##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549




---

FORM 10-Q

(Mark One)



|  |                                                         
|- | --------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2001

or



|  |                                                          
|- | ---------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from
               to

               .

Commission file number 000-26313

NETWORK PLUS CORP.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                |  |                                   
|--------------------------------------------------------------- |  | ----------------------------------
|                                                               
|                                                               
|                                                               
|                                                               
|Delaware                                                        |  | 04-3430576                        
|                                                               
|                                                               
|                                                               
|                                                               
|(State or Other Jurisdiction of
	Incorporation or Organization) |  | (IRS Employer
	Identification No.)
|41 Pacella Park Drive, Randolph,
	Massachusetts                 |  | 02368                             
|(Address of Principal Executive
	Officer)                       |  | (Zip Code)                        

(781) 473-2000

(Registrants Telephone Number, Including
Area Code)




(Former Name, Former Address and Former Fiscal
Year,


if Changed Since Last Report)


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  
o

The number of shares of the registrants Common Stock
($0.01 par value) outstanding on August 1, 2001 was
65,408,979.



---






---

TABLE OF CONTENTS



|                                                  |                                                                                               |                                                                |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION                  
|                                                  | Item 1.Financial Statements                                                                  
|                                                  |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                         
|                                                  |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
|                                                  |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                                                  |                                                                                               | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                  | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II -- OTHER INFORMATION                     
|                                                  | Item 1. Legal Proceedings                                                                    
|                                                  | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                  | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                       
|EXHIBIT INDEX                                    
|Second Amendment to Credit and Guaranty Agreement
|Third Amendment to Credit and Guaranty Agreement 
|Amendment to Form of Common Stock Warrant        



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##### Table of Contents



FORM 10-Q

THREE MONTHS ENDED JUNE 30, 2001


INDEX

|                               |  |                    |    |                                                                                                              |  |        |    | 
|------------------------------ |  | ------------------ | -- | ------------------------------------------------------------------------------------------------------------ |  | ------ | -- | 
|                               |  |                    |    |                                                                                                              |  | Page  
|                               |  |                    |    |                                                                                                              |  | Number
|                               |  |                    |    |                                                                                                              |  |       
|PART I  FINANCIAL INFORMATION |  |                    |    |                                                                                                             
|                              
|                              
|                              
|                              
|                               |  | Item 1.            |    | Financial Statements                                                                                         |  |        | 1  | 
|                               |  | NETWORK PLUS CORP. |    |                                                                                                              |  |       
|                              
|                              
|                              
|                              
|                               |  |                    |    | Unaudited Condensed Consolidated Balance Sheets
	June 30, 2001 and December 31, 2000                         |  |        | 2  | 
|                              
|                              
|                              
|                              
|                               |  |                    |    | Unaudited Condensed Consolidated Statements of
	Operations Three and Six Months Ended June 30, 2001 and 2000 |  |        | 3  | 
|                              
|                              
|                              
|                              
|                               |  |                    |    | Unaudited Condensed Consolidated Statements of
	Cash Flows Six Months Ended June 30, 2001 and 2000           |  |        | 4  | 
|                              
|                              
|                              
|                              
|                               |  |                    |    | Notes to Unaudited Condensed Consolidated
	Financial Statements                                              |  |        | 5  | 
|                              
|                              
|                              
|                              
|                               |  | Item 2.            |    | Managements Discussion and Analysis of
	Financial Condition and Results of Operations                       |  |        | 9  | 
|                              
|                              
|                              
|                              
|                               |  | Item 3.            |    | Quantitative and Qualitative Disclosures About
	Market Risk                                                  |  |        | 15 | 
|PART II  OTHER INFORMATION    |  |                    |    |                                                                                                             
|                              
|                              
|                              
|                              
|                               |  | Item 1.            |    | Legal Proceedings                                                                                            |  |        | 15 | 
|                              
|                              
|                              
|                              
|                               |  | Item 4.            |    | Submission of Matters to a Vote of Security
	Holders                                                         |  |        | 16 | 
|                              
|                              
|                              
|                              
|                               |  | Item 6.            |    | Exhibits and Reports on Form 8-K                                                                             |  |        | 16 | 
|                              
|                              
|                              
|                              
|Signatures                     |  |                    | 17 |                                                                                                             
|                              
|                              
|                              
|                              
|Exhibit Index                  |  |                    | 18 |                                                                                                             

1



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1.     Financial
Statements

NETWORK PLUS CORP.






CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands, except per share data)


(Unaudited)


|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |        |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------- | ------------ | ------- |  | -------- | ------ | ------- | 
|                                                                                                                                                                                                                                                               |                                                                                                 | June 30,                                                                            |          | December 31,
|                                                                                                                                                                                                                                                               |                                                                                                 | 2001                                                                                |          | 2000        
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |             
|ASSETS                                                                                                                                                                                                                                                        
|Current Assets                                                                                                                                                                                                                                                 |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Cash and cash equivalents                                                                       |                                                                                     | $        | 4,456        |         |  | $        | 12,474 |        
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Accounts receivable, net of allowance for
	doubtful accounts of $5,456 and $3,294, respectively |                                                                                     |          | 48,356       |         |  |          | 55,922 |        
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Prepaid expenses                                                                                |                                                                                     |          | 3,943        |         |  |          | 1,185  |        
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Other current assets                                                                            |                                                                                     |          | 14,037       |         |  |          | 14,517 |        
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                               |                                                                                                 | Total current assets                                                                |          |              | 70,792  |  |          |        | 84,098  | 
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Property and equipment, net                                                                                                                                                                                                                                    |                                                                                                 |                                                                                     | 318,408  |              |         |  | 269,073  |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Other assets, net                                                                                                                                                                                                                                              |                                                                                                 |                                                                                     | 40,637   |              |         |  | 51,488   |       
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                               |                                                                                                 | TOTAL ASSETS                                                                        |          | $            | 429,837 |  |          | $      | 404,659 | 
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|LIABILITIES, REDEEMABLE CONVERTIBLE
	PREFERRED
	STOCK AND STOCKHOLDERS EQUITY                                                                                                                                                                                
|Current Liabilities                                                                                                                                                                                                                                            |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Accounts payable                                                                                |                                                                                     | $        | 35,557       |         |  | $        | 72,231 |        
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Accrued liabilities                                                                             |                                                                                     |          | 18,642       |         |  |          | 14,979 |        
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                               | Current portion of capital lease obligations                                                    |                                                                                     |          | 14,268       |         |  |          | 17,288 |        
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                               |                                                                                                 | Total current liabilities                                                           |          |              | 68,467  |  |          |        | 104,498 | 
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Revolving credit facility                                                                                                                                                                                                                                      |                                                                                                 |                                                                                     | 109,000  |              |         |  |         |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Long-term capital lease obligations                                                                                                                                                                                                                            |                                                                                                 |                                                                                     | 36,926   |              |         |  | 28,351   |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Long-term note payable to stockholder                                                                                                                                                                                                                          |                                                                                                 |                                                                                     | 1,875    |              |         |  | 1,875    |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Other long-term liabilities                                                                                                                                                                                                                                    |                                                                                                 |                                                                                     | 4,018    |              |         |  | 2,815    |       
|Commitments                                                                                                                                                                                                                                                    |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Preferred stock, $0.01 par value, 1,000 shares
	authorized: Redeemable Series A Cumulative Convertible
	Preferred Stock, 500 shares authorized: 250 shares issued and
	outstanding, (aggregate liquidation preference of $127,445 and
	$127,566, respectively) |                                                                                                 |                                                                                     | 120,284  |              |         |  | 120,065  |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Stockholders Equity:                                                                                                                                                                                                                                          |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Common stock, $0.01 par value, 150,000 shares
	authorized, 65,046 and 61,810 shares, issued and outstanding,
	respectively                                                                                                                                     |                                                                                                 |                                                                                     | 650      |              |         |  | 618      |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Additional paid-in capital                                                                                                                                                                                                                                     |                                                                                                 |                                                                                     | 273,200  |              |         |  | 271,399  |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Stock subscription receivable                                                                                                                                                                                                                                  |                                                                                                 |                                                                                     | (167     | )            |         |  | (176     | )     
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Warrants                                                                                                                                                                                                                                                       |                                                                                                 |                                                                                     | 15,074   |              |         |  | 15,634   |       
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                              
|Accumulated deficit                                                                                                                                                                                                                                            |                                                                                                 |                                                                                     | (199,490 | )            |         |  | (140,420 | )     
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                               |                                                                                                 | Total stockholders equity                                                          |          |              | 89,267  |  |          |        | 147,055 | 
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       
|                                                                                                                                                                                                                                                               |                                                                                                 | TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE
	PREFERRED STOCK AND STOCKHOLDERS EQUITY |          | $            | 429,837 |  |          | $      | 404,659 | 
|                                                                                                                                                                                                                                                               |                                                                                                 |                                                                                     |          |              |         |  |          |       

The accompanying notes are an integral part of the unaudited



2



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##### Table of Contents



NETWORK PLUS CORP.






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share data)


(Unaudited)


|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------- | ----------------------------------------------------- | -------------- | ------- | -------------- | - | ---- | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                           |                                                       |                |         |               
|                                                                           |                                                       | Three Months   |         | Six Months    
|                                                                           |                                                       | Ended June 30, |         | Ended June 30,
|                                                                           |                                                       |                |         |               
|                                                                           |                                                       | 2001           |         | 2000           |   | 2001 |         | 2000   
|                                                                           |                                                       |                |         |                |   |      |         |        
|Revenues                                                                   |                                                       | $              | 76,125  |                |   | $    | 54,427  |         |   | $ | 148,244 |         |   | $ | 104,686 |        
|Operating expenses                                                         |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Costs of services                                     |                |         | 51,655         |   |      |         | 41,562  |   |   |         | 104,900 |   |   |         | 82,416  |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Selling, general and administrative expenses          |                |         | 29,453         |   |      |         | 27,490  |   |   |         | 57,800  |   |   |         | 47,543  |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Depreciation and amortization                         |                |         | 16,742         |   |      |         | 6,560   |   |   |         | 31,610  |   |   |         | 11,309  |  
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                           |                                                       |                | 97,850  |                |   |      | 75,612  |         |   |   | 194,310 |         |   |   | 141,268 |        
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Operating loss                                                             |                                                       |                | (21,725 | )              |   |      | (21,185 | )       |   |   | (46,066 | )       |   |   | (36,582 | )      
|Other income (expense)                                                     |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Interest income                                       |                |         | 119            |   |      |         | 2,634   |   |   |         | 305     |   |   |         | 3,043   |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Interest expense                                      |                |         | (7,290         | ) |      |         | (1,163  | ) |   |         | (13,306 | ) |   |         | (2,611  | )
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Other income (expense)                                |                |         | 4              |   |      |         | (10     | ) |   |         | (3      | ) |   |         | 17      |  
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                           |                                                       |                | (7,167  | )              |   |      | 1,461   |         |   |   | (13,004 | )       |   |   | 449     |        
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Net loss                                                                   |                                                       |                | (28,892 | )              |   |      | (19,724 | )       |   |   | (59,070 | )       |   |   | (36,133 | )      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Preferred stock dividends and accretion of
	offering expenses and discount |                                                       |                | 2,555   |                |   |      | 2,262   |         |   |   | 5,453   |         |   |   | 2,262   |        
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Net loss applicable to common stockholders                                 |                                                       | $              | (31,447 | )              |   | $    | (21,986 | )       |   | $ | (64,523 | )       |   | $ | (38,395 | )      
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Net loss per share applicable to common
	stockholders  basic and diluted  |                                                       | $              | (0.49   | )              |   | $    | (0.37   | )       |   | $ | (1.01   | )       |   | $ | (0.67   | )      
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Weighted average shares outstanding 
	basic and diluted                   |                                                       |                | 64,300  |                |   |      | 59,358  |         |   |   | 63,851  |         |   |   | 57,216  |        
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Comprehensive loss                                                         |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Net loss                                              |                | $       | (28,892        | ) |      | $       | (19,724 | ) |   | $       | (59,070 | ) |   | $       | (36,133 | )
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Unrealized loss on investment securities, net of
	tax |                |         |               |   |      |         | (946    | ) |   |         |        |   |   |         | (1,779  | )
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        
|Comprehensive loss                                                         |                                                       | $              | (28,892 | )              |   | $    | (20,670 | )       |   | $ | (59,070 | )       |   | $ | (37,912 | )      
|                                                                           |                                                       |                |         |                |   |      |         |         |   |   |         |         |   |   |         |        

The accompanying notes are an integral part of the unaudited



3



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##### Table of Contents



NETWORK PLUS CORP.






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


(Unaudited)


|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |          |         |          |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ------- | ------- | ------- | ------- | -------- | ------- | -------- | -
|                                                 |                                                                                 |                                                
|                                                 |                                                                                 | Six Months                                     
|                                                 |                                                                                 | Ended June 31,                                 
|                                                 |                                                                                 |                                                
|                                                 |                                                                                 | 2001                                            |                                           | 2000   
|                                                 |                                                                                 |                                                 |                                           |        
|Cash flows from operating activities:            |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Net loss                                                                        |                                                 | $                                         | (59,070 | )       |         | $       | (36,133  | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income to net cash
	used for operating activities: |                                                 |                                           |         |         |         |         |          |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Depreciation and amortization                   |                                           |         | 31,610  |         |         |          | 11,309  |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Amortization of debt issuance costs             |                                           |         | 6,459   |         |         |          | 94      |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Interest payable on note payable to stockholder |                                           |         | 95      |         |         |          | 95      |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Stock-based compensation                        |                                           |         |        |         |         |          | 101     |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Changes in assets and liabilities:                                              |                                                 |                                           |         |         |         |         |          |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Accounts receivable                             |                                           |         | 7,566   |         |         |          | (17,669 | )       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Prepaid expenses                                |                                           |         | (2,758  | )       |         |          | (1,672  | )       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Other current assets                            |                                           |         | 480     |         |         |          | (149    | )       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Other assets                                    |                                           |         | 4,108   |         |         |          | 383     |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Accounts payable                                |                                           |         | (22,174 | )       |         |          | 1,021   |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Accrued liabilities                             |                                           |         | 3,663   |         |         |          | 6,122   |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Other liabilities                               |                                           |         | 1,108   |         |         |          | 752     |         
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                 |                                                                                 |                                                 | Net cash used for operating activities    |         |         | (28,913 | )       |          |         | (35,746  | )
|                                                
|                                                
|                                                
|                                                
|Cash flows from investing activities:            |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital expenditures                                                            |                                                 |                                           | (67,947 | )       |         |         | (116,142 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of fiber capacity                                                      |                                                 |                                           | (14,500 | )       |         |         |         |        
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                 |                                                                                 |                                                 | Net cash used for investing activities    |         |         | (82,447 | )       |          |         | (116,142 | )
|                                                
|                                                
|                                                
|                                                
|Cash flows from financing activities:            |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Net proceeds from revolving credit facility                                     |                                                 |                                           | 109,000 |         |         |         |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Principal payments on capital lease obligations                                 |                                                 |                                           | (7,159  | )       |         |         | (6,358   | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Net proceeds from issuance of common stock                                      |                                                 |                                           | 1,501   |         |         |         | 128,051  |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net proceeds from issuance of preferred stock                                   |                                                 |                                           |        |         |         |         | 119,750  |        
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                 |                                                                                 |                                                 | Net cash provided by financing activities |         |         | 103,342 |         |          |         | 241,443  |  
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|Net decrease in cash                             |                                                                                 |                                                 | (8,018                                    | )       |         |         | 89,555  |         
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                 |                                                 | 12,474                                    |         |         |         | 43,031  |         
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|Cash and cash equivalents at end of period       |                                                                                 | $                                               | 4,456                                     |         |         | $       | 132,586 |         
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|Noncash investing and financing activities:      |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Fixed assets acquired under capital leases                                      |                                                 | $                                         | 12,714  |         |         | $       | 13,398   |        
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         
|                                                 | Dividends recorded on preferred stock, Paid in
	common stock                    |                                                 | $                                         | 5,453   |         |         | $       | 2,262    |        
|                                                 |                                                                                 |                                                 |                                           |         |         |         |         |         

The accompanying notes are an integral part of the unaudited



4



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##### Table of Contents



NETWORK PLUS CORP.






NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS


(In thousands, except per share data)


1.  Basis of Presentation

The accompanying condensed consolidated financial statements of
Network Plus Corp. (the Company) are unaudited and
have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim
financial information and with the instructions to
Form 10-Q and Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management,
all normal, recurring adjustments considered necessary for a
fair presentation have been included. The balance sheet data as
of December 31, 2000 has been derived from the
Companys audited consolidated financial statements.

These financial statements should be read in conjunction with
the audited consolidated financial statements and footnotes
thereto included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2000.
Interim results of operations are not necessarily indicative of
the results to be expected for the full year or any other
interim periods.

Certain amounts in the financial statements for the prior year
have been reclassified to conform with the current year
presentation. Such reclassifications had no effect on previously
reported results of operations.

2.  Property and Equipment

|                                               |  |             |                  |          |  |              |         |   |  |   |         |  
|---------------------------------------------- |  | ----------- | ---------------- | -------- |  | ------------ | ------- | - |  | - | ------- | -
|                                               |  | Estimate    |                  | June 30, |  | December 31,
|                                               |  | Useful Life |                  | 2001     |  | 2000        
|                                               |  |             |                  |          |  |             
|Network infrastructure and equipment           |  |             | 5 and 10 years   |          |  | $            | 257,425 |   |  | $ | 162,665 |  
|                                              
|                                              
|                                              
|                                              
|Computer equipment                             |  |             | 3-5 years        |          |  |              | 18,287  |   |  |   | 14,665  |  
|                                              
|                                              
|                                              
|                                              
|Office furniture and equipment                 |  |             | 7 years          |          |  |              | 5,135   |   |  |   | 3,783   |  
|                                              
|                                              
|                                              
|                                              
|Software                                       |  |             | 3 years          |          |  |              | 20,079  |   |  |   | 15,496  |  
|                                              
|                                              
|                                              
|                                              
|Motor vehicles                                 |  |             | 5 years          |          |  |              | 1,229   |   |  |   | 947     |  
|                                              
|                                              
|                                              
|                                              
|Leasehold improvements                         |  |             | Shorter of term  |          |  |              | 58,218  |   |  |   | 28,684  |  
|                                               |  |             | of lease or life |          |  |              |         |   |  |   |         |  
|                                               |  |             | of asset         |          |  |              |         |   |  |   |         |  
|                                              
|                                              
|                                              
|                                              
|Construction in progress                       |  |             |                  |          |  |              | 27,596  |   |  |   | 81,068  |  
|                                               |  |             |                  |          |  |              |         |   |  |   |         |  
|                                               |  |             |                  |          |  |              | 387,969 |   |  |   | 307,308 |  
|                                              
|                                              
|                                              
|                                              
|Less accumulated depreciation and amortization |  |             |                  |          |  |              | (69,561 | ) |  |   | (38,235 | )
|                                               |  |             |                  |          |  |              |         |   |  |   |         |  
|                                               |  |             |                  |          |  | $            | 318,408 |   |  | $ | 269,073 |  
|                                               |  |             |                  |          |  |              |         |   |  |   |         |  

Depreciation and amortization expense related to property and
equipment for the three months and six months ended
June 30, 2001 amounted to $16,601 and $31,326,
respectively. Depreciation and amortization expense related to
property and equipment for the three months and six months ended
June 30, 2000 amounted to $5,921 and $9,993, respectively.

5



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##### Table of Contents



NETWORK PLUS CORP.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS  (Continued)


3.  Other Assets

Other assets consist of the following:

|                         |  |          |        |              |  |   |        | 
|------------------------ |  | -------- | ------ | ------------ |  | - | ------ | 
|                         |  | June 30, |        | December 31,
|                         |  | 2001     |        | 2000        
|                         |  |          |        |             
|Prepaid fiber capacity   |  | $        | 36,573 |              |  | $ | 39,707 | 
|                        
|                        
|                        
|                        
|Debt issuance costs, net |  |          |       |              |  |   | 9,164  | 
|                        
|                        
|                        
|                        
|Rent deposits            |  |          | 1,242  |              |  |   | 1,218  | 
|                        
|                        
|                        
|                        
|Intangible assets, net   |  |          | 787    |              |  |   | 1,071  | 
|                        
|                        
|                        
|                        
|Other deposits           |  |          | 2,035  |              |  |   | 328    | 
|                         |  |          |        |              |  |   |        | 
|                         |  | $        | 40,637 |              |  | $ | 51,488 | 
|                         |  |          |        |              |  |   |        | 

Prepaid fiber capacity relates to payments made for long-haul
transport capacity. These fees were paid by the Company in
exchange for a 20 year indefeasible right to use
pre-determined fiber routes connecting the northeastern and
southeastern regional networks. Based on the terms of the
agreement, these pre-determined routes may be changed at the
option of the Company. The current portion of prepaid fiber
capacity included in other current assets at June 30, 2001
was $2,002. These fees are being amortized to operations over
the 20 year service period, of which $501 and $1,133 has
been amortized during the three and six months ended
June 30, 2001, respectively.

Amortization expense related to intangible assets was $142 and
$284 for the three and six months ended June 30, 2001,
respectively. Amortization expenses for the same period in the
prior year was $639 and $1,316, respectively.

4.  Revolving Credit Agreements

On September 27, 2000, the Company entered into a Senior
Secured Credit Facility as amended, (the Credit
Facility), with various lenders allowing for maximum
borrowings of $225 million. Borrowings at June 30, 2001
totaled $109 million. Subsequent to June 30, 2001 through
August 1, 2001, the Company has borrowed an additional $25
million under the Credit Facility. The Credit Facility matures
on June 30, 2002, when all unpaid borrowings become
immediately due. Based on the terms of this agreement, the
Company is subject to various covenants, including the
maintenance of certain financial and operating ratios. The
Company is required to maintain pre-established levels of
revenue, earnings before interest, taxes, depreciation, and
amortization (EBITDA), days sales outstanding
(DSO) and access lines, as defined by the agreement.
Additionally, the Company is restricted as to the level of
capital assets it may acquire within any given quarter and is
restricted from paying cash dividends. Failure to comply with
the restriction and covenant obligations under the Credit
Facility could result in a default. The lenders have a right,
under events of default, and an event deemed by the lenders to
be an adverse change in the Companys business to terminate
future borrowings under the Credit Facility and require
accelerated repayment of outstanding borrowings.

Effective as of July 19, 2001 and August 10, 2001, a
Second and Third Amendment were made to the Credit Facility,
respectively. Included in the Second Amendment are provisions
adjusting the minimum quarterly revenue requirement for the
fiscal quarter ending June 30, 2001 and the EBITDA
requirement for the fiscal quarter ending September 30,
2001. If this amendment was not made, the Company would not have
been in compliance with the financial covenants under the Credit
Facility during the quarter ended June 30, 2001. The Third
Amendment includes a waiver of the revenue covenants for the
quarters ending September 30, 2001 and December 31,
2001, provided that the Company meets specified alternative
revenue requirements during these quarters. These waivers expire
on January 1, 2002. In addition, the amendments limits the
maximum borrowings available to the sum of the lesser of (A)(i)
80% of eligible receivables,

6



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##### Table of Contents



NETWORK PLUS CORP.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS  (Continued)


(ii) 70% of eligible unbilled accounts and
(iii) eligible net property or (B) $155 million until five
business days following delivery of financial statements for the
fiscal quarter ended September 30, 2001 by the Company to the
lenders, thereafter maximum borrowings available under the
Credit Facility are $175 million until December 31, 2001,
$210 million until March 31, 2002 and $225 million until
June 30, 2002.

In connection with the Credit Facility, the Company issued
warrants entitling the holders to purchase in aggregate 3,854
shares of the Companys common stock at an exercise price
of $7.01 per share. Upon entering the Credit Facility, 72.73% of
the warrants were exercisable, with 13.64% exercisable on a pro
rata basis with each amount drawn by the Company on the first
$100 million of loans under the Credit Facility, and the
remaining 13.63% exercisable at any time on or after the date
the amount drawn by the Company under the Credit Facility
exceeds $100. Since borrowings at June 30, 2001 exceeded
$100 million all of the unexercisable warrants became
exercisable. These warrants were valued using a Black-Scholes
valuation model assuming an interest rate of 5.83%, volatility
of 93%, no dividends, and an estimated life of 3 years. The
$15,043 value assigned to these warrants along with $6,701 of
other issuance costs is included in debt issuance costs and is
being accreted to interest expense on a straight-line basis
through the maturity date. At June 30, 2001, $13,023 of
unamortized debt issuance costs remains in other current assets.
In connection with the Third Amendment to the Credit Facility,
the exercise price of these warrants was reduced to $2.80 per
share as of the date on which the aggregate amount of all
outstanding loans under the Credit Facility exceed $165 million.
This adjustment to the exercise price will result in an
additional non-cash debt issuance cost for reporting purposes
which will be amortized over the remaining period of the loan.

The Company is currently in negotiation with the lenders of the
Credit Facility to extend the expiration of the Credit Facility
to a period subsequent to June 30, 2002. As a result, the Credit
Facility remains classified as a long-term liability.

Along with this agreement, the Company has also entered into a
pledge and security agreement, pledging substantially all of the
Companys assets to the lenders as collateral.

5.  Net Loss Per Share

The computations of basic and diluted earnings per common share
are based upon the weighted average number of common shares
outstanding and potentially dilutive securities. Potentially
dilutive securities for the Company include warrants, stock
options and redeemable convertible preferred stock.

The following table sets forth the computation of basic and
diluted loss per share:

|                                                                          |  |                    |         |                  |  |      |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                          |  |                    |         |                 
|                                                                          |  | Three Months Ended |         | Six Months Ended
|                                                                          |  | June 30,           |         | June 30,        
|                                                                          |  |                    |         |                 
|                                                                          |  | 2001               |         | 2000             |  | 2001 |         | 2000
|                                                                          |  |                    |         |                  |  |      |         |     
|Net loss applicable to common stockholders                                |  | $                  | (31,447 | )                |  | $    | (21,986 | )    |  | $ | (64,523 | ) |  | $ | (38,395 | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Shares used in net loss per share 
	basic and diluted                    |  |                    | 64,300  |                  |  |      | 59,358  |      |  |   | 63,851  |   |  |   | 57,216  |  
|                                                                          |  |                    |         |                  |  |      |         |      |  |   |         |   |  |   |         |  
|Net loss per share applicable to common
	stockholders  basic and diluted |  | $                  | (0.49   | )                |  | $    | (0.37   | )    |  | $ | (1.01   | ) |  | $ | (0.67   | )
|                                                                          |  |                    |         |                  |  |      |         |      |  |   |         |   |  |   |         |  

Warrants for the purchase of 3,862 and 1,366 shares and stock
options for the purchase of 7,200 and 4,353 shares of common
stock were not included in the computation of net loss per share
for the three months and six months ended June 30, 2001 and
2000, respectively, because inclusion of these shares would have
an anti-dilutive effect. In addition, shares of redeemable
convertible preferred stock which are convertible into an
aggregate of 3,663 shares of common stock were not included in
the computation of net loss per share for the

7



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##### Table of Contents



NETWORK PLUS CORP.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS  (Continued)


three months and six months ended June 30, 2001 because
inclusion of these shares would have an anti-dilutive effect on
net loss per share.

6.  Recent Accounting Pronouncement

In June 2001, the Financial Accounting Standard Board
issued SFAS No. 142, Goodwill and Other Intangible
Assets effective January 1, 2002. SFAS 142 requires,
among other things, the cessation of the amortization of
goodwill. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles
out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future
impairments of goodwill. SFAS 142 also requires the Company to
complete a transitional goodwill impairment test six months from
the date of adoption. The Company is required to adopt SFAS 142
for fiscal periods beginning subsequent to December 15,
2001. The Company is currently assessing the impact of this new
statement on its consolidated financial position and results of
operations and has not yet determined the impact of its adoption.

7.  Segment Information

The Company has two reportable segments which management
operates as distinct sales organizations. These two segments are
segregated by type of customer base to whom services are
provided. The two customer base types are: retail
telecommunications and data services, and wholesale
telecommunications. The Company measures and evaluates its two
reportable segments based on revenues and costs of services. The
retail telecommunications and data services segment provides
local and long distance services, including voice and data
transport and enhanced and customer calling features. This
segment focuses on selling these services to end user customers,
such as businesses and residences. The wholesale
telecommunications segments provides transport and termination
services. This segment focuses on selling these services to
large communication carriers, who utilize the Companys
excess capacity to provide telephone voice services to their
customers.

|                        |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |        | 
|----------------------- | ------------------------------------------- | ------------------ | ------ | ---------------- |  | ---- | ------ | ------ |  | - | ------- | ------- |  | - | ------- | ------ | 
|                        |                                             |                    |        |                 
|                        |                                             | Three Months Ended |        | Six Months Ended
|                        |                                             | June 30,           |        | June 30,        
|                        |                                             |                    |        |                 
|                        |                                             | 2001               |        | 2000             |  | 2001 |        | 2000  
|                        |                                             |                    |        |                  |  |      |        |       
|Revenue:                |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |       
|                       
|                       
|                       
|                       
|                        | Retail telecommunications and data services |                    | $      | 60,235           |  |      | $      | 34,397 |  |   | $       | 115,418 |  |   | $       | 62,998 | 
|                       
|                       
|                       
|                       
|                        | Wholesale telecommunications                |                    |        | 15,890           |  |      |        | 20,030 |  |   |         | 32,826  |  |   |         | 41,688 | 
|                        |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |       
|Total revenues          |                                             | $                  | 76,125 |                  |  | $    | 54,427 |        |  | $ | 148,244 |         |  | $ | 104,686 |       
|                        |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |       
|Costs of services:      |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |       
|                       
|                       
|                       
|                       
|                        | Retail telecommunications and data services |                    | $      | 35,208           |  |      | $      | 22,553 |  |   | $       | 69,768  |  |   | $       | 42,956 | 
|                       
|                       
|                       
|                       
|                        | Wholesale telecommunications                |                    |        | 16,447           |  |      |        | 19,009 |  |   |         | 35,132  |  |   |         | 39,460 | 
|                        |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |       
|Total costs of services |                                             | $                  | 51,655 |                  |  | $    | 41,562 |        |  | $ | 104,900 |         |  | $ | 82,416  |       
|                        |                                             |                    |        |                  |  |      |        |        |  |   |         |         |  |   |         |       

8



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##### Table of Contents






Item 2.  Managements Discussion and
Analysis of Financial Condition and Results of Operations

Introduction

The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and
related notes of Network Plus Corp. (the Company,
we or us) included herein as well as the
consolidated financial statements and notes and
Managements Discussion and Analysis of Financial Condition
and Results of Operations included in the Companys Annual
Report on Form 10-K for the fiscal year ended
December 31, 2000. In addition to historical information,
the following discussion and other information in this report
contains forward-looking information that involves risks and
uncertainties. For this purpose, any statement that is not a
statement of historical fact is forward-looking information,
including without limitation statements concerning the
Companys future capital requirements, future financial
results, sufficiency of available capital and availability of
additional financing. Without limiting the generality of the
foregoing, words such as believes,
anticipates, expects and similar
expressions identify forward-looking statements. The
Companys actual results could differ materially from those
anticipated by such forward-looking information due to
competitive factors, risks associated with the Companys
expansion plans and other factors discussed in the
Companys Annual Report on Form 10-K for the year
ended December 31, 2000 and below under Certain
Factors That May Affect Future Operating Results.

Overview

Network Plus, founded in 1990, is a network-based communications
provider offering a comprehensive suite of telecommunications,
broadband data and Internet Data Center hosting services. The
Companys services include local and long distance voice,
high-speed data, Internet and web server and managed server
hosting. The Company currently utilizes digital subscriber line,
or DSL, technology to provide high-speed data and Internet
access and provides local and long distance services using
traditional switched access, ATM and other technologies. The
Company currently serves primarily small and medium-sized
business customers in the northeastern and southeastern regions
of the United States.

Results of Operations

The following table sets forth for the periods indicated certain
financial data as a percentage of revenues:

|                                    |  |              |     |            |  |      |     |      |  |  |     |    |  |  |     |   
|----------------------------------- |  | ------------ | --- | ---------- |  | ---- | --- | ---- |  |  | --- | -- |  |  | --- | --
|                                    |  |              |     |           
|                                    |  | Three Months |     | Six Months
|                                    |  | Ended        |     | Ended     
|                                    |  | June 30,     |     | June 30,  
|                                    |  |              |     |           
|                                    |  | 2001         |     | 2000       |  | 2001 |     | 2000
|                                    |  |              |     |            |  |      |     |     
|Revenues                            |  |              | 100 | %          |  |      | 100 | %    |  |  | 100 | %  |  |  | 100 | % 
|                                   
|                                   
|                                   
|                                   
|Costs of services                   |  |              | 68  |            |  |      | 76  |      |  |  | 71  |    |  |  | 79  |   
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |  |              | 39  |            |  |      | 51  |      |  |  | 39  |    |  |  | 45  |   
|                                   
|                                   
|                                   
|                                   
|Depreciation and amortization       |  |              | 22  |            |  |      | 12  |      |  |  | 21  |    |  |  | 11  |   
|                                   
|                                   
|                                   
|                                   
|Operating loss                      |  |              | (29 | )          |  |      | (39 | )    |  |  | (31 | )  |  |  | (35 | ) 
|                                   
|                                   
|                                   
|                                   
|Other income (expense)              |  |              | (9  | )          |  |      | 3   |      |  |  | (9  | )  |  |  | 0   |   
|                                   
|                                   
|                                   
|                                   
|Net loss                            |  |              | (38 | )%         |  |      | (36 | )%   |  |  | (40 | )% |  |  | (35 | )%

Three and Six Months Ended June 30, 2001 Compared to
Three and Six Months Ended June 30, 2000

Revenues. Total revenues increased $21.7 million or 40%
to $76.1 million for the three months ended June 30, 2001
from $54.4 million for the same period in the prior year.
Revenues from local and data services represented 58% of total
revenues or $43.9 million for the three month period ended
June 30, 2001 as compared to 33% of total revenues or $18.0
million for the same period in the prior year. Revenues from
long distance services, which include retail and international
wholesale services, represented $32.2 million or 42% of total
revenues for the three months ended June 30, 2001, a
decrease from $36.4 million or 67% of total revenues for the
same period in the prior year. Total revenues for the six month
period ended June 30, 2001 increased $43.5 million or 42%
to $148.2 million from $104.7 million for the same period in the
prior year. Revenues from local and data services for the six
month period ended June 30, 2001 represented 57% of total

9



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##### Table of Contents





Approximately one half of the increase in total revenues for the
three months ended June 30, 2001 was due to the $11.4
million increase in revenues from the sale of local services
which totalled $25.4 million from $14.0 million for the same
period in the prior year. Revenues for the six months ending
June 30, 2001 from the sale of local services increased
127% to $48.1 million from $21.2 million for the same period in
the prior year. The increase in local revenues resulted from the
increase in local lines in service. Revenues generated from data
services, which include colocation and Internet Data Center
hosting services, DSL and leasing of fiber-optic capacity,
totalled $18.5 million for the three month period ended
June 30, 2001, an increase of $14.5 million over the same
period in the prior year. Revenues from the sale of data
services increased five times to $36.1 million from $6.0 million
for the six months ended June 30, 2001 and 2000,
respectively.

Retail long distance remained essentially unchanged decreasing
to $16.3 million from $16.4 million for the three month periods
ended June 30, 2001 and 2000, respectively. For the six
month period ended June 30, 2001, retail long distance
decreased $4.6 million to $31.2 million from $35.8 million for
the same period in the period year. International wholesale
traffic, which results from utilizing excess capacity on our
long distance switches, decreased to $15.9 million for the three
month period ended June 30, 2001 from $20.0 million for the
same period in the prior year. For the six months ended
June 30, 2001, international wholesale revenues decreased
$8.9 million or 21% to $32.8 million from $41.7 million for the
same period in the prior year. We expect continued price erosion
of the average rate per minute from the prior year in the market
for long distance services.

Costs of Services. Cost of services increased $10.1
million or 24% to $51.7 million for the three months ended
June 30, 2001 from $41.6 million for the same period in the
prior year. As a percentage of revenues, costs of services
decreased to 68% for the three months ended June 30, 2001
from 76% for the same period in the prior year. Costs of
services increased $22.5 million or 27% to $104.9 million for
the six months ended June 30, 2001 from $82.4 million for
the same period in the prior year. As a percentage of revenues,
costs of services decreased to 71% for the six months ended
June 30, 2001 from 79% for the same period in the prior
year.

The increase in costs of services of 24% and 27% for the three
month and six month periods ended June 30, 2001,
respectively compared to the same periods in the prior year is
due to the increase in total revenues for both periods. Costs of
services as a percentage of revenue is positively impacted by a
shift of services to local and data, which have lower costs of
services as a percentage of revenue from that of long distance
traffic. As the deployment of our local network continues and
more facilities become operational, the costs associated with
the co-location facilities, including rent and access charges,
are reflected in cost of services. These facility costs are
generally fixed and will result in fluctuations in margin until
this capacity is fully utilized.

Selling, General and Administrative. Selling, general and
administrative expenses increased $2.0 million or 7% to $29.5
million for the three months ended June 30, 2001 from $27.5
million for the same period in the prior year. As a percentage
of revenues, selling, general, and administrative expenses
decreased to 39% for the three months ended June 30, 2001
from 51% for the same period in the prior year. Selling, general
and administrative expenses increased $10.3 million or 22% to
$57.8 million for the six months ended June 30, 2001 from
$47.5 million for the same period in the prior year. As a
percentage of revenues, selling, general, and administrative
expenses decreased to 39% for the six months ended June 30,
2001 from 45% for the same period in the prior year.

We employed 1,043 employees at June 30, 2001, compared with
886 at June 30, 2000, resulting in an increase in payroll
and related expenses of $3.4 million and $8.1 million for the
three month and six month

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Depreciation and Amortization. Depreciation and
amortization expenses increased $10.1 million or 155% to $16.7
million for the three months ended June 30, 2001 from $6.6
million for the same period in the prior year. Depreciation and
amortization expenses increased $20.3 million or 180% to $31.6
million for the six months ended June 30, 2001 from $11.3
million for the same period in the prior year.

The increase is due primarily to additional local network
facilities, fiber, computer and other telecommunications and
data services equipment to support our network expansion. We
expect the depreciation and amortization expense to increase as
we bring additional network facilities on-line, including fiber
routes, and as we make additional investments in our network and
operational infrastructure.

Interest. Interest expense net of interest income was
$7.2 million for the three months ended June 30, 2001.
Interest income net of interest expense was $1.5 million for the
three months ended June 30, 2000, which resulted from the
investment of capital obtained from the common and preferred
stock offerings in April 2000.

Interest expense, net of interest income, was $13.0 million for
the six months ended June 30, 2001. Interest income, net of
interest expense, was $0.4 million for the six months ended
June 30, 2000.

The increase in net interest expense is due to the amortization
of issuance costs of $3.2 million and $6.4 million associated
with borrowings under the Credit Facility during the three and
six month periods ended June 30, 2001. We expect interest
expense to increase as the Company continues to borrow under the
Credit Facility.

Net Loss and Net Loss Applicable to Common Stockholders.
The contribution from increased revenues was offset by an
increase in selling, general and administrative expenses,
depreciation and amortization expense and interest expense,
which resulted in a net loss of $28.9 million and $59.1 million
for the three and six months ended June 30, 2001,
respectively, compared to $19.7 million and $36.1 million for
the same periods in the prior year.

The effect of the net loss combined with the preferred stock
dividends and accretion of offering expenses of $2.6 million for
the three months ended June 30, 2001 and $2.3 million for
the three months ended June 30, 2000 contributed to net
losses applicable to common stockholders, which were $31.4
million for the three month period ended June 30, 2001 and
$22.0 million for the same period in the prior year. For the six
month period ending June 30, 2001, preferred stock
dividends and accretion of offering expenses were $5.5 million
as compared to $2.3 million for the same period in the prior
year, contributing to a net loss applicable to common
shareholders of $64.5 million and a net loss applicable to
common shareholders of $38.4 million. There were no dividends or
accretion of offering expenses during the first three months of
2000.

EBITDA. The EBITDA loss of $5.0 million for the three
months ended June 30, 2001 compared to a loss of $14.6
million for the same period in the prior year. The EBITDA loss
of $14.5 million for the six months ended June 30, 2001
compared to a loss of $25.2 million for the same period in the
prior year. This improvement was due to increased contributions
from revenues that were partially offset by increased sales,
general & administration expenses.

Liquidity and Capital Resources

Total assets were $429.8 million at June 30, 2001 compared
to $404.7 million at December 31, 2000. Cash and cash
equivalents were approximately $4.5 million at June 30,
2001 compared to $12.5 million at December 31, 2000. Net
cash used for operating activities was $28.9 million during the
six months ended

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On September 27, 2000 we entered into a Senior Secured
Credit Facility (as amended, the Credit Facility)
agreement with Goldman Sachs Credit Partners, Fleet Securities,
DLJ Bridge Finance and Fleet National Bank. The Credit Facility
provides up to $225.0 million in total principal based on
eligible receivables, eligible net property and minimum interim
amounts as defined by the agreement. Borrowings under the Credit
Facility are expected to be used for the purchase and
acquisition of telecommunications assets and to finance
operating losses and working capital. Borrowings under the
Credit Facility are collateralized by substantially all of the
Companys assets. There were $109.0 million and $134.0
million outstanding under this facility at June 30, 2001
and August 1, 2001, respectively.

The Credit Facility agreement imposes operating and financial
restrictions on us. Failure to comply with any of these
restrictions, including pre-established levels of revenue,
earnings before interest, taxes, depreciation, and amortization,
or EBITDA, days sales outstanding and access lines, could limit
the availability of borrowings or result in a default under the
Credit Facility. The restrictions in the Credit Facility affect,
and in many cases limit, among other things, our ability to pay
dividends or make distributions to our stockholders, incur
additional indebtedness, make investments or other restricted
payments, sell or dispose of assets, and take other actions that
management or our stockholders may consider beneficial.

Effective as of July 19, 2001 and August 10, 2001, a
Second and Third Amendment were made to the Credit Facility,
respectively. Included in the Second Amendment are provisions
adjusting the minimum quarterly revenue requirement for the
fiscal quarter ending June 30, 2001 and the EBITDA
requirement for the fiscal quarter ending September 30,
2001. If this amendment was not made, the Company would not have
been in compliance with the financial covenants under the Credit
Facility during the quarter ended June 30, 2001. The Third
Amendment includes a waiver of the revenue covenants for the
quarters ending September 30, 2001 and December 31,
2001, provided that the company meets specified alternative
revenue requirements during these quarters. These waivers expire
on January 1, 2002. In addition, the amendments limits the
maximum borrowings available to the sum of the lesser of
(A)(i) 80% of eligible receivables, (ii) 70% of
eligible unbilled accounts and (iii) eligible net property
or (B) $155 million until five business days following delivery
of financial statements for the fiscal quarter ended
September 30, 2001, by the Company to the lenders,
thereafter maximum borrowings available under the Credit
Facility are $175 million until December 31, 2001, $210
million until March 31, 2002 and $225 million until
June 30, 2002. We do not anticipate that our funding
requirements will exceed the maximum borrowings allowed.

We are currently in negotiation with the lenders of the Credit
Facility to extend the expiration of the Credit Facility to a
period subsequent to June 30, 2002. As a result, the Credit
Facility remains classified as a long-term liability.

Our strategic initiatives include the deployment of additional
local switches, the co-location of network equipment, the
offering of new local and data services, the expansion of our
sales force and other personnel, and significant investment in
our information technology systems. These initiatives will
require a substantial amount of capital for the installation of
network switches and related equipment, fiber, personnel
additions and funding of operating losses and working capital.

We currently anticipate that our available cash and borrowings
available under the Credit Facility will be sufficient to meet
our anticipated working capital and capital expenditure
requirements through fiscal 2001. In the event our operations
are not profitable or do not generate sufficient cash, or if we
fail to comply with the restrictions and obligations under the
Credit Facility, which could result in a default that could
limit the availability of borrowings under the facility, we may
have to substantially reduce our level of operations. In
addition, we may need to raise additional capital to meet our
needs after 2001, to fund more rapid expansion, to develop new
services, to enhance existing services in response to
competitive pressures, and to acquire complementary services,
businesses or technologies. However, we may not be able to
obtain additional financing on terms favorable to us, if at all.
If adequate funds are not available or are not available on
terms favorable to us, our business, results of operations and
financial condition could be materially and adversely affected.

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Our estimates of future capital requirements and capital
availability are forward-looking statements within the meaning
of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The actual amount and timing of
our future capital requirements may differ substantially from
our estimates due to factors such as the costs of building the
mid-Atlantic region, capital requirements and growth
projections, cost overruns, changes in demand for our services,
regulatory, technological or competitive developments, and the
other factors identified under Certain Factors That May
Affect Future Operating Results.

Recently Issued Accounting Standard

In June 2001, the Financial Accounting Standards Board
issued SFAS No. 142, Goodwill and Other Intangible
Assets effective January 1, 2002. SFAS 142 requires,
among other things, the cessation of the amortization of
goodwill. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles
out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future
impairments of goodwill. SFAS 142 also requires us to complete a
transitional goodwill impairment test six months from the date
of adoption. We are currently assessing the impact of this new
statement on our combined financial position and results of
operations and have not yet determined the impact of adoption.

Certain Factors that May Affect Future Operating Results

We had operating losses in the first two quarters of 2001 and in
each of the last five years and negative cash flow from
operating activities in the first two quarters of 2001 and for
the year 2000. We expect to incur significant expenditures in
connection with the continued acquisition, development and
expansion of our network infrastructure, product offerings and
information technology systems. As a result, we expect to incur
future operating losses. If our revenues do not increase
significantly or the increase in our expenses is greater than
expected, we may not achieve or sustain profitability or
generate positive cash flow in the future.

Our ability to meet our projected growth will require
substantial cash resources. The anticipated expansion of our
network infrastructure through 2001 and beyond, including the
addition of co-locations, switches, Internet Data Centers and
other network elements, will require additional capital. Our
ability to satisfy future capital needs will depend upon the
continued availability of our credit and equipment lease
facilities and cash from operations. If for any reason our
Credit Facility otherwise becomes unavailable or our ability to
draw on this facility is limited, including as a result of a
breach by us of the financial or other covenants contained in
the Credit Facility, we will be required to seek alternative
financing, significantly reduce our planned expansion and level
of operations, or otherwise modify our business plan. The
maturity of our credit facility in mid-2002 or upon an earlier
default will also require additional capital. Furthermore, if we
acquire other businesses, we may require additional financing.
Additional financing may place significant limits on our
financial and operating flexibility, may cause significant
dilution to existing investors, or may not be available to us.
As a result of the current unfavorable climate in the economy
generally and in the telecommunications sector in particular, it
may be difficult for us to obtain additional financing. Failure
to obtain future financing when needed or on acceptable terms
could cause us to delay or abandon our development and expansion
plans and could materially adversely affect our growth and
ability to compete.

Our Credit Facility imposes operating and financial restrictions
on us. Failure to comply with any of these restrictions,
including pre-established levels of EBITDA, days sales
outstanding and access lines, could limit the availability of
borrowings or result in a default under our Credit Facility. For
each of the year ended December 31, 2000 and the quarters
ended June 30, September 30, and December 31,
2001, the lenders agreed to amend financial covenants in order
to waive defaults and grant us additional operating flexibility.
We can give no assurance that we will obtain a waiver or
amendment for any future noncompliance. If we default under the
Credit Facility, the lenders may accelerate the maturity of the
facility, which could require us to seek alternative sources of
financing, and there can be no assurance such financing would be
available. If the lenders accelerate the payment of borrowed
amounts and we are unable to repay such amounts, the lenders
could proceed against the collateral securing the indebtedness,
and our assets may be insufficient to repay our

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We have a significant amount of indebtedness, and our
indebtedness will increase as we continue to draw on our Credit
Facility. Our ability to repay our indebtedness will depend on
our future operating performance, which will be affected by
prevailing economic conditions and financial, business and other
factors. Some of these factors are beyond our control. If we are
unable to service our indebtedness, we will be forced to examine
alternative strategies. These strategies may include reducing or
delaying capital expenditures, restructuring or refinancing
indebtedness or seeking additional debt or equity financing. We
can give no assurance that any of these strategies could be
effected on satisfactory terms.

As a result of our limited operating history as a provider of
telecommunications broadband data and Internet Data Center
hosting services and the evolving nature of the
telecommunications and Internet industries, we may not be able
to accurately forecast our revenues. We do not believe that
period-to-period comparisons of our operating results are
necessarily meaningful, or that investors should rely upon them
as indicators of future performance. In one or more future
quarters, our results of operations may fall below the
expectations of securities analysts and investors. This would
likely materially adversely affect the trading price of our
stock.

The markets for Internet access, broadband data, including DSL,
web and managed server hosting and competitive local service are
in the early stages of development. We have limited experience
providing these additional services and can give no assurance
that our services will receive market acceptance or that prices
and demand for these services will be sufficient to achieve or
sustain profitable operations.

Our future operating performance will depend upon our ability to
implement and manage our growth effectively. Our rapid growth to
date has placed, and in the future will continue to place, a
significant strain on our administrative, operational,
managerial and financial resources. Failure to attract and
retain additional qualified sales and other personnel, including
management personnel who can manage our growth effectively, or
failure to successfully train or integrate such personnel, could
materially adversely affect our future operating performance. To
manage our growth effectively, we will also have to continue to
improve and upgrade operational, financial and accounting
information systems, controls and infrastructure, as well as
control costs and maintain regulatory compliance. Failure of our
systems to perform as expected could have a material adverse
effect on us.

Prices for telecommunications services have fallen historically,
a trend we expect will continue. Accordingly, we cannot predict
to what extent we may need to reduce our prices to remain
competitive or whether we will be able to sustain future pricing
levels as our competitors introduce competing services or
similar services at lower prices.

We rely on other companies to supply certain key components of
our network infrastructure, including telecommunications
services, DSL and Internet services, network capacity and
switching and networking equipment, which, in the quantities and
quality demanded by us, are available only from sole or limited
sources. We are also dependent upon incumbent local exchange
carriers and other carriers to provide telecommunications
services and facilities to us and our customers and upon third
parties for other services. Many of these companies are or may
become our competitors. There can be no assurance that we will
be able to obtain such services or facilities on the scale and
within the time frames required by us at an affordable cost, or
at all.

We may acquire other businesses that we believe will complement
our existing business. These acquisitions will likely involve
risks such as the difficulty of assimilating the acquired
operations and personnel, the diversion of resources and the
risks of entering markets in which we have little experience.
These transactions may be required for us to remain competitive.
We can give no assurance that we will be able to obtain required
financing for such transactions or that such transactions will
occur.

Our industry is highly competitive, and we expect competition to
intensify in the future. We do not have a significant market
share in any of our markets. Most of our actual and potential
competitors have substantially

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The telecommunications industry has been, and is likely to
continue to be, characterized by rapid technological change,
frequent new service introductions and evolving industry
standards. Increases or changes in technological capabilities
could harm our competitive position.

Telecommunications services are subject to significant
regulation at the Federal, state, local and international
levels. Delays in receiving required regulatory approvals or the
enactment of new legislation or regulations could have a
material adverse effect on us. In addition, future governmental
actions could alter competitive conditions in the markets in
which we are operating or intend to operate in ways that are
materially adverse to us.

Interruptions in service, capacity limitations or security
breaches on our network or the networks on which we depend could
have a material adverse effect on our reputation and competitive
position.

See also the Risk Factors contained in our Annual Report on
Form 10-K for the year ended December 31, 2000.




Item 3.  Quantitative and Qualitative
Disclosures About Market Risk

The Company is exposed to market risk from changes in the
interest rate related to our Credit Facility, which is based
upon either the Prime Rate or LIBOR Rate, each of which is a
variable interest rate. Assuming an average borrowing level of
$109.0 million (the amount borrowed under all revolving credit
facilities as of June 30, 2001) each 1 percentage
point increase in the applicable interest rate would result in
$1.1 million of additional annual interest charges. The Company
does not currently use interest rate derivative instruments to
manage exposure to interest rate changes.




PART II  OTHER INFORMATION




Item 1.  Legal Proceedings

The Company, certain of its current and former officers and
directors and certain of the underwriters in its initial public
offering have been named as defendants in two class action
lawsuits, Werman et al. v. Network Plus Corp.
et al., which was filed in U.S. District Court for the
Southern District of New York on July 3, 2001 and
Grewal et al v. Network Plus Corp. et al,
which was filed in U.S. District Court for the Southern District
of New York on July 19, 2001. This class action lawsuit is
similar to over 200 others filed recently against companies that
went public between 1998 to 2000. Network Plus believes the
claims against it and its officers and directors are without
merit and intends to defend them vigorously.

The complaints allege violations of Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933 and Section 10(b)
of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. The complaints allege that the
Prospectus for the Companys initial public offering of
Common Stock in June 1999 was materially false and
misleading because it failed to disclose, among other things,
the following allegations made by plaintiffs: (i) that
Goldman Sachs, Bear Stearns, Credit Suisse First Boston, Merrill
Lynch, Lehman Brothers and Salomon Smith Barney (each an
underwriter in the Companys initial public offering)
solicited and received excessive and undisclosed commissions
from certain investors in exchange for which these underwriters
allocated to those investors material portions of the restricted
number of the Company shares issued in connection with the
Companys initial public offering; and (ii) that
Goldman Sachs, Bear Stearns, Credit Suisse First Boston, Merrill
Lynch, Lehman Brothers and Salomon Smith Barney entered into
agreements with customers whereby these underwriters agreed to
allocate shares to those customers in the Companys initial
public offering in exchange for which the customers agreed to
purchase additional Company shares in the aftermarket at
pre-determined prices.

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

At the Companys 2001 Annual Meeting of Stockholders held
on May 7, 2001, the following proposals were adopted by the
stockholders of the Company by the votes specified below:

|   |  |                                                                                                                                    |  |     |            |            |  |         |           |           |  |  |        |  |  |  |            | 
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---------- | ---------- |  | ------- | --------- | --------- |  |  | ------ |  |  |  | ---------- | 
|   |  |                                                                                                                                    |  |     |            | Against or |  |         |           | Broker   
|   |  | Proposal                                                                                                                           |  | For |            | Withheld   |  | Abstain |           | Non-Votes
|   |  |                                                                                                                                    |  |     |            |            |  |         |           |          
|1. |  | Election of two class II Directors to serve for a
	Three-year term:                                                                |  |     |            |            |  |         |           |           |  |  |        |  |  |  |            | 
|  
|  
|  
|  
|   |  | Robert T. Hale                                                                                                                     |  |     | 55,106,804 |            |  |         | 583,407   |           |  |  | 0      |  |  |  | 0          | 
|  
|  
|  
|  
|   |  | David D. Martin                                                                                                                    |  |     | 55,449,553 |            |  |         | 240,658   |           |  |  | 0      |  |  |  | 0          | 
|  
|  
|  
|  
|2. |  | Approval of amendment to and continuance of, the
	Companys 1998 Stock Incentive Plan                                              |  |     | 17,691,011 |            |  |         | 2,112,066 |           |  |  | 68,192 |  |  |  | 39,818,942 | 
|  
|  
|  
|  
|3. |  | Ratification of the selection of
	PricewaterhouseCoopers LLP as the Companys
	independent accountants for the current fiscal year |  |     | 54,750,351 |            |  |         | 907,853   |           |  |  | 32,007 |  |  |  | 0          | 

In addition to the Directors elected at the Annual Meeting, the
term of office of the following Directors also continued
following the meeting: Robert T. Hale, James J. Crowley, David
D. Martin, Joseph C. McNay and Lawrence E. Strickling.




Item 6.  Exhibits and Reports on
Form 8-K

(a)  Exhibits

The exhibits listed on the Exhibit Index are filed herewith.

(b)  Reports on Form 8-K

The Company did not file any reports on Form 8-K during the
three months ended June 30, 2001.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in
Randolph, Massachusetts, on August 13, 2001.



| |                   
| | ------------------
| | NETWORK PLUS CORP.



| |     |                     
| | --- | --------------------
| | By: | /s/ROBERT J. COBUZZI

| |                                             
| | --------------------------------------------
| |                                             
| | Robert J. Cobuzzi                           
| | Executive Vice President, Chief             
| | Financial Officer and Treasurer             
| | (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

|        |       |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ----- | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |      
|Number  |       | Title
|        |       |      
|        | 10.6B |       |  | Second Amendment, dated as of July 19, 2001,
	to the Credit and Guaranty Agreement, dated as of
	September 27, 2000, as amended, by and among the Company,
	Network Plus, Inc., the Lenders, Goldman Sachs Credit Partners,
	L.P., as a Joint Lead Arranger, Book Runner and Syndication
	Agent, Fleet Securities, Inc., as a Joint Lead Arranger, DLJ
	Bridge Finance, Inc., as Documentation Agent, and Fleet National
	Bank as Collateral Agent and Administrative Agent. 
|        | 10.6C |       |  | Third Amendment, dated as of August 10,
	2001, to the Credit and Guaranty Agreement, dated as of
	September 27, 2000, as amended, by and among the Company,
	Network Plus, Inc., the Lenders, Goldman Sachs Credit Partners,
	L.P., as a Joint Lead Arranger, Book Runner and Syndication
	Agent, Fleet Securities, Inc., as a Joint Lead Arranger, DLJ
	Bridge Finance, Inc., as Documentation Agent, and Fleet National
	Bank as Collateral Agent and Administrative Agent.
|        | 10.8A |       |  | Amendment No. 1, dated as of August 10,
	2001, to form of Common Stock Purchase Warrant originally issued
	as of September 27, 2000 to the Lenders.                                                                                                                                                                                                                                                                                                                          

18