<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                   FORM 10-Q

(Mark One)

|X|  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934.

                 For the quarterly period ended March 31, 2001

                                       OR

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

                    For the transition period from        to
                                                   -------   ------

                        Commission file number 000-24661

                          FiberNet Telecom Group, Inc.

             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                     52-2255974
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)

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

                                 (212) 405-6200
                (Issuer's Telephone Number, Including Area Code)





     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days. Yes  X  No
                                                                   ---    ---

     The number of shares outstanding of the issuer's common stock, as of
May 14, 2001, was 39,680,077 shares of Common Stock, $.001 par value.

--------------------------------------------------------------------------------
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>            <C>                                                                                         <C>
PART I.        FINANCIAL INFORMATION....................................................................         1
Item 1.        Consolidated Financial Statements........................................................
               Report of Independent Public Accountants  ...............................................         8
               Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000  .................         9
               Consolidated Statements of Operations for the three months ended March 31, 2001 and
               2000......................................................................................       10
               Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and
               2000.....................................................................................        11
               Notes to Consolidated Financial Statements...............................................        12
Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations....         1
PART II.       OTHER INFORMATION  ......................................................................         6
</TABLE>
<PAGE>

                                     PART I

                             FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

     See attached.


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operation

     This report contains certain forward-looking statements and information
relating to FiberNet Telecom Group, Inc. and its subsidiaries ("FiberNet" or the
"Company") that are based on the beliefs of the Company's management, as well as
assumptions made by and information currently available to the Company's
management. When used herein, words such as "anticipate," "believe," "estimate,"
"expect," "intend," and similar expressions, as they relate to the Company or
the Company's management, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions, relating to the
operations and results of operations of the Company, the Company's business
strategy, competition and changes in economic cycles, as well as other factors
described herein. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described herein as anticipated,
estimated, expected or intended.

Overview

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

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

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

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

o    We have deployed our advanced, vertical in-building networks, known as
     FiberNet In-Building Networks, or FINs, in 12 office buildings in New York
     City and seven in Chicago.

o    We had 57 customers and entered into 79 interconnection agreements with
     existing and potential customers, establishing the basis for purchase
     orders from them.

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


                                       1
<PAGE>

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

     We have experienced significant operating losses, net losses and negative
cash flows from operating activities. We expect to continue to experience such
losses and negative cash flows as we continue to deploy our network
infrastructure and expand our business operations. As a result of our limited
operating history, prospective investors have limited operating history and
financial data upon which to evaluate our performance.

Factors Affecting Future Operations

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

     Revenues are derived from three general types of services:

     Transport services. Our transport services include the offering of
broadband circuits on our metropolitan transport networks and FINs. Over our
metropolitan transport networks, we can provision circuits from one of our
carrier hotel facilities to another carrier hotel facility or to an on-net
building via an interconnection with our FIN in that building. We can also
provision circuits vertically between floors in a carrier hotel or an on-net
building.

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

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

     The growth of our revenues is dependent upon our ability to add more
carrier hotel facilities and on-net and off-net buildings as points of
connectivity on our networks. We believe that an increase in the number of
locations where we can deliver traffic for our customers provides us with a
broader addressable market to offer our services. Within each carrier hotel
facility, on-net and off-net building, our revenues will depend upon the demand
for our services, the competition that we face and our customer service.

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

     Currently our colocation and access services produce approximately one-
third of our revenues. In the future we anticipate generating significantly more
of our revenues from transport services than from colocation or access
management services. The scalability of our network architecture allows us to
increase transport capacity to a greater degree than is possible with our
colocation and access services. In addition, we typically require our customers
to make minimum commitments for transport services to utilize the inherent
operating leverage in our networks.

                                       2
<PAGE>

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

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

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

     Stock Related Expense. Stock related expense relates to the granting of
stock options to our employees. We grant stock options to our employees as a
form of equity-based compensation to attract, retain and incentivize qualified
personnel. These costs are non-cash charges that are amortized over the vesting
term of each employee's option agreement.

     Depreciation and Amortization. Depreciation and amortization expense
includes the depreciation of our network equipment and infrastructure, computer
hardware and software, furniture and fixtures, and leasehold improvements, as
well as the amortization of goodwill and certain deferred charges. We commence
the depreciation of network related fixed assets when they are placed into
service and depreciate those assets over periods ranging from three to 20 years.

Results of Operations

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

     Revenues. Revenues for the three months ended March 31, 2001 were $7.4
million compared to $111,000 for the three months ended March 31, 2000, a $7.3
million increase. We generated revenues by providing transport, colocation and
communications access management services to our customers. For the three months
ended March 31, 2001 and March 31, 2000, we recognized $5.1 million and
approximately $35,000 in transport services, $0.8 million and approximately
$44,000 in colocation services and $1.5 million and approximately $32,000 in
communications access management and other services, respectively. During the
three-month period ending March 31, 2001, two of our customers 360networks and
Qwest, accounted for approximately 50.7% of our revenues. We expect such
customer concentration to diminish as we further expand our operations and
diversify our customer base.

     Direct Costs. Direct costs for the three months ended March 31, 2001 and
March 31, 2000 were $2.9 and $0.2 million, respectively. The increase of $2.7
million was due to expenses associated with the expansion of our network
facilities. These costs included on-net building license fees, maintenance and
repair costs, rent expense at carrier hotel facilities and on-net and off-net
buildings, and related utility costs.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 2001 were $9.9
million compared to $4.3 million for the three months ended March 31, 2000. This
increase is consistent with the rapid expansion of our operations. We have
experienced significant growth in personnel costs, marketing and advertising
expenses, and network construction overhead to support our business strategy.


                                       3
<PAGE>

     Stock Related Expense. Stock related expense for the three months ended
March 31, 2001 was ($0.1) million compared to $1.7 million for the three months
ended March 31, 2000. This non-cash expense relates to the granting of stock
options to our employees. The amount recorded for the three months ended March
31, 2001 was a reversal of an expense incurred during 2000 due to a decline in
the public market price of our common stock since the end of 2000.

     Depreciation and Amortization. Depreciation and amortization expense for
the three months ended March 31, 2001 was $3.1 million compared to $1.2 million
of depreciation and amortization expense for the three months ended March 31,
2000. The increase resulted from commencement of the depreciation of network
related fixed assets that were placed into service.

     Interest Expense, Net. Interest expense, net for the three months ended
March 31, 2001 was $2.1 million compared to $49,000 of interest income, net for
the three months ended March 31, 2000. Interest expense was generated as a
result of borrowings under our senior secured credit facility and our
outstanding capital lease obligations.

     Preferred Stock Dividends. For the three months ended March 31, 2001, we
accrued $0.7 million in non-cash dividends on our preferred stock, payable in
the form of additional shares of each respective series of preferred stock,
based on the closing price per share at the end of the period. For the three
months ended March 31, 2000 we accrued $2.9 million in non-cash dividends on our
preferred stock, payable in the form of additional shares of each respective
series of preferred stock, based on the closing price per share at the end of
the period. For the period ending March 31, 2001 the liquidation value of all of
the dividends accrued was $1.4 million. All of the series of preferred stock are
convertible into shares of common stock.

     Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $18.7 million for the three months ended
March 31, 2001, compared to a loss of $10.1 million for the three months ended
March 31, 2000. The increase is a result of the aforementioned changes in our
operations and a non-cash charge of $7.4 million related to an early
extinguishment of debt from the modification of our credit facility on
February 9, 2001.

Liquidity and Capital Resources

     As a result of our developmental activities and the deployment of our
networks and facilities, we have incurred significant losses from inception to
date. We expect such losses to continue, as we further execute our business plan
and expand our operations. Consequently, we have been dependent upon external
sources of capital to fund our operations. Prospectively, we will continue to
incur losses and will not be able to fund our operations with internally
generated funds. Therefore we will require additional, external capital.
Additionally, we have no relevant operating history upon which an evaluation of
our performance and prospects can be made. We are subject to unforeseen capital
requirements, failure of market acceptance, failure to establish and maintain
business relationships, and competitive disadvantages against larger and more
established companies.

     To date, we have financed our operations through direct equity investments
from our stockholders, the issuance of additional debt and equity securities in
private transactions and by arranging a senior secured credit facility with a
group of lenders. We incurred an EBITDA loss and a net loss applicable to common
stockholders for the three months ended March 31, 2001 of $5.4 million and $18.7
million, respectively, compared to $4.4 million and $10.1 million, respectively,
for the three months ended March 31, 2000. During the three months ended March
31, 2001, cash used to fund operating activities was $6.9 million, and cash
purchases of property, plant and equipment were $18.0 million, compared to $4.7
million and $5.7 million, respectively, for the three months ended March 31,
2000.

     During the three months ended March 31, 2001, we received $24.6 million in
net cash proceeds from financing activities. On February 2, 2001, we completed a
$28.2 million directed public offering of our common stock under our existing
shelf registration statement. We issued 6,440,000 shares of common stock at a
purchase price of $4.375 per share as well as warrants to purchase an additional
1,288,000 shares at an exercise price of $6.56 per share. We may redeem the
warrants when the stock trades at $11.48 or above for 20 consecutive trading
days. As of May 14, 2001, we are eligible to sell an additional $121.8 million
of common stock, preferred stock, debt securities and


                                       4
<PAGE>

warrants under our existing shelf registration statement. Net proceeds from the
issuance of equity securities during the three months ended March 31, 2001 were
$26.0 million.

     On February 9, 2001, we increased our existing credit facility with
Deutsche AG New York Branch, Deutsche Banc Alex. Brown Inc., First Union
Investors, Inc., First Union Securities, Inc., Toronto Dominion (USA) Securities
Inc. and other lenders from $75.0 million to $105.0 million. The maturity of the
credit facility was extended to six years from four and one-half years, and the
initial interest rate was lowered to LIBOR + 4.5% from LIBOR + 6.0%. In
connection with this amended credit facility, we issued warrants to purchase an
additional 454,409 shares of our common stock at a purchase price of $8.00 per
share. In addition, as part of the amendment of our credit facility, all
warrants issued under the original credit agreement were replaced with new
warrants to purchase an equivalent amount of our common stock at a purchase
price of $8.00 per share.

     As of March 31, 2001, the outstanding borrowings under our credit facility
were $52.0 million. For the three months ended March 31, 2000, we received $3.3
million in net cash proceeds from the exercise of outstanding options to
purchase shares of equity securities.

     We anticipate spending $55.0 million to $75.0 million during the fiscal
year 2001 for the deployment of our FINs, expansion of our metropolitan
transport networks, the development of additional carrier hotel facilities and
other network programs and management systems.

     Our planned operations may require significant additional capital to fund
equipment purchases, engineering and construction costs, marketing costs,
administrative expenses and other operating activities. We continue to have on-
going discussions with sources of additional financing. From time to time, we
may consider private or public sales of additional equity or debt securities and
other financings, depending upon market conditions, in order to finance the
continued operations of our business. There can be no assurance that we will be
able to successfully consummate any such financing on acceptable terms, or at
all.




                                       5
<PAGE>

                                    PART II

                               OTHER INFORMATION

Item 1. Legal Proceedings

     None.


Item 2. Changes in Securities and Use of Proceeds

        On January 31, 2001, a stockholders agreement by and among us and the
stockholders listed therein was amended and restated to incorporate prior
amendments and to modify certain other provisions. Such amended and restated
stockholders agreement was filed as part of a current report on Form 8-K, filed
on February 2, 2001.

Item 3. Defaults Upon Senior Securities

        None.


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

        None.


Item 5. Other Information

        None.


Item 6. Exhibits and Reports on Form 8-K

        (a) The following documents are filed herewith as part of this
            Form 10-Q:

            None.

        (b) The following reports were filed on Form 8-K, under Item 5, during
            the quarter ended March 31, 2001:

    1.  Two reports were filed on February 2, 2001, regarding the amendment and
        restatement of the stockholders agreement, dated as of January 31, 2001,
        by and among us and the stockholders listed therein.

    2.  A report was filed on February 5, 2001, regarding our entering into a
        commitment agreement to amend and restate our credit agreement with the
        parties listed therein and our sale of 6,440,000 shares of common stock
        and warrants to purchase 1,288,000 shares of common stock.

    3.  A report was filed on February 15, 2001, regarding the amendment and
        restatement of the credit agreement, dated February 9, 2001, by and
        among us and the parties listed therein.

    4.  A report was filed on March 19, 2001, regarding the date of our annual
        meeting and the deadlines for submitting stockholder proposals.



                                       6
<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.


Date: May 14, 2001            FIBERNET TELECOM GROUP, INC.

                              By:   /s/   Jon A. DeLuca
                                  -------------------------
                              Name:  Jon A. DeLuca
                              Title:  Chief Financial Officer *

* The Chief Financial Officer is signing this quarterly report on Form 10-Q as
both the principal financial officer and authorized officer.




                                       7
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To FiberNet Telecom Group, Inc.:

We have reviewed the accompanying consolidated balance sheet of FiberNet Telecom
Group, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
March 31, 2001, and the related consolidated statements of operations and the
consolidated statements of cash flows for the three-month periods ended March
31, 2001 and 2000. These financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.


                                  /s/   Arthur Andersen LLP


New York, New York
April 23, 2001

                                       8
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                          CONSOLIDATED BALANCE SHEETS

                               (DOLLARS IN 000'S)

<TABLE>
<S>                                                                                     <C>            <C>
                                                                                    March 31,    December 31,
                                                                                      2001           2000
                                                                                   -----------   ------------
                                                                                   (Unaudited)
                                     ASSETS
Current assets:
  Cash and cash equivalents ......................................................   $   1,231    $   1,582
  Accounts receivable, net .......................................................       9,845       14,030
  Prepaid expenses and other .....................................................         465          960
                                                                                     ---------    ---------
     Total current assets ........................................................      11,541       16,572
Property, plant and equipment, net ...............................................     142,399      126,114
Goodwill and intangibles, net ....................................................      67,854       69,057
Deferred charges, net ............................................................      12,977       14,293
Other assets .....................................................................       1,741        1,129
                                                                                     ---------    ---------
TOTAL ASSETS .....................................................................   $ 236,512    $ 227,165
                                                                                     =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ...............................................................   $  13,643    $  11,119
  Accrued expenses ...............................................................       6,707       10,590
  Deferred revenues ..............................................................      12,467       14,381
  Capital lease obligation--current portion ......................................         241          233
                                                                                     ---------    ---------
     Total current liabilities ...................................................      33,058       36,323
Notes payable, less discount .....................................................      45,035       45,836
Capital lease obligation .........................................................         660          723
                                                                                     ---------    ---------
     Total liabilities ...........................................................      78,753       82,882
                                                                                     ---------    ---------

Stockholders' equity:
  Common Stock, $.001 par value, 150,000,000 shares authorized
    and 39,680,077 and 33,238,346 shares issued and outstanding, respectively ....          40           33
  Series C Voting Preferred Stock $.001 par value 83,688 issued and
    outstanding, respectively. (Preference in involuntary liquidation value, $1.50
    per share) ...................................................................         126          126
  Series D Preferred Stock $.001 par value, 322,704 shares issued
    and outstanding, respectively. (Preference in involuntary liquidation value,
    $15.00 per share) ............................................................      23,971       23,971
  Series E Preferred Stock $.001 par value, 317,853 shares issued
    and outstanding, respectively. (Preference in involuntary liquidation value,
    $15.00 per share) ............................................................      24,130       24,130
  Series F Preferred Stock $.001 par value, 376,202 shares issued
    and outstanding, respectively. (Preference in involuntary liquidation value,
    $30.00 per share) ............................................................      28,559       28,559
  Series H Preferred Stock $.001 par value, 440,544 shares issued and
    outstanding (Preference in involuntary liquidation value, $100.00 per share) .      64,568       64,568
  Series I Preferred Stock $.001 par value, 64,431 shares issued and
    outstanding (Preference in involuntary liquidation value, $120.00 per share) .      12,577        8,969
  Additional paid in capital and other ...........................................     175,245      146,719
  Accumulated deficit ............................................................    (171,457)    (152,792)
                                                                                     ---------    ---------
     Total stockholders' equity ..................................................     157,759      144,283
                                                                                     ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................   $ 236,512    $ 227,165
                                                                                     =========    =========
</TABLE>

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

                                       9
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

                  (DOLLARS IN 000'S, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                              Three Months Ended March 31,
                                                                              ----------------------------
                                                                                    2001         2000
                                                                              ------------    ------------
<S>                                                                           <C>            <C>
Revenues .................................................................     $    7,374    $        111
Operating expenses:
 Direct costs ............................................................          2,921             203
 Selling, general and administrative expenses ............................          9,895           4,291
 Stock related expense ...................................................           (137)          1,696
 Depreciation and amortization ...........................................          3,105           1,175
                                                                               ----------      ----------
Total operating expenses .................................................         15,784           7,365
                                                                               ----------      ----------
Loss from operations .....................................................         (8,410)         (7,254)
Interest (expense) / income, net .........................................         (2,126)             49
                                                                               ----------      ----------
Net loss before extraordinary item .......................................        (10,536)         (7,205)
Extraordinary loss on early extinguishment of debt .......................         (7,398)             --
                                                                               ----------      ----------
Net loss .................................................................        (17,934)         (7,205)
Preferred stock dividends ................................................           (731)         (2,851)
                                                                               ----------      ----------
Net loss applicable to common stockholders ...............................     $  (18,665)   $    (10,056)
                                                                               ==========      ==========
Net loss applicable to common stockholders per share - basic and diluted       $    (0.50)   $      (0.38)
Weighted average shares outstanding ......................................     37,460,720      26,813,099
</TABLE>


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

                                       10
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

                               (DOLLARS IN 000'S)

<TABLE>
<CAPTION>
                                                                                Three Months Ended March 31,
                                                                                     2001        2001
                                                                                   --------    --------
<S>                                                                                <C>         <C>
Cash flows from operating activities:
  Net loss applicable to common stockholders .................................     $(18,665)   $(10,056)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Extraordinary item ......................................................        7,398          --
     Depreciation and amortization ...........................................        3,105       1,175
     Preferred stock dividends ...............................................          731       2,851
     Stock related expense ...................................................         (137)      1,696
     Other non-cash items ....................................................          744          --
     Change in assets and liabilities:
        (Increase) decrease in accounts receivable, prepaid expenses and other
          assets .............................................................        3,218        (435)
        Increase (decrease) in accounts payable, accrued expenses and deferred
          revenues ...........................................................       (3,292)         90
                                                                                   --------    --------
Cash used in operating activities ............................................       (6,898)     (4,679)
Cash flows from investing activities:
  Capital expenditures .......................................................      (18,005)     (5,717)
                                                                                   --------    --------
Cash used in investing activities ............................................      (18,005)     (5,717)
Cash flows from financing activities:
  Net repayments of debt financings ..........................................       (1,404)         --
  Net proceeds from issuance of equity securities ............................       26,011       3,300
  Repayment of capital lease obligation ......................................          (55)        (48)
                                                                                   --------    --------
Cash provided by financing activities ........................................       24,552       3,252
                                                                                   --------    --------
Net decrease in cash .........................................................         (351)     (7,144)
Cash at beginning of period ..................................................        1,582       9,512
                                                                                   --------    --------
Cash at end of period ........................................................     $  1,231    $  2,368
                                                                                   ========    ========
Supplemental disclosures of cash flow information:
  Interest paid ..............................................................     $  1,160    $     44
  Income taxes paid ..........................................................           --          --
</TABLE>



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


                                       11
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1. ORGANIZATION AND OPERATIONS

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

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

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

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Use of Estimates

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and



                                       12
<PAGE>

disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

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

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

Cash and Cash Equivalents

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

Property, Plant and Equipment

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

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


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

Impairment of Long-Lived Assets

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

                                       13
<PAGE>

Revenue Recognition

     FiberNet generates revenues from selling network capacity and related
services to other communications service providers. The majority of the
Company's revenues are generated on a monthly recurring basis under long-term
contracts, typically three to five years in length. Revenue is recognized over
the service contract period for all general services. Deferred revenues consist
primarily of payments received in advance of revenue being earned under the
service contracts. Most of its customers are obligated to make minimum payments
for the utilization of its networks and facilities. Customers may elect to
purchase additional services in excess of minimum contractual requirements.

     The Company has entered into certain reciprocal agreements. The services
provided and obtained through these agreements are priced at fair market value
and are included in revenues and direct costs in the accompanying consolidated
statements of operations.

     Revenues are derived from three general types of services:

     Transport services. FiberNet's transport services include the offering of
broadband circuits on its metropolitan transport networks and in-building
networks. Over its metropolitan transport networks, the Company can provision
circuits from one of its carrier hotel facilities to another carrier hotel
facility or to an on-net building via an interconnection with its in-building
network in that building. The Company can also provision circuits vertically
between floors in a carrier hotel or an on-net building.

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

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

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101 ("SAB 101"), which addresses accounting policies
to be applied in the recognition, presentation and disclosure of revenues from
contract partnerships, in financial statements filed with the SEC. The net
effect of SAB 101, when applicable, could defer revenue recognition for certain
payments previously received into future accounting periods. On June 26, 2000,
the SEC deferred the implementation of SAB 101 from the second calendar quarter
of 2000 until no later than the fourth calendar quarter of 2000, to provide
companies with additional time to determine the effect that a change in
accounting policy under SAB 101 has on their revenue recognition practices. The
implementation of SAB 101 requires companies to report any changes in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion No. 20, "Accounting Changes". The Company's financial statements
reflect the accounting guidance in SAB 101 for all periods presented.

Fair Value of Financial Instruments

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

Goodwill and Intangibles

     Cost in excess of net assets of acquired businesses, principally goodwill,
is amortized on the straight-line method over 15 years. Other intangible assets
include the cost to access buildings and deferred financing costs.


                                       14
<PAGE>

Costs to access buildings are amortized over 15 years, which represents the term
of the related contracts. Deferred financing costs are amortized over the term
of the associated debt obligation.

Earnings Per Share

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

Concentration of Credit Risk

     The Company has some concentration of credit risk among its customer base.
The Company performs ongoing credit evaluations of the financial condition its
customers. As of March 31, 2001, two customers in the aggregate accounted for
20.7% of the Company's total accounts receivable. For the three months ended
March 31, 2001, two customers in the aggregate accounted for 50.7% of the
Company's total revenues. The Company recorded an allowance for doubtful
accounts of $1.3 million as of March 31, 2001.

Stock Option Plan

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

Accounting for Income Taxes

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

Reclassifications

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

Segment Reporting

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

Recent Accounting Pronouncements

     In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133", which deferred SFAS 133's
effective date to January 2001. SFAS 133 establishes new standards of accounting
and reporting for derivatives instruments and hedging activities and requires
that all derivatives be recognized on the balance sheet at fair value. Changes
in the fair value of derivatives that do not meet the hedge accounting criteria
are to be reported in earnings. The adoption of SFAS 133 did not have a material
impact on the Company's consolidated financial statements, as the Company has
not entered into any derivative instrument contracts.


                                       15
<PAGE>

     The accompanying financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in FiberNet's
annual report on Form 10-K for the fiscal year ended December 31, 2000.


3. PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                     March 31,     December 31,
                                                        2001           2000
                                                     ---------      ---------
<S>                                                  <C>            <C>
Computer software ..........................         $   3,402      $   2,963
Computer equipment .........................             2,863          1,926
Leasehold improvements .....................             1,279          1,111
Office equipment and furniture .............               928            810
Construction in progress ...................            56,118         52,876
                                                     ---------      ---------
Network equipment and infrastructure .......            84,424         71,322
                                                       149,014        131,008
Accumulated depreciation ...................            (6,615)        (4,894)
                                                     ---------      ---------
Property, plant and equipment, net .........         $ 142,399      $ 126,114
                                                     =========      =========
</TABLE>

4. SIGNIFICANT EVENTS

     On February 2, 2001, FiberNet completed a $28.2 million direct public
offering of its common stock. FiberNet issued 6,440,000 shares of common stock
at $4.375 per share as well as warrants to purchase an additional 1,288,000
shares at an exercise price of $6.56 per share. The Company may redeem the
warrants when the stock trades at $11.48 or above for 20 consecutive trading
days.

     On February 9, 2001, FiberNet increased its existing credit facility from
$75 million to $105 million. In connection with this amended credit facility,
the Company issued warrants to purchase an additional 454,409 shares of its
common stock at an exercise price of $8.00 per share. In addition, as part of
the amendment of its credit facility, all warrants issued under the original
credit agreement were replaced with new warrants to purchase an equivalent
amount of its common stock at an exercise price of $8.00 per share. The Company
incurred an extraordinary loss from the early extinguishment of debt of $7.4
million, or $0.20 per share, as a result of the modification of the credit
facility.


                                       16