<Page>

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

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

                                   FORM 10-K/A
                                (AMENDMENT NO. 2)

         (MARK ONE)

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

                      FOR THE YEAR ENDED DECEMBER 31, 2000

                                       OR

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

                        COMMISSION FILE NUMBER: 000-26873

                               DIGEX, INCORPORATED
             (Exact name of registrant as specified in its charter)

                       DELAWARE                     59-3582217
           (STATE OR OTHER JURISDICTION OF       (I.R.S. EMPLOYER
            INCORPORATION OR ORGANIZATION)     IDENTIFICATION NUMBER)

                               14400 SWEITZER LANE
                                LAUREL, MD 20707
                    (Address of principal executive offices)

                                 (240) 264-2000
                                Telephone Number

           Securities registered pursuant to Section12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section12(g) of the Act:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE

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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form10-K or any
amendment in this Form 10-K. [ ]

    Aggregate market value of the voting stock held by non-affiliates (1) of the
registrant on February 28, 2001: $444,735,381.

    As of February 28, 2001, there were 24,622,028 and 39,350,000 shares of the
Registrant's Class A and Class B Common
<Page>

Stock outstanding, respectively.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III of the Form 10-K will be incorporated by reference from the
Registrant's Proxy Statement for the 2001 Annual Meeting of Stockholders.

(1)  As used herein, "voting stock held by non-affiliates" means shares of
     Common Stock held by persons other than executive officers, directors and
     persons holding in excess of 5% of the registrant's Common Stock. The
     determination of market value of the Common Stock is based on the last
     reported sale price as reported by the Nasdaq Stock Market on the date
     indicated. The determination of the "affiliate" status for purposes of this
     report on Form 10-K shall not be deemed a determination as to whether an
     individual is an "affiliate" of the registrant for any other purposes.
<Page>

                               DIGEX, INCORPORATED

                                      INDEX

<Table>
<Caption>
                                                                                           PAGE
                                                                                           ----

<S>          <C>                                                                          <C>
                                     PART II

Item 5       Market for Registrant's Common Equity and Related Stockholder Matters........  1
Item 6       Selected Financial and Other Operating Data..................................  3
Item 7       Management's Discussion and Analysis of Financial Condition
                 and Results of Operations................................................  7
Item 7A      Quantitative and Qualitative Disclosures About Market Risk .................. 18
Item 8       Financial Statements and Supplementary Data.................................. 18
Item 9       Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure................................................. 18

                                     PART IV

Item 14      Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 19
             Signatures................................................................... 24
</Table>
<Page>

                                INTRODUCTORY NOTE

     Digex, Incorporated hereby amends its Annual Report on Form 10-K for the
year ended December 31, 2000, originally filed with the Securities and Exchange
Commission on April 2, 2001, to restate the selected financial and other
operating data (Part II, Item 6) and consolidated financial statements (Part
IV, Item 14). Certain information in the market for registrant's common
equity and related stockholder matters (Part II, Item 5), management's
discussion and analysis of financial condition and results of operations
(Part II, Item 7), and notes to the consolidated financial statements (Part
IV, Item 14) were also updated.

     The carrying amount of the Series A preferred stock was originally reported
in stockholders' equity in the consolidated balance sheets included in the
quarterly reports on Form 10-Q for each of the quarters in the period March 31,
2000 through September 30, 2000 and in the Annual Report on Form 10-K for the
year ended December 31, 2000. However, because of certain redemption features of
the preferred stock, the carrying amount was reclassified from stockholders'
equity to redeemable preferred stock at December 31, 2000 in this Annual Report
on Form 10-K/A. The restatement had no effect on Digex's net loss or net loss
per share, total assets or total liabilities for the year ended December 31,
2000. Refer to Note 5 and Note 17 to the consolidated financial statements for
additional information.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our Class A Common Stock trades on The Nasdaq Stock Market under the symbol
"DIGX." As of December 31, 2000, based upon 42 holders of record and an estimate
of the number of individual participants represented by security position
listings, there are approximately 16,294 beneficial holders of our Class A
Common Stock. All of our outstanding Class B Common Stock is held by Intermedia
Financial Company. The approximate high and low closing prices for our Class A
Common Stock are as reported by The Nasdaq Stock Market.

<Table>
<Caption>
                                                            CLOSING PRICE
                                                      --------------------------
                                                         HIGH           LOW
                                                      ------------  ------------
<S>                                                 <C>            <C>
      1999

      Third quarter (from July 29, 1999) .......... $    33.25     $   15.50
      Fourth quarter ..............................      86.88         21.19

      2000

      First quarter ............................... $   171.50     $   56.06
      Second quarter ..............................     111.00         35.25
      Third quarter ...............................      94.00         46.88
      Fourth quarter ..............................      58.44         21.19
</Table>

DIVIDEND POLICY

     We do not anticipate paying any dividends on any of our common stock in the
foreseeable future. Moreover, because we are subject to restrictions under the
Intermedia indentures, we are effectively prohibited from paying dividends. We
may also incur indebtedness in the future, which may prohibit or effectively
restrict the payment of dividends.


                                       1
<Page>

     The Litigation Settlement provides for a settlement fund to be established
consisting of WorldCom common stock having a "stated value" of $165.0 million.
The "stated value" of the WorldCom stock to be placed in the fund will be
determined by taking the average trading price on the Nasdaq National Market for
ten trading days randomly selected by lot from the 20 consecutive trading days
ending on the third trading day immediately preceding the closing date of the
Intermedia - WorldCom Merger. The WorldCom common stock placed in the fund, less
the amount awarded to plaintiffs' counsel for legal fees and expenses, will be
distributed on a per share basis to the holders of Digex Class A common stock as
follows: (i) 50% will be distributed to the record holders of Digex Class A
common stock as of the closing of business on September 1, 2000; and (ii) 50%
will be distributed to the record holders of Digex Class A common stock of a
record date to be established in the future that is expected to be on or about
the closing date of the Intermedia - WorldCom Merger.

     This allocation of the WorldCom stock is subject to approval by the
Delaware Chancery Court, and the parties to the litigation settlement have
agreed they will change this allocation in whatever manner is necessary to
obtain final court approval of the litigation settlement. In addition, because
of the formula for determining the value of the WorldCom stock to be placed in
the settlement fund, it is possible that the "stated value" produced by such
formula may be higher or lower than the actual trading prices of the WorldCom
common stock on the date of deposit into the settlement fund or the distribution
of such stock to Digex Class A common stock holders.

  RECENT SALES OF UNREGISTERED SECURITIES.

     On January 12, 2000, we sold 100,000 shares of our non-voting preferred
stock, designated as Series A Convertible Preferred Stock, with detachable
warrants to purchase 1,065,000 shares of our Class A common stock, to Microsoft
Corporation and CPQ Holdings, Inc., a subsidiary of Compaq Computer Corporation,
for an aggregate of $100.0 million, of which $15.0 million was in the form of
equipment purchase credits. Of the $15.0 million of equipment purchase credits,
approximately $2.7 million was used for equipment purchases in 2000. The
warrants can be exercised at any time on or before January 12, 2003 at an
initial price of $57.00 per share, subject to certain adjustments. The proceeds
from the offering were allocated between the preferred stock and the warrants
based upon their relative fair values.

     In the event of liquidation, each share of preferred stock is entitled to a
liquidation preference of $1,000 per share before any amount may be paid to
common stockholders. The holders of the preferred stock are also not entitled to
receive dividends. We may not issue any stock with the same or senior
preferences or priorities to this series without the consent of the majority of
our preferred stockholders.

     Each share of preferred stock is convertible into shares of Class A common
stock at a conversion price of $68.40 per share, subject to certain adjustments,
for a total of approximately 1,462,000 shares of Class A common stock. Unless
earlier converted, on January 12, 2005, each share of preferred stock will
automatically convert into the number of shares of Class A common stock equal to
$1,000 divided by the average of the closing prices of the Class A common stock
for the twenty consecutive trading days prior to January 12, 2005.

     Subject to the legal availability of funds, the preferred stock is
redeemable in cash at the option of the holders after January 12, 2004 or upon
our change of control at a price of $1,000 per share if the redemption is then
permitted under those indentures of Digex and Intermedia which existed on
January 10, 2000. If the restrictions under these agreements terminate at an
earlier date, the holders may require us to redeem the preferred stock before
entering into an agreement which would restrict our ability to redeem the
preferred stock. We are not required to make sinking fund payments with respect
to the preferred stock.

     Based on representations by the purchasers, the issuances were made in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act, as a transaction by an issuer not involving a public offering.


                                       2
<Page>

  USE OF PROCEEDS FROM A SALE OF REGISTERED SECURITIES

     On July 29, 1999, the Registration Statement relating to our initial public
offering (SEC File No. 333-77105) was declared effective. The net proceeds of
the offering were approximately $178.9 million.

     Under the terms of Intermedia's indentures, described under "Risk
Factors--Digex is controlled by a controlling stockholder, which could involve
multiple risks for you as a stockholder," we were required to use all of the net
proceeds of our offerings to purchase telecommunications related assets.
Telecommunications-related assets mean assets used in connection with the
business of: (1) transmitting, or providing services relating to the
transmission of, voice, video or data through owned or leased transmission
facilities; (2) creating, developing and marketing communications related
network equipment, software and other devices for use relating to (1); or (3)
evaluating, participating in or pursuing any other activity or opportunity that
is related to those identified in (1) or (2); all as determined in good faith by
the board of directors of Intermedia. We have entered into a letter agreement
with Intermedia pursuant to which Intermedia will purchase from us, at our cost,
some of the Telecommunications Related Assets purchased with the net proceeds of
our offerings. Intermedia paid us for these Telecommunications Related Assets to
the extent necessary with funds not subject to restrictions under the Intermedia
indentures that we used for working capital purposes and to fund operating
losses.

    From July 29, 1999 through the period ended June 30, 2000, we used $133.2
million of the net proceeds of our initial public offering to purchase
telecommunications related assets held by us and $45.7 million for the purchase
of telecommunications related assets subsequently sold to Intermedia. The
proceeds of the sales of assets to Intermedia were unrestricted and were used to
fund our operating expenses. All proceeds of our initial public offering have
been used as of June 30, 2000.

ITEM 6. SELECTED FINANCIAL AND OTHER OPERATING DATA

     The following table sets forth selected historical financial data of Digex
for the period from July 7, 1997, the date of acquisition by Intermedia of the
Web site hosting unit (the "Predecessor"), to December 31, 1997, and the years
ended December 31, 1998, 1999 and 2000 of the Predecessor for the year ended
December 31, 1996 and the period from January 1, 1997 to July 6, 1997. The
selected historical financial data has been derived from Digex's and the
Predecessor's audited financial statements.

     The following table also sets forth pro forma financial information of
Digex for the year ended December 31, 1997. The pro forma financial information
gives effect to the purchase by Intermedia of the Predecessor as if such
acquisition had occurred on January 1, 1997. The presentation of pro forma
financial information was made to permit useful comparison of results of
operations between periods presented. This pro forma financial information is
not necessarily indicative of the operating results Digex would have achieved if
the Predecessor had been acquired on January 1, 1997. The relationship between
Business Internet and the Predecessor is more fully described in Note 1 to the
consolidated financial statements.

     In the following table, basic and diluted net loss per share have been
calculated assuming that the common shares issued in connection with our
recapitalization in April 1999 were outstanding for all periods of Digex
presented, and giving effect to the 50,000-for-one stock split of our Class B
Common Stock effected in July 1999 prior to the closing of our initial public
offering.


                                       3
<Page>

     The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and our consolidated financial statements and related
notes, included elsewhere in this report.

<Table>
<Caption>
                                   PREDECESSOR                                            DIGEX
                          ------------------------------  ----------------------------------------------------------------------
                                   HISTORICAL               HISTORICAL   PRO FORMA (1)                 HISTORICAL
                          ------------------------------  -------------- -------------- ----------------------------------------
                                                          PERIOD FROM
                                                          JULY 7, 1997
                                          PERIOD FROM      (DATE OF
                                           JANUARY 1,     ACQUISITION)                                 YEAR ENDED
                           YEAR ENDED         1997             TO         YEAR ENDED                  DECEMBER 31,
                          DECEMBER 31,     TO JULY 6,     DECEMBER 31,   DECEMBER 31,   ----------------------------------------
                              1996            1997            1997           1997          1998         1999           2000
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------
                                                                          (UNAUDITED)
                                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                            <C>             <C>             <C>           <C>          <C>         <C>            <C>
STATEMENT OF OPERATIONS
      DATA:

Revenues................       $  2,803        $  4,420        $  7,192      $  11,612    $ 22,635    $  59,786      $  168,085

Costs and expenses:
    Cost of operations..          2,002           4,149           1,739          2,808       6,710        9,656          21,244
    Cost of services....            684           1,817           1,611          3,428       7,044       21,750          69,658
    Selling, general and
     administrative.....          3,194           7,001           6,087         13,088      17,512       70,213         144,876
    Deferred compensation            --              --              --             --          --        1,299           4,101
    Depreciation and
     amortization.......            591             519           2,753          4,850       8,109       29,070          78,819
    Charge off of purchased
     in-process research
     and development....             --              --          15,000 (2)     15,000 (2)      --           --              --
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------
Total costs and expenses          6,471          13,486          27,190         39,174      39,375      131,988         318,698
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------
Loss from operations....         (3,668)         (9,066)        (19,998)       (27,562)    (16,740)     (72,202)       (150,613)
Other income (expense):
     Interest expense...             --              --              --             --          --       (1,094)         (2,008)
    Interest and other
     income ............             --              --              --             --          --        3,458          12,608
    Merger-related
     expenses  .........             --              --              --             --          --           --          (2,922)
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------
Loss before income
tax benefit ............         (3,668)         (9,066)        (19,998)       (27,562)    (16,740)     (69,838)       (142,935)
Income tax benefit......             --              --           1,440          4,710         159        4,839              --
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------
Loss before cumulative
   effect of change in
   accounting principle          (3,668)         (9,066)        (18,558)       (22,852)    (16,581)     (64,999)       (142,935)
Cumulative effect of
   change in accounting
   principle ..........              --              --              --             --          --           --            (166)
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------

Net loss ...............       $ (3,668)      $  (9,066)      $ (18,558)    $  (22,852)  $ (16,581)   $ (64,999)     $ (143,101)
                          ============== ===============  ============== ============== =========== ============   =============
</Table>


                                       4
<Page>

<Table>
<Caption>
                                   PREDECESSOR                                            DIGEX
                          ------------------------------  ----------------------------------------------------------------------
                                   HISTORICAL               HISTORICAL   PRO FORMA (1)                 HISTORICAL
                          ------------------------------  -------------- -------------- ----------------------------------------
                                                          PERIOD FROM
                                                          JULY 7, 1997
                                          PERIOD FROM      (DATE OF
                                           JANUARY 1,     ACQUISITION)                                 YEAR ENDED
                           YEAR ENDED         1997             TO         YEAR ENDED                  DECEMBER 31,
                          DECEMBER 31,     TO JULY 6,     DECEMBER 31,   DECEMBER 31,   ----------------------------------------
                              1996            1997            1997           1997          1998         1999           2000
                          -------------- ---------------  -------------- -------------- ----------- ------------   -------------
                                                                          (UNAUDITED)
                                              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                            <C>            <C>             <C>           <C>          <C>          <C>            <C>
PROFORMA AMOUNTS, ASSUMING
   THE ACCOUNTING CHANGE IS
   APPLIED RETROACTIVELY:

Net loss  ..............       $ (3,668)      $  (9,066)      $ (18,558)    $  (22,852)  $ (16,618)   $ (65,115)     $ (142,935)
                          ============== ===============  ============== ============== =========== ============   =============

Net loss per common share:
   basic and diluted ...             --              --       $   (0.37)    $    (0.46)  $   (0.33)   $   (1.19)     $    (2.25)
                          ============== ===============  ============== ============== =========== ============   =============

Shares used in computing
   basic and diluted net
   loss per share and
   proforma net loss per
   share ...............             --              --      50,000,000     50,000,000  50,000,000   54,726,027      63,404,839
                          ============== ===============  ============== ============== =========== ============   =============

OTHER DATA:

EBITDA before certain
charges  (3)............       $ (3,077)      $  (8,547)    $    (2,245)     $  (7,712)  $  (8,631)  $  (41,833)     $  (67,693)
Net cash used in
  operating activities..         (2,565)         (7,172)         (6,079)       (13,251)    (10,930)     (20,515)        (62,520)
Net cash used in
  investing activities..         (1,445)         (1,004)        (55,237)       (56,241)    (30,969)    (170,193)       (204,604)
Net cash provided by
  financing activities .          4,010           8,176          61,316         69,492      41,899      279,486         261,818
Capital expenditures....          1,445           1,004           8,016          9,020      30,969      170,396         202,604
</Table>

<Table>
<Caption>
                                                    PREDECESSOR                             DIGEX
                                                   --------------  ---------------------------------------------------------
                                                    DECEMBER 31,                         DECEMBER 31,
                                                        1996           1997          1998           1999           2000
                                                   --------------  ------------  -------------  ------------  --------------
                                                                                                                (RESTATED)
                                                                                (IN THOUSANDS)
<S>                                                   <C>            <C>            <C>            <C>            <C>
BALANCE SHEET DATA:

Cash and cash equivalents (4) ...................     $       --     $      --      $      --      $ 88,778       $  83,434
Restricted investment ...........................             --            --             --            --           2,000
Working capital (deficit) .......................         (1,237)         (351)         1,231        74,778          71,922
Property and equipment, net......................          2,599        12,930         39,059       205,903         348,975
Total assets.....................................          3,173        49,693         77,739       344,309         521,051
Long-term note payable, including current
portion .........................................             --            --             --         3,712           4,207
Capital lease obligations, including current
portion .........................................          1,745         1,980          2,089        16,567          29,002
Redeemable preferred stock  (5) .................             --            --             --            --          71,572
Total stockholders'/owner's equity (5) ..........     $      342     $  45,527      $  70,845      $290,189       $ 345,056
</Table>


----------
(1)      The pro forma statement of operations data for the year ended December
         31, 1997, represents the combining of the historical Predecessor
         statement of operations data for the period from January 1, 1997


                                       5
<Page>

         to July 6, 1997 and the historical Digex statement of operations data
         for the period from July 7, 1997 to December 31, 1997, as adjusted for
         the following items:

         o        A decrease in cost of operations of $3,080 which represents
                  reduced network expenses.

         o        An increase in depreciation and amortization of $1,578 which
                  represents amortization of intangible assets arising from the
                  acquisition.

         o        An increase in income tax benefit of $3,270 which represents
                  the income tax effect of purchase accounting adjustments.

(2)      This amount represents a one-time charge to operations for charge off
         of purchased in-process research and development related to the
         Predecessor in connection with Intermedia's purchase of Business
         Internet on July 7, 1997.

(3)      EBITDA before certain charges consists of (earnings) loss before
         interest expense, interest and other income, merger-related expenses,
         foreign exchange gains (losses), income tax benefit, deferred
         compensation, charge off of purchased in-process research and
         development, and depreciation and amortization. EBITDA before certain
         charges does not represent funds available for management's
         discretionary use and is not intended to represent cash flow from
         operations. EBITDA before certain charges should also not be construed
         as a substitute for operating income or a better measure of liquidity
         than cash flow from operating activities, which are determined in
         accordance with generally accepted accounting principles. This caption
         excludes components that are significant in understanding and assessing
         our results of operations and cash flows. In addition, EBITDA before
         certain charges is not a term defined by generally accepted accounting
         principles and as a result our measure of EBITDA before certain charges
         might not be comparable to similarly titled measures used by other
         companies. However, we believe that EBITDA before certain charges is
         relevant and useful information which is often reported and widely used
         by analysts, investors and other interested parties in the Web and
         application hosting industry. Accordingly, we are disclosing this
         information to permit a more comprehensive analysis of our operating
         performance, as an additional meaningful measure of performance and
         liquidity, and to provide additional information with respect to our
         ability to meet future debt service, capital expenditure and working
         capital requirements.

(4)      Prior to our initial public offering in July 1999, we participated in
         Intermedia's and the Predecessor's centralized cash management system,
         and, as a result, did not carry cash balances on our financial
         statements for any period prior to the initial public offering. Since
         that date, we have maintained and reported cash balances on our
         financial statements.

(5)      See Note 17 "Restatement" to the consolidated financial statements.


                                       6
<Page>

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

OVERVIEW

     We are a leading provider of managed Web and application hosting services
to businesses operating mission-critical, multi-functional Web sites. We provide
the computer hardware, software, network technology, and systems management
necessary to provide our customers comprehensive, managed Web hosting and
application hosting solutions. We also offer related value-added services such
as firewall management, stress testing and consulting services, including
capacity and migration planning and database optimization. We currently provide
such services to a diversified customer base consisting of over 600 customers.
As of December 31, 2000, we managed approximately 4,216 Windows- and UNIX-based
servers in our state-of-the-art data centers which are strategically positioned
on the east and west coasts of the United States and in Europe.

     Our revenues grew at a compounded annual growth rate of 178% between 1996
and 2000, from $2.8 million in 1996 to $168.1 million in 2000. We believe our
singular focus on delivering mission-critical Web site and application hosting
solutions has been the major contributor to our growth.

     In January 2000, Microsoft and a subsidiary of Compaq invested $100.0
million in Digex, of which $85.0 million was paid in cash and $15.0 million was
paid in the form of equipment credits from Compaq. We also entered into
strategic development agreements with both companies to advance our capabilities
to more rapidly install, manage and upgrade large numbers of Microsoft
Windows-based servers and to streamline the order, delivery and installation of
Compaq hardware and storage devices.

     On February 16, 2000, we completed a public offering of 12,650,000 shares
of our Class A Common Stock. We sold 2,000,000 shares of Class A Common Stock
and received net proceeds of approximately $171.6 million. Intermedia sold
10,650,000 shares of Class B Common Stock. The Class B Common Stock sold by
Intermedia automatically converted into Class A Common Stock at the closing of
the offering.

    In May 2000, we created European operating entities to support our
international operations and opened our first data center outside of the United
States. Located in London, our European SmartCenterSM gives Digex customers in
Europe the superior level of technology, security, and support services in
Europe they have come to rely on in the United States. The data center is a
leased facility which became operational in July 2000.

    We recently completed two rigorous assessments of our operating environment.
These assessments included a Type II review based on the American Institute of
Certified Public Accountants (AICPA)'s Statement on Auditing Standards No. 70
(SAS 70), and the Ernst & Young Cyber Process Certification. These reviews
examined Digex's managed data center facilities in three locations in the United
States and the United Kingdom. SAS 70 was established by the AICPA to provide a
basis for examinations of the internal controls of service organizations related
to financial transaction processing. Digex had successfully completed a SAS 70
Type I review in May 2000. The Type II review -- which requires testing of
controls by the auditing firm -- was conducted by Ernst & Young for the period
July 1, 2000 through December 31, 2000. Also, Ernst & Young's Cyber Process
Certification evaluated and tested the design and operational effectiveness of
controls to achieve the objectives specified in the report, related to Digex's
Web hosting services. Both reviews focused on the control environment which
govern the company's; (1) physical security, (2) electronic security measures,
(3) customer server infrastructure, implementation, and maintenance, (4) network
services and problem management, and (5) business continuity. In February 2001,
we successfully completed the Type II review and the Cyber Process Certification
for the six month period July 1, 2000 to December 31, 2000.

    On June 1, 2000, we entered into an Asset Migration Agreement with
Intermedia. Under the terms of the agreement, we purchased certain assets,
including certain licensed third-party software, machinery, and equipment from
Intermedia at cost to provide independent managed firewall services. We paid a
purchase price of $4.5 million for net book value of these assets and services
on June 30, 2000, the closing date of the


                                       7
<Page>

agreement. Under the Asset Migration Agreement, we made equal monthly
installments amounting to $0.9 million for Intermedia's support and consultation
for the six month period ended December 31, 2000. In connection with the
purchase of firewall-related assets from Intermedia, the Managed Firewall
Services Agreement between Digex and Intermedia was terminated.

    On June 29, 2000, we entered into a ten-year lease commencing in September
2000 for our new corporate headquarters facility in Laurel, Maryland. The lease
agreement requires an initial security deposit of $2.0 million in the form of a
letter of credit. This letter of credit may be reduced at the commencement of
the seventh lease year to an amount equal to the then current one month's base
rent if certain conditions are met annually prior to the seventh year of the
lease.

    On September 1, 2000, Intermedia entered into a merger agreement with
WorldCom. During the third quarter, we have incurred legal fees, investment
advisory fees, accounting fees, and certain travel expenses associated with due
diligence activities relating to the merger and the possible sale of Digex.
Merger-related costs of $2.9 million were expensed as incurred during the year
ended December 31, 2000.

    In October 2000, we entered into a Prime/Subcontractor Agreement with
WorldCom whereby we have agreed to provide managed hosting services to WorldCom
customers in the United States and in all international locations we presently
serve or in the future for certain service fees. Under the terms of the
agreement, we will provide the computer hardware, software, network technology,
Internet connectivity and systems management necessary to offer WorldCom's
customers comprehensive outsourced Web site and application hosting solutions.

     In November 2000, WorldCom announced the immediate U.S. availability of an
expanded global Web hosting product suite to include high-end managed hosting
services through arrangements with Digex. Through the arrangement, we will be
able to connect our Internet data centers in the U.S. to the WorldCom global IP
network that runs through North America, South America, Europe, Asia, and
Australia with over 2,500 points of presence. We will also utilize WorldCom's
sales force to enhance its global presence.

    REVENUE. Our revenues consist primarily of monthly fees from our managed Web
and application hosting services. Contracts for these services are typically
between one and three years in length. In addition to Web and application
hosting, we also offer enterprise services and consulting services and believe
that we will begin to derive increasing amounts of revenues from the sale of
these services in the future. Revenue earned from the sale of third party
equipment is also included.

    COSTS AND EXPENSES. Costs and expenses include:

    o cost of operations;

    o cost of services;

    o selling, general and administrative expenses;

    o deferred compensation; and

    o depreciation and amortization expense.

    Cost of operations consist primarily of the costs for our network
connectivity and firewall services. We expect our network connectivity
requirements to grow in conjunction with the growth of our overall business,
including the expansion of our business abroad through our wholly-owned
subsidiaries, and accordingly expect


                                       8
<Page>

these costs to increase in the future. Expenses directly attributed to the sale
of third party equipment is also included.

    Cost of services consist primarily of facilities administration expenses
including rent, maintenance and utilities to support our data centers and
salaries and related benefits for our technical operations. We expect our cost
of services to increase in dollar amount but to decline as a percentage of
revenue due to economies of scale and expected improvements in technology and
productivity.

    Selling, general and administrative expenses consist primarily of salaries
and benefits for our marketing, sales and support personnel, advertising costs,
consultants' fees, provision for doubtful accounts and other miscellaneous
expenses. We expect selling, general and administrative expenses to increase in
dollar amount and to decline as a percentage of revenue over time.

    Deferred compensation expense relates to stock options that were granted by
Digex to certain employees at exercise prices below market value.

    Depreciation and amortization expense consists primarily of depreciation of
our data centers, servers and related equipment and amortization of our
intangible assets. We expect these expenses to increase due to our plans to
invest significant capital to continue to expand our data center capacity.

PLAN OF OPERATION

    We plan to expand our Web and application hosting business by focusing on
large companies which are looking to develop a presence on the Internet by both
providing e-commerce business solutions to their customers and outsourcing the
management of their Web sites and Web-enabled business applications. In the
fourth quarter of 1999, we opened our state-of-the-art data centers on the east
and west coasts of the United States. Our first international data center,
located in London, was operational in July 2000. We anticipate that these data
centers, when operating at full capacity, will support servers generating in
excess of $800.0 million in annualized revenue. We believe that the new data
centers in the United States and those we continue to develop internationally
will place us in a stronger competitive position to successfully provide
outsourced solutions of scalable managed Web and application hosting solutions.
We also offer value-added services, such as firewall management, stress testing,
and consulting services, including capacity and migration planning and database
optimization, and believe that we will derive increasing amounts of revenue from
these services in the future.

     Our commercial agreements with WorldCom will allow us to purchase bandwidth
and connectivity from WorldCom in the United States and around the globe to
support our managed Web hosting activities. Through the arrangements, we will be
able to connect our Internet data centers in the U.S. to the WorldCom global IP
network that runs through North America, South America, Europe, Asia, and
Australia with over 2,500 points of presence.


                                       9
<Page>

RESULTS OF OPERATIONS

     The following table presents certain information derived from our audited
financial statements for the years ended December 31, 2000, 1999, and 1998
expressed as a percentage of revenue.

<Table>
<Caption>
                                                                            YEAR ENDED
                                                                           DECEMBER 31,
                                                        ---------------------------------------------------
                                                              2000                1999            1998
                                                        ----------------    ---------------  --------------
<S>                                                            <C>                <C>             <C>
         Revenues.....................................            100.0%             100.0%          100.0%
         Costs and expenses:
              Cost of operations......................             12.6               16.2            29.6
              Cost of services........................             41.4               36.4            31.1
              Selling, general and administrative.....             86.2              117.4            77.5
               Deferred compensation .................              2.4                2.2              --
              Depreciation and amortization...........             46.9               48.6            35.8
                                                        ----------------    ---------------  --------------
                  Total costs and expenses............            189.6              220.8           174.0
                                                        ----------------    ---------------  --------------
         Loss from operations.........................            (89.6)            (120.8)          (74.0)

         Other income (expense):
               Interest expense ......................             (1.2)              (1.8)             --
               Interest and other income .............              7.5                5.8              --
               Merger-related expense ................             (1.7)                --              --
                                                        ----------------    ---------------  --------------
         Loss before income tax benefit ..............            (85.0)            (116.8)          (74.0)
         Income tax benefit...........................               --                8.1             0.7
                                                        ----------------    ---------------  --------------
         Loss before cumulative effect of
              change in accounting principle..........            (85.0)%           (108.7)%         (73.3)%
                                                        ================   ================  ==============
</Table>

YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

REVENUE

    Total revenue increased 181.1% to $168.1 million in 2000 compared to $59.8
million in 1999. The increase in revenue was due to customer growth of 12% from
December 31, 1999 to December 31, 2000, a significant increase in the number of
managed servers per customer, and a rise of average monthly revenue per server
in the fourth quarter of $4,259 in 2000 compared to $3,354 for the same period
in 1999. Our installed base of servers increased 82% to 4,216 at December 31,
2000 from 2,311 at December 31, 1999. In addition to revenue from managed Web
and application hosting services, Digex recognized $5.0 million of third party
equipment sales revenue in the second quarter of 2000.

COST OF OPERATIONS

    Cost of operations increased 120.0% to $21.2 million in 2000 compared to
$9.6 million in 1999. The increase was due to additional network costs resulting
from our expanded customer base and increases in service offerings. As a
percentage of revenue excluding second quarter equipment sales, cost of
operations excluding the second quarter cost of third party equipment decreased
to 10.7% in 2000 compared to 16.2% in 1999 due to the net effect of improved
network utilization.


                                       10
<Page>

COST OF SERVICES

    Cost of services increased 220.3% to $69.7 million in 2000 compared to $21.7
million in 1999. The increase was primarily related to the increased level of
operations and the expansion of our new data centers including costs related to
the hiring of additional personnel and consultants in customer service,
engineering, and facilities administration supporting server growth. As a
percentage of revenue, total cost of services increased to 41.4% in 2000
compared to 36.4% in 1999. Costs did not increase proportionally with revenue
due primarily to additional costs incurred in 2000 related to the asset
migration agreement.

SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative expenses increased 106.3% to $144.9
million in 2000 compared to $70.2 million in 1999. Through 2000, as part of our
growth strategy, we continued to build our infrastructure and administrative
requirements to operate as a separate public company. Increases in selling,
general and administrative expenses for 2000 included the costs associated with
an increased employee base, advertising campaigns, back office support
(including the G&A Agreement, as amended, with Intermedia), rent for additional
office space, consultants' professional fees, an increased provision for
doubtful accounts receivable and the addition of key executive management to
support the growth of the business. We expect that our growth strategy will
continue to require significant sales and marketing activities, including an
expansion of our sales force and further development of brand name recognition.
In addition, we will continue to build our personnel base to support our growth
strategy in the managed Web and application hosting industry. As a result, we
believe that our selling, general and administrative expenses will continue to
increase in the future. As a percentage of revenue, total selling, general and
administrative expenses decreased to 86.2% in 2000 compared to 117.4% in 1999
due primarily to revenue growth and because the selling portion of the selling,
general and administrative cost is fixed, expenses will not increase
proportionally according to revenue.

DEFERRED COMPENSATION

    Deferred compensation expense increased 215.7% to $4.1 million in 2000
compared to $1.3 million in 1999. The increase was primarily due to increases in
stock options granted to certain employees at exercise prices below market value
since July 29, 1999. We recorded approximately $13.5 million of deferred
compensation in 1999 and $2.1 million (net of forfeitures) in 2000, a separate
component of stockholders' equity, to be expensed over the four-year vesting
period of the options.

DEPRECIATION AND AMORTIZATION

    Depreciation and amortization expenses increased 171.1% to $78.8 million in
2000 compared to $29.0 million in 1999. The increase was principally due to
additional servers and other facilities and equipment placed in service since
December 31, 1999. We entered into a capital lease for our corporate
headquarters facility in the third quarter of 2000, which also contributed to
the increase in expense. We have electronics, computer hardware, and computer
software with useful lives ranging from three to five years. We expect increases
in depreciation charges through 2001 due to the continued expansion of our new
data centers and due to future increased server installations based on customer
demand.

INTEREST EXPENSE

    Interest expense increased 83.5% to $2.0 million in 2000 compared to $1.1
million in 1999. The increase resulted from the capital leases assigned to us by
Intermedia during the second quarter of 1999 and the capital lease for our new
corporate headquarters facility in the third quarter of 2000. Additionally, a
note payable was


                                       11
<Page>

issued by us to a third party during the third quarter of 1999.

INTEREST AND OTHER INCOME

    Interest and other income increased 264.6% to $12.6 million in 2000 compared
to $3.5 million in 1999. The increase resulted principally from interest earned
on the cash proceeds from the investment in Digex by Microsoft and a subsidiary
of Compaq, an initial and subsequent public equity offering, and exercised stock
options.

MERGER-RELATED EXPENSES

    Merger-related expenses of $2.9 million associated with due diligence
activities relating to the merger and the possible sale of Digex were incurred
in 2000.

EBITDA BEFORE CERTAIN CHARGES

    EBITDA before certain charges, as defined below, increased 61.8% to $(67.7)
million in 2000 compared to $(41.8) million in 1999. The change is primarily
attributable to costs associated with our growth strategy. Costs associated with
the administration and maintenance of our expanded data centers and increased
selling, general and administrative costs will continue to represent a large
portion of expenses during our planned expansion. In addition, we expect to
continue to experience growth in marketing and selling expenses as new customers
are acquired.

    EBITDA BEFORE CERTAIN CHARGES CONSISTS OF EARNINGS (LOSS) BEFORE INTEREST
EXPENSE, INTEREST AND OTHER INCOME, MERGER-RELATED EXPENSES, FOREIGN EXCHANGE
GAINS (LOSSES), INCOME TAX BENEFIT, DEFERRED COMPENSATION, AND DEPRECIATION AND
AMORTIZATION. EBITDA BEFORE CERTAIN CHARGES DOES NOT REPRESENT FUNDS AVAILABLE
FOR MANAGEMENT'S DISCRETIONARY USE AND IS NOT INTENDED TO REPRESENT CASH FLOW
FROM OPERATIONS. EBITDA BEFORE CERTAIN CHARGES SHOULD ALSO NOT BE CONSTRUED AS A
SUBSTITUTE FOR OPERATING INCOME OR A BETTER MEASURE OF LIQUIDITY THAN CASH FLOW
FROM OPERATING ACTIVITIES, WHICH ARE DETERMINED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES. THIS CAPTION EXCLUDES COMPONENTS THAT ARE
SIGNIFICANT IN UNDERSTANDING AND ASSESSING OUR RESULTS OF OPERATIONS AND CASH
FLOWS. IN ADDITION, EBITDA BEFORE CERTAIN CHARGES IS NOT A TERM DEFINED BY
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND AS A RESULT OUR MEASURE OF EBITDA
BEFORE CERTAIN CHARGES MIGHT NOT BE COMPARABLE TO SIMILARLY TITLED MEASURES USED
BY OTHER COMPANIES. HOWEVER, WE BELIEVE THAT EBITDA BEFORE CERTAIN CHARGES IS
RELEVANT AND USEFUL INFORMATION WHICH IS OFTEN REPORTED AND WIDELY USED BY
ANALYSTS, INVESTORS AND OTHER INTERESTED PARTIES IN THE WEB AND APPLICATION
HOSTING INDUSTRY. ACCORDINGLY, WE ARE DISCLOSING THIS INFORMATION TO PERMIT A
MORE COMPREHENSIVE ANALYSIS OF OUR OPERATING PERFORMANCE, AS AN ADDITIONAL
MEANINGFUL MEASURE OF PERFORMANCE AND LIQUIDITY, AND TO PROVIDE ADDITIONAL
INFORMATION WITH RESPECT TO OUR ABILITY TO MEET FUTURE DEBT SERVICE, CAPITAL
EXPENDITURE AND WORKING CAPITAL REQUIREMENTS. SEE THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO CONTAINED ELSEWHERE IN THIS REPORT FOR MORE
DETAILED INFORMATION.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

  REVENUE

     Total revenue increased 164.6% to $59.8 million in 1999 compared to $22.6
million in 1998. The increase in revenue was due primarily to new customer
growth and to an increase in the number of servers per customer and revenue per
server. Our installed base of servers increased 120.5% from 1,048 at December
31, 1998 to 2,311 at December 31, 1999.


                                       12
<Page>

  COST OF OPERATIONS

     Cost of operations increased 43.3% to $9.6 million in 1999 compared to $6.7
million in 1998. The increase was primarily due to additional network costs
resulting from our expanded customer base and increase in service offerings
since December 31, 1998. In addition, there were more servers on line since
December 31, 1998. As a percentage of revenue, cost of operations decreased to
16.2% in 1999 compared to 29.6% in 1998 as a result of improved network
utilization associated with the revenue improvement discussed above.

  COST OF SERVICES

     Cost of services increased 210.0% to $21.7 million in 1999 compared to $7.0
million in 1998. The increase was due primarily to increased facilities and
engineering costs to support our growth and to support the expansion of our data
centers. As a percentage of revenue, cost of services increased to 36.4% in 1999
compared to 31.1% in 1998.

  SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative expenses increased 301.1% to $70.2
million in 1999 compared to $17.5 million in 1998. As a percentage of revenue,
total selling, general and administrative expenses increased to 117.4% in 1999
compared to 77.5% in 1998 due primarily to the significant administrative
requirements to support our growth strategy. During 1998, the managed Web site
and application hosting business operated as part of a wholly owned subsidiary
of Intermedia. During 1999, as part of our growth strategy, we continued
building up our infrastructure to operate as a separate public company.
Increases in selling, general and administrative expenses for 1999 include the
costs associated with an increased employee base, advertising campaigns, back
office support (including the General and Administrative Services Agreement with
Intermedia), an increased provision for doubtful accounts receivable, and the
addition of key executive management to support the growth of the business. We
expect that our growth strategy will continue to require significant sales and
marketing activities, including an expansion of our sales force and further
development of brand name recognition. In addition, we will continue to build
our personnel base to support our growth strategy in the managed Web site and
application hosting industry. As a result, we believe that our selling, general
and administrative expenses will continue to increase in the future.

  DEFERRED COMPENSATION

     During 1999, we granted stock options to certain employees at exercise
prices below market value. As a result, we recorded approximately $12.2 million
and $1.3 million of deferred compensation in the third and fourth quarter of
1999, respectively, to be expensed over the four-year vesting period of the
options.

  DEPRECIATION AND AMORTIZATION

     Depreciation and amortization expenses increased 258.0% to $29.0 million in
1999 compared to $8.1 million in 1998. The increase was principally due to
additional servers and other facilities and equipment placed in service since
December 31, 1998. We expect increases in depreciation charges next year due to
the continued expansion of our data centers and due to future increased server
installations.


                                       13
<Page>

INTEREST EXPENSE

     Interest expense of $1.1 million in 1999 resulted from the capital leases
assigned to us by Intermedia during the second quarter of 1999 and a note
payable issued by us during the third quarter of 1999.

  INTEREST AND OTHER INCOME

     Interest and other income of $3.5 million resulted principally from
interest earned on the cash proceeds from the initial public offering completed
in August 1999.

LOSS BEFORE INCOME TAX BENEFIT

     Net loss before income tax benefit increased 318.0% to $(69.8) million in
1999 compared to $(16.7) million in 1998. As more fully discussed above, the
increased loss is attributable to growth strategy costs in excess of current
period revenues.

  INCOME TAX BENEFIT

     In connection with Intermedia's contribution of assets on April 30, 1999,
we recorded a deferred tax liability, net of deferred tax assets, of $4.8
million. The deferred tax liability was related to certain identifiable
intangible assets. Since the date of the contribution, we experienced taxable
losses and non-deductible expenses that resulted in recognition of deferred tax
assets in excess of the deferred tax liability. Accordingly, we recorded a $4.8
million deferred tax benefit during the second quarter of 1999.

  EBITDA BEFORE CERTAIN CHARGES

     EBITDA before certain charges, as defined below, increased 386.0% to
$(41.8) million in 1999 compared to $(8.6) million in 1998. The change is
primarily attributable to costs associated with our growth strategy. Costs
associated with the administration and maintenance of our expanded data centers
and increased selling, general and administrative costs will continue to
represent a large portion of our expenses during our planned expansion. In
addition, we expect to continue to experience rapid growth in marketing and
selling expenses as new customers are acquired.

     EBITDA BEFORE CERTAIN CHARGES CONSISTS OF EARNINGS (LOSS) BEFORE INTEREST
EXPENSE, INTEREST AND OTHER INCOME, INCOME TAX BENEFIT, DEFERRED COMPENSATION,
DEPRECIATION AND AMORTIZATION, AND THE CHARGE OFF OF PURCHASED IN-PROCESS
RESEARCH AND DEVELOPMENT. EBITDA BEFORE CERTAIN CHARGES DOES NOT REPRESENT FUNDS
AVAILABLE FOR MANAGEMENT'S DISCRETIONARY USE AND IS NOT INTENDED TO REPRESENT
CASH FLOW FROM OPERATIONS. EBITDA BEFORE CERTAIN CHARGES SHOULD ALSO NOT BE
CONSTRUED AS A SUBSTITUTE FOR OPERATING INCOME OR A BETTER MEASURE OF LIQUIDITY
THAN CASH FLOW FROM OPERATING ACTIVITIES, WHICH ARE DETERMINED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. THIS CAPTION EXCLUDES COMPONENTS
THAT ARE SIGNIFICANT IN UNDERSTANDING AND ASSESSING OUR RESULTS OF OPERATIONS
AND CASH FLOWS. IN ADDITION, EBITDA BEFORE CERTAIN CHARGES IS NOT A TERM DEFINED
BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND AS A RESULT OUR MEASURE OF
EBITDA BEFORE CERTAIN CHARGES MIGHT NOT BE COMPARABLE TO SIMILARLY TITLED
MEASURES USED BY OTHER COMPANIES. HOWEVER, WE BELIEVE THAT EBITDA BEFORE CERTAIN
CHARGES IS RELEVANT AND USEFUL INFORMATION WHICH IS OFTEN REPORTED AND WIDELY
USED BY ANALYSTS, INVESTORS AND OTHER INTERESTED PARTIES IN THE WEB SITE AND
APPLICATION HOSTING INDUSTRY. ACCORDINGLY, WE ARE DISCLOSING THIS INFORMATION TO
PERMIT A MORE COMPREHENSIVE ANALYSIS OF OUR OPERATING PERFORMANCE, AS AN
ADDITIONAL MEANINGFUL MEASURE OF PERFORMANCE AND LIQUIDITY, AND TO PROVIDE
ADDITIONAL INFORMATION WITH RESPECT TO OUR ABILITY TO MEET FUTURE DEBT SERVICE,
CAPITAL EXPENDITURE AND WORKING CAPITAL REQUIREMENTS. SEE THE FINANCIAL
STATEMENTS AND NOTES THERETO CONTAINED ELSEWHERE IN THIS REPORT FOR MORE
DETAILED INFORMATION.


                                       14
<Page>

LIQUIDITY AND CAPITAL RESOURCES

     We have used cash in our operating and investing activities during all
periods since inception. These cash usages have been funded by permanent
contributions to capital from Intermedia. Such contributions amounted to $148.3
million in 1999 and $41.9 million in 1998. Since the date of our initial public
offering, there have been no permanent capital contributions made by Intermedia.

     Net cash used in operating activities was $62.5 million in 2000, $20.5
million in 1999, and $10.9 million in 1998. Net cash used for operating
activities in each of these periods was primarily the result of operating losses
and changes in working capital.

     Net cash used for investing activities was $204.6 million in 2000, $170.2
million in 1999, and $31.0 million in 1998. Net cash used for investing
activities in each of these periods was primarily the result of capital
expenditures for data center infrastructure which includes servers purchased for
customer use, as well as leasehold improvements, furniture and fixtures and
computers and other equipment, including a $2.0 million letter of credit
pursuant to a ten-year lease entered into by us on June 29, 2000 for our new
corporate headquarters facility in Laurel, Maryland. Although we have plans to
invest significantly in property and equipment, we have no material commitments
for such items at this time.

     Prior to the date of our initial public offering, our capital expenditures
and operating expenses were principally funded by Intermedia. On August 4, 1999,
we sold 11,500,000 shares of Class A Common Stock in our initial public
offering. The net proceeds from the offering were approximately $178.9 million.

     On January 12, 2000, we sold 100,000 shares of our non-voting, redeemable
preferred stock, designated as Series A Convertible Preferred Stock, with
detachable warrants to purchase 1,065,000 shares of our Class A common stock, to
Microsoft Corporation and CPQ Holdings, Inc., a subsidiary of Compaq Computer
Corporation, for an aggregate of $100.0 million, of which $15.0 million was in
the form of equipment purchase credits. Of the $15.0 million of equipment
purchase credits, approximately $2.7 million was used for equipment purchases in
2000. The warrants can be exercised at any time on or before January 12, 2003 at
an initial price of $57.00 per share, subject to certain adjustments. The
proceeds from the offering were allocated between the preferred stock and the
warrants based upon their relative fair values.

     To the extent necessary to perform our obligations under our agreement with
Compaq, the proceeds from the investment by a subsidiary of Compaq will be used
toward the development of a platform for the delivery of high-performance
application hosting services, which will include capital expenditures and
research and development expenditures. Therefore, we do not expect the proceeds
of the investment by a subsidiary of Compaq to be available for general
corporate purposes. We also intend to use the proceeds of the investment by
Microsoft to fund this development project.

     On February 16, 2000, we completed a public offering of 12,650,000 shares
of our Class A Common Stock. We sold 2,000,000 shares of Class A Common Stock
and received net proceeds of approximately $171.6 million. Intermedia sold
10,650,000 shares of Class B Common Stock. The Class B Common Stock sold by
Intermedia automatically converted into Class A Common Stock at the closing of
the offering.

     The net proceeds of our public offerings and the cash proceeds of the
investments by Microsoft and Compaq were used to purchase telecommunications
related assets due to restrictions in Intermedia's debt instruments. Therefore,
to provide for the funding of our operating expenses, we made arrangements with
Intermedia to sell to Intermedia certain telecommunications related assets that
were purchased by Digex with the net proceeds of these offerings. The assets
were sold to Intermedia for cash at our cost. We received approximately $33.7
million in 2000 and $25.3 million in 1999 from Intermedia related to the sale of
telecommunications related assets. These


                                       15
<Page>

proceeds were unrestricted and were used to fund our operating expenses. See
"Market for Registrant's Common Equity and Related Stockholder Matters--Use of
Proceeds from a Sale of Registered Securities."

     In June 2000, the Department of Business and Economic Development of
Maryland received approval from the Maryland General Assembly Legislative Policy
Committee to provide $3.0 million in funding to Digex for the development of a
Web hosting facility in Prince George's County, Maryland under the Sunny Day
Fund initiative. The funds will initially be provided to us in the form of a
conditional loan which will accrue deferred interest at 5%. If certain
conditions are met, the conditional loan and accrued interest will be forgiven.
The Committee also approved our eligibility to seek an additional $1.0 million
in such funding on or after January 1, 2005 if certain conditions are met. We
received the proceeds from the $3.0 million conditional loan in January 2001.

     In accordance with the Digex Long-Term Incentive Plan, stock options
granted to certain employees of Digex and Intermedia became vested and
exercisable beginning in the second quarter of 2001. Cash proceeds of $6.1
million were received from exercised stock options during the year ended
December 31, 2000. We may continue to receive cash proceeds from stock options
in the future as an increasing number of options will become exercisable
according to each optionee's respective vesting schedule.

     On September 1, 2000, Intermedia entered into a merger agreement with
WorldCom whereby, upon consummation of the merger, a subsidiary of WorldCom will
be merged with and into Intermedia and Intermedia will become a subsidiary of
WorldCom. As a result of the merger, WorldCom will beneficially own a majority
of our capital stock and will have voting control of us. The merger is expected
to be consummated in the second quarter of 2001. See "Business--Recent
Developments."

     On October 31, 2000, Intermedia increased the commitments available to it
under its Revolving Credit Facility ("Credit Facility") from $100.0 million to
$350.0 million. The Credit Facility is fully guaranteed by WorldCom. As a
subsidiary of Intermedia, we are a limited guarantor under the Credit Facility
to the greater of $90.0 million or the amounts borrowed by Digex. Through
Intermedia, we expect to have access to the proceeds available under the Credit
Facility to fund a portion of our capital expenditures as liquidity needs arise
consistent with our projections. As of December 31, 2000, Intermedia had $113.0
million outstanding on its Credit Facility.

     On October 31, 2000, Intermedia also entered into a Note Purchase Agreement
with WorldCom. Intermedia authorized the issue and sale of up to $225.0 million
aggregate principal amount of 14.12% Senior Subordinated Notes due 2009 and
22,500 shares of Series H Preferred Stock. Through Intermedia, we expect the
proceeds from these financings will be available to fund our operations, working
capital needs and capital expenditures as liquidity needs arise. Intermedia had
not made any borrowings under these financings as of December 31, 2000.

     We expect to enter into a master lease and financing agreement with a
vendor for a line of credit of up to $25.0 million to facilitate the leasing of
computer hardware and software in the future. The initial term of the agreement
ranges from 24 to 36 months. We also have an option to purchase the equipment at
the end of the initial lease term.

     After the anticipated closing of the Intermedia - WorldCom Merger, WorldCom
has agreed that it will provide funding to us for the performance of our 2001
and 2002 business plans as approved by the Digex and WorldCom boards of
directors. Such funding will bear interest at a rate equal to LIBOR plus 300
basis points and will be repayable over a four-year period commencing in 2003.
The terms of such funding are expected to contain conditions to borrowing,
covenants and other terms that have not yet been negotiated but could restrict
our access to the availability to such funds. In addition, any changes to our
business plans that requires increased funding would require the WorldCom board
of directors' approval before WorldCom would be obligated to fund any such
increase.


                                       16
<Page>

     We expect to continue experiencing negative cash flow from operating and
investing activities due to our plans for expansion and the growth of our
business. We anticipate we will have significant cash requirements for several
years as we expand our data center capacity, increase servers under management,
increase our employee base, acquire additional office space to support our
expanding operations and invest in our marketing organization. In addition, we
expect to invest significantly in the purchase of property and equipment and for
research and development, including funding the expenses associated with our
research and development alliance with Microsoft and a subsidiary of Compaq. We
expect our capital expenditures to increase due to the growth of servers under
management and our continuing data center expansion in the United States and
abroad. With our existing cash resources and financing available from
Intermedia, we believe we have sufficient capital to sustain our current
operations and capital expenditure plans into mid 2001. Upon depletion of these
financing sources, we intend to rely on WorldCom for funding. There can be no
assurance that such funding will be available on terms satisfactory to us. In
the event the Intermedia - WorldCom Merger does not close, our intention would
be to access the capital markets for our necessary funding. Management has had
preliminary discussions with third party sources regarding potential financing,
including vendor financing facilities or other asset backed secured financing.
Based on these discussions, management believes we will have access to the
capital markets to obtain sufficient funding to continue our business plans as
described above or, at a minimum, in an amount that would provide sufficient
funding to execute a modified or curtailed plan into 2002. See Risk Factor--
"The failure of the Intermedia - WorldCom Merger to close would adversely impact
us."

     Intermedia is and will continue to be highly leveraged. At December 31,
2000 and 1999, Intermedia had outstanding approximately $2.8 billion and $3.2
billion of debt and other liabilities including trade payables, respectively,
and a total of approximately $1.1 million and $916.8 million of obligations with
respect to five outstanding series of preferred stock. In addition, as of
December 31, 2000, Intermedia borrowed $113.0 million under its $350.0 million
credit facility. Intermedia has also entered into a $225.0 million Note Purchase
Agreement with WorldCom. Through Intermedia, we expect the proceeds from these
financings will be available to fund our operations, working capital needs and
capital expenditures as liquidity needs arise.

     Intermedia's level of debt will require it to dedicate a substantial
portion of its future cash flow from operations for payment of principal and
interest on its debt, as well as dividends on and the redemption of its
preferred stock. Historically, Intermedia has not generated sufficient cash flow
to cover its operating and investing expenses. For the years ended December 31,
2000 and 1999, Intermedia's earnings were insufficient to cover combined fixed
charges and dividends on preferred stock. The auditors of Intermedia have also
expressed in their opinion that while Intermedia's consolidated financial
statements have been prepared assuming that it will continue as a going concern,
Intermedia has incurred recurring operating losses and has a net capital
deficiency, and as a result, these conditions raise substantial doubt about
Intermedia's ability to continue as a going concern.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

     The information set forth above in "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" includes forward-looking
statements that involve numerous risks and uncertainties within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including statements concerning the
future outcome of litigation and the completion of the Intermedia - WorldCom
Merger. Forward-looking statements can be identified by the use of
forward-looking terminology such as "estimates," "projects," "anticipates,"
"expects," "intends," "believes," or the negative thereof or other variations
thereon or comparable terminology or by discussions of strategy that involve
risks and uncertainties. See "Risk Factors--This report includes forward-looking
statements which could differ from actual results."

INCOME TAXES


                                       17
<Page>

     We account for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME
TAXES. At December 31, 2000, a full valuation allowance was provided on net
deferred tax assets of $75.2 million based upon our deficit in earnings and the
uncertainty surrounding our ability to recognize such assets. The valuation
allowance relates primarily to a net operating loss carryforward. Income tax
accounting information is disclosed in Note 9 to the Consolidated Financial
Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We expect to continue recognizing revenue from international sales
denominated in foreign currency. As a global concern, we could face exposure to
adverse movements in foreign currency exchange rates on the financial results of
foreign subsidiaries that are translated into U.S. dollars upon consolidation.
These exposures may change over time as business practices evolve and could
affect our financial results. Currently, we do not hedge against any foreign
currency risk and, as a result, could incur gains or losses.

     While our long-term note payable bears an effective fixed interest rate,
the fair market value of our fixed rate long-term note payable is sensitive to
changes in interest rates. We run the risk that market rates will decline, and
the required payments will exceed those based on current market rates. Under our
current risk management policies, we do not use interest rate derivative
instruments to manage our exposure to interest rate changes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements listed in Item 14 are included in
this report beginning on page F-1.

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

     None.


                                       18
<Page>

                                     PART IV

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

(a)  FINANCIAL STATEMENT AND FINANCIAL STATEMENT SCHEDULES

     The following consolidated financial statements of the Company and the
notes thereto, the related reports thereon of the independent auditors, and
financial statement schedules, are filed pursuant to Item 8 of this Report:

                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                                                                  PAGE
                                                                                                                  ----
<S>                                                                                                               <C>
Report of Independent Auditors ................................................................................    F-1

Consolidated Balance Sheets as of December 31, 2000 and 1999 ..................................................    F-2

Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999, and 1998 ...................    F-3

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2000, 1999, and 1998 ........     F-4

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998 ...................    F-5

Notes to Consolidated Financial Statements.....................................................................    F-6

FINANCIAL STATEMENT SCHEDULES

Schedule II--Valuation and Qualifying Accounts .................................................................  F-31
</Table>

     All other financial statement schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission (the
"SEC") are not required pursuant to the instructions to Item 8 or are
inapplicable and therefore have been omitted.


                                       19
<Page>

                                  EXHIBIT INDEX

All Exhibits listed below were filed with the original Form 10-K, unless
specifically stated to be incorporated by reference to other documents
previously filed with the SEC.

   EXHIBIT
   NUMBERS                                   DESCRIPTION
   -------                                   -----------

     2.1       --          Contribution Agreement by and between Digex and
                           Business Internet, Inc., dated as of April 30, 1999.*

     2.2       --          Assignment and Assumption Agreement by and between
                           Digex and Business Internet, Inc., dated as of April
                           30, 1999.*

     2.3       --          Trademark Assignment by and between Digex and
                           Business Internet, Inc., dated as of April 30, 1999.*

     2.4       --          Bill of Sale to the Contribution Agreement, dated as
                           of April 30, 1999.*

     2.5       --          Agreement and Plan of Merger among WorldCom, Inc.,
                           Wildcat Acquisition Corp. and Intermedia
                           Communications Inc., dated as of September 1, 2000.
                           Incorporated herein by reference to Digex's Form 8-K
                           (File No. 000-26873) filed with the SEC on September
                           7, 2000.

     3.1       --          Certificate of Incorporation of Digex, as amended.
                           Incorporated herein by reference to Digex's Form 10-Q
                           (File No. 000-26873) filed with the SEC on September
                           13, 1999.

     3.2       --          Bylaws of Digex, as amended. Incorporated herein by
                           reference to Digex's Form 10-Q (File No. 000-26873)
                           filed with the SEC on May 12, 2000.

     3.3       --          Certificate of Designation for the Series A Preferred
                           Stock.**

     3.4       --          See the Certificate of Incorporation of Digex, as
                           amended to date, filed as Exhibit 3.1.

     3.5       --          Proposed Amendment to the Certificate of
                           Incorporation. Incorporated herein by reference to
                           Digex's Form 8-K (File No. 000-26873) filed with the
                           SEC on February 15, 2001.

     4.1       --          Warrant Agreement, dated as of January 12, 2000,
                           among Digex, Microsoft Corporation and CPQ Holdings,
                           Inc.**

     4.2       --          Registration Rights Agreement, dated as of January
                           12, 2000, among Digex, Microsoft Corporation and CPQ
                           Holdings, Inc.**

     10.1      --          Intentionally Omitted.

     10.2      --          Lease by and between Intermedia and Intel
                           Corporation, dated as of November 10, 1998.*

     10.3      --          Lease by and between Intermedia and Ammendale
                           Commerce Center Limited Partnership, dated as of
                           April 15, 1998.*


                                       20
<Page>

     10.4      --          Lease by and between Intermedia and 1111 19th Street
                           Associates, dated as of July 23, 1998.*

     10.5      --          Contract for Construction by and between Intermedia
                           and R.W. Murray Company, d/b/a The Murray Company,
                           dated as of February 19, 1999.*

     10.6      --          Contract for Construction by and between Intermedia
                           and R.W. Murray Company, d/b/a The Murray Company,
                           dated as of January 4, 1999.*

     10.7      --          Software License and Services Agreement by and
                           between Digex and Oracle Corporation, dated as of May
                           27, 1999.*

     10.8      --          License Agreement by and between Digex and Microsoft
                           Corporation.*

     10.9      --          Consulting Letter Agreement by and between Digex,
                           Intermedia and Andersen Consulting LLP, dated as of
                           April 1, 1999.*

    10.10      --          Internet Transit Services Agreement (East Coast)
                           between Digex and Business Internet, Inc., dated as
                           of April 30, 1999. (2)*

    10.11      --          Internet Transit Services Agreement (West Coast)
                           between Digex and Business Internet, Inc., dated as
                           of April 30, 1999. (2)*

    10.12      --          Managed Firewall Services Agreement between Digex and
                           Business Internet, Inc., dated as of April 30, 1999.
                           (2)*

    10.13      --          Employment Letter dated June 29, 1999 between Digex
                           and Mark K. Shull, and amendments thereto. (1)**

    10.14      --          Employment Letter dated December 14, 1998 between
                           Digex and Nancy G. Faigen, and amendments thereto.
                           (1)**

    10.15      --          Employment Letter dated July 9, 1999 between Digex
                           and Rebecca Ward, and amendments thereto. (1)**

    10.16      --          Employment Letter dated July 9, 1999 between Digex
                           and Bryan T. Gernert, and amendments thereto. (1)**

    10.17      --          Employment Letter dated December 15, 1999 between
                           Digex and Timothy M. Adams, and amendments thereto.
                           (1)**

    10.18      --          Employment Letter dated September 11, 1996 between
                           Digex and Robert B. Patrick, and amendments thereto.
                           (1)**

    10.19      --          Digex Long-Term Incentive Plan. (1)**

    10.20      --          Intermedia 1996 Long-Term Incentive Plan. (1)**

    10.21      --          General and Administrative Services Agreement between
                           Digex and Intermedia, dated as of April 30, 1999. *

    10.22      --          Amendment No. 1, dated as of January 17, 2000, to
                           General and Administrative Services Agreement between
                           Digex and Intermedia.**


                                       21
<Page>

    10.23      --          Use of Proceeds Agreement between Digex and
                           Intermedia, dated as of June 2, 1999.**

    10.24      --          Use of Proceeds Agreement between Digex and
                           Intermedia, dated as of January 11, 2000.**

    10.25      --          Use of Proceeds Agreement between Digex and
                           Intermedia, dated as of January 24, 2000.**

    10.26      --          Expense Summary and Indemnity Arrangement Agreement
                           between Digex and Intermedia, dated as of January 24,
                           2000.**

    10.27      --          Employment Letter dated March 22, 2000 between Digex
                           and Thomas Davidsson. (1)***

    10.28      --          Employment Letter dated July 5, 2000 between Digex
                           and Todd Carlson, and amendments thereto. (2)***

    10.29      --          Employment Letter dated July 6, 2000 between Digex
                           and Bruce F. Metge. (1)***

    10.30      --          Lease by and between Digex and Riggs & Company, dated
                           as of June 29, 2000. (3)***

    10.31      --          Amendment No. 2, dated as of June 29, 2000, to the
                           General and Administrative Services Agreement between
                           Digex and Intermedia. ***

    10.32      --          Asset Migration Agreement, dated as of June 1, 2000,
                           between Digex and Intermedia.***

    10.33      --          Letter Agreement dated July 31, 2000 between Digex
                           and Lemis O. Altan. (1)****

    10.34      --          Amended and Restated Guaranty Agreement, dated as of
                           October 31, 2000, by Digex, as Guarantor, on behalf
                           of Bank of America, N.A., as Administrative Agent for
                           Lenders, amending and restating the Guaranty
                           Agreement, dated as of December 22, 1999, by Digex,
                           as Guarantor, on behalf of Bank of America N.A., as
                           Administrative Agent for Lenders. ****

    10.35      --          Amended and Restated Security Agreement, dated as of
                           October 31, 2000, between Digex, as Debtor, and Bank
                           of America, N.A., as the Secured Party on behalf of
                           Lenders, amending and restating the Security
                           Agreement, dated as of December 22, 1999, between
                           Digex, as Debtor, and Bank of America, N.A., as the
                           Secured Party on behalf of Lenders.****

    10.36      --          Amendment, dated as of October 24, 2000, to the Use
                           of Proceeds Agreement between Digex and Intermedia,
                           dated as of January 24, 2000. ****

    10.37      --          Employment Letter dated October 26, 2000 between
                           Digex and Howard Weizmann. (1)

    10.38      --          Master Channel Agreement between Digex and MCI
                           WorldCom Network Services, Inc., dated as of January
                           1, 2001. Incorporated herein by reference to Digex's
                           Form 8-K (File No. 000-26873) filed with the SEC on
                           March 5, 2001.

    10.39      --          Master Facilities Agreement between Digex and MCI
                           WorldCom Network Services, Inc., dated as of January
                           1, 2001. Incorporated herein by reference to Digex's
                           Form 8-K (File No. 000-26873) filed with the SEC on
                           March 5, 2001.


                                       22
<Page>

     23.1      --          Consent of Ernst & Young LLP.

----------

(1)      Management contract or compensatory plan or arrangement.

(2)      Confidential treatment of certain provisions of this exhibit was
         requested and granted by the SEC in connection with the filing of
         Digex's registration statement on Form S-1 (File No. 333-77105).

(3)      Confidential treatment of certain provisions of this exhibit was
         requested and granted by the SEC in connection with the filing of
         Digex's Form 10-Q for the quarter ended June 30, 2000 (File
         No.000-26873) filed with the SEC on August 14, 2000.

*        Incorporated herein by reference to Digex's registration statement on
         Form S-1 (File No. 333-77105) filed with the SEC.

**       Incorporated herein by reference to Digex's registration statement on
         Form S-1 (File No. 333-94879) filed with the SEC.

***      Incorporated herein by reference to Digex's Form 10-Q for the quarter
         ended June 30, 2000 (File No. 000-26873) filed with the SEC on August
         14, 2000.

****     Incorporated herein by reference to Digex's Form 10-Q for the quarter
         ended September 30, 2000 (File No. 000-26873) filed with the SEC on
         November 14, 2000.

(b) REPORTS ON FORM 8-K

     The following Current Reports on Form 8-K were filed during the fourth
quarter of 2000:

     Digex filed a Current Report on Form 8-K, dated October 13, 2000, reporting
under Item 5 reporting the filing of multiple shareholder complaints against
Intermedia, Digex, certain interested directors of Digex, and WorldCom in
connection with the Merger Agreement between Intermedia and WorldCom. The
Company also reported under Item 7 the filing of the complaint as an exhibit to
the Form 8-K.

     Digex filed a Current Report on Form 8-K, dated October 26, 2000, reporting
under Item 5 reporting the filing of a consolidated shareholders complaint
against Intermedia, Digex, certain interested directors of Digex, and WorldCom.
The Company also reported under Item 7 the filing of the complaint as an exhibit
to the Form 8-K.

     Digex filed a Current Report on Form 8-K, dated October 27, 2000, reporting
under Item 5 the issuance of a press release discussing Digex's third quarter
results. The Company also reported under Item 7 the filing of the press release
as an exhibit to the Form 8-K.

     Digex filed a Current Report on Form 8-K, dated November 20, 2000,
reporting under Item 9 Regulation FD Disclosure discussing its Analyst Day
presentation to financial analysts and others. The Company also reported under
Item 7 the filing of selected presentation slides as an exhibit to the Form 8-K.

     Digex filed a Current Report on Form 8-K, dated December 15, 2000,
reporting under Item 5 reporting the Legal Opinion of the Court of Chancery of
the State of Delaware in and for New Castle County In Re: Digex, Inc.
Shareholders Litigation, dated December 13, 2000. The Company also reported
under Item 7 the filing of the Opinion as an exhibit to the Form 8-K.


                                       23
<Page>

                                   SIGNATURES

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

Dated: December 7, 2001

                                          DIGEX, INCORPORATED
                                          (Registrant)


                                          By: /s/ TIMOTHY M. ADAMS
                                              ----------------------------
                                                    Timothy M. Adams
                                                 Chief Financial Officer


                                       24
<Page>


                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Digex, Incorporated

     We have audited the accompanying consolidated balance sheets of Digex,
Incorporated as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Digex, Incorporated at December 31, 2000 and 1999, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

     As discussed in Note 1 to the consolidated financial statements, in 2000
the Company changed its method of accounting for revenue recognition.

     As discussed in Note 17, the consolidated financial statements have been
restated to exclude redeemable preferred stock from total stockholders' equity.


                                            /s/ ERNST & YOUNG LLP


McLean, Virginia
January 30, 2001

     Except for Notes 14 and 16, as to which the date is
     March 2, 2001, and
     except for Notes 5 and 17, as to which the date is
     November 27, 2001


                                      F-1
<Page>

                               DIGEX, INCORPORATED

                           CONSOLIDATED BALANCE SHEETS

                (AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

<Table>
<Caption>
                                                                                              DECEMBER 31,
                                                                                 ------------------------------------
                                                                                      2000                  1999
                                                                                 ---------------      ---------------
                                                                                   (RESTATED)
<S>                                                                           <C>                    <C>
                                   ASSETS

Current assets:
     Cash and cash equivalents .............................................  $          83,434      $        88,778
     Restricted investments ................................................              2,000                   --
     Accounts receivable, net of allowance of $4,741 and $4,362 in 2000
           and 1999, respectively...........................................             42,201               17,271
     Due from Intermedia ...................................................                 40                3,110
     Deferred costs ........................................................              8,627                   --
     Prepaid expenses and other current assets..............................              7,452                1,496
                                                                                 ---------------      ---------------
            Total current assets............................................            143,754              110,655
Property and equipment, net.................................................            348,975              205,903
Intangible assets, net......................................................             23,222               27,213
Other assets................................................................              5,100                  538
                                                                                 ---------------      ---------------
            Total assets....................................................  $         521,051      $       344,309
                                                                                 ===============      ===============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued expenses..................................  $          59,455      $        33,619
     Current portion of deferred revenue....................................              7,734                  222
     Current portion of note payable........................................              2,772                1,235
     Current portion of capital lease obligations...........................              1,871                  801
                                                                                 ---------------      ---------------
            Total current liabilities.......................................             71,832               35,877
Deferred revenue............................................................              4,025                   --
Note payable................................................................              1,435                2,477
Capital lease obligations...................................................             27,131               15,766
                                                                                 ---------------      ---------------
            Total liabilities...............................................            104,423               54,120
                                                                                 ---------------      ---------------

Redeemable preferred stock, $.01 par value; 5,000,000 shares authorized; 100,000
     shares designated as Series A Convertible; 100,000 Series A Convertible
     shares issued and outstanding (aggregate liquidation
     preference of $100,000)................................................             71,572                   --

Stockholders' equity:
     Class A common stock, $.01 par value; 100,000,000 shares authorized;
         24,546,543 and 11,500,000 shares issued and outstanding in 2000 and
         1999, respectively ................................................                245                  115
     Class B common stock, $.01 par value; 50,000,000 shares authorized;
         39,350,000 and 50,000,000 issued and outstanding in 2000 and  1999,
         respectively ......................................................                394                  500
     Additional capital.....................................................            550,465              354,553
     Accumulated deficit....................................................           (195,869)             (52,768)
     Deferred compensation..................................................            (10,141)             (12,211)
     Accumulated other comprehensive loss  .................................                (38)                  --
                                                                                 ---------------      ---------------
            Total stockholders' equity......................................            345,056              290,189
                                                                                 ---------------      ---------------
            Total liabilities and stockholders'equity.......................  $         521,051      $       344,309
                                                                                 ===============      ===============
</Table>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-2
<Page>

                               DIGEX, INCORPORATED

                      CONSOLIDATED STATEMENTS OF OPERATIONS

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<Table>
<Caption>
                                                                          YEAR ENDED DECEMBER 31,
                                                            ---------------------------------------------------
                                                                  2000              1999              1998
                                                            ----------------  ---------------   ---------------
<S>                                                               <C>               <C>              <C>
Revenues.................................................         $ 168,085         $ 59,786         $  22,635

Costs and expenses:
     Cost of operations..................................            21,244            9,656             6,710
     Cost of services....................................            69,658           21,750             7,044
     Selling, general and administrative.................           144,876           70,213            17,512
     Deferred compensation ..............................             4,101            1,299                --
     Depreciation and amortization ......................            78,819           29,070             8,109
                                                            ----------------  ---------------   ---------------
Total costs and expenses.................................           318,698          131,988            39,375
                                                            ----------------  ---------------   ---------------
Loss from operations.....................................          (150,613)         (72,202)          (16,740)
Other income (expense):
     Interest expense....................................            (2,008)          (1,094)               --
     Interest and other income...........................            12,608            3,458                 --
     Merger-related expenses ............................            (2,922)              --               --
                                                            ----------------  ---------------   ---------------

Loss before income tax benefit...........................          (142,935)         (69,838)          (16,740)
Income tax benefit.......................................                --            4,839               159
                                                            ----------------  ---------------   ---------------

Loss before cumulative effect of change in accounting
     principle..........................................           (142,935)         (64,999)          (16,581)
Cumulative effect of change in accounting principle .....              (166)              --                --
                                                            ----------------  ---------------   ---------------

Net loss ................................................         $(143,101)        $(64,999)        $ (16,581)
                                                            ================  ===============   ===============


LOSS PER COMMON SHARE- BASIC AND DILUTED:

Loss before cumulative effect of change in accounting
     principle .........................................          $   (2.25)        $  (1.19)        $   (0.33)
Cumulative effect of change in accounting principle .....             (0.01)              --                --
                                                            ----------------  ---------------   ---------------

Net loss per common share ...............................         $   (2.26)        $  (1.19)        $   (0.33)
                                                            ================  ===============   ===============


PRO FORMA AMOUNTS, ASSUMING THE ACCOUNTING CHANGE IS
   APPLIED RETROACTIVELY:

Net loss ................................................         $(142,935)        $(65,115)        $ (16,618)
                                                            ================  ===============   ===============
Net loss per common share ...............................         $   (2.25)        $  (1.19)        $   (0.33)
                                                            ================  ===============   ===============

Shares used in computing basic and diluted net loss per
     share ..............................................        63,404,839       54,726,027        50,000,000
                                                            ================  ===============   ===============
</Table>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-3
<Page>

                               DIGEX, INCORPORATED

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
                                EQUITY (RESTATED)

                             (AMOUNTS IN THOUSANDS)

<Table>
<Caption>
                                                    REDEEMABLE
                                                    PREFERRED
                                                     STOCK                        STOCKHOLDERS' EQUITY
                                               ------------------      -------------------------------------------
                                                                                      COMMON STOCK
                                                                            CLASS A                 CLASS B
                                               SHARES      AMOUNT      SHARES      AMOUNT      SHARES       AMOUNT
                                               ------      ------      ------      ------      ------       ------
<S>                                            <C>         <C>         <C>         <C>         <C>          <C>
BALANCE AT DECEMBER 31, 1997 ..........          --          --          --          --          --           --

Total allocated costs .................          --          --          --          --          --           --
Funding for working capital ...........          --          --          --          --          --           --
Funding for purchases of property,
   plant and equipment ................          --          --          --          --          --           --
Net loss ..............................          --          --          --          --          --           --
                                          ------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1998 ..........          --          --          --          --          --           --

Total allocated costs .................          --          --          --          --          --           --
Funding for working capital ...........          --          --          --          --          --           --
Funding for purchases of property,
   plant and equipment ................          --          --          --          --          --           --
Recapitalization by Intermedia ........          --          --          --          --      50,000          500
Contributions from Intermedia
   following recapitalization .........          --          --          --          --          --           --
Initial public offering of common
   stock, net of issuance cost ........          --          --      11,500         115          --           --
Issuance of stock options under
   long-term compensation plan ........          --          --          --          --          --           --
Amortization of deferred compensation .          --          --          --          --          --           --
Net loss ..............................          --          --          --          --          --           --
                                          ------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1999 ..........          --          --      11,500         115      50,000          500

Issuance of Series A Convertible
   preferred stock and warrants, net
   of available equipment credits .....         100      71,572          --          --          --           --
Subsequent public offering of common
   stock,  net of issuance cost .......          --          --      12,650         126     (10,650)        (106)
Issuance of stock options under
   long-term compensation plan, net of
   forfeitures ........................          --          --          --          --          --           --
Exercise of common stock options ......          --          --         397           4          --           --
Amortization of deferred compensation .          --          --          --          --          --           --
Foreign currency translation adjustment          --          --          --          --          --           --
Net loss ..............................          --          --          --          --          --           --
                                          ------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 2000 (RESTATED)         100   $  71,572      24,547   $     245      39,350    $     394
                                          ========================================================================

<Caption>
                                                                     STOCKHOLDERS' EQUITY
                                            ------------------------------------------------------------------------
                                                                                  ACCUMULATED    OWNER'S
                                                                                     OTHER         NET
                                            ADDITIONAL  ACCUMULATED    DEFERRED  COMPREHENSIVE  INVESTMENT
                                              CAPITAL     DEFICIT    COMPENSATION     LOSS      (DEFICIT)      TOTAL
                                              -------     -------    ------------     ----      ---------      -----
<S>                                           <C>         <C>        <C>           <C>          <C>          <C>

BALANCE AT DECEMBER 31, 1997 ..........          --          --           --           --       $  45,527    $  45,527

Total allocated costs .................          --          --           --           --          10,018       10,018
Funding for working capital ...........          --          --           --           --             912          912
Funding for purchases of property,
   plant and equipment ................          --          --           --           --          30,969       30,969
Net loss ..............................          --          --           --           --         (16,581)     (16,581)
                                          -----------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1998 ..........          --          --           --           --          70,845       70,845

Total allocated costs .................          --          --           --           --           3,541        3,541
Funding for working capital ...........          --          --           --           --          11,443       11,443
Funding for purchases of property,
   plant and equipment ................          --          --           --           --          89,574       89,574
Recapitalization by Intermedia ........     114,566          --           --           --        (115,066)          --
Contributions from Intermedia
   following recapitalization .........      47,689          --           --           --         (48,106)        (417)
Initial public offering of common
   stock, net of issuance cost ........     178,788          --           --           --              --      178,903
Issuance of stock options under
   long-term compensation plan ........      13,510          --      (13,510)          --              --           --
Amortization of deferred compensation .          --          --        1,299           --              --        1,299
Net loss ..............................          --     (52,768)          --           --         (12,231)     (64,999)
                                          -----------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1999 ..........     354,553     (52,768)     (12,211)          --              --      290,189

Issuance of Series A Convertible
   preferred stock and warrants, net
   of available equipment credits .....      16,100          --           --           --              --       16,100
Subsequent public offering of common
   stock,  net of issuance cost .......     171,623          --           --           --              --      171,643
Issuance of stock options under
   long-term compensation plan, net of
   forfeitures ........................       2,067          --       (2,067)          --              --           --
Exercise of common stock options ......       6,122          --           --           --              --        6,126
Amortization of deferred compensation .          --          --        4,137           --              --        4,137
Foreign currency translation adjustment          --          --           --          (38)             --          (38)
Net loss ..............................          --    (143,101)          --           --              --     (143,101)
                                          -----------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 2000 (RESTATED)   $ 550,465   $(195,869)   $ (10,141)   $     (38)             --    $ 345,056
                                          =============================================================================
</Table>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-4
<Page>

                               DIGEX, INCORPORATED

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (AMOUNTS IN THOUSANDS)

<Table>
<Caption>
                                                                            YEAR ENDED DECEMBER 31,
                                                                      -----------------------------------
                                                                        2000         1999         1998
                                                                      ---------    ---------    ---------
<S>                                                                   <C>          <C>          <C>
OPERATING ACTIVITIES:
   Net loss .......................................................   $(143,101)   $ (64,999)   $ (16,581)
   Cumulative effect of change in accounting principle ............         166           --           --
                                                                      ---------    ---------    ---------

   Loss before cumulative effect of accounting change .............    (142,935)     (64,999)     (16,581)
   Adjustments to reconcile net loss to cash used in
   operating activities:
     Depreciation and amortization ................................      78,819       29,070        8,109
     Provision for doubtful accounts ..............................      10,649        4,265        1,491
     Amortization of deferred compensation ........................       4,137        1,299           --
     Loss on sale/ disposals of telecommunications
       equipment ..................................................         655           52           --
     Deferred income taxes ........................................          --       (4,839)        (159)
     Accretion of interest on note payable and capital lease
       obligation .................................................         467           --           --
   Changes in operating assets and liabilities:
     Accounts receivable ..........................................     (35,612)     (15,409)      (5,559)
     Due from Intermedia ..........................................       3,077       (3,110)          --
     Deferred costs ...............................................      (8,627)          --           --
     Prepaid expenses and other current assets ....................      (5,956)        (606)        (550)
     Other assets .................................................      (4,562)         (79)        (459)
     Accounts payable and accrued expenses ........................      25,997       33,619        2,778
     Deferred revenue .............................................      11,371          222           --
                                                                      ---------    ---------    ---------
   Net cash used in operating activities ..........................     (62,520)     (20,515)     (10,930)

INVESTING ACTIVITIES:
   Purchases of property and equipment ............................    (202,604)    (170,396)     (30,969)
   Purchase of restricted investments .............................      (2,000)          --           --
   Proceeds from sale of telecommunication assets .................          --          203           --
                                                                      ---------    ---------    ---------
   Net cash used in investing activities ..........................    (204,604)    (170,193)     (30,969)

FINANCING ACTIVITIES:
   Proceeds from subsequent public offering, net of costs .........     171,645           --           --
   Proceeds from issuance of preferred stock ......................      85,000           --           --
   Proceeds from exercise of common stock options .................       6,126           --           --
   Principal payments on long-term note payable and capital leases         (953)      (1,424)          --
   Proceeds from initial public offering, net of costs ............          --      178,903           --
   Net contributions from Intermedia ..............................          --      102,007       41,899
                                                                      ---------    ---------    ---------
   Net cash provided by financing activities ......................     261,818      279,486       41,899

Effect of exchange rate on cash and cash equivalents ..............         (38)          --           --

Net increase in cash and cash equivalents .........................      (5,344)      88,778           --
Cash and cash equivalents at beginning of the year ................      88,778           --           --
                                                                      ---------    ---------    ---------
Cash and cash equivalents at end of year ..........................   $  83,434    $  88,778    $      --
                                                                      =========    =========    =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Assets acquired through capital leases ..........................   $  13,249    $  17,111    $     958
  Asset purchase financed by note payable .........................          --        4,672           --
  Interest paid ...................................................       1,696        1,010           --
</Table>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-5
<Page>

                               DIGEX, INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

    Digex, Incorporated ("Digex") was incorporated on April 26, 1999, under the
laws of the State of Delaware. Digex's business was operated as the Web site
hosting unit of Intermedia Communications Inc. ("Intermedia") since its
acquisition by Intermedia on July 7, 1997. On that date, Intermedia acquired
Business Internet, Inc. (previously known as DIGEX, Incorporated), including the
Web site hosting unit, in a business combination accounted for as a purchase.
The Web site hosting unit presented in the accompanying financial statements had
no legal status or existence prior to the incorporation of Digex on April 26,
1999. Prior to April 30, 1999, Digex had no assets or liabilities.

    Digex's predecessor operations began in January 1996 to provide managed Web
hosting services, principally to Fortune 2000 companies. Digex's services
include implementing and maintaining secure, scalable, high performance Web
sites on the Internet 24 hours a day. In addition, Digex provides a
comprehensive suite of Web management services, including business process
solutions and value-added testing services directed toward improving its
customers' overall Internet performance.

    On July 11, 2000, Intermedia announced that it was exploring strategic
alternatives with regard to Digex, including, without limitation, the possible
sale of its ownership position in Digex. On September 1, 2000, Intermedia
entered into a merger agreement with WorldCom, Inc. ("WorldCom") whereby, upon
consummation of the merger, a subsidiary of WorldCom will be merged with and
into Intermedia and Intermedia will become a subsidiary of WorldCom (the
"Intermedia - WorldCom Merger). As a result of the merger, WorldCom will
beneficially own a majority of the capital stock of Digex and will have voting
control of Digex. The merger is expected to be consummated in the second quarter
of 2001.

BASIS OF PRESENTATION

    The accompanying consolidated financial statements include the accounts of
Digex and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The consolidated
financial statements reflect, in the opinion of management, all adjustments,
which are of a normal and recurring nature, necessary for a fair presentation of
the financial condition and results of operations and cash flows for the periods
presented. Certain prior period amounts have been reclassified to conform to the
current period presentation.


                                      F-6
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The financial statements for periods prior to April 30, 1999 represent the
carved-out operations of the managed Web and application hosting unit of
Intermedia. Digex's accumulated deficit of $195.9 million arose after April 30,
1999. Accumulated losses and capital contributions from Intermedia were included
in owner's net investment prior to April 30, 1999 and were transferred to
additional capital upon the capitalization of Digex. Intermedia contributed
approximately $115.1 million in assets and certain liabilities on April 30,
1999. Intermedia also contributed additional capital of $48.1 million to Digex
beginning May 1 through August 4, 1999, principally by way of contributions of
telecommunications assets. These contributions were accounted for at
Intermedia's underlying book values on the date of contribution. As more fully
discussed in Note 2, "Related Party Corporate Allocations," the financial
statements for 1998 and 1999 include allocations of network costs and corporate
expenses. In addition, for financial reporting purposes, the equity activity of
Digex prior to its incorporation has been accumulated into a single disclosure
caption entitled "Owner's Net Investment."

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  USE OF ESTIMATES

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

  CASH EQUIVALENTS

     Digex considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

  PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the property and
equipment, ranging from three years for electronics to five years for furniture
and office equipment. Buildings under capital leases and leasehold improvements
are amortized over the lesser of the lease term or the useful life. Property and
equipment acquired under capital leases is amortized using the straight-line
method over the lesser of the lease term or the estimated useful life of the
asset.


                                      F-7
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

  INTANGIBLE ASSETS

     Intangible assets include assets that arose in connection with the purchase
of Business Internet, Inc. by Intermedia. Identifiable intangible assets arising
from the purchase are stated at cost and consist of trade name, customer lists,
acquired workforce, developed technology and goodwill. Amortization of these
assets is computed using the straight-line method over the estimated periods of
benefit, generally five years for developed technologies and ten years for all
other intangible assets.

  IMPAIRMENT OF LONG-LIVED ASSETS

     In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, Digex reviews its long-lived assets for impairment
when events or changes in circumstances indicate the carrying value of such
assets may not be recoverable. This review consists of a comparison of the
carrying value of the asset with the asset's expected future undiscounted cash
flows without interest costs. Estimates of expected future cash flows represent
management's best estimate based on reasonable and supportable assumptions and
projections. If the expected future cash flow exceeds the carrying value of the
asset, no impairment indicator is considered present. If the carrying value
exceeds the future cash flow, an impairment indicator is considered present.
Such impairment would be measured and recognized using a discounted cash flow
method.

  FINANCIAL INSTRUMENTS

     The carrying value of Digex's financial instruments, including cash and
cash equivalents, restricted investments, accounts receivable, accounts payable,
note payable and capital lease obligations approximate their fair market values.

  REVENUE RECOGNITION

     Revenues principally consist of installation fees and monthly service fees
charged to customers under contracts having terms that typically range from one
to three years. Installation fees along with related costs are deferred and
recognized over the contract period. Monthly services fees are recognized in the
month the service is rendered. Certain customer payments for managed Web hosting
services received in advance of service delivery are deferred until the service
is performed. Additional services are recognized in the month the services are
performed. Refer to "Change in Accounting Principle" in Note 1 to the
consolidated financial statements for further discussion.


                                      F-8
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 ADVERTISING COSTS

     Digex expenses advertising costs as incurred. Advertising expense amounted
to $21.9 million in 2000, $6.8 million in 1999, and $2.5 million in 1998 and is
included in the consolidated statements of operations as selling, general and
administrative expense.

  RESEARCH AND DEVELOPMENT COSTS

     Digex expenses research and development costs ("R&D costs") as incurred,
except for equipment that have alternative future uses, in accordance with SFAS
No. 2, ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS. Indirect costs and general
administrative expenses directly related to a joint development project and
normal business development activities are expensed as incurred. R&D costs
amounted to $9.5 million in 2000, $0.6 million in 1999, and $1.0 million in 1998
and are included in the consolidated statements of operations as selling,
general, and administrative expense.

     Costs incurred in the research and development of new software products and
enhancements to existing software products are expensed as incurred until
technological feasibility has been established. After technological feasibility
is established, any additional development costs are capitalized in accordance
with SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD,
LEASED, OR OTHERWISE MARKETED. Product development costs incurred for internal
use software are expensed as incurred until the application development state,
after which costs are capitalized in accordance with Statement of Position 98-1,
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE.

  STOCK-BASED COMPENSATION

     Digex accounts for employee stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations. Accordingly, in cases where exercise
prices at the date of the grant equal or exceed fair market value of the
underlying common stock, Digex recognizes no compensation expense. In cases
where exercise prices at the date of the grant are less than the fair value,
compensation is recognized over the period of performance or vesting period.

  INCOME TAXES

     Digex accounts for income taxes under the provisions of SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and 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.


                                      F-9
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

  LOSS PER SHARE

     Digex has applied the provisions of SFAS No. 128, EARNINGS PER SHARE, which
establishes standards for computing and presenting earnings per share. Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period.

  COMPREHENSIVE INCOME

     In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, REPORTING COMPREHENSIVE INCOME. This standard requires that total
comprehensive income (loss) be disclosed with equal prominence as net income.
Comprehensive income is defined as changes in stockholder's equity exclusive of
transactions with owners, such as capital contributions and dividends. Digex
adopted this standard in 1998 and implemented the standard for all years
presented herein. Digex's only component of accumulated other comprehensive
income for 2000 resulted from foreign currency translation. Comprehensive losses
were equal to net losses for 1999 and 1998.

   FOREIGN CURRENCY TRANSLATION

     The financial statements of foreign subsidiaries have been translated into
U.S. dollars in accordance with SFAS No. 52, FOREIGN CURRENCY TRANSLATION. All
balance sheet accounts have been translated using the exchange rates in effect
at the balance sheet date. Income statement amounts have been translated using
the average exchange rate for the period. Foreign currency translation
adjustments are reported as a component of accumulated other comprehensive
income within stockholders' equity. The gains and losses of $0.07 million
resulting from foreign currency transactions are reported in the results of
operations in 2000.

 CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially expose Digex to credit risk consist
primarily of cash and cash equivalents, restricted investments and accounts
receivable.

     Digex places its cash and temporary cash investments with high-quality
institutions. Fair value of the restricted investment approximates the cost due
to the short period of time to maturity.

     Accounts receivable are due from commercial entities to whom credit is
extended based on evaluation of the customer's financial condition, and in
certain cases collateral is required. Anticipated credit losses are provided for
in the consolidated financial statements and have been within management's
expectations for all periods presented. As of December 31, 2000, Digex does not
have any significant concentrations of business transacted with a particular
customer, supplier or lender that could, if suddenly eliminated, severely impact
its operations.


                                      F-10
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

   CHANGE IN ACCOUNTING PRINCIPLE

    Effective January 1, 2000, Digex changed its method of accounting for
revenue recognition in accordance with Staff Accounting Bulletin No. 101 ("SAB
101"), REVENUE RECOGNITION IN FINANCIAL STATEMENTS. Historically, Digex has
recognized installation revenue, in accordance with industry practice, upon
completion of the managed Web hosting solution. The direct costs associated with
the installation were expensed as incurred. Under the new accounting method
adopted retroactive to January 1, 2000, Digex now recognizes installation
revenue and related direct incremental costs of performing the installation over
the contract term (generally 24 months).

     The cumulative effect of the change on prior years resulted in a net charge
of $0.2 million ($5.3 million revenue less related direct incremental costs),
which is included in the Consolidated Statement of Operations for the year ended
December 31, 2000. The effect of the change on the year ended December 31, 2000
was to increase net loss before the cumulative effect of the accounting change
by $0.25 million (less than $0.01 per share). For the year ended December 31,
2000, Digex recognized revenue of $4.6 million and direct incremental costs of
$4.4 million that was included in the cumulative effect adjustment as of January
1, 2000. With the adoption of SAB 101, there was no economic impact to Digex's
business operations or cash flows. There was also no material effect to Digex's
consolidated financial statements. The pro forma amounts presented in the
Consolidated Statements of Operations were calculated assuming the accounting
change was made retroactively to prior periods.

   RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2000, the FASB issued SFAS No. 138, ACCOUNTING FOR CERTAIN
DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES, an amendment of SFAS No.
133, which is effective for fiscal years beginning after June 15, 2000. Digex
anticipates that the adoption of SFAS No. 133, as amended, will not have a
significant effect on its consolidated financial statements.


2.  RELATED PARTY CORPORATE ALLOCATIONS

     Prior to August 4, 1999, Digex utilized the central cash management systems
of Business Internet and Intermedia. Cash requirements during these periods were
satisfied by cash transactions and transfers that were accounted for through an
intercompany account. In addition, Intermedia charged Digex for identifiable
corporate and operating expenses, such as network cost and corporate overhead
cost. Intercompany account balances for periods prior to July 29, 1999 have been
treated as permanent contributions and have been reflected as a component of
owner's net investment in the accompanying consolidated financial statements.


                                      F-11
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The following table summarizes corporate charges and allocations included in the
accompanying consolidated financial statements (in thousands):

<Table>
<Caption>
    STATEMENT OF OPERATIONS CAPTION           1999           1998
    --------------------------------      -------------  ------------
<S>                                            <C>          <C>
Cost of operations......................       $ 9,190      $  6,494
Cost of services........................           494         1,320
Selling, general and administrative.....        18,123         2,204
                                          -------------  ------------
                                               $27,807      $ 10,018
                                          =============  ============
</Table>

     Amounts presented for 1999 in the table above include expenses recorded as
a result of certain related party agreements with Intermedia. Management
believes that the allocation methodology applied is reasonable. However, it was
not practicable to determine whether the allocated amounts represent amounts
that would have been incurred on a standalone basis. Explanations of the
composition and the method of allocation for the above captions are as follows:

  COST OF OPERATIONS

     Allocated costs within this caption were the costs of telecommunications
backbone circuits. These costs were allocated to Digex based upon circuit usage
and rate information.

  COST OF SERVICES

     Allocated costs within this caption were the costs associated with two data
centers (maintenance, utilities and support and employment costs for network
engineering and support, and certain other overhead). These costs were allocated
based upon the employee base.

  SELLING, GENERAL AND ADMINISTRATIVE

     Allocated costs within this caption were the costs of human resources,
information systems services, accounting and back office support, executive
salaries and other general and administrative costs, including rent. All costs
except accounting and back office support were allocated based upon the employee
base. Accounting and back office support were allocated based upon the relative
percentage of monthly recurring revenues.

     Refer to Note 12 to the consolidated financial statements for additional
related party transactions and agreements.


                                      F-12
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

3.  PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following (in thousands):

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                        -------------------------------
                                                            2000              1999
                                                        --------------    -------------
<S>                                                         <C>               <C>
     Buildings .......................................      $  30,178         $ 17,344
     Electronics and computer equipment...............        276,587          126,389
     Computer software................................         54,845           29,053
     Furniture and office equipment...................          8,532            2,427
     Leasehold improvements ..........................         84,485           61,981
                                                        --------------    -------------
                                                              455,627          237,194
     Less accumulated depreciation and amortization...       (105,652)         (31,291)
                                                        --------------    -------------
                                                            $ 348,975         $205,903
                                                        ==============    =============
</Table>

     Property and equipment included buildings, electronics and computer
equipment, and furniture and office equipment of $30.5 million and $20.3 million
at December 31, 2000 and 1999, respectively, that were capitalized pursuant to
the terms of capital lease agreements. Accumulated amortization of assets
recorded under capital leases amounted to $3.4 million and $1.3 million at
December 31, 2000 and 1999, respectively. Amortization of these assets is
included in depreciation and amortization expense.

4.  INTANGIBLE ASSETS

     Intangible assets consisted of the following (in thousands):

<Table>
<Caption>
                                                     DECEMBER 31,
                                         -------------------------------------
                                              2000                 1999
                                         ----------------    -----------------
<S>                                            <C>                   <C>
     Goodwill..........................        $  19,099             $ 19,099
     Trade name........................            9,750                9,750
     Customer list.....................            3,120                3,120
     Developed technologies............            2,720                2,720
     Acquired workforce................            1,253                1,253
                                         ----------------    -----------------

                                                  35,942               35,942
     Less accumulated amortization.....          (12,720)              (8,729)
                                         ----------------    -----------------
                                               $  23,222             $ 27,213
                                         ================    =================
</Table>

     Amortization expense amounted to $4.0 million in 2000, $4.0 million in 1999
and $3.2 million in 1998.


                                      F-13
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

5.  SERIES A CONVERTIBLE PREFERRED STOCK

     In January 2000, Digex sold 100,000 shares of its non-voting preferred
stock, designated as Series A Convertible Preferred Stock, with detachable
warrants to purchase 1,065,000 shares of its Class A common stock, for an
aggregate of $100.0 million, of which $15.0 million was in the form of equipment
purchase credits. Of the $15.0 million of equipment purchase credits,
approximately $2.7 million was used for equipment purchases in 2000. The
warrants can be exercised at any time on or before January 12, 2003 at an
initial price of $57.00 per share, subject to certain adjustments. The proceeds
from the offering were allocated between the preferred stock and the warrants
based upon their relative fair values.

     In the event of liquidation, each share of preferred stock is entitled to a
liquidation preference of $1,000 per share before any amount may be paid to
common stockholders. The holders of the preferred stock are also not entitled to
receive dividends. Digex may not issue any stock with the same or senior
preferences or priorities to this series without the consent of the majority of
its preferred stockholders.

     Each share of preferred stock is convertible into shares of Class A common
stock at a conversion price of $68.40 per share, subject to certain adjustments,
for a total of approximately 1,462,000 shares of Class A common stock. Unless
earlier converted, on January 12, 2005, each share of preferred stock will
automatically convert into the number of shares of Class A common stock equal to
$1,000 divided by the average of the closing prices of the Class A common stock
for the twenty consecutive trading days prior to January 12, 2005.

     Subject to the legal availability of funds, the preferred stock is
redeemable in cash at the option of the holders after January 12, 2004 or upon a
change of control of Digex at a price of $1,000 per share if the redemption is
then permitted under those indentures of Digex and Intermedia which existed on
January 10, 2000. If the restrictions under these agreements terminate at an
earlier date, the holders may require Digex to redeem the preferred stock before
entering into an agreement which would restrict the ability to redeem the
preferred stock. Digex is not required to make sinking fund payments with
respect to the preferred stock.

     See also Note 17, "Restatement", to the consolidated financial statements.

6.  STOCKHOLDERS' EQUITY

     In connection with the recapitalization, Digex filed a Certificate of
Incorporation and certain amendments in the state of Delaware. Pursuant to the
Certificate, as amended, the number of authorized shares of common stock is
150,000,000 (including 100,000,000 Class A shares and 50,000,000 Class B shares)
and the number of authorized shares of preferred stock is 5,000,000 shares. The
Class A and Class B common stock are identical in all respects except that the
Class A is entitled to one vote for each share and the Class B is entitled to
ten votes for each share.

     On August 4, 1999, Digex sold 11,500,000 shares of its Class A Common Stock
in an initial public offering (also referred to as the "Offering"). The shares
sold represented approximately 18.7% of the


                                      F-14
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

aggregate number of shares of Class A and Class B Common Stock then outstanding.
After the Offering, Intermedia retained a 97.8% voting interest in the Company.
The net proceeds from the Offering were approximately $178.9 million and could
be used only to purchase telecommunications related assets due to restrictions
in Intermedia's debt instruments.

     On February 16, 2000, Digex completed a public offering of 12,650,000
shares of Class A Common Stock. Digex sold 2,000,000 shares of Class A Common
Stock and received net proceeds of approximately $171.6 million. Intermedia sold
10,650,000 shares of Class B Common Stock. The Class B Common Stock sold by
Intermedia automatically converted into Class A Common Stock at the closing of
the offering. Each share of Class B Common Stock is entitled to 10 votes while
each share of Class A Common Stock is entitled to one vote. As a result, while
Intermedia owns approximately 61.6% of Digex's equity interests, it controls
approximately 94.1% of Digex's voting interest as of December 31, 2000.

7. DEFERRED COMPENSATION

     Since July 29, 1999, Digex granted options to purchase 1,241,250 shares
(net of 188,750 forfeited options) of Class A Common Stock under the Digex Long
Term Incentive Plan to certain employees of Digex at exercise prices below
market value. Digex recorded deferred compensation of $4.2 million in 2000 and
$13.5 million in 1999, a separate component of stockholders' equity, to be
expensed over the four-year vesting period of the options. Deferred compensation
was reduced by $2.1 million in the year ended December 31, 2000 for forfeited
stock options. Deferred compensation expense of $4.1 million and $1.3 million
was recorded during the years ended December 31, 2000 and 1999, respectively.

8. EMPLOYEE BENEFIT PLANS

   STOCK-BASED COMPENSATION PLAN

     Under the provisions of the Intermedia 1996 Long-Term Incentive Plan (1996
Plan), certain employees and directors of Digex were granted options to buy
shares of Intermedia common stock, generally at market value with terms of five
to ten years.

     The Digex Long-Term Incentive Plan adopted on July 23, 1999 (1999 Plan) and
administered by the compensation committee of the Board of Directors permits
awards of stock, stock options, stock appreciation rights, restricted stock and
other stock-based awards as incentives to current and prospective employees,
officers, directors and consultants, and those of Digex's subsidiaries or of any
person that owns over 50% of the voting power of our authorized and outstanding
voting shares. Stock options are generally vested over a four-year period for
officers and employees. Exercisable options expire ten years following the date
of the grant.

     On June 1, 2000, a majority of Digex stockholders ratified the Board's
amendment to the 1999 Plan, increasing the aggregate number of shares of Class A
Common Stock authorized for issuance under the 1999 Plan to 15,000,000 shares.
As of December 31, 2000, the Board has 6,677,408 shares of Common


                                      F-15
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Stock reserved for issuance to employees, officers, directors, and consultants
of Digex pursuant to the 1999 Plan.

     The following table summarizes the stock option activity related to
employees of Intermedia and Digex:

<Table>
<Caption>
                                                      NUMBER OF       PER SHARE
                                                       SHARES        OPTION PRICE
                                                   --------------   --------------
<S>                                                   <C>            <C>
Outstanding Intermedia options at December 31, 1997      359,988      $ 0.26-10.82
     Granted ......................................      130,900       16.38-37.00
     Exercised ....................................      (87,521)       0.26-10.82
     Canceled .....................................     (183,187)       0.26-37.00
                                                   --------------   --------------

Outstanding Intermedia options at December 31, 1998      220,180      $ 0.26-37.00
                                                   ==============   ==============

Digex options granted on  July 29, 1999 ...........    5,031,500      $ 5.00-17.00
     Granted ......................................    1,360,170        5.00-54.19
     Exercised ....................................           --                --
     Canceled .....................................     (687,650)      17.00-54.19
                                                   --------------   --------------

Outstanding Digex options at December 31, 1999 ....    5,704,020        5.00-54.19
     Granted ......................................    4,545,993      11.00-139.38
     Exercised ....................................     (396,543)       5.00-29.13
     Canceled .....................................   (1,927,421)      5.00-139.38
                                                   --------------   --------------

Outstanding Digex options at December 31, 2000 ....    7,926,049     $ 5.00-139.38
                                                   ==============   ==============

Exercisable Intermedia options at December 31, 1998       75,244     $  0.26-37.00
                                                   ==============   ==============
Exercisable Digex options at December 31, 1999 ....       30,000     $       17.00
                                                   ==============   ==============
Exercisable Digex options at December 31, 2000 ....    1,320,256     $  5.00-54.19
                                                   ==============   ==============
</Table>

     Digex has adopted the disclosure only provisions of SFAS No. 123,
ACCOUNTING FOR STOCK COMPENSATION. Pro forma net loss and net loss per share,
assuming that Digex had applied the fair value model (Black-Scholes Pricing
Model) required by SFAS No. 123, is as follows (in thousands):


                                      F-16
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<Table>
<Caption>
                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                            -------------------------------------------------------
                                                   2000              1999                1998
                                            -----------------  ----------------   -----------------
<S>                                            <C>                <C>                 <C>
     Net loss............................      $ (185,803)        $ (71,800)          $ (16,828)
     Net loss per share..................      $    (2.93)        $   (1.31)          $   (0.34)
</Table>

     The following table summarizes the significant assumptions used in
developing the information:

<Table>
<Caption>
                                                                   YEAR ENDED
                                                                  DECEMBER 31,
                                                  ----------------------------------------------
                                                       2000             1999           1998
                                                  --------------   --------------  -------------
<S>                                                  <C>              <C>            <C>
          Risk-free interest rate.............        5.5%             5.6%           5.4%
          Volatility factor....................       1.379             .60            .53
          Dividend yield.......................        --               --             --
          Weighted average life................      5 years          5 years        5 years
</Table>

     The following table summarizes the weighted average exercise prices of
option activity:

<Table>
<Caption>
                                                          YEAR ENDED
                                                         DECEMBER 31,
                                               -------------------------------
                                                    2000             1999
                                               --------------   --------------
<S>                                               <C>               <C>
       Balance at beginning of year..........     $ 18.45           $  --
            Granted..........................       78.36             18.92
            Exercised........................       15.55              --
            Canceled.........................       60.63             22.76
       Balance at end of year................       42.55           $ 18.45
</Table>

     The weighted average exercise price of exercisable options was $16.60 in
2000, $17.00 in 1999, and $8.07 in 1998. The per share weighted average fair
value of options granted were $40.66 in 2000, $12.67 in 1999, and $14.84 in
1998.

     Under the 1999 Plan, options were granted to certain employees of Digex at
exercise prices below the fair market value of Digex common stock at the date of
the grant. The options granted during 2000 and 1999 are summarized as follows:


                                      F-17
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<Table>
<Caption>
                                                            2000                              1999
                                                ------------------------------    -----------------------------
                                                                  Weighted                         Weighted
                                                   Weighted        average          Weighted        average
                                                   average        exercise           average       exercise
                                                  fair value        price          fair value        price
                                                --------------- --------------    -------------- --------------
<S>                                                 <C>             <C>               <C>            <C>
   Exercise Price = Fair Market Value ..........    $  64.60        $ 79.30           $ 12.13        $ 21.33
   Exercise Price > Fair Market Value...........          --             --              8.47          17.00
   Exercise Price < Fair Market Value...........       57.69          41.15             15.63           9.85
                                                    $  40.66        $ 78.36           $ 12.67        $ 18.92
</Table>

     The range of option exercise prices for options outstanding as of December
31, 2000 was $5.00 to $139.38. The range of exercise prices for options is wide
due primarily to the increasing price of Digex common stock over the period in
which the option grants were awarded. The options outstanding as of December 31,
2000 are summarized in ranges as follows:

<Table>
<Caption>
                                               Options Outstanding                     Options Exercisable
                                -------------------------------------------------- -----------------------------
                                                    Weighted    Weighted average                     Weighted
                                                    average         remaining                        average
                                                    exercise    contractual life                     exercise
Range of exercise prices             Shares          price         (in years)          Shares         price
------------------------------- ----------------- ------------- ------------------ --------------- -------------
<S>                                <C>              <C>               <C>            <C>               <C>
$ 5.00 -- $ 10.00                    941,156         $ 5.29           8.62             284,736         $ 5.22
$17.00 -- $ 17.00                  2,673,461          17.00           8.58             855,246          16.61
$21.18 -- $ 48.18                  1,646,650          40.60           9.30             155,209          31.38
$54.18 -- $ 74.94                  1,831,702          67.79           9.46              25,065          54.19
$78.00 -- $139.38                    833,080         115.02           9.23                  --             --
                                ----------------- ------------- ------------------ --------------- -------------
                                   7,926,049        $ 42.55           9.01           1,320,256         $16.60
</Table>

   RETIREMENT PLAN

     Digex has established a 401(k) plan. Employees 21 years or older with at
least three months of service are eligible to participate in the plan.
Participants may elect to contribute, on a tax-deferred basis, up to 15% of
their compensation, not to exceed $10,500 during the taxable year. Digex will
match one-half of a participant's contribution, up to a maximum of 7% of the
participant's compensation. Digex's matching contribution fully vests after
three years of service. Digex's contributions to the plan were $1.1 million
in 2000, $0.5 million in 1999, and $0.2 million in 1998.

                                      F-18
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9.  INCOME TAX INFORMATION

     Digex files a consolidated income tax return with its wholly owned domestic
subsidiary. Separate returns are filed for its foreign subsidiaries. The
consolidated tax provision, therefore, is based upon the separate tax provisions
of the domestic and foreign jurisdictions.

     Domestic and foreign loss before the benefit from income taxes consists of
the following (in thousands):

<Table>
<Caption>
                                                    YEAR ENDED
                                                   DECEMBER 31,
                                  ----------------------------------------------
                                       2000           1999             1998
                                  --------------- --------------  --------------
<S>                                   <C>             <C>             <C>
      Domestic .................      $ (135,171)     $ (69,838)      $ (16,740)
      Foreign ..................          (7,764)            --              --
                                  --------------- --------------  --------------

                Total ..........      $ (142,935)     $ (69,838)      $ (16,740)
                                  =============== ==============  ==============
</Table>

     Income tax benefit for the tax years ended December 31 is comprised of the
following (in thousands):

<Table>
<Caption>
                                                    YEAR ENDED
                                                   DECEMBER 31,
                                   ---------------------------------------------
                                       2000           1999            1998
                                   -------------- -------------- ---------------
<S>                                       <C>          <C>               <C>
       Current...................         $   --         $   --          $   --
       Deferred:
                 Federal.........             --          4,244             144
                 State...........             --            595              15
                                   -------------- -------------- ---------------
                                          $   --       $  4,839          $  159
                                   ============== ============== ===============
</Table>


                                      F-19
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The following table reconciles the assumed statutory tax rate with the
effective rate to income tax expense:

<Table>
<Caption>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                      -----------------------------------------------
                                                          2000             1999            1998
                                                      --------------   --------------  --------------
<S>                                                         <C>              <C>         <C>
     Tax benefit at statutory rate.................          (34.0)%          (34.0)%     (34.0)%
     Reconciling items:
          State income taxes, net..................           (3.2)%           (3.2)%      (3.1)%
           Non-deductible items ...................            0.7%             3.3%         --
          Change in valuation allowance............           36.3%            19.1%       32.0%
          Foreign taxes ...........................            0.2%              --          --
          Other items..............................             --              7.8%        4.1%
                                                      --------------   --------------  --------------
     Effective tax rate............................           (0.0)%           (7.0)%      (1.0)%
                                                      --------------   --------------  --------------
</Table>

     At December 31, 2000 and 1999, Digex had temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the deferred
tax assets and liabilities were as follows (in thousands):

<Table>
<Caption>
                                                                              DECEMBER 31,
                                                                   ---------------------------------
                                                                        2000              1999
                                                                   ---------------   ---------------
<S>                                                                  <C>               <C>
Deferred tax liabilities:
     Depreciation and amortization .............................     $     (6,485)     $       --
     Identifiable intangible assets ............................           (3,748)           (4,299)
                                                                   ---------------   ---------------
        Total deferred tax liabilities..........................          (10,233)           (4,299)
Deferred tax assets:
     Net operating loss carryforwards - U.S. ...................           74,567            18,449
     Net operating loss carryforwards - Foreign.................            2,320              --
     Allowance for bad debts....................................            2,289             1,636
     Depreciation and amortization .............................             --               1,867
     Contingent tax accrual ....................................              266               352
     Deferred revenue ..........................................            4,410              --
     Stock-based compensation...................................            1,630               487
                                                                   ---------------   ---------------
        Total deferred tax assets...............................           85,482            22,791
        Less: valuation allowance...............................          (75,249)          (18,492)
                                                                   ---------------   ---------------
             Net deferred tax asset.............................           10,233             4,299
                                                                   ---------------   ---------------

Net deferred tax asset (liability)..............................     $       --        $       --
                                                                   ===============   ===============
</Table>


                                      F-20
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     As a result of the recapitalization of Digex on April 30, 1999, the net
operating loss carryforwards of Digex as of December 31, 1998 did not transfer
to Digex after the recapitalization. Accordingly, a net deferred tax liability
of $4.8 million relating to identifiable intangible assets was recorded as a
result of the recapitalization on April 30, 1999. Digex generated net operating
losses and non-deductible expenses in excess of the deferred tax liability after
the recapitalization and recorded the deferred tax asset associated with the
future deductible items. Accordingly, Digex recorded a $4.8 million deferred tax
benefit during the year ended December 31, 1999.

     SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $75.2 million valuation allowance at December 31, 2000 is
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The increase in the valuation allowance for the current
year is $56.8 million. At December 31, 2000, Digex's net operating loss
carryforwards for income tax purposes are approximately $205.2 million, with
expiration periods beginning in 2019 through 2020.

10.  LOSS PER SHARE

     On April 30, 1999, Digex issued 1,000 shares of Class B Common Stock to
Intermedia in connection with the contribution of assets to Digex. Loss per
share is presented on a pro forma basis prior to that period assuming that the
common shares issued in connection with the recapitalization on April 30, 1999
were outstanding for all periods of Digex presented. On July 23, 1999, the Board
of Directors authorized a 50,000-for-one split of the Class B Common Stock,
effective as of August 4, 1999 and paid in the form of a stock dividend for
shares outstanding as of July 8, 1999. The basic and diluted net loss per common
share were calculated assuming that the stock split was effective for all
periods presented. All share information presented gives effect to the stock
split.

     The following table sets forth computation of basic and diluted loss per
share of common stock (amounts in thousands, except share and per share
information):

<Table>
<Caption>
                                                                                   YEAR ENDED
                                                                                  DECEMBER 31,
                                                              ------------------------------------------------------
                                                                    2000               1999               1998
                                                              ----------------   ----------------   ----------------
<S>                                                              <C>                 <C>                <C>
      Net loss, as reported................................      $   (143,101)       $   (64,999)       $   (16,581)
                                                              ================   ================   ================
      Weighted average number of common shares.............        63,404,839         54,726,027         50,000,000
                                                              ================   ================   ================
      Loss per share:
           basic and diluted...............................      $      (2.26)       $     (1.19)       $     (0.33)
                                                              ================   ================   ================
</Table>

     Convertible securities (convertible preferred stock, warrants, and stock
options) were excluded from the computation of diluted loss per share because
assumed exercise or conversion would be anti-dilutive.


                                      F-21
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

11.  COMPREHENSIVE LOSS

     The following table reflects the calculation of comprehensive losses for
the year ended December, 31, 2000, 1999, and 1998 (in thousands):

<Table>
<Caption>
                                                         2000         1999         1998
                                                       ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>
Net loss applicable to common stockholders .........   $(143,101)   $ (64,999)   $ (16,581)
                                                       ---------    ---------    ---------

Other comprehensive loss:
     Foreign currency translation adjustments ......         (38)          --           --
                                                       ---------    ---------    ---------

Comprehensive loss applicable to common stockholders   $(143,139)   $ (64,999)   $ (16,581)
                                                       =========    =========    =========
</Table>

12.  RELATED PARTY AGREEMENTS

   GENERAL AND ADMINISTRATIVE SERVICES AGREEMENT

     On April 30, 1999, Digex entered into a General and Administrative Services
Agreement (the "G&A Agreement") with Intermedia. Under the terms of the G&A
Agreement, as amended to date, Intermedia provided Digex with back office and
administrative services such as human resources, finance and accounting, tax
services, investor relations, treasury, and information management services.
This agreement has an initial term of two years and expires in April 2001. The
charge for these services was $15.0 million in 2000 and $16.5 million in 1999.

     Rates charged to Digex in 1999 and 1998 for these services prior to the G&A
Agreement are believed to be consistent with the allocations in the accompanying
financial statements. Rates for services not previously provided to Digex (e.g.
investor relations) were based upon Intermedia and Digex's best estimate of the
fair value of those services.

   NETWORK SERVICES AGREEMENTS

     Pursuant to three Network Services Agreements between Intermedia and Digex
entered into in July 1999, Intermedia has been providing Digex with east and
west coast Internet transit, Internet access and managed firewall services.
These agreements have an initial term of two years and expire in July 2001. The
charges for these services amounted to $5.0 million in 2000 and $7.8 million in
1999. Rates charged to Digex in 1999 and 1998 prior to the Network Services
Agreements were generally consistent with rates incurred during the periods
presented in the accompanying consolidated financial statements.

   ASSET MIGRATION AGREEMENT


                                      F-22
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

    On June 1, 2000, Digex entered into an Asset Migration Agreement with
Intermedia. Under the terms of the agreement, Digex purchased certain assets,
including certain licensed third-party software, machinery, and equipment from
Intermedia at cost to provide independent managed firewall services. In
connection with the purchase of firewall-related assets from Intermedia, the
Managed Firewall Services Agreement between Digex and Intermedia was terminated.
Digex paid a purchase price of $4.5 million for the net book value of these
assets and services on June 30, 2000, the closing date of the agreement. Under
the Asset Migration Agreement, Digex has made equal monthly installments of $0.9
million for Intermedia's support and consultation for the six months ended
December 31, 2000.

  EXPENSE SHARING AND INDEMNITY ARRANGEMENTS

    On January 24, 2000, Digex agreed with Intermedia to allocate and pay the
expenses of its February 2000 public offering, including any amounts arising
from any indemnification or contribution obligations, in proportion to the
number of shares of Class A Common Stock sold by Digex and by Intermedia.
Expenses of $0.3 million were allocated to Digex in 2000 and were netted against
offering proceeds.

SALE OF TELECOMMUNICATIONS RELATED ASSETS TO INTERMEDIA

     Digex entered into three Use of Proceeds Agreements with Intermedia on June
2, 1999, January 11, 2000, and January 24, 2000, respectively, to sell to
Intermedia certain telecommunications related assets that were purchased by
Digex with the net proceeds of certain offerings of Digex securities and the
cash proceeds of the investments by Microsoft and Compaq. The assets were sold
to Intermedia at Digex's cost. The proceeds from the sale of telecommunications
related assets to Intermedia were approximately $33.7 million and $25.3 million
during the years ended December 31, 2000 and 1999, respectively. These proceeds
were unrestricted and used to fund Digex's operating expenses. Net proceeds from
the equity offerings were fully used as of December 31, 2000.

  GUARANTY AGREEMENT

     On October 31, 2000, Intermedia increased the commitments available to it
under its Revolving Credit Facility ("Credit Facility") from $100.0 million to
$350.0 million. As a subsidiary of Intermedia, Digex will be a limited guarantor
under the Credit Facility to the greater of $90.0 million or the amounts
borrowed by Digex. The Credit Facility is also fully guaranteed by WorldCom. At
December 31, 2000, Intermedia had $113.0 million outstanding under its Credit
Facility.

  SOFTWARE, EQUIPMENT AND SERVICES PURCHASED FROM MICROSOFT AND COMPAQ

     In January 2000, Digex entered into strategic development agreements and
joint marketing arrangements with Microsoft and Compaq. Digex and Microsoft will
work together to advance Digex's capabilities to more rapidly install, manage
and upgrade large numbers of Microsoft Windows-based servers for Web site and
application hosting. Digex and Compaq will work jointly to streamline the order,
delivery


                                      F-23
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

and installation of Compaq's server hardware and storage devices. In connection
with these agreements, Microsoft and a subsidiary of Compaq made a $100.0
million equity investment in Digex, of which $85.0 million was paid in cash and
$15.0 million was paid in the form of equipment credits from Compaq.

     Digex has in the past purchased and expect to continue to purchase computer
hardware, software and certain consulting services from both Microsoft and
Compaq pursuant to certain arrangements negotiated prior to or in connection
with the investment by Microsoft and Compaq in Digex. Digex purchased $2.7
million in 2000, $3.1 million in 1999, and $1.1 million in 1998 for products and
services provided by Microsoft. Digex purchased $26.6 million (excluding $2.7
million of equipment credits) in 2000, $18.7 million in 1999, and $7.5 million
in 1998 for products and services provided by Compaq.


                                      F-24
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

13.  LEASE COMMITMENTS AND NOTE PAYABLE

     On June 29, 2000, Digex entered into a ten-year lease commencing in
September 2000 for its new corporate headquarters facility in Laurel, Maryland.
The lease agreement requires an initial security deposit of $2.0 million in the
form of a letter of credit. This letter of credit may be reduced at the
commencement of the seventh lease year to an amount equal to the then current
one month's base rent if certain conditions are met annually prior the seventh
year of the lease. Property and equipment include the present value of the
capital lease which is amortized over the term of the lease.

     Digex leases office space and vehicles under capital lease arrangements.
Digex also leases office space and office equipment under operating leases.
Future noncancelable lease payments under Digex's lease commitments at December
31, 2000 are as follows (in thousands):

<Table>
<Caption>
                                              CAPITAL            OPERATING
                                              LEASES              LEASES
                                          ---------------    -----------------
<S>                                             <C>                 <C>
Future minimum lease payments:
Year ending December 31:
     2001...............................        $  4,374            $   3,921
     2002...............................           4,483                2,925
     2003...............................           4,716                2,401
     2004...............................           4,642                2,378
     2005...............................           4,774                2,014
Thereafter..............................          19,920                3,129
                                          ---------------    -----------------
                                                  42,909            $  16,768
                                                             =================
Less amount representing interest  .....         (13,907)
                                          ---------------
Present value of lease payments ........          29,002
Current portion of capital leases.......          (1,871)
                                          ---------------
Noncurrent portion of capital leases....       $  27,131
                                          ===============
</Table>

     Rent expense amounted to $3.9 million, $2.0 million, and $0.8 million for
the years ended December 31, 2000, 1999, and 1998, respectively. Lease payments
under operating leases include certain rent allocated to Digex in 1999.

     Digex expects to enter into a master lease and financing agreement with a
vendor for a line of credit of up to $25.0 million to facilitate the leasing of
computer hardware and software in the future. The initial term of the agreement
ranges from 24 to 36 months. Digex has an option to purchase the equipment at
the end of the initial lease term.


                                      F-25
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     A note payable of $4.7 million was issued in 1999 in connection with the
purchase of software. The note accrues at an effective interest rate of 7.00%
per annum and matures in January 2002. Principal repayments until maturity are
as follows (in thousands):

<Table>
<S>                                               <C>
           Year ending December 31:
                2001.......................       $   2,772
                2002.......................           1,435
                                             ---------------
           Total ..........................       $   4,207
                                             ===============
</Table>

     Interest cost incurred and charged to expense related to the note payable
was $0.3 million in 2000 and $0.2 million in 1999.

14.  CONTINGENCIES

     On September 5, 2000, and thereafter, Intermedia, Digex, the directors of
Digex, and in some cases, WorldCom, were named as defendants in a total of
thirteen lawsuits in the Court of Chancery of the State of Delaware in and for
New Castle County. Of those thirteen lawsuits, eight were brought as class
actions on behalf of Digex public shareholders, three were brought as derivative
actions, purportedly on behalf of Digex, and two advanced both class action and
derivative claims. On October 17, 2000, the Court ordered that all thirteen
lawsuits to be consolidated into a single combined derivative and class action.

     In general, the complaints advanced substantially similar allegations that
the defendants breached their fiduciary duties to the class members by acting to
further their own interests at the expense of Digex public stockholders, by
engaging in self-dealing and by failing to act in good faith towards the Digex
public stockholders. The complaints claimed that such alleged wrongdoing caused
irreparable harm to such stockholders. In addition, four of the complaints
alleged that the Digex board members who are also directors or executive
officers of Intermedia conferred a substantial benefit on Intermedia at the
expense of the Digex public stockholders by voting to waive application of
Section 203 of the Delaware General Corporation Law to future transactions
between WorldCom and Digex. These complaints also alleged that WorldCom aided
and abetted the wrongdoing of Intermedia's and the Intermedia-affiliated
directors of Digex. The complaints sought injunctive relief and unspecified
damages.

     On February 15, 2001, a memorandum of understanding was executed on behalf
of all interested parties in the consolidated actions, setting forth an
agreement in principle providing for the settlement of all actions in their
entirety. WorldCom will make a settlement payment of WorldCom common stock
having a total value of $165.0 million for distribution to Digex common stock
holders. One half of the settlement fund net of plaintiffs' attorneys fees will
be distributed to record holders of Digex common stock on September 1, 2000. The
balance of the settlement fund net of attorneys' fees will be paid to record
holders of Digex stock at the time of the consummation of the merger. Neither
Intermedia nor its affiliates will be entitled to any distribution from the
settlement fund. The merger agreement between Intermedia and WorldCom will be
amended to change the consideration to be paid to Intermedia


                                      F-26
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

shareholders in connection with the merger. All fees and expenses of all
plaintiffs and all counsel representing all plaintiffs in the action will also
be paid out of that settlement fund. In connection with the proposed settlement,
WorldCom will reimburse Digex for certain fees and expenses incurred by Digex
associated with the merger and the consolidated lawsuit in an amount not to
exceed $15.0 million. WorldCom has also agreed to enter into certain commercial
agreements with Digex. A further provision of the settlement will make Section
203 of the Delaware General Corporation Law inapplicable to future transactions
between WorldCom and Digex. The proposed settlement would, if approved by the
Court, fully resolve all claims in the lawsuit.

     On March 2, 2001, Digex, WorldCom, and Intermedia entered into a definitive
Stipulation of Settlement with all relevant parties to settle all claims related
to the consolidated class action and derivative action in accordance with the
terms agreed to in the February 15, 2001 memorandum of understanding. The Court
has entered an order directing that notice of the settlement be sent to members
of the class and has scheduled a settlement hearing to be held on April 6, 2001
in the Delaware Court of Chancery in Wilmington, Delaware. The final settlement
of the suit is subject to the satisfaction of certain conditions as well as
final court approval. Based on the memorandum of understanding and the
Stipulation of Settlement, Digex does not expect to have any future liability
from the outcome of this litigation.

     Digex also does not believe that there are any other pending or threatened
legal proceedings that, if adversely determined, would have a material adverse
effect on Digex's results of operations, cash flows, or financial position.

15.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 2000 and 1999 (in thousands):

<Table>
<Caption>
                                                                          2000
                                 ---------------------------------------------------------------------------------------
                                          FIRST                    SECOND                     THIRD             FOURTH
                                     As          As           As           As            As          As
                                 previously   restated    previously    restated     previously   restated
                                  reported       (1)       reported        (1)        reported       (1)
                                 ---------    ---------    ---------    ---------    ---------    ---------    ---------
<S>                              <C>          <C>          <C>          <C>          <C>          <C>          <C>
Revenues .....................   $  27,974    $  25,796    $  42,222    $  40,368    $  46,531    $  43,979    $  57,942
Operating expenses ...........      56,677       54,568       80,119       78,325       87,343       84,875      100,930
                                 ---------    ---------    ---------    ---------    ---------    ---------    ---------
Loss from operations .........     (28,703)     (28,772)     (37,897)     (37,957)     (40,812)     (40,896)     (42,988)
Other income (expense) .......       3,057        3,057        3,472        3,472         (393)        (393)       1,542
Income tax benefit ...........          --           --           --           --           --           --           --
                                 ---------    ---------    ---------    ---------    ---------    ---------    ---------
Loss before cumulative effect
  of change in accounting
  principle ..................     (25,646)     (25,715)     (34,425)     (34,485)     (41,205)     (41,289)     (41,446)
Cumulative effect of change in
   accounting principle ......          --         (166)          --           --           --           --           --
                                 ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net loss .....................   $ (25,646)   $ (25,881)   $ (34,425)   $ (34,485)   $ (41,205)   $ (41,289)   $ (41,446)
                                 =========    =========    =========    =========    =========    =========    =========


                                      F-27
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 Loss per Common Share (2):
  basic and diluted ..........   $   (0.41)   $   (0.41)   $   (0.54)   $   (0.54)   $   (0.65)   $   (0.65)   $   (0.65)
                                 =========    =========    =========    =========    =========    =========    =========
</Table>

<Table>
<Caption>
                                                     1999
                                -----------------------------------------------
                                 FIRST        SECOND       THIRD        FOURTH
                                --------     --------     --------     --------
<S>                             <C>          <C>          <C>          <C>
Revenues ...................    $  9,392     $ 12,629     $ 16,111     $ 21,654
Operating expenses .........      17,987       30,482       37,803       45,716
                                --------     --------     --------     --------
Loss from operations .......      (8,595)     (17,853)     (21,692)     (24,062)
Other income (expense) .....          --         (239)         920        1,683
Income tax benefit .........          --        4,839           --           --
                                --------     --------     --------     --------
Net loss ...................    $ (8,595)    $(13,253)    $(20,772)    $(22,379)
                                ========     ========     ========     ========

Loss per Common Share:
    basic and diluted ......    $  (0.17)    $  (0.27)    $  (0.36)    $  (0.36)
                                ========     ========     ========     ========
</Table>

----------
(1)      Restated for the effect of the implementation of SAB 101 (see Note 1).

(2)      Represents loss before cumulative effect of change in accounting
         principle and net loss per common share.


16.  SUBSEQUENT EVENTS

     In January 2001, Digex received a $3.0 million loan from the State of
Maryland Department of Business and Economic Development under the Sunny Day
Fund initiative. The loan is subject to multiple maturity dates, and is
guaranteed by Intermedia. Interest on the unpaid principal balances accrues at
5% per annum. The principal amounts and any accrued interest will be deferred
each year through December 31, 2008 if Digex meets certain annual conditions
regarding the hiring of permanent, full time employees and the expenditures for
the development of a Web hosting facility in Prince George's County, Maryland.
At December 31, 2008, the principal amounts and any accrued interest outstanding
may convert to a grant upon the achievement of certain requirements by Digex.

     Also in January 2001, the Federal Communications Commission approved the
merger between WorldCom and Intermedia on the condition it comply with an
agreement reached with antitrust authorities that WorldCom divest certain
Intermedia assets and operations.

    On March 2, 2001, Digex and certain subsidiaries of WorldCom agreed to enter
into four commercial agreements. These commercial agreements will become
effective at or before the consummation of the Intermedia - WorldCom Merger
pursuant to the merger agreement. The principal terms of the four commercial
agreements are generally described as follows:


                                      F-28
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         --       SALES CHANNEL AGREEMENT. Under this agreement, WorldCom will
                  resell the Digex portfolio of managed Web hosting products. If
                  Digex satisfies certain service level commitments, WorldCom
                  agrees to purchase up to a total of $500.0 million during the
                  period from 2001 through 2003. Digex and WorldCom will share
                  costs and profits generated from the WorldCom sales channel.

         --       FUNDING AGREEMENT. After the completion of the Intermedia -
                  WorldCom Merger, WorldCom's Board of Directors will review the
                  Digex business plans for 2001 and 2002 approved by the Digex
                  Board of Directors. If these business plans are approved by
                  the WorldCom Board of Directors, WorldCom agrees to loan Digex
                  funds for these business plans; the loan rate will be LIBOR
                  plus 300 basis points. Repayment will be made over a four-year
                  period commencing in 2003. However, the funding agreement
                  would not prevent Digex from seeking replacement funding from
                  other sources.

         --       FACILITIES AGREEMENT. Managed Web hosting facilities for Digex
                  will be built into several WorldCom data centers in the United
                  States and around the globe. Digex will lease space from
                  WorldCom at these data centers based on customer demand.

         --       NETWORK AGREEMENT. This agreement permits Digex to purchase
                  bandwidth and connectivity from WorldCom in the United States
                  to support its managed Web hosting activities.

     Digex expects to continue experiencing negative cash flow from operating
and investing activities due to its plans for expansion and the growth of the
business. As described above, Digex has entered into a series of commercial
arrangements with WorldCom. These favorable agreements are subject to
termination if, among other things, the Intermedia-WorldCom Merger is not
completed prior to December 31, 2001. Completion of the Intermedia-WorldCom
Merger is subject to a number of conditions. While Digex believes it is probable
the Intermedia - WorldCom Merger will close, if for any reason it does not,
Digex might no longer have the benefit of the WorldCom commercial agreements or
the funding to be made available by WorldCom for its 2001 and 2002 business
plans. In addition, if the Intermedia - WorldCom Merger did not close,
Intermedia would no longer be able to borrow under its existing credit facility
or note purchase agreement with WorldCom and would unlikely be able to provide
Digex with any additional funding for working capital needs, operating losses or
capital expenditure requirements.

     In the event the Intermedia - WorldCom Merger does not close, Digex's
intention would be to access the capital markets for their necessary funding.
Management has had preliminary discussions with third party sources regarding
potential financing, including vendor financing facilities or other asset backed
secured financing. Based on these discussions, management believes Digex will
have access to capital markets to obtain sufficient funding to continue its
business plans as described above or, at a minimum, in an amount that would
provide sufficient funding to execute a modified or curtailed plan into 2002.


                                      F-29
<Page>

                               DIGEX, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17.  RESTATEMENT

     Digex has restated its consolidated balance sheet and consolidated
statement of stockholders' equity as of December 31, 2000 to reclassify its
Series A convertible preferred stock outside of stockholders' equity. The
result of the reclassification was to reduce additional capital and
stockholders' equity in the amount of $71.6 million (the aggregate fair value
of the outstanding preferred stock at issuance, net of $16.1 million
allocated to the warrants and $12.3 million of available equipment purchase
credits.) The restatement had no effect on Digex's net loss or net loss per
share, total assets or total liabilities for the year ended December 31, 2000.

     As discussed in Note 5, "Series A Convertible Preferred Stock," the holders
of the preferred stock have the right, under certain circumstances, to
require Digex to redeem the preferred stock. Digex will accrete the preferred
stock discount of $16.1 million to the mandatory conversion date in January
2005. The accretion will not have an impact on its business operations or
cash flows. To date, Digex believes that a redemption event is not probable
due to the covenants contained in the indentures of Digex and Intermedia
restricting redemption and the requirement of legal availability of funds,
which would prohibit redemption of the securities.

                                      F-30
<Page>

                               DIGEX, INCORPORATED

                                   SCHEDULE II
                       VALULATION AND QUALIFYING ACCOUNTS

                             (AMOUNTS IN THOUSANDS)

<Table>
<Caption>
                                                               ADDITIONS
                                                          ---------------------
                                             BALANCE AT   CHARGED TO    CHARGED   DEDUCTIONS      BALANCE AT
                                             BEGINNING    COSTS AND    TO OTHER     ------          END OF
             DESCRIPTION                     OF PERIOD     EXPENSES    ACCOUNTS    DESCRIBE         PERIOD
---------------------------------------      ----------   ----------   --------   -----------     ----------
<S>                                           <C>           <C>        <C>        <C>               <C>
For the year ended December 31, 1998:
   Deducted from asset accounts:
     Allowance for doubtful accounts ...      $    369      $  1,491      --      $  1,141 (1)      $    719
                                              ==============================================================
     Allowance for deferred tax accounts            --      $  5,349      --            --          $  5,349
                                              ==============================================================

For the year ended December 31, 1999:
   Deducted from asset accounts:
     Allowance for doubtful accounts ...      $    719      $  4,265      --      $    622 (1)      $  4,362
                                              ==============================================================
     Allowance for deferred tax accounts      $  5,349      $ 13,143      --            --          $ 18,492
                                              ==============================================================

For the year ended December 31, 2000:
   Deducted from asset accounts:
     Allowance for doubtful accounts ...      $  4,362      $ 10,649      --      $ 10,270 (1)      $  4,741
                                              ==============================================================
     Allowance for deferred tax accounts      $ 18,492      $ 56,757      --            --          $ 75,249
                                              ==============================================================
</Table>

----------
(1)      Uncollectible accounts written off, net of recoveries.


                                      F-31