
     controlling access to the Internet Data Center.

     Global Backbone Network. The Company is currently building a Tier 1 network
     backbone which will include private and public peering relationships. Tier
     1 ISPs are defined as network providers who maintain their own physical
     infrastructure and peering arrangements with other Tier 1 networks, such as
     UUNet, MCI/Cable & Wireless, and Sprint. The Company's new backbone will
     consist of a 6,500 mile, fiber based network designed with a highly
     reliable and secure bi-directional, line switching OC-3 SONET ring
     architecture which traverses the continental United States. The
     construction of the new network is expected to be completed by June 30,
     1999. This network will connect the Company's three new SuperPOPs located
     in New York City, Santa Clara, California, and London and the Company's
     planned POPs to be located in Chicago, Los Angeles and Washington, D.C. The
     network will offer a self-healing system that provides a

<PAGE>   9
     high level of security and reliability. To facilitate the Company's
     expansion into Europe, a fully redundant DS-3 transatlantic fiber segment
     will be used to connect the New York SuperPOP and the London SuperPOP. The
     Company's SuperPOPs and POPs will be serviced by wide area switching
     equipment manufactured by Cisco Systems with 100% redundancy. These
     switches will allow for a high degree of reliability and service.

              The Globix SuperPOPs and POPs under construction will give the
     Company access to key Network Access Points, or NAPs. A NAP is an exchange
     point for Internet traffic. ISPs typically connect their networks to NAPs
     for the purpose of exchanging traffic with other ISPs and organizations.
     Globix's SuperPOPs and POPs will be geographically located near most major
     NAPs, including the four original National Science Foundation NAPs now
     operated by PACBell, Ameritech, Sprint and MFS. ISPs and other
     organizations located at these NAPs negotiate bilateral agreements or
     MultiLateral Peering Agreements with each other. Globix is continuing to
     negotiate both public and private peering agreements.

     Global Operations Center. The Company is currently constructing a Global
     Operations Center located at the new SuperPOP in New York City. The Global
     Operations Center will serve as the command, control and communications
     center for all of the Company's Network Operations Centers, SuperPOPs and
     POPs. The Global Operations Center will be staffed 24 x 7 by distinct teams
     of individuals dedicated to maintaining the highest quality of service for
     the Company' customers. From the Global Operations Center the network
     administrators will monitor Globix's entire Network architecture from the
     network backbone to the end user interface. This will allow the Global
     Operations Center network administrators to efficiently identify and
     correct any network problems either by direct action or by the activation
     of the system engineers located at any of the Company's Network Operations
     Centers. The customer support facilities within the Global Operations
     Center will utilize state-of-the-art equipment and technologies, including
     automatic call distribution, automatic number identification and a database
     of customer information and history. The Global Operations Center's
     advanced network management and monitoring capabilities will enable Globix
     to quickly identify and respond to potential problems or service
     disruptions.

     CUSTOMER SUPPORT

              High quality customer service and support is critical to the
     Company's objective of retaining and developing its customers. The Company
     has made significant investments in customer service personnel and systems
     that enhance customer care and service throughout the complete customer
     life cycle from order entry and billing to selling of value-added services.
     To ensure consistency in the quality and approach to customer care,
     customer care associates attend an extensive formal technical training and
     certification program. In conjunction with the current upgrading of its
     customer support system, the Company will utilize a leading customer
     support trouble ticketing and workflow management system from Remedy
     Corporation to tract, route and report on customer service issues. A
     customer service specialist is assigned to each customer issue, and acts as
     a liaison, tracking the customer issue to resolution. Network operations
     can remotely service customer connections to the Company's network. In
     addition, field service personnel are dispatched in the event of an
     equipment failure that cannot be serviced remotely. As part of the
     Company's expansion strategy, the Company is developing fully redundant
     NOCs at its new SuperPOPs. The Company's high customer retention rate
     demonstrates the quality of the Company's services. In connection with its
     customer care initiatives, the Company seeks to continuously improve
     systems that increase productivity and enhance customer satisfaction.
<PAGE>   10
     SALES AND MARKETING

              Globix has built a sales and marketing approach in an effort to
     respond effectively to the growing opportunities in the business Internet
     market. The Company seeks to combine the technical skills and experience of
     its direct sales force with the sales and marketing resources available to
     it through its strategic alliances with selected hardware and software
     manufacturer. As a result, the Company is able to offer Globix services and
     products to a broader and more diverse potential customer base in its
     targeted markets.

     Direct Sales. Globix has a direct sales force consisting of approximately
     42 Internet sales consultants. Because they are locally based, these
     Internet sales consultants are able to meet face-to-face with prospective
     customers to discuss their Internet needs and technical requirements and
     develop tailored solutions. Direct marketing tactics used include direct
     contacts with potential corporate accounts by the Internet sales
     consultants and systems engineers, direct mail, inbound and outbound
     telemarketing, seminars and trade show participation. The Company has
     developed programs to attract and train high quality, motivated Internet
     sales consultants. These programs include technical sales training,
     consultative selling technique training, sales compensation plan
     development and sales representative recruiting profile identification.

     Strategic Alliances. Globix has established a number of strategic alliances
     with selected computer hardware and software manufacturers, including
     Microsoft, Sun Microsystems and Checkpoint Systems which give the Company
     access to potential Internet service customers in the manufacturers'
     customer base, while enabling the manufactures to offer their customers an
     integrated package of hardware, software and Internet services and
     products. The Company believes that these strategic alliances allow
     Globix to cost-effectively add new customers. The Company co-markets with
     these vendors through direct mail programs, joint seminar development and
     joint trade show involvement.

     Marketing. Globix's marketing program is intended to build national and
     local strength and awareness of the Globix brand. The Company uses radio
     and print advertising in targeted markets and publications to enhance
     awareness and acquire leads for the Company's direct sales team. The
     Company's print advertisements are placed in trade journals, local
     technology sections of newspapers and special-interest publications. The
     Company attempts to create brand awareness by participating in industry
     trade shows such as PC Expo, Internet and Electronic Commerce, and Internet
     World. The Company also uses direct mailings, telemarketing programs, web
     marketing, co-marketing agreements and joint promotional efforts to reach
     new corporate customers. The Company attempts to retain its customers
     through active and responsive customer support as well as by continually
     offering new value-added services.

     (2) Competition

              The market served by the Company is intensely competitive, and
     such competition is increasing. There are few substantial barriers to
     entry, and the Company expects that it will face additional competition
     from existing competitors and new market entrants in the future.

              The Company believes that a reliable network, a broad range of
     quality products and services, a knowledgeable sales force and the quality
     of customer care currently are the primary competitive factors in the
     Company's targeted market and that price is generally secondary to these
     factors. The Company's current and potential competitors in the market
     include: (i) national and regional ISPs, (ii) global, regional, and
     local telecommunications companies and RBOCs, and (iii) other competitors.

     ISPs. The Company's current and potential competitors in the market include
     other ISP's with a significant national presence which focus on business
     customers, such as UUNET Technologies, Inc., Concentric Network, and
     PSINet. Globix also competes with national and regional ISPs which have
     facilities in the New York metropolitan area, including Space Lab (which
     was recently acquired by Verio), Interport, Genuity (a subsidiary of GTE),
     Exodus, Applied Theory, and GlobalCenter (which was acquired by Frontier
     Corporation). Many
<PAGE>   11
     of these competitors have greater financial, technical, and marketing
     resources, larger customer bases, greater name recognition, and more
     established relationships in the industry than the Company.

     Telecommunications Carriers. Many long distance companies including AT&T,
     Cable & Wireless/MCI, Sprint and MCI/Worldcom offer Internet access
     services and compete with the Company. Recent reforms in the federal
     regulation of the telecommunications industry have created greater
     opportunities for ILECs, including RBOCs and other competitive CLECs, to
     enter the Internet connectivity market. The Company believes that there is
     a move toward vertical integration by ILECs and CLECs through acquisitions
     or joint ventures with, and the wholesale purchase of, connectivity from
     ISPs to address the Internet connectivity requirements of the business
     customers of long distance and local carriers. The recent MCI/Worldcom
     merger (and the WorldCom/MFS/UUNet consolidation), GTE's recent acquisition
     of BBN, the recent acquisition by ICG Communications, Inc. of Netcom and
     the recent acquisition by Frontier Corp. of GlobalCenter, and the pending
     acquisition of IBM's Internet service operations by AT&T are indicative of
     this trend. Accordingly, the Company expects that it will experience
     increased competition from the traditional telecommunications carriers. In
     addition to their greater network coverage, market presence, and financial,
     technical, and personnel resources, many of these telecommunications
     carriers also have large existing commercial customer bases.

     Other Competitors. Because the Company offers a broad range of goods and
     services, it encounters competition from numerous businesses which provide
     one or more similar goods or services. So, for example, Globix encounters
     competition from numerous resellers of computer equipment and providers of
     video streaming. Globix does not believe that any of the competitors in its
     target market offer as broad a range of Internet products and services.

              While the Company believes that its ability to attract business
     customers and to market value-added services is a key to its future
     success, there can be no assurance that its competitors will not introduce
     comparable services or products at similar or more attractive prices in the
     future or that the Company will not be required to reduce its prices to
     match competition. Furthermore, there can be no assurance that more of the
     Company's competitors will not shift their focus to attracting business
     customers, resulting in even more competition for the Company. There can be
     no assurance that the Company will be able to offset the effects of any
     such competition or resulting price reductions. Increased competition could
     result in erosion of the Company's market share and could have a material
     adverse effect on the Company's business, financial condition and results
     of operation.

     (3)      Dependence upon Suppliers

              In order to provide Internet access and other on-line services to
     its customers, the Company leases long distance fiber optic
     telecommunications lines from more than one national telecommunications
     services provider. The Company is dependent upon these providers of data
     communications facilities.

              Certain of the Company's suppliers, including RBOCs and CLECs,
     currently are subject to various price constraints, including tariff
     controls, which in the future may change. In addition, regulatory proposals
     are pending that may affect the prices charged by the RBOCs and CLECs to
     the Company. Such regulatory changes could result in increased prices of
     products and services, which could have a material adverse effect on the
     Company's business, financial condition and results of operations.

              The Company relies on other companies to supply certain components
     of its computer inventory as well as its network infrastructure (including
     telecommunications services and networking equipment) which, in the
     quantities and quality required by the Company, is available only from sole
     or limited sources. At the present time, Silicon Graphics, Sun
     Microsystems, Compaq and Intergraph are the Company's largest suppliers of
     products for both its Computer Product Sales and Services Division and its
     Internet and Media Development Division. The Company has in the past, and
     may from time to time, experience delays in receiving telecommunications
     services and shipments of merchandise purchased for resale. There can be no
     assurance that the Company will be able to obtain such telecommunication
     services and shipments of merchandise on the scale and at the times
     required by the Company at an affordable cost or at all. There also can be
     no assurance that the Company's suppliers, will not enter into exclusive
     arrangements with the Company's competitors or stop selling their products
     or components to the Company at commercially reasonable prices, or at all.
     Any failure of the Company's sole or limited-source suppliers to provide
     products or components that comply with its standards could have a material
     adverse effect on the Company's business, financial condition and results
     of operations.

     (4)      Employees

                  At November 30, 1998, the Company had 187 full time employees
and 17 part-time employees.

Item 2.           Properties

                  On July 1, 1998, the Company through BLP Acquisitions LLC, a
New York limited liability company ("BLP"), over 99% owned by the Company,
purchased the land and building located at 139 Centre Street, New York, New York
from Bank Leumi USA, a New York banking corporation. The nine story building
contains approximately 160,000 square feet of floor space. The Company intends
to house its New York SuperPOP facility and operations in the new premises
beginning April 1999.

                  In July 1998, the Company signed a 15 year triple net lease
commencing January 15, 1999 to rent approximately 62,000 square feet of office
space at 2807 Mission College Boulevard, Santa Clara, California at an annual
base rent of $1,277,715. The building is currently under construction. The
Company is building a SuperPOP data center in the new building, which will also
provide space for sales and administrative personnel. The Company expects its
Santa Clara SuperPOP to be fully operational by June 30, 1999.
<PAGE>   12
         In October 1998, the Company signed a lease with Corston Holdings
Limited (a United Kingdom Corporation) for a 15 year term through September 2014
for the rental of 33,500 square feet at Prospect House, 80 to 110 New Oxford
Street London at an annual base rent of pounds sterling 1,080,000 (approximately
$1,836,000 in U.S. dollars) commencing in October 1999. The Company is building
a SuperPOP data center in the new premises, which will also provide space for
sales and administrative personnel. The Company expects the London SuperPOP to
be fully operational by June 30, 1999.

                  The Company leases approximately 32,000 square feet of space
at 295 Lafayette Street, New York, New York. The lease expires in 2007. The
facility currently houses the Company's initial New York SuperPOP data center.

         The Company considers that, in general, its physical properties are
well maintained, in good operating condition and adequate for its purposes.

Item 3.           Legal Proceedings

         In January 1997, an action was commenced in the Supreme Court of the 
State of New York, County of New York against General Media International Inc., 
the Company and two individuals. The Complaint alleges that the Company 
tortiously interfered with the plaintiff's contractual and business relations 
with General Media International Inc. On April 15, 1997, counsel for the 
plaintiffs advised the Company that the litigation was put on hold. No further 
steps have been taken by plaintiffs to pursue their claims against the Company. 
In the Company's opinion, plaintiffs' claims against the Company are without 
merit.


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

         During the fourth quarter of the Company's fiscal year ended September
30, 1998 there were no matters submitted to a vote of security holders.
<PAGE>   13
                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

                  (a) The Company's Common Stock is traded on the NASDAQ
SmallCap Market System. The following table indicates high and low sales
quotations for the periods indicated based upon information supplied by NASDAQ,
Inc. Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.


<TABLE>
<CAPTION>
                  1997                                        Low                       High
                  ----                                        ---                       ----
<S>                                                          <C>                       <C>
                  first quarter                              $8.875                    $ 9.875
                  second quarter                              9.625                     13.750
                  third quarter                               9.875                     13.875
                  fourth quarter                              5.563                     11.375
</TABLE>

<TABLE>
<CAPTION>
                  1998                                        Low                       High
                  ----                                        ---                       ----
<S>                                                          <C>                       <C>
                  first quarter                              $4.500                    $ 8.313
                  second quarter                              4.375                     11.750
                  third quarter                               9.250                     15.938
                  fourth quarter                              6.250                     13.625
</TABLE>



                  (b) Number of Holders of Common Stock. The number of holders
of record of the Company's Common Stock on December 18, 1998 was 41, which does
not include individual participants in security position listings.

                  (c) Dividends. There were no dividends or other distributions
made by the Company during the fiscal year ended September 30, 1998. Under the
terms of the Senior Notes discussed above, the Company's ability to pay
dividends is contractually limited. It is anticipated that cash dividends will
not be paid to the holders of the Company's Common Stock in the foreseeable
future.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      The following discussion and analysis should be read together with the
consolidated financial statements and notes to such statements and notes
appearing elsewhere herein.

OVERVIEW

     Globix was founded in 1989 as a value-added reseller, or VAR, primarily
focused on providing custom computer hardware and software solutions for desktop
publishing. By 1995, Globix recognized the growing demand by business for
electronic information delivery and began to re-shape its corporate strategy
with a focus on offering Internet products and services. In December 1995,
Globix began to offer Internet access to business customers and by the end of
1996 had grown its Internet customer base to over 80 large and medium size
business accounts. In 1997, Globix, capitalizing on its expertise in Internet
technologies, began to offer a range of products and services that enable its
customers to more effectively carry out their business strategy using the
Internet. As of December 1, 1998, Globix's customer base for Internet products
and services had grown to over 800 large and medium size business customer
accounts.

     Prior to 1996, Globix's revenues consisted almost exclusively of sales of
desktop publishing computer products and services. In 1996, Globix shifted its
primary sales focus from desk-top publishing hardware and software products to
Internet-related servers and software. Since 1996, Globix has broadened its
product offerings to include dedicated Internet access, web hosting, co-location
and value-added Internet services. Commencing with fiscal 1996, Globix began
segment reporting of its results of operations. Globix divides its operations
for segment reporting into two divisions: (i) the "Internet Division," which
provides
<PAGE>   14
high bandwidth dedicated Internet access, web hosting, co-location and
value-added Internet services (such as web development, e-commerce and security
solutions, streaming media products and corporate training); and (ii) the
"Server Sales and Integration Division," which provides Internet-related
hardware and software sales and related systems and network integration. Over
the last three fiscal years, the revenue from the Internet Division has grown
significantly as a percentage of total revenue from 6.2% to 31.3%. Globix
expects that the Internet Division revenues will continue to grow as a
percentage of total revenues.

STATEMENT OF OPERATIONS

Revenues. The Company currently derives a majority of its revenue from sales of
Internet-related hardware and software. Globix intends to continue to offer such
higher-margin workstation, web and database server and software components as a
complement to its sophisticated Internet solutions and as a convenience to its
Internet customers. The Company typically keeps on hand a small amount of server
and software inventory, and typically purchases products from manufacturers only
after receiving a customer order for the items. The second largest component of
Globix's revenues is from Internet access. Most of Globix's Internet access
customers sign one or two-year contracts. Globix derives dedicated Internet
access revenues from initial connection charges and monthly service fees, both
of which vary directly with the bandwidth chosen and utilized. For web hosting
and co-location services, the Company charges monthly fees based on the amount
of data transferred to and from the customer's web site. In addition, for
co-location services the Company charges monthly rental fees for the use of its
facilities. Value-added Internet services are charged on a project (fixed price
or time and materials) or ongoing monthly basis.

The Company's costs include (i) cost of revenues related to direct costs of
hardware and software sold and the cost of leased long distance and local
circuits and certain direct labor costs, (ii) selling, general and
administrative expenses, (iii) interest expense (net of interest income)
primarily associated with the Senior Notes, and (iv) depreciation and
amortization.

Cost of Revenues. Cost of revenues for the Server Sales and Integration Division
consist primarily of acquisition costs of computer and networking hardware and
software.

Cost of revenues for the Internet Division consist primarily of
telecommunications costs for Internet access customers and direct labor costs
for web development and training operations. Telecommunications costs include
the cost of providing local telephone lines into the Company's SuperPOP, costs
related to the use of third party networks pursuant to service agreements, and
costs associated with leased lines connecting the SuperPOP and third-party
network to the Internet backbone. In October 1998, the Company signed an
agreement with Qwest giving the Company exclusive access to high-capacity
bandwidth coast-to-coast in the United States and from the United States to the
United Kingdom. When the network backbone becomes operational in mid 1999, data
transmission costs are expected to increase substantially in the short-term due
to the higher network operating and maintenance charges and depreciation of the
Qwest IRU. As utilization of the network backbone increases in future years, the
Company expects to realize a substantial reduction in per unit data transmission
costs due to the network's scalability and fixed cost structure.

Costs of revenue for web development consist of labor and overhead costs for the
personnel performing the service including the cost of project management,
quality control and project review. Costs of revenue for training consist of
labor and overhead costs for offering the training courses including in-house
and contract instructors and the cost to develop and produce course materials.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of sales and marketing personnel and
related occupancy costs; advertising costs; salaries and occupancy costs for
executive, financial and administrative personnel; and personnel and related
operating expenses associated with network operations, customer support and
field services. The principal increase in the Company's overhead expenses is
related directly to the hiring of new employees to support the Company's
increasing emphasis on Internet-related products and services. The Company is in
the process of hiring a significant number of additional personnel to staff and
market its three new SuperPOP facilities.

The Company expects selling and marketing expenses to continue to increase in
absolute dollars in future years due to increases in the size of its sales
force, advertising and other marketing activities. The Company expects these
additional expenditures to contribute significantly to an increase in losses in
fiscal 1999.
<PAGE>   15
Interest and Financing Expense. Interest expense (net of interest income) is
primarily related to debt service on the Senior Notes partially offset by
interest earned on invested cash, including the cash held in escrow to fund the
first six semi-annual interest payments on the Senior Notes, resulting in an
increase in net interest expense. In addition, the Company is amortizing debt
issuance costs relating to the $160.0 million Senior Notes offering of $6.6
million over seven years.

Depreciation and Amortization. Depreciation and amortization expenses are
expected to increase significantly beginning in fiscal 1999 as the Company
continues to make capital expenditures. The Company has not taken any
depreciation for the year ended September 30, 1998 on its under-construction
SuperPOPs in New York, San Francisco and London, and will commence depreciation
upon their opening, which is scheduled to be by June 30, 1999.

SEGMENT INFORMATION

     The Company's activities fall within two main segments: the Internet
Division and the Server Sales and Integration Division. The following table
details segment information for the fiscal years ending September 30, 1996, 1997
and 1998:


<TABLE>
<CAPTION>
                                       Fiscal year ended September 30

                                           1997              1998
                                      -------------     -------------
<S>                                   <C>               <C>
Sales:
  Server sales and integration        $  14,986,417     $  14,147,429
  Internet                                2,413,538         6,447,504
                                      -------------     -------------
  Consolidated                           17,399,955        20,594,933
                                      =============     =============
Operating income (loss)(1):
  Server sales and integration             (378,647)          721,125
  Internet                                  (84,632)        1,145,068
  Consolidated                           (3,010,234)       (4,733,404)
Identifiable assets(2):
  Server sales and integration            5,781,580         3,731,505
  Internet                                2,105,207         7,808,987
  Consolidated                           11,024,988       182,266,372
</TABLE>

     (1) Includes $6,599,597 for the fiscal year ended September 30, 1998 and
     $2,546,955 for fiscal year ended September 30, 1997 of unallocated
     corporate overhead including executive salaries of $823,662 for fiscal year
     ended September 30, 1998 and $616,034 for fiscal year ended September 30,
     1998 and $616,034 for fiscal year ended September 30, 1997 and overhead
     including rent, payroll charges for administrative staff including
     accounting, human resources, MIS and other support personnel and
     professional fees.


     (2) Including corporate assets not allocable to a particular segment of
     $170,725,880 and $3,138,201 for the fiscal years ended
     September 30, 1998 and 1997, respectively.



     Fiscal Year Ended September 30, 1998 Compared With Fiscal Year Ended
     September 30, 1997

     Revenues. Consolidated revenues for the fiscal year ended September 30,
     1998 increased 18.4% to approximately $20.6 million from approximately
     $17.4 million for the fiscal year ended September 30, 1997. Revenues from
     the Server Sales and Integration Division for fiscal year ended September
     30, 1998 decreased 5.6% to approximately $14.1 million from approximately
     $15.0 million for the fiscal year ended September 30, 1997. Revenues from
     the Internet division increased 167.1% to $6.4 million for the fiscal year
     ended September 30, 1998 from approximately $2.4 million for the fiscal
     year ended September 30, 1997. The increase in percentage of Internet
     Division revenues as a percentage of total revenues reflects the Company's
     shift in product mix toward Internet related sales.
<PAGE>   16
     Cost of Revenues. Cost of Revenues for the fiscal year ended September 30,
     1998 was $13.3 million or 64.7% as compared to $13.7 million or 78.7% of
     total revenues for the fiscal year ended September 30, 1997. The decrease
     in cost of revenues directly relates to the increase in higher Internet
     sales as a percentage of total sales.

     Selling, General and Administrative. Costs for the fiscal year ended
     September 30, 1998 were approximately $10.7 million or 51.9% of total
     revenues as compared to approximately $6.0 million or 34.7% of total
     revenues for the fiscal year ended September 30, 1997.

         For the year ended September 30, 1998, total salary expense increased
     approximately $2.6 million over the prior fiscal year due to the increase
     in personnel costs for sales, marketing, engineering, training and
     administration necessitated by the growth in operations. The number of
     employees increased from 90 as of September 30, 1997 to approximately 170
     as of September 30, 1998. The Company increased expenditures in advertising
     from approximately $325,000 for the year ended September 30, 1997 to
     approximately $1.3 million for the year ended September 30, 1998. The
     Company began a print advertising campaign in June 1998 to establish brand
     recognition for Globix. Additional print advertising in Crains New York,
     The New York Times and The Wall Street Journal commenced later in the
     year to promote sales. In addition, the Company increased its expenditures
     for local area trade shows by both appearing in additional shows over the
     prior period and increasing its presence at these shows by purchasing
     larger display areas.

     Interest and Financing Expense and Interest Income. The increase in
     interest expense is a direct result of the $160.0 million Senior Notes
     offering in April 1998. The increase in interest income reflects the
     increased cash position derived from the net proceeds of the Senior Notes
     offering. The Company is amortizing debt issuance costs relating to the
     $160.0 million Senior Notes offering totaling $6.6 million over seven
     years.

     Depreciation and Amortization. Depreciation and amortization increased to
     $1.3 million for the year ended September 30, 1998 as compared to
     approximately $675,000 for the year ended September 30, 1997. The increase
     is directly related to the equipment purchased during fiscal 1998.

     Net Loss to Common Shareholders and Loss per Share. As a result of the
     above, the Company reported a net loss for fiscal 1998 of $11.2 million or
     $3.08 per share as opposed to a net loss of $3.1 million or $1.01 per share
     for fiscal 1997.

     LIQUIDITY AND CAPITAL RESOURCES

          Since inception, the Company has satisfied its cash requirements
     through a combination of public and private sales of equity, borrowings
     from institutional and private lenders, and cash flow from operations. In
     January 1996, the Company completed an initial public offering of 1,279,642
     shares of its Common Stock and 661,250 redeemable Common Stock purchase
     warrants (the "IPO Warrants") to purchase an additional 661,250 shares of
     Common Stock. The net proceeds of the initial public offering were
     approximately $7 million. In September 1997, the Company completed a
     private placement of 400,000 shares of Common Stock through Value
     Management and Research GmbH for a total consideration of $2.2 million. In
     April 1998, the Company completed a $160.0 million issuance of Senior
     Notes, the net proceeds (after an interest escrow of $57.0 million and debt
     issuance costs of $6.6 million) of which were approximately $97.0 million.
     In July 1998, the Company called the outstanding IPO Warrants for
     redemption. Substantially all of the IPO Warrants were exercised and the
     net proceeds to the Company were approximately $4.3 million.

         At September 30, 1998, the Company had working capital of approximately
     $76.0 million, as compared to working capital of approximately $2.0 million
     at September 30, 1997. Working capital increased primarily because of the
     $160.0 million Senior Notes offering partially offset by the loss from
     operations of $11.2 million. Working capital was reduced by $60.2 million
     which has been set aside in restricted investments to pay the first six
     interest payments on the Senior Notes. In addition, in July 1998 the
     Company purchased its new corporate headquarters at 139 Centre Street, New
     York, for a cash outlay of approximately $15.3 million ($4.3 million is the
<PAGE>   17
     remaining liability for the purchase). Working capital was also reduced by
     deductions for depreciation and amortization of $1.7 million. The Company
     is in the process of securing a first mortgage on 139 Centre Street for
     approximately $19.8 million.

         Cash and cash equivalents increased by approximately $59.1 million from
      September 30, 1997 primarily as the result of the offering of $160.0
      million Senior Notes completed in April 1998 offset by the $60.2 million
      placed into long-term restricted cash, $13.0 million invested in
      marketable securities and $15.3 million paid for 139 Centre Street.

         On April 30, 1998, Globix issued $160 million of Senior Notes, which
     consist of 160,000 Units for aggregate gross proceeds of $160.0 million.
     Each Unit included $1,000 principal amount at maturity of the Senior Notes
     and one Warrant entitling the holder thereof to purchase 3.52 shares of
     Common Stock. The maturity date of the Senior Notes is May 1, 2005.
     Interest on the Senior Notes accrues at the rate of 13.0% per annum and is
     payable semi-annually on May 1 and November 1 of each year. Upon issuance
     of the Senior Notes, Globix deposited with an escrow agent an amount of
     cash and U.S. government securities (approximately $57.0 million), that,
     together with the proceeds from the investment thereof, were estimated to
     be sufficient to pay when due the first six interest payments on the Senior
     Notes, with any balance to be retained by Globix. The Senior Notes are
     collateralized by a first priority security interest in such escrow
     account.

         The Company maintains a $1.0 million credit line from Cisco Systems
     Capital Corporation ("CSC") to lease Cisco System products and associated
     peripherals. The terms of this line, which was entered into in December
     1997, provided for 180 days of borrowing and a maximum borrowing limit of
     $1.0 million. However, CSC has informally permitted the Company to continue
     to borrow under this line and to exceed the stated $1.0 million limit.
     Amounts borrowed under the line are to be repaid over a 36-month period
     with the Company having the option of purchasing the equipment for $1.00 at
     the end of the lease term. As of September 30, 1998, approximately $945,000
     was outstanding under this credit line.

         The Company also has credit facilities to finance certain inventory and
     equipment. As of September 30, 1998, the aggregate amount outstanding under
     such facilities was approximately $1.3 million.

         As of September 30, 1998, the Company had spent approximately $2.5
     million to construct and equip its three new SuperPOP facilities. The
     Company estimates that it will spend an additional $47.5 million to
     complete the SuperPOPs and $10.0 million to complete the Company's backbone
     infrastructure. In addition, the Company has an option from Qwest to
     maintain the capacity of its domestic network backbone at OC-3 bandwidth
     levels for the balance of the 20 year term of its agreement for an
     additional payment of $15.0 million. The Company can exercise this option
     at any time prior to December 31, 1999. The Company expects its new
     SuperPOP facilities and network backbone to become operational by June 30,
     1999.

         In the opinion of management, the Company will be able to finance its
     business as currently conducted and as currently planned from its current
     working capital at least through fiscal 1999.

     YEAR 2000 COMPLIANCE

         Many currently installed computer systems and software products are
     coded to accept or recognize only two digit entries in the date code field.
     These systems and software products will need to accept four digit entries
     to distinguish 21st century dates from 20th century dates. As a result,
     computer systems and/or software used by many companies and governmental
     agencies may need to be upgraded to comply with such Year 2000 requirements
     or risk system failure or miscalculations causing disruptions of normal
     business activities.

     State of Readiness. Globix has made a preliminary assessment of the Year
     2000 readiness of its information technology ("IT") systems, including the
     hardware and software that enable Globix to provide and deliver its
     solutions, and its non-IT systems. Globix's assessment plan consists of (i)
<PAGE>   18
     quality assurance testing of its internally developed proprietary software
     and systems; (ii) contacting third-party vendors and licensors of material
     hardware, software and services that are both directly and indirectly
     related to the delivery of Globix's solutions to its customers; (iii)
     contacting vendors of material non-IT systems; (iv) assessment of repair or
     replacement requirements; (v) repair or replacement; (vi) implementation;
     and (vii) creation of contingency plans in the event of Year 2000 failures.
     Globix plans to perform a Year 2000 simulation on its software during the
     second fiscal quarter of 1999 to test system readiness. Based on the
     results of its Year 2000 simulation test, Globix intends to revise the code
     of its software and systems as necessary to improve the Year 2000
     compliance of its software. Globix has been informed by its vendors of
     material hardware and software components of its IT systems that the
     products used by Globix are currently Year 2000 compliant. Globix is
     currently assessing the materiality of its non-IT systems and will seek
     assurances of Year 2000 compliance from providers of material non-IT
     systems. Until such testing is complete and such vendors and providers are
     contacted, Globix will not be able to completely evaluate whether its IT
     systems or non-IT systems will need to be revised or replaced. Globix plans
     to complete this phase of its Year 2000 evaluation during the first half of
     1999.

     Costs. To date, Globix has not incurred any material expenditures in
     connection with identifying or evaluating Year 2000 compliance issues. Most
     of its expenses have related to, and are expected to continue to relate to,
     the operating costs associated with time spent by employees in the
     evaluation process and Year 2000 compliance matters generally. At this
     time, Globix does not possess the information necessary to estimate the
     potential costs of revisions to its software and systems should such
     revisions be required or the replacement of third party software, hardware
     or services that are determined not to be Year 2000 compliant. Although
     Globix does not anticipate that such expenses will be material, such
     expenses, if higher than anticipated, could have a material adverse effect
     on Globix's business, results of operations and financial condition.

     Risks. Globix is not currently aware of any Year 2000 compliance problems
     relating to its IT or non-IT systems that would have a material adverse
     effect on Globix's business, results of operations and financial condition.
     There is no assurance that Globix will not discover Year 2000 compliance
     problems in its software and systems that will require substantial
     revisions. In addition, there is no assurance that third party software,
     hardware or services incorporated into Globix's material IT and non-IT
     systems will not need to be revised or replaced, all of which could be time
     consuming and expensive. The failure of Globix to fix its proprietary
     software or to fix or replace third-party software, hardware or services on
     a timely basis could result in lost revenues, increased operating costs and
     the loss of customers and other business interruptions, any of which could
     have a material adverse effect on Globix's business, results of operations
     and financial condition. Moreover, the failure to adequately address Year
     2000 compliance issues in its IT and non-IT systems could result in claims
     of mismanagement, misrepresentation or breach of contract and related
     litigation, which could be costly and time-consuming to defend.

         In addition, there can be no assurance that governmental agencies,
     utility companies, telecommunication companies, other Internet service
     providers, third party service providers, hardware and software
     manufacturers and others outside Globix's control will be Year 2000
     compliant. The failure by such entities to be Year 2000 compliant could
     result in a systemic failure beyond the control of Globix, such as a
     prolonged Internet, telecommunications or electrical failure, which could
     also prevent Globix from delivering its services to its customers, decrease
     the use of the Internet or prevent users from accessing the web sites of
     its customers. Any of these occurrences could have a material adverse
     effect on Globix's business, results of operations and financial condition.

     Contingency Plan. As discussed above, Globix is engaged in an ongoing Year
     2000 assessment and has not yet developed any contingency plans. The
     results of Globix's Year 2000 simulation testing and the responses received
     from third-party vendors and service providers will be taken into account
     in determining the nature and extent of any contingency plans.
<PAGE>   19
     INTRODUCTION OF THE EURO

         On January 1, 1999, eleven of the fifteen member countries of the
     European Union are scheduled to establish fixed conversion rates between
     their existing sovereign currencies and a new currency called the "Euro."
     These countries have agreed to adopt the Euro as their common legal
     currency on that date. The Euro will then trade on currency exchanges and
     be available for non-cash transactions. Thereafter and until January 1,
     2002, the existing sovereign currencies will remain legal tender in these
     countries. On January 1, 2002, the Euro is scheduled to replace the
     sovereign legal currencies of these countries.

         The Company will evaluate the impact the implementation of the Euro
     will have on its business operations and no assurances can be given that
     the implementation of the Euro will not have material adverse affect on the
     Company's business, financial condition and results of operations. However,
     the Company does not expect the Euro to have a material effect on its
     competitive position. In addition, the Company cannot accurately predict
     the impact the Euro will have on currency exchange rates or the Company's
     currency exchange risk.

     FORWARD LOOKING STATEMENTS

         The foregoing contains certain forward-looking statements. Due to the
     fact that the Company faces intense competition in a business characterized
     by rapidly changing technology and high capital requirements, actual
     results and outcomes may differ materially from any such forward looking
     statements and, in general are difficult to forecast.


Item 7.  Financial Statements

         Financial Statements Data are attached hereto following page F-2.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         During fiscal years 1997 and 1998 there were no changes in or
disagreements with the Company's principal independent accountant on accounting
or financial disclosure.
<PAGE>   20
                                    PART III

Item 9.  Directors and Executive Officers of the Company

                  As of December 1, 1998, the Company's directors and executive
officers were as follows:

<TABLE>
<CAPTION>
                                            Position With the Company                   Held Office
Name and Age                                and Principal Occupation                    since
------------                                ------------------------                    -----
<S>                                         <C>                                         <C>
Marc H. Bell, 31                            Chairman (Chief Executive                   1989
                                            Officer) and Director

Robert B. Bell, 59                          Executive Vice President,                   1994
                                            Chief Financial Officer, Director

Tsuyoshi Shiraishi, 54                      Director                                    1995

Martin Fox, 62                              Director                                    1995

Dr. Richard Videbeck, 75                    Director                                    1995

Anthony St. John, 41                        Director                                    1997

Sid Paterson, 57                            Director                                    1998

Marc Jaffe, 31                              Vice-President                              1997

William T. Jahnke, 44                       Vice-President                              1997

Alan Levy, 36                               Treasurer, Chief Accounting Officer         1997

Scott Safran, 42                            Vice-President                              1997
</TABLE>

                               Business Experience

         Marc H. Bell has been the President and Chief Executive Officer since
he founded the Company in 1989. Since re-focusing the Company on
Internet-related sales, Mr. Bell has appeared on numerous television broadcasts
and has been frequently quoted in numerous national publications regarding
Internet-related topics. Mr. Bell has always been interested in computer
technology. While in high school, Mr. Bell served as a free-lance computer
consultant including instructing the faculty at Fordam University on teaching
computers in the classroom. In 1983, Mr. Bell wrote the second bulletin board
system ("BBS") program available for the Apple II series computer called Camelot
BBS. In addition, Mr. Bell has worked in a variety of fields, including
advertising and publishing, utilizing cutting-edge computer technology. Mr. Bell
has a B.S. degree in accounting from Babson College and an M.S. degree in Real
Estate Finance from New York University.

         Robert B. Bell has served as Executive Vice President and Chief
Financial Officer of the Company and its corporate predecessor since 1994. Prior
to joining the Company, Mr. Bell was a practicing attorney in New York City at
the firm of Bell, Kalnick, Beckman, Klee and Green, which Mr. Bell founded in
the early 1970's. Prior to 1994, Mr. Bell for many years was also an Adjunct
Professor at New York University. He is primarily responsible for the
administration of the Company's financial affairs and day to day business
operations. Robert Bell is the father of Marc H. Bell. Mr. Bell has a B.S.
degree from New York University and a J.D. degree from the University of
California at Berkley.

         Tsuyoshi Shiraishi has been a director of the Company since July 1,
1994. Mr. Shiraishi has been the Chairman of Century World PTE Ltd., an
investment consulting firm, and the Managing Director of Harpoon since 1992.
Prior to that, Mr. Shiraishi was the Director of Marketing & Investment for
Kajima Overseas Asia PTE Ltd., a subsidiary of Kajima Corporation, an
international construction company, since 1990. In addition, since 1990, Mr.
<PAGE>   21
Shiraishi has been Vice Chairman of Century International Hotels, which operates
and manages 17 hotels in the Pacific Rim. He is the sole shareholder of Harpoon,
which acquired 50% of the capital stock of the Company as of July 1, 1994. Mr.
Shiraishi is a Japanese citizen and a resident of Singapore.

         Martin Fox has been a director of the Company since October 1995. Mr.
Fox has been, for more than five years, the President and a director of Initio,
Inc., a publicly owned mail order retailer of consumer products.

         Richard Videbeck has been a director of the Company since October 1995.
Since 1983, Dr. Videbeck has been an independent consultant in consumer risk
analysis, particularly for retailers and banks. From 1974 until 1986 Dr.
Videbeck was a professor of sociology at the University of Illinois at Chicago.
From 1974 until 1977, Dr. Videbeck was the Dean of the Doctor of Arts Program of
the Graduate College of the University of Illinois at Chicago.

         Anthony St. John, Lord St. John of Bletso is a member of the House of
Lords of the Parliament of the United Kingdom. He also serves as a consultant to
Merrill Lynch and is a Registered Representative of the London Stock Exchange.

         Sid Paterson has been President and Chief Executive Officer of Sid
Paterson Advertising Inc., for more than five years.

         Marc Jaffe a Vice President, Internet Services, joined the Company in
early 1995 to lead the Company's Internet services business. Prior to joining
the Company, Mr. Jaffe had extensive experience in the use of computers and
telecommunications in the advertising and marketing industry. Mr. Jaffe recently
developed an Internet-focused marketing strategy that won the prestigious
CreaTech Award, presented by Advertising Age magazine, and has spoken at
numerous Internet conferences. Prior to joining the Company, Mr. Jaffe was a
department manager at Sid Paterson Advertising Inc. in New York City since
1989. Mr. Jaffe graduated from Colgate University in 1989, where he received a
Bachelor of Arts Degree.

         William T. Jahnke has been a Vice President of the Company since March
1997 and the Director of Corporate Sales of the Company since August 1995. Prior
to joining the Company, Mr. Jahnke was president and chief operating officer of
Vernon Computer Rentals and Leasing from February 1989 to December 1994, where
he pioneered and implemented a nationwide asset management program for Apple
which is used by several thousand U.S. sales representatives. Mr. Jahnke
received a B.S. Degree in Computer Science from Seneca College in 1975.

         Alan Levy joined the Company as Treasurer and Chief Accounting Officer
in February 1997. From March 1994, to February 1997, Mr. Levy was the Assistant
to the Vice President of Finance of Del Laboratories, Inc., a manufacturer and
wholesaler of cosmetics and over-the-counter pharmaceuticals. Prior to that, Mr.
Levy was a Technical Manager with the American Institute of Certified Public
Accountants from August 1990 to March 1994. Prior to August 1990, Mr. Levy was a
manager for Ernst & Young. He is a Certified Public Accountant and received his
Bachelor's degree in Public Accounting from Long Island University, C.W. Post
Campus.

         Scott Safran has been Vice President - Training and Interactive
Development since June 1997 and the Director of Corporate Training since joining
the Company in March 1996. Prior to joining the Company he was a Senior Account
Executive at IBM Skill Dynamics Corporation from December 1994 to October 1995.
From December 1989 to December 1994 Mr. Safran was in various sales positions
with AT&T Networking Systems. Mr. Safran has a Bachelor of Arts in English
Literature and Master of Business Administration degrees from St. John's
University.

The Securities and Exchange Commission has adopted rules relating to the filing
ownership reports under Section 16 (A) of the Securities Exchange Act of 1934.
One such rule requires disclosure of filings which under the Commission's rules,
are not deemed to be timely. During its' review, the Company discovered that Mr.
Marc H. Bell and Mr. Robert Bell did not file timely each, regarding the
conversion of 50 IPO warrants into common stock and Mr. Jaffe regarding the
conversion of 100 IPO warrants into common stock.
<PAGE>   22
Item 10. Executive Compensation

         The following table sets forth compensation paid to executive officers
whose compensation was in excess of $100,000 for any of the three fiscal years
ended September 30, 1998. No other executive officers received total salary and
bonus compensation in excess of $100,000 during any of such fiscal years.

                           SUMMARY COMPENSATION TABLE

Annual Compensation and Grant of Stock Options

<TABLE>
<CAPTION>
Name and
Principal Position                              Year       Salary        Options
------------------                              ----       ------        -------
<S>                                             <C>       <C>            <C>
Marc H. Bell                                    1998      $250,000       211,500
President and Chief                             1997      $200,000            --
Executive Officer                               1996      $165,000            --

Robert B. Bell                                  1998      $151,042        30,000
Executive Vice President and                    1997       125,000            --
Chief Financial Officer                         1996       100,504        90,000

Marc Jaffe                                      1998      $131,250        50,000
Vice President - Internet Services              1997        89,000        25,000
                                                1996        64,093         5,000

William T. Jahnke                               1998      $100,000        10,000
Vice President - Server and                     1997        82,800        12,000
Workstation Sales and Service                   1996        80,000         6,000

Scott Safran                                    1998      $107,203        20,000
Vice President - Training and                   1997        60,547         5,000
Interactive Development                         1996        17,385            --
</TABLE>

         Compensation of Directors

         Each director of the Company who is not employed by the Company, and
who does not beneficially own more than 5% of the outstanding Common Stock of
the Company, will be entitled to receive annually, options to purchase a total
of 10,000 shares of Common Stock. Such options are immediately exercisable, have
a ten-year term, subject to certain restrictions, and are exercisable at the
fair market value of the Common Stock at the date of the grant. Of the current
board members, only Mr. Fox , Dr. Videbeck, Lord St. John and Mr. Paterson are
entitled to receive such compensation. . In addition, at the discretion of the
Board of Directors, directors may be reimbursed for reasonable travel expenses
in attending Board and committee meetings. In October 1997, Anthony St. John
received options to purchase a total of 10,000 shares of common stock at a price
of $7.25 per share and 10,000 options were granted each to Mr. Fox, Dr. Videbeck
and Mr. Paterson in March 1998 at $6.50 per share (the fair market value of the
underlying shares on the date of grant) in lieu of receiving any cash
compensation.

         During the fiscal year ended September 30, 1998, Mr. Fox received
$10,195 in consulting fees from the Company.

Employment Contracts

         In October 1995, the Company entered into an employment agreement with
Marc H. Bell for a period of five years. Pursuant to the terms of the agreement,
Mr. Bell received a base salary of $200,000 per year.

         Pursuant to his employment agreement, the Company loaned Mr. Bell a
total of $145,408 during fiscal 1997. The loan is due in 2002 and bears interest
at the rate of 8.75% per annum. In the second quarter of fiscal 1998, the
<PAGE>   23
Company granted Mr. Bell options to purchase 142,000 shares of Common Stock at a
purchase price of $6.50 per share and 69,500 shares of Common Stock at a
purchase price of $7.15 per share. 155,900 of such stock options are currently
exercisable. The Company has also purchased a key person life insurance policy
on Mr. Bell in the amount of $1,000,000. The Company is the sole beneficiary of
such policy.

         Effective June 1, 1998, the Company terminated Mr. Bell's former
employment agreement and entered into a new employment agreement, which will
terminate on June 30, 2005. The new employment agreement provides for a base
salary of $350,000 per year, increasing annually at the rate of 5% starting
October 1, 1999. In addition, Mr. Bell will receive an annual bonus equal to
10,000 times the increase, if any, of the fair market value per share of the
Company's Common Stock measured during the 12-month period ending on June 30 of
each year of the agreement, commencing with the year beginning July 1, 1998. Mr.
Bell will also be entitled to receive stock options to purchase that number of
shares as shall equal 25% of the increase, if any, in the number of issued and
outstanding shares of Common Stock during the 12-month period ending on
September 30 of each year of the agreement, provided that such increase was
attributable to equity offerings or acquisitions. The new employment agreement
also provides that Mr. Bell may require the Company to lend him a total of
$155,000. Any loan taken thereunder will mature five years after the date made
and bear interest at the rate of 8% per annum. However, the interest accruing
during the first two years is not payable until the end of such two year period.
Mr. Bell borrowed from the Company $155,000 in September, 1998.
<PAGE>   24
Item 11.          Security Ownership of Certain Beneficial Owners and Management

                  (a) The following table sets forth, as at November 30, 1998,
certain information concerning stock ownership of the Company by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
common shares of the Company, (ii) each of the companies directors and (iii) all
directors and officers of the Company as a group. Except as otherwise indicated,
all such persons have both sole voting and investment power over the shares
beneficially owned by them.

<TABLE>
<CAPTION>
                                                                          Percent
                                                    Number of Shares         of
Name and Address (1)                               Beneficially Owned      Class
--------------------                               ------------------      -----
<S>                                                <C>                    <C>
Marc H. Bell (2)                                       1,699,193           39.7%

Tsuyoshi Shiraishi(2)(3)
Harpoon Holdings, Ltd.
2 Handy Road, #11-09 Cathay Building,
Singapore 229233                                         612,500           14.8%

Robert Bell (4)                                          120,051            2.8%

Martin Fox (4)
2001 Tonnelle Avenue
North Bergen, NJ 07047                                    26,000              *

Dr. Richard Videbeck (4)
3249 East Angler's Stream
Avon Park, FL 33825                                       26,000              *

Anthony St. John
97 Cadogan Gardens
London SW32RE                                             25,000              *

Sid Paterson
99 Madison Avenue
New York, NY 10016                                        30,000              *

 All executive officers and directors as a
group (11 persons)(5)                                  1,971,846           43.4%
</TABLE>

*        Less than 1%

(1)      The address of each of the named individuals, other than Mr. Shiraishi,
         Mr. Fox, Dr. Videbeck, Lord St. John and Mr. Paterson is c/o Globix
         Corporation, 295 Lafayette Street, New York, NY 10012.

(2)      Includes the 612,500 Harpoon Shares which are subject to the October
         1995 Irrevocable Proxy entered into between Harpoon and Marc H. Bell,
         pursuant to which Harpoon has granted Mr. Bell the sole right to vote
         the Harpoon Shares with respect to the election of the Company's
         directors. The Irrevocable Proxy terminates in October 2005.

(3)      Mr. Shiraishi, a director of the Company, is the sole shareholder of
         Harpoon

(4)      The named individual has the right to acquire the number of shares
         shown pursuant to a currently exercisable stock option.

(5)      Includes currently exercisable stock options to purchase 399,499
         shares.
<PAGE>   25
         (b) In connection with the company's initial public offering, Marc Bell
and Harpoon have each deposited 210,000 shares of the Common Stock owned by them
(the "Deposit Shares") with the Company. The Company will hold such shares
pursuant to a Share Deposit Agreement. The Deposit Shares will be returned to
their respective owners no later than at the end of eight years from the date of
the Prospectus for the initial public offering. However, the Deposit Shares may
be returned prior to such time, if certain levels of profitability are met.

Item 12.          Certain Relationships and Related Transactions

         See "Employment Contracts" above for a description of certain loans the
Company has made to Marc H. Bell.

Item 13. Exhibits and Reports on Form 8-K

     (a)          Exhibits.  See index of exhibits annexed hereto.

     (b)          Reports on Form 8-K

                  (i)      Date Filed: 7/16/98*           Date of Event: 7/1/98

                           Subject:         Company, through a subsidiary,
                                            purchased the land and building
                                            located at 139 Centre Street, New
                                            York, New York from Bank Leumi USA
                                            at a total acquisition cost of
                                            $17,000,000, including the cost of
                                            purchasing the rights to acquire the
                                            property.

                  (ii)     Date Filed: 8/19/98            Date of Event: 7/23/98

                           Subject:         Company entered into a Securities
                                            Purchase Agreement with Cybernet
                                            Data Systems, Inc. and purchased for
                                            $1,000,000, a 10% Convertible
                                            Subordinated Debenture due 2001
                                            which is convertible into 670,000
                                            shares of Cybernet common stock and
                                            a Warrant to purchase 666,667 shares
                                            of Cybernet common stock at an
                                            exercise price of $1.50 per share
                                            until its expiration on July 23,
                                            1999.


                           * Amendment No. 1 to Form 8-K filed 9/16/98.
                           Confidential treatment granted for certain portions
                           of Exhibits pursuant to Rule 406 promulgated under
                           the Securities Act.
<PAGE>   26
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


Date: December 29, 1998            Globix Corporation

                                        By: /s/ Marc H. Bell
                                            ------------------------------------
                                                Marc H. Bell, President and
                                                Chief Executive Officer

         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.

Date: December 29, 1998                         /s/ Marc H. Bell
                                                --------------------------------
                                                    Marc H. Bell, President,
                                                    Chief Executive Officer
                                                    and Director


Date: December 29, 1998                         /s/ Robert B. Bell
                                                --------------------------------
                                                    Executive Vice President,
                                                    Chief Financial Officer and
                                                    Director


Date: December 29, 1998                             Martin Fox
                                                    ----------------------------
                                                    Martin Fox, Director


Date: December 29, 1998                             Tsuyoshi Shiraishi
                                                    ----------------------------
                                                    Tsuyoshi Shiraishi, Director

Date: December 29, 1998                         /s/ Richard Videbeck
                                                --------------------------------
                                                    Richard Videbeck, Director


Date: December 29, 1998                             Anthony St. John
                                                    ----------------------------
                                                    Anthony St. John, Director

Date: December 29, 1998                             Sid Paterson
                                                    ----------------------------
                                                    Sid Paterson, Director

Date: December 29, 1998                         /s/ Alan Levy
                                                --------------------------------
                                                    Alan Levy, Treasurer and
                                                    Chief Accounting Officer
<PAGE>   27
Number                                    Description

3.1               Certificate of Incorporation of the Company, as amended.(12)

3.2               By-laws of the Company, as amended.(13)

4.1               Specimen Stock Certificate.(3)

4.2               Form of Underwriter's Warrant.(3)

4.3               Indenture between the Company and Marine Midland Bank, as
                  Trustee, dated April 30, 1998.(10)

4.4               Form of $160,000,000 13% Senior Note, Series A, due 2005.(10)

4.5               Form of $160,000,000 13% Senior Notes, Series B, due 2005.(12)

4.6               Form of Warrant to purchase Common Stock expiring May 1,
                  2005.(10)

10.1              Purchase Agreement between the Company and ING Baring (U.S.)
                  Securities, Inc. (the "Initial Purchaser"), dated April 24,
                  1998.(10)

10.2              Warrant Agreement between the Company and Marine Midland Bank,
                  as Warrant Agent, dated as of April 30, 1998.(10)

10.3              Registration Rights Agreement between the Company and the
                  Initial Purchaser, dated as of April 30, 1998.(10)

10.4              Warrant Registration Rights Agreement between the Company and
                  the Initial Purchaser, dated as of April 30, 1998.(10)

10.5              Escrow and Security Agreement between Marine Midland Bank, as
                  Escrow Agent, Marine Midland Bank, as Trustee, and the
                  Company, dated as of April 30, 1998.(10)

10.6              Sublease for Penthouse Suite 907D between Rhodes Associates,
                  Rose Associates, Electric Curtain Inc., Graphics and Stellar
                  Corp., dated as of July 1, 1997. (8) ***

10.7              Bell Technology Group Ltd. 1995 Stock Option Plan, adopted
                  September 29, 1995.(1)

10.8              Bell Technology Group Ltd. 1998 Stock Option Plan, adopted
                  April 16, 1998.(11)

10.9              Irrevocable Proxy Agreement between Harpoon Holdings Ltd. and
                  Marc H. Bell, dated as of October 1, 1995.(1)

10.10             Employment Agreement between Marc H. Bell and the Company,
                  dated as of April 10, 1998.(*)

10.11             Share Deposit Agreement between Marc H. Bell, Harpoon Holdings
                  Ltd., the Company, and Rickel & Associates.(3)

10.12             Form of Consulting Agreement between the Company and Rickel &
                  Associates.(1)

10.13             Agreement of Lease between Bell Technology Group Ltd. and Puck
                  Associates, dated as of July 23, 1996.(4)

10.14             Security Agreement with NationsCredit Commercial Corporation
                  of America and NAFT International Ltd., dated October 1996.(4)

10.15             Restated Security Agreement with NationsCredit Distribution
                  Finance, Inc. and the Company, dated as of February 11,
                  1998.(12)

10.16             Agreement for Wholesale Financing between NAFT International
                  Ltd. and NationsCredit, dated as of October 1996.(4)
<PAGE>   28
10.17             Lockbox Service Agreement between NAFT, European American Bank
                  and NationsCredit, dated as of October 1996.(4)

10.18             Loan and Security Agreement between Finova Capital Corporation
                  ("Finova") and the Company, dated as of May 1, 1997.(6)

10.19             Guaranty by NAFT in favor of Finova, dated as of May 1,
                  1997.(6)

10.20             Guaranty by NAFT Computer Service Corp. in favor of Finova,
                  dated as of May 1, 1997.(6)

10.21             Guaranty by Bluestreak Digital, Inc., in favor of Finova,
                  dated as of May 1, 1997.(6)

10.22             Guaranty by PFM Communications, Inc., in favor of Finova,
                  dated as of May 1, 1997.(6)

10.23             Promissory Notes to Bell Technology Group Ltd., from Marc H.
                  Bell, dated April 2, 1997 and June 30, 1997.(8)

10.24             Agreement by and between Bell Technology Group Ltd., and Value
                  Management & Research GmbH for the sale of an aggregate of
                  382,609 shares of Common Stock, dated as of September 24,
                  1997.(7)

10.25             Employment Agreement between William T. Jahnke and NAFT
                  International Ltd., dated as of November 1, 1995.(2)

10.26             Employment Agreement between Alan Levy and Bell Technology
                  Group Ltd., dated as of June 1, 1997.(9)

10.27             Amendment to Employment Agreement between Marc H. Bell and the
                  Company, dated as of January 1, 1996.(4)

10.28             Agreement between Bell Technology Group Ltd., and Cisco
                  Systems Capital Corporation granting credit approval for
                  $1,000,000 for leasing transactions, dated as of December 15,
                  1997.(9)

10.29(+)          Purchase Agreement between Hanover Equities, Inc. and the
                  Company dated as of June 2, 1998.(15)

10.30(+)          Purchase Agreement between Young Woo and the Company dated as
                  of June 2, 1998.(15)

10.31             Lease between Mission Plaza LLC and the Company dated as of
                  July 24, 1998.(*)

10.32             First Amendment to Lease by and between Mission Plaza LLC and
                  the Company dated October 8, 1998 and effective as of July 24,
                  1998.(*)

10.33             Lease by and between Corston Holdings Limited, Globix Limited
                  and the Company dated October 15, 1998.(*)

10.34             Deed of Guaranty between Bank Leumi (UK) Plc, Corston Holdings
                  Limited, and Globix Limited dated October 15, 1998.(*)

10.35             IRU Agreement between Qwest Communications Corporation and the
                  Company dated as of October 5, 1998.(*)

21                List of Subsidiaries.

23                Consent of Arthur Andersen LLP.

27                Financial Data Schedule 

(*)   Filed herewith.

(+)   Confidential treatment granted for certain portions of this Exhibit
      pursuant to Rule 406 promulgated under the Securities Act.

(1)   Incorporated by reference to Registration Statement on Form SB-2 (File No.
      33-98978) (the "Registration Statement") filed November 3, 1995.

(2)   Incorporated by reference to Amendment No. 1 to the Registration
      Statement, filed December 20, 1995.
<PAGE>   29
(3)   Incorporated by reference to Amendment No. 2 to the Registration Statement
      filed January 23, 1996, declared effective January 24, 1996.

(4)   Incorporated by reference to the Company's Annual Report on Form 10-KSB/A
      for the year ended September 30, 1996.

(5)   Incorporated by reference to the Company's Registration Statement on Form
      SB-2 filed March 13, 1997 (File No. 333-23259).

(6)   Incorporated by reference to the Company's Report on Form 8-K/A filed July
      18, 1997.

(7)   Incorporated by reference to the Company's Report on Form 8-K filed
      October 8, 1997.

(8)   Incorporated by reference to Amendment No. 4 filed November 6, 1997 to
      Registration Statement (File No. 333 23259) filed March 13, 1997.

(9)   Incorporated by reference to the Company's Annual Report on Form 10-KSB
      for the year ended September 30, 1997.

(10)  Incorporated by reference to the Company's Report on Form 8-K filed May
      11, 1998.

(11)  Incorporated by reference to the Company's Proxy Statement on Schedule 14A
      filed on March 16, 1998.

(12)  Incorporated by reference to the Company's Registration Statement on Form
      S-4 (File No. 333-57993) filed June 29, 1998.

(13)  Incorporated by reference to the Company's Registration Statement on Form
      S-4/A (File No. 333-57993) filed August 7, 1998.

(14)  Incorporated by reference to the Company's Report on Form 8-K filed August
      19, 1998.

(15)  Incorporated by reference to the Company's Report on Form 8-K/A filed
      September 16, 1998.
<PAGE>   30
                       GLOBIX CORPORATION AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                    <C>
  Report of Independent Public Accountants ........................................................           F-2

 Consolidated Balance Sheets - As of September 30, 1998 and September 30, 1997 ....................           F-3

 Consolidated Statements of Operations - For the years ended  September 30, 1998 and September
  30, 1997 ........................................................................................           F-4

 Consolidated Statements of Changes in Stockholders' Equity - For the years ended September 30,
  1998 and September 30, 1997 .....................................................................           F-5

 Consolidated Statements of Cash Flows - For the years ended September 30, 1998 and September
  30, 1997 ........................................................................................     F-6 - F-7

 Notes to Consolidated Financial Statements .......................................................    F-8 - F-19
</TABLE>



                                       F-1
<PAGE>   31
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To:       GLOBIX CORPORATION:


We have audited the accompanying consolidated balance sheets of Globix
Corporation (formerly Bell Technology Group, Ltd.) (a Delaware corporation) and
Subsidiaries as of September 30, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These 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 generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Globix Corporation and
Subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.

                                        Arthur Andersen LLP



December 14, 1998
New York, New York



                                       F-2
<PAGE>   32
                       Globix Corporation and Subsidiaries
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                      September 30,     September 30,
                                                           1998              1997
                                                      -------------     -------------
<S>                                                   <C>               <C>
                                Assets
Current assets:
  Cash and cash equivalents                           $  61,473,285     $   2,401,446
  Marketable securities                                  14,638,173                --
  Accounts receivable, net of allowance for
   doubtful accounts of $410,000 and $194,684,
   respectively                                           4,861,219         3,259,548
  Inventories                                               391,848           487,542
  Prepaid expenses and other current assets               1,699,117           727,765
  Restricted cash                                        10,316,667                --
                                                      -------------     -------------
     Total current assets                                93,380,309         6,876,301
Investments, restricted                                  50,163,109           325,000
Property and equipment, net                              30,871,719         3,548,838
Debt issuance costs, net of accumulated
 amortization of $393,321                                 6,214,473                --
Other assets                                              1,636,762           274,849
                                                      -------------     -------------
     Total assets                                     $ 182,266,372     $  11,024,988
                                                      =============     =============

     Liabilities and Stockholders' Equity

Current liabilities:
  Short term borrowings                               $          --     $   2,001,157
  Current portion of notes payable                        2,397,777           335,021
  Accounts payable                                        6,185,460         2,010,507
  Accrued expenses                                          192,913           425,852
  Accrued interest expense                                8,666,667                --
  Deferred revenues                                          78,166           123,046
                                                      -------------     -------------
     Total current liabilities                           17,520,983         4,895,583
Long term note payable, net of current portion            1,199,429           923,217
Long-term debt, net of unamortized
  discount of $2,107,800                                157,892,200                --
Other long term liabilities                               2,934,675           191,928
                                                      -------------     -------------
     Total liabilities                                  179,547,287         6,010,728
                                                      -------------     -------------
Commitments and contingencies

Stockholders' equity:
  Preferred Stock, $.01 par value; 500,000
  shares authorized; no shares issued and
  outstanding                                                    --                --
  Common Stock, $.01 par value; 20,000,000
  shares authorized; 4,140,116 and 3,448,450
  shares issued and outstanding                              41,401            34,485
  Additional paid-in capital                             17,247,354        10,069,474
  Unrealized gain on securities available for sale        1,675,907                --
  Accumulated deficit                                   (16,245,577)       (5,089,699)
                                                      -------------     -------------
     Total stockholders' equity                           2,719,085         5,014,260
                                                      -------------     -------------
     Total liabilities and stockholders'
         equity                                       $ 182,266,372     $  11,024,988
                                                      =============     =============
</TABLE>


    The accompanying notes are an integral part of these consolidated balance
                                     sheets.


                                       F-3
<PAGE>   33
                       Globix Corporation and Subsidiaries
                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                   Year Ended          Year Ended
                                               September 30, 1998  September 30, 1997
                                               ------------------  ------------------
<S>                                            <C>                 <C>
Revenues                                          $ 20,594,933        $ 17,399,955
Costs and expenses:
  Cost of revenues                                  13,321,952          13,699,205
  Selling, general and administrative               10,696,359           6,036,032
  Depreciation and amortization                      1,310,026             674,952
                                                  ------------        ------------
     Total costs and expenses                       25,328,337          20,410,189
Loss from operations                                (4,733,404)         (3,010,234)

  Interest income                                    1,952,952              72,427
  Interest and financing expense                    (8,375,426)           (177,626)
                                                  ------------        ------------
Loss before taxes                                  (11,155,878)         (3,115,433)


Benefit from taxes                                          --                  --
                                                  ------------        ------------
Net loss                                          $(11,155,878)       $ (3,115,433)
                                                  ============        ============


Basic and diluted loss per share                        ($3.08)             ($1.01)


Weighted average common shares outstanding-
  basic and diluted                                  3,625,794           3,075,235
</TABLE>



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




                                       F-4
<PAGE>   34
                       Globix Corporation and Subsidiaries
           Consolidated Statements of Changes in Stockholders' Equity


<TABLE>
<CAPTION>
                                                                              Unrealized Gain
                                                                               on Securities
                                                                Additional       Available                                Total
                                            Common Stock         Paid-in            for            Accumulated         Stockholders'
                                         Shares      Amount      Capital            Sale             Deficit              Equity
                                         ------      ------      -------            ----             -------              ------
<S>                                    <C>          <C>        <C>            <C>                 <C>                  <C>
Balance, September 30, 1996            3,083,210    $30,832    $ 8,033,134       $       --       ($  1,974,266)       $  6,089,700
Proceeds from Private Placement, net     400,000      4,000      1,979,241               --                  --           1,983,241
Proceeds from exercise of stock
  options and warrants, net                8,098         81         56,671               --                  --              56,752
Correction of outstanding shares         (42,858)      (428)           428               --                  --                  --
Net Loss                                      --         --             --               --          (3,115,433)         (3,115,433)
                                       ---------    -------    -----------       ----------        ------------        ------------
Balance, September 30, 1997            3,448,450    $34,485    $10,069,474       $       --        $ (5,089,699)       $  5,014,260
Unrealized increase in value of
  investments                                                                     1,675,907                               1,675,907
Warrants issued in connection with
  senior note offering                                           2,252,800                                                2,252,800
Issuance of common stock upon
  exercise of options and warrants,
  net                                    691,666      6,916      4,925,080               --                  --           4,931,996
Net loss                                      --         --             --                          (11,155,878)        (11,155,878)
                                       ---------    -------    -----------       ----------        ------------        ------------
Balance, September 30, 1998            4,140,116    $41,401    $17,247,354       $1,675,907        $(16,245,577)       $  2,719,085
                                       =========    =======    ===========       ==========        ============        ============
</TABLE>


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




                                       F-5
<PAGE>   35
                       Globix Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                 Year Ended           Year Ended
                                                             September 30, 1998   September 30, 1997
                                                             ------------------   ------------------
<S>                                                          <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                     $ (11,155,878)       $  (3,115,433)
Adjustments to reconcile net loss
  to net cash provided by (used in) operating activities
Depreciation and amortization                                      1,310,026              686,250
Amortization of discount and debt issuance costs                     538,321                   --
Changes in operating assets and liabilities:
Increase in accounts receivable                                   (1,601,671)          (1,411,630)
Decrease in inventories                                               95,694              270,811
(Increase) decrease in prepaid expenses
  and other current assets                                        (1,571,352)              31,348
(Increase) decrease in other assets                                 (206,913)              36,708
Increase in accounts payable                                       4,174,953              736,310
(Decrease) increase in accrued expenses                             (232,939)             277,664
Increase in accrued interest expense                               8,666,667                   --
Decrease in deferred revenues                                        (44,880)             (43,571)
Other long term liabilities                                          142,747                   --
                                                               -------------        -------------
Net cash provided by (used in) operations                            114,775           (2,531,543)
                                                               -------------        -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in restricted cash                                    (10,316,667)                  --
Investment in marketable securities                              (12,962,266)                  --
Investment in long-term restricted investments                   (49,838,109)                  --
Investment in Cybernet Data Systems                               (1,000,000)                  --
Purchases of property and equipment,
  net of landlord reimbursement in 1997                          (23,269,967)          (1,542,431)
                                                               -------------        -------------
Net cash used in investing activities                            (97,387,009)          (1,542,431)
                                                               -------------        -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior note offering net of
  offering expenses of $6,607,794                                153,392,206                   --
Net proceeds from (repayments of)
  short term borrowings                                           (2,001,157)           2,001,077
Shareholder loan                                                    (155,000)            (145,408)
Proceeds from notes payable for equipment refinancing                     --              873,610
Repayments of notes payable                                         (423,972)            (195,887)
Proceeds from private placement                                      600,000            1,544,031
Proceeds from exercise of stock options and warrants,
  net                                                              4,931,996               55,986
                                                               -------------        -------------
Net cash provided by financing activities                        156,344,073            4,133,409
                                                               -------------        -------------

Net increase in cash and
  cash equivalents                                                59,071,839               59,435
Cash and cash equivalents,
  Beginning of period                                              2,401,446            2,342,011
                                                               -------------        -------------
Cash and cash equivalents,
  Ending of period                                             $  61,473,285        $   2,401,446
                                                               =============        =============
</TABLE>




                                       F-6
<PAGE>   36
<TABLE>
<CAPTION>
                                                          Year Ended          Year Ended
                                                      September 30, 1998  September 30, 1997
                                                      ------------------  ------------------
<S>                                                   <C>                 <C>
   Supplemental disclosure of cash flow information:

Cash paid for interest                                    $  223,251          $165,540
Cash paid for income taxes                                    51,220            27,881
Non-cash investing and financing activities:
Equipment acquired under capital lease obligations         1,112,671           539,764
Capital expenditures included in accounts payable,
  notes payable and other long term liabilities            6,701,707                --
Proceeds receivable associated with private
  placement                                                       --           600,000
Issuance of common stock in connection with
  private placement                                               --           100,000
Warrants issued in connection with
  senior note offering                                     2,252,800                --
</TABLE>





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


                                       F-7
<PAGE>   37
                       GLOBIX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION

         Globix Corporation and Subsidiaries (the "Company") was originally
incorporated in New York in 1989 as NAFT International Ltd. In July 1994, PFM
Technologies Corporation, a newly formed affiliate of NAFT, acquired NAFT and
its affiliated corporations in a tax-free exchange of common stock. The Company
was reincorporated in Delaware in 1995 under the name Bell Technology Group Ltd.
The Company changed its name to Globix Corporation on June 1, 1998.

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements herein include the accounts of
the Company, NAFT International Ltd., PFM Communications Inc., NAFT Computer
Service Inc., GameNet Corp., Bluestreak Digital Inc., BLP Acquisitions LLC 
(since July 1998), ATC Merger Corp., BTG Technology Group Ltd and Globix
Limited. All material intercompany accounts and transactions have been
eliminated. In September 1995, the Company changed its fiscal year end from
December 31 to September 30.

OPERATIONS

         The Company's activities presently fall into two main segments. One
segment consists of server and workstation sales and service. The second segment
consists of all Internet related activities including high bandwidth dedicated
Internet access, web hosting, co-location and value-added Internet services
(such as web development, e-commerce and security solutions, streaming media
products and corporate training).

         In the opinion of management, the Company will be able to finance its
business as currently conducted from its current working capital and from the
proceeds of the $160 million bond offering completed in April 1998 at least
through the fiscal year 1999.




                                       F-8
<PAGE>   38
SEGMENT INFORMATION

         The following is a summary of segment information for the fiscal years
ended September 30, 1998 and 1997.


Fiscal year ended September 30, 1998

<TABLE>
<CAPTION>
                                  Server Sales
                                  and Integration     Internet        Consolidated
<S>                               <C>               <C>              <C>
Sales to unaffiliated customers    $  14,147,429    $   6,447,504    $  20,594,933
Operating income (loss)                  721,125        1,145,068       (4,733,404)*
Identifiable assets                    3,731,505        7,808,987      182,266,372**
</TABLE>

Fiscal year ended September 30, 1997


<TABLE>
<CAPTION>
                                   Server Sales
                                   and Integration    Internet     Consolidated
                                   ---------------    --------     ------------
<S>                                <C>              <C>            <C>
Sales to unaffiliated customers      $14,986,417    $ 2,413,538    $17,399,955
Operating Loss                           378,647         84,632      3,010,234*
Identifiable assets                    5,781,580      2,105,207     11,024,988**
</TABLE>



* Includes $6,599,597 for the fiscal year ended September 30, 1998 and
$2,546,955 for fiscal year ended September 30, 1997 of unallocated corporate
overhead including executive salaries of $823,662 for fiscal year ended
September 30, 1998 and $616,034 for fiscal year ended September 30, 1997 and
overhead including rent, payroll charges for administrative staff including
accounting, human resources, MIS and other support personnel and professional
fees.

** Including corporate assets not allocable to a particular segment of
$170,725,880 and $3,138,201 for the fiscal years ended September 30, 1998 and
1997.


PER SHARE DATA

         During 1997, SFAS No. 128 "Earnings per Share" was issued and became
effective for the Company's September 30, 1998 financial statements. SFAS No.
128 establishes new standards for computing and presenting earnings per share
(EPS). The new standard requires the presentation of basic EPS and diluted EPS.
Basic EPS is calculated by dividing income available to common shareholders by
the weighted average number of shares of common stock outstanding during the
period. Diluted EPS is calculated by dividing income available to common
shareholders by the weighted average number of common shares outstanding
adjusted to reflect potentially dilutive securities. Diluted EPS has not been
presented since the inclusion of outstanding options would be antidilutive.
The Company's September 30, 1997 financial statements have been restated to 
reflect this pronouncement.

CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents. As of
September 30, 1998 and 1997, cash equivalents consist of $71,789,952
($61,473,285 included in cash and cash equivalents and $10,316,667 included in
restricted cash) and $2,401,446, respectively.

                                       F-9
<PAGE>   39
CONCENTRATIONS OF CREDIT RISK

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. The Company maintains cash and cash equivalents with
various major financial institutions which invest primarily in U.S. Government
instruments, high quality corporate obligations, certificates of deposit and
commercial paper. The Company believes that concentrations of credit risk with
respect to trade accounts receivable are limited due to the large number of
entities comprising the Company's customer base.

SIGNIFICANT VENDOR

         One vendor comprises approximately $2,384,000 or 21% of the Company's
inventory purchases during the fiscal year ended September 30, 1998. If such
vendor ceases to supply the Company, management is confident it can procure
comparable services at similar costs elsewhere.

MAJOR CUSTOMER

         One customer comprises approximately $2,355,000 or 11% of the Company's
revenues during the fiscal year ended September 30, 1998.

INVENTORIES

         Inventory consists of computer hardware and software, parts and related
items. Inventories are carried at the lower of cost or market determined by the
first-in, first-out method.

INVESTMENTS

         Marketable equity securities are reported at fair value. Unrealized
gains and losses from those securities which are classified as
available-for-sale are reported as a separate component of shareholders' equity.

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost, less accumulated
depreciation or amortization computed on the straight-line method. Building is
depreciated over its estimated useful life of forty years. Furniture and
equipment are depreciated over their estimated useful lives, generally five
years. Leasehold improvements are amortized over the term of the lease or life
of the asset, whichever is shorter.

LONG-LIVED ASSETS

         The Company's policy is to record long-lived assets at cost. These
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be recoverable.
Furthermore, the assets are evaluated for continuing value and proper useful
lives by comparison to expected future cash projections.

REVENUE RECOGNITION

         Revenues consist primarily of computer hardware sales, Internet access
fees and network installation charges. Payments received in advance of providing
services are deferred until the period such services are provided. Equipment
sales and installation charges are recognized when installation is completed.



                                      F-10
<PAGE>   40
         Monthly subscription service revenue related to Internet access is
recognized over the period services are provided. Subscription service and
equipment installation revenues, which require the use of Company-provided
installation of equipment at a subscriber's location, are recognized at
completion of installation and upon commencement of service. Revenues related to
the Web; interactive development and to 2-D and 3-D animation are recognized as
the project progresses. Projects are generally completed within a three month
period.

COST OF REVENUES

         Cost of revenues in the Company's Internet division consists primarily
of local access costs, leased network backbone circuit costs and the cost of
equipment. For the Server Sales and Integration division, the cost of revenues
is the cost of the computer products it sells including parts, internal and
third-party labor costs, and training and certification costs.

STOCK-BASED COMPENSATION

         The Company accounts for employee stock options in accordance with
Accounting Principles Board No. 25 ("APB No. 25"), "Accounting for Stock Issued
to Employees." Under APB No. 25, the Company applies the intrinsic value method
of accounting and therefore does not recognize compensation expense for options
granted, because options are only granted at a price equal to market value on
the day of grant.

         During 1996, Statement of Financial Accounting Standards No. 123 ("SFAS
No. 123"), "Accounting for Stock Based Compensation," became effective for the
Company. SFAS No. 123 prescribes the recognition of compensation expense based
on the fair value of options determined on the grant date. However, SFAS No. 123
allows companies currently applying APB No. 25 to continue using that method.

         The Company has therefore elected to continue applying the intrinsic
value method under APB No. 25. For companies that choose to continue applying
the intrinsic value method, SFAS No. 123 mandates certain pro forma disclosures
as if the fair value method had been utilized. See Note 6 for additional
discussion.

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 amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of financial statements.
The Company's consolidated financial statements will be required to include
comprehensive income disclosures beginning with the first quarter of fiscal year
1999. Restatement of prior period information will be made for comparative
purposes. Comprehensive income for the years ended September 30, 1998 and 1997
amounted to ($9,479,971) and ($3,115,433), respectively.

         In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information", which changes the way public
companies report information about operating segments. SFAS No. 131, which is
based on the management approach to segment reporting, establishes requirements
to report selected segment information quarterly and to report entity-wide
disclosures about products and services, major customers, and the material
countries in which the entity holds assets and reports revenue. The Company will
adopt SFAS No. 131 in fiscal year 1999. The Company does not believe the 
adoption of SFAS No. 131 will have a material effect on results of operation or 
financial condition.

                                      F-11
<PAGE>   41
2.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following:


<TABLE>
<CAPTION>
                                                September 30,      September 30,
                                                    1998               1997
                                                ------------       ------------
<S>                                             <C>                <C>
Land                                            $  1,997,413       $         --
Building                                          19,075,028                 --
Leasehold improvements                             3,553,705            686,662
Computer hardware and software
    and network equipment                          7,906,863          3,724,645
Furniture and delivery equipment                     749,219            238,014
Less: Accumulated depreciation and
    Amortization                                  (2,410,509)        (1,100,483)
                                                ------------       ------------

Property and equipment, net                     $ 30,871,719       $  3,548,838
                                                ============       ============
</TABLE>

         Included in property and equipment is $2,526,044 and $1,413,373 of
assets held under capital lease obligations at September 30, 1998 and 1997,
respectively. Included in total property and equipment is $416,667 representing
internally developed software costs as of September 30, 1998 and 1997
respectively. Also, included in property and equipment is $1,098,315 of
capitalized interest as of September 30, 1998 related to the purchase of the
land and building located at 139 Centre Street. In addition, included in
property and equipment is $153,014 related to the implementation of a new MIS
system as of September 30, 1998 and 1997, respectively.

         Depreciation and amortization expense for the years ended September 30,
1998 and 1997, was $1,310,026 and $686,250, respectively.

         On July 1, 1998, the Company through BLP Acquisitions LLC, a New York
limited liability company ("BLP") and over 99% owned by the Company, purchased
the land and building located at 139 Centre Street, New York, New York from Bank
Leumi USA, a New York banking corporation. The nine story building contains
approximately 160,000 square feet of floor space. The Company intends to house
its New York SuperPOP facility and operations in the new premises beginning
February 1999.

3.       OTHER ASSETS

         Other assets includes the investment in Cybernet Data Systems, due from
officer, security deposits and other assets.

         On July 23, 1998, the Company entered into a Securities Purchase
Agreement with Cybernet Data Systems, Inc., a Delaware Corporation ("Cybernet").
Cybernet is the publisher of the web site "Edgar-Online.com." Under the
Securities Purchase Agreement, the Company purchased for $1,000,000, a 10%
Convertible Subordinated Debenture due 2001 (the "Cybernet Debenture") and a
Warrant to Purchase Common Stock (the "Cybernet Warrant"). The Cybernet
Debenture is non-interest bearing until July 23, 1999. Beginning on July 23,
1999, the Cybernet Debenture will bear interest at a rate of 10% per annum
payable semiannually in advance on July 23 and January 23, in each year until
July 23, 2001, when the Cybernet Debenture is to be redeemed by Cybernet. The
Cybernet Debenture is convertible into 670,000 shares of Cybernet common stock.
The Cybernet Warrant entitles the Company to purchase an additional

                                      F-12
<PAGE>   42
666,667 shares of Cybernet common stock at an exercise price of $1.50 per share
until the Cybernet Warrant's expiration date of July 23, 1999. If the Company
converted the Cybernet Debenture into common stock and exercised its Cybernet
Warrant, the Company would own approximately 20% of the outstanding shares of
Cybernet. In addition, Cybernet has signed a 5 year exclusive contract with the
Company to provide web hosting services.

4.       FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value.

LONG AND SHORT-TERM DEBT

         The carrying amount of the Company's short-term borrowings approximates
fair value. The fair value of the Company's long-term debt, including current
portions, is determined based on market prices for similar debt instruments or
on the current rates offered to the Company for debt with similar maturities.

         As of September 30, 1998, the fair value based upon quotes from
securities dealers and carrying value of the Company's Senior Notes were
$128,000,000 and $157,892,200, respectively.

5.       SENIOR NOTE OFFERING

         In April 1998, the Company completed a private offering for
$160,000,000 consisting of 160,000 units, each unit consisting of $1,000
principal amount of 13% Senior Notes due 2005 and one warrant to purchase 3.52
shares of common stock (total of 563,200 shares of common stock) at a purchase
price of $14.03 per share. The Notes will mature on May 1, 2005. Interest on the
notes are payable semi-annually in arrears on May 1 and November 1 of each year,
commencing November 1, 1998. The Company has deposited with an escrow agent
$57,000,000, that together with the interest received thereon, will be
sufficient to pay, when due, the first six interest payments. The Notes are
collateralized by a first priority security interest in the escrow account. The
Notes are senior unsecured obligations of the Company and rank pari passu in
right of payment with all existing and future unsecured and unsubordinated
indebtedness and rank senior in right of payment to any future subordinated
indebtedness. In connection with the warrants issued with the Senior Notes, the 
Company has assigned an original issue discount of approximately $2.3 million. 
In addition, the Company incurred costs associated with the offering of 
approximately $6.6 million. These amounts are being amortized by the Company 
over seven years.

6.       STOCKHOLDERS' EQUITY AND STOCK OPTIONS

INITIAL PUBLIC OFFERING

         In January 1996, the Company sold, in an initial public offering,
1,150,000 shares of Common Stock at an initial offering price of $7.00 per
share, and 575,000 Redeemable Purchase Warrants for $.10 per warrant. Each
warrant entitles the holder to purchase one share of the Company's common stock
for $7.70 per share. The warrants are redeemable by the Company at $.10 per
warrant at any time after January 24, 1997 if certain conditions are met. The
net proceeds which the Company received from the public offering amounted to
approximately $6,600,000.

         In March 1996, the underwriter of the initial public offering exercised
its over-allotment option to purchase 129,642 common shares from the Company for
$7.00 per share. The net proceeds amounted to approximately $800,000.





                                      F-13
<PAGE>   43
PRIVATE PLACEMENT

                  In September 1997, the Company sold 382,609 shares of its
common stock in a private transaction for a total consideration of $2,200,000.
Form SB-2 was filed with the Securities and Exchange Commission with respect to
these shares on November 6, 1997 and became effective on November 20, 1997. A
fee with respect to the sale of these shares of $100,000 in cash and 17,391
shares of common stock was paid to the investors and were offset against the
proceeds of the issuance. Of the total consideration, $1,600,000 was received by
the Company in September 1997. Included in prepaid expenses and other current
assets as of September 30, 1997 is a receivable of $600,000 which was received
by the Company in October 1997.

STOCK OPTIONS

         The Company, with the approval of its stockholders, adopted the 1995
Stock Option Plan ("Option Plan") which reserved 360,000 shares of common stock
for issuance under the Option Plan. Under the Option Plan, the term of the
options issued are determined by the stock option committee and range from 5 to
10 years from the date of the grant. Options issued to directors are immediately
exercisable and options issued to employees are exercisable ratably over a
three-year period. Options issued before the Company's initial public offering
were issued at the fair value of the stock at the date of grant, in the opinion
of management. The exercise price of the options issued subsequent to the
initial public offering (Note 3) is equal to or greater than 100% of the fair
market value of the stock on the date of grant.

         In April 1998, the Company's Board of Directors (the "Board") adopted,
and its stockholders approved, the 1998 Stock Option Plan (the " 1998 Plan"),
which provides for the grant of stock options to purchase up to 1,200,000 shares
of common stock to any employee, Non-Employee director, or consultant at the
Board's discretion. Under the 1998 Plan, these options may not be exercised
after ten years from the date of grant. Options issued to employees are
exercisable ratably over a five-year period. Under the 1998 Plan, options shall
be granted each year to Non-Employee directors on the first day of the Company's
fiscal year or on the first day of the term as director at a purchase price
equal to the fair market value on the date of grant. In addition, the
Non-Employee director stock options shall be exercisable in full twelve months
after the date of grant unless determined otherwise by the stock option
committee.

         On September 30, 1997, 250,064 options previously issued to employees
and directors with a weighted average exercise price of $8.32 were canceled and
reissued at $6.125, the fair market value of the Company's common stock on the
date reissuance. This revaluation did not alter or amend any other provision of
the optionee's original option agreement, including the vesting period and
option term.

         The Company accounts for awards granted to employees and directors
under APB No. 25, under which no compensation cost has been recognized for stock
options granted. Had compensation cost for these stock options been determined
consistent with SFAS No. 123, the Company's net loss and loss per share would
have been increased to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                  1998                  1997
                                                              ------------          -----------
<S>                                       <C>                 <C>                   <C>
      Net loss:                           As reported         $(11,155,878)         $(3,115,433)
                                          Pro forma            (13,394,255)          (3,307,639)

      Basic and diluted loss per share:   As reported                (3.08)               (1.01)
                                          Pro forma                  (3.69)               (1.08)
</TABLE>


                                      F-14
<PAGE>   44
         The effects of applying SFAS No. 123 in this pro forma disclosure are
not indicative of future amounts as additional awards in future years are
anticipated.

         Option activity for the two years ended September 30, 1998 is as
follows:

<TABLE>
<CAPTION>
                                                                                 Weighted Average
                                                                                     Exercise
                                                              Number of Shares        Price
                                                              ----------------        -----
<S>                                                           <C>                <C>
   Options outstanding, October 1, 1996                           202,730             $7.04

       Granted                                                    390,897             $7.41
       Canceled                                                  (284,065)            $8.39
       Exercised                                                   (7,998)            $7.00
                                                                 ---------            -----

   Options outstanding, September 30, 1997                        301,564             $6.13

       Granted                                                    682,375             $6.25
       Canceled                                                   (62,018)            $5.91
       Exercised                                                   (6,316)            $6.13
                                                                 ---------            -----

   Options outstanding, September 30, 1998                        915,605             $6.39
                                                                 ========             =====
</TABLE>


    There were 563,062 options available for future grant at September 30, 1998.

    The weighted average fair value of options granted is $5.27 and $3.76 for
the years ended September 30, 1998 and 1997, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 1998 and 1997, respectively: risk-free interest rate of 5.56% and
6.17%; expected life of 6.00 and 6.00 years; expected volatility of 110.61% and
42% and expected dividend yield of 0%.

    The following table summarized information with respect to stock options
outstanding at September 30, 1998:

<TABLE>
<CAPTION>
                                      Options Outstanding                             Options Exercisable
                       --------------------------------------------------       -------------------------------
                       Number of Options     Weighted                           Number of Options
                          Outstanding        Average             Weighted          Exercisable         Weighted
                              at            Remaining            Average               at              Average
        Range of         September 30,     Contractual           Exercise         September 30,        Exercise
     Exercise Prices         1998             Life                Price               1998              Price
     ---------------         ----             ----                -----               ----              -----
<S>                    <C>                    <C>               <C>             <C>                   <C>
     $5.00 - $7.50         844,230            8.33              $    5.97           412,153           $    6.36
     $7.50 - $10.75         50,375            9.25                  10.73             1,667               10.50
     $10.75 - $13.25        21,000            8.86                  12.86             4,333               12.63
</TABLE>

DEPOSIT SHARES

         In connection with the Company's initial public offering, Marc H. Bell
and Harpoon have each deposited 210,000 shares of the Common Stock owned by them
(the "Deposit Shares") with the Company. The Company will hold such shares
pursuant to a Share Deposit Agreement. The Deposit Shares will be returned to
their respective owners in January 2004.




                                      F-15
<PAGE>   45
7.       COMMITMENTS AND CONTINGENCIES

NOTES PAYABLE

         In connection with the purchase of the land and building at 139 Centre
Street, New York, New York in July 1998 as described in Footnote 2, the Company
is indebted to an individual for the rights to purchase this property in the
amount of $1,650,000. The $1,650,000 is due on demand and has been recorded in
current portion of notes payable as of September 30, 1998. The Company also
entered into an agreement with the minority partner of BLP Acquisitions LLC,
giving the Company the right to purchase the minority interest at any time for a
purchase price of $2,600,000. Interest at 7% per annum is payable monthly in
arrears. The $2,600,000 is due in July 2005 and has been recorded in other
long-term liabilities as of September 30, 1998.

CAPITAL AND OPERATING LEASES

         The Company leases office equipment and office space under various
noncancellable operating leases accounted for on a straight line basis. Rent
expense for the year ended September 30, 1998 and 1997 was $560,105 and
$548,897, respectively.

         In February 1996, the Company entered into a lease for its corporate
headquarters effective July 1996. The lease is for eleven years and six months
starting with an initial annual base rental of $309,250 escalating to $563,547
in the final year. Under the lease, the landlord reimbursed the Company $500,000
for leasehold improvements. The Company is required by the terms of the lease to
maintain a security deposit in the form of a letter of credit in the amount of
$325,000. In order to obtain a standby letter of credit, the Company maintains a
restricted certificate of deposit presently in the amount of $325,000. As of
March 1999, this amount is to be reduced to $250,000 if the Company is not in
default under the terms of the lease. Therefore $75,000 of this deposit is
classified as other current assets and $250,000 is included in "Long-term
Restricted Cash" of the Company's consolidated balance sheets as of September
30, 1998.

         The Company maintains a $1.0 million credit line from Cisco Systems
Capital Corporation ("CSC") to lease Cisco System products and associated
peripherals. The terms of this line, which was entered into in December 1997,
provided for 180 days of borrowing and a maximum borrowing limit of $1.0
million. However, CSC has informally permitted the Company to continue to borrow
under this line and to exceed the stated $1.0 million limit. Amounts borrowed
under the line are to be repaid over a 36-month period with the Company having
the option of purchasing the equipment for $1.00 at the end of the lease term.
As of September 30, 1998, approximately $945,000 was outstanding under this
credit line.

         The Company has entered into leases for various items of its office
furniture and equipment as well as for its telephone system accounted for as
capital leases. The terms on these leases vary from 36 to 60 month terms.

         In July 1998, the Company signed a 15 year triple net lease commencing
January 15, 1999 to rent approximately 62,000 square feet of office space in
Santa Clara, California at an annual base rental of approximately $1.3 million.
The building is currently under construction, and completion is scheduled for
December 1998. As per the lease agreement, the Company will be required to pay a
security deposit of $400,000 upon completion of certain construction terms.

         The Company has signed an additional long-term agreement with Qwest
Communications and a lease for its London facility as described in the
subsequent events footnote (see footnote 10).




                                      F-16
<PAGE>   46
         Future minimum lease and loan payments under these agreements including
payments under the London lease described in Footnote 10 are as follows:

<TABLE>
<CAPTION>
Year Ending
September 30,                                                                       Operating                     Capital
-------------                                                                       ---------                     -------
<S>                                                                                <C>                          <C>
1999............................................................                   $ 1,381,603                     $914,869
2000............................................................                     3,561,077                      782,845
2001............................................................                     3,570,025                      439,525
2002............................................................                     3,579,151                       75,354
2003............................................................                     3,594,793                           --
Thereafter .....................................................                    35,586,453                           --
     Less: Amount representing interest.........................                            --                     (249,744)
                                                                                   -----------                  -----------
Present value of net minimum lease payments                                        $51,273,102                  $ 1,962,849
                                                                                   ===========                  ===========
</TABLE>

8.       INCOME TAXES

         Deferred tax assets and liabilities are determined based on differences
between the financial reporting and income tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

         The Company is in an accumulated loss position for both financial
reporting and income tax purposes. The tax benefit recorded by the Company has
been fully reserved against due to the uncertainty of the Company's ability to
realize benefits by generating taxable income in the future. The Company has a
tax loss carryforward of approximately $17 million at September 30, 1998. This
carryforward expires between 2011 and 2013. Pursuant to Section 382 of the 
Internal Revenue Code, the usage of these net operating loss carryforwards may 
be partially limited due to changes in ownership that have occurred. The 
Company has not yet determined the impact that changes in ownership have had on 
net operating loss carryforwards, if any.

          The provision for income taxes on historical net income for the years
ended September 30, 1998 and 1997 differs from the amount computed by applying
the federal statutory rate due to the following:


<TABLE>
<CAPTION>
                                                          Year Ended    Year Ended
                                                           September     September
                                                           30, 1998      30, 1997
                                                           --------      --------
<S>                                                       <C>           <C>
     Statutory federal income tax rate ................      (34)%         (34)%

     State and local taxes, net of federal benefit ....      (11)%         (11)%
     Other ............................................       (0)%          (0)%
     Valuation allowance ..............................       45%           45%
                                                             ---           ---
     Effective income tax rate ........................       (0)%          (0)%
                                                             ===           ===
</TABLE>




                                      F-17
<PAGE>   47
         Significant components of the Company's deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
                                                                  September 30, 1998   September 30, 1997
                                                                  ------------------   ------------------
<S>                                                               <C>                  <C>
         Deferred tax assets (liabilities):
         Tax depreciation and amortization in excess of book
           depreciation and amortization                             $  (417,659)         $  (264,820)
         Capitalized interest                                           (496,658)                  --
         Net operating loss carry forward                              7,507,964            1,908,226
         Allowance for doubtful accounts                                 241,927              255,350
         Deferred Rent                                                   152,069               80,795
         Valuation allowance                                          (6,987,643)          (1,979,551)
                                                                     -----------          -----------

         Total net deferred tax liabilities                                   --                   --
                                                                     ===========          ===========
</TABLE>

9.       EMPLOYMENT AGREEMENT

         In October 1995, the Company entered into an employment agreement with
Marc H. Bell which extends for a period of five years, terminating on September
30, 2000. Pursuant to the terms of the agreement, Mr. Bell receives a base
salary of $200,000 per year and a bonus equal to 5% of the annual pre-tax net
income of the Company in excess of $1 million (50% of the Bonus Pool) to the
extent, if any, that the Bonus Pool exceeds $100,000.

         During the third quarter of fiscal 1997, the Company made loans to Mr.
Bell bearing interest at 8.75% per annum in the total amount of $145,408. These
loans were pursuant to his existing employment agreement. The loans mature in
June 2002.

         Effective June 1, 1998, the Company terminated Mr. Bell's former
employment agreement and entered into a new employment agreement, which will
terminate on June 30, 2005. The new employment agreement provides for a base
salary of $350,000 per year, increasing annually at the rate of 5% starting
October 1, 1999. In addition, Mr. Bell will receive an annual bonus equal to
10,000 times the increase, if any, of the fair market value per share of the
Company's Common Stock measured during the 12-month period ending on June 30 of
each year of the agreement, commencing with the year beginning July 1, 1998. Mr.
Bell will also be entitled to receive stock options to purchase that number of
shares as shall equal 25% of the increase, if any, in the number of issued and
outstanding shares of Common Stock during the 12-month period ending on
September 30 of each year of the agreement, provided that such increase was
attributable to equity offerings or acquisitions. The new employment agreement
also provides that Mr. Bell may require the Company to lend him a total of
$155,000. Any loan taken thereunder will mature five years after the date made
and bear interest at the rate of 8% per annum. However, the interest accruing
during the first two years is not payable until the end of such two year period.
Mr. Bell borrowed from the Company $155,000 in September, 1998.




                                      F-18
<PAGE>   48
10.  SUBSEQUENT EVENTS

QWEST COMMUNICATIONS

         In October 1998, the Company contracted with Qwest Communications
Corporation ("Qwest") with broadband capacity on the nationwide Qwest Macro
Capacity(SM) Fiber Network. Initially, Globix will receive a long-term right to
use OC-3 (155 mbps) capacity to route its Internet and data traffic. The Company
is currently committed to Qwest for a fee of $9,192,176 of which it had paid
$919,218 at contract. The balance is payable by October 1999. In addition, the
Company has the right to increase its capacity on the Qwest Network at the cost
of $1.50 multiplied by the number of DS-0 (64 kbs per second) V&H Miles (length
in miles between the termination points of a Qwest Network Segment using airline
miles and determined based on the vertical and horizontal geographic coordinates
of the locations of the termination points). The Company is also liable for a
monthly operating and maintenance charge of $.0035 per each DS-0 V&H Mile. The
Company will amortize the total contract value over the term of the agreement of
20 years.

LONDON FACILITY

In October 1998, the Company signed a lease with Corston Holdings Limited (a
United Kingdom Corporation) for a 15 year term through September 2014 for the
rental of 33,500 square feet at Prospect House, 80 to 110 New Oxford Street
London at an annual base rent of pound sterling 1,080,000 (approximately
$1,836,000 in U.S. dollars) commencing in October 1999. The Company intends to
build a SuperPOP data center in the new premises, which will also provide space
for sales and administrative personnel.




                                      F-19