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                       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, 2002

                                       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,
2002, was 62,942,833 shares of Common Stock, $.001 par value.

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                                      INDEX
<TABLE>
<CAPTION>
<S>                     <C>                                                                   <C>
                                                                                             Page
                                                                                             ----
PART I.        FINANCIAL INFORMATION .....................................................     3
Item 1.        Consolidated Financial Statements .........................................     3
               Consolidated Balance Sheets as of March 31, 2002 and December 31,
               2001 ......................................................................    12
               Consolidated Statements of Operations for the three months
               ended March 31, 2002 and 2001 .............................................    13
               Consolidated Statements of Cash Flows for the three months ended
               March 31, 2002 and 2001....................................................    14
               Notes to Consolidated Financial Statements ................................    15
Item 2.        Management's Discussion and Analysis of Financial Condition and
               Results of Operations .....................................................     3
Item 3         Quantitative and Qualitative Disclosures About Market Risk ................     8
PART II.       OTHER INFORMATION .........................................................    10
</TABLE>
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                                     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 as that term is defined
in the Private Securities Litigation Reform Act of 1995. Such statements are
based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Investors are cautioned
that there can be no assurance that actual results or business conditions will
not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
following: the difficulty inherent in operating an early-stage company in a new
and rapidly evolving market; our history of operating losses and accumulated
deficit; our limited financial resources and uncertainty as to the availability
of additional capital to fund our operations on acceptable terms, if at all; our
success in obtaining additional carrier hotel lease agreements and license
agreements with building owners; growth in demand for our services; the
frequency of service interruptions on our networks; the potential development by
competitors of competing products and technologies; restrictions imposed on us
as a result of our debt; and changes in the regulatory environment. As a result,
our future operations involve a high degree of risk. Except as required by law,
we undertake no obligation to update any forward- looking statement, whether as
a result of new information, future events or otherwise.

Overview

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

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 operate our business. We also have a
limited operating history. Consequently, prospective investors have limited
operating history and financial data upon which to evaluate our performance.

The telecommunications industry is currently experiencing a period of
uncertainty and rationalization. Many companies in our industry are in financial
distress, and some of our largest customers have filed for bankruptcy. We have
been negatively impacted by the general economic environment and by the
difficulties that are impacting our industry. Most significantly, customer
contracts and services have been cancelled, resulting in a loss of recurring
revenues to us. We are unable to determine the extent to which additional
contracts or services that we provide to our customers will be cancelled, and we
cannot forecast our ability to replace those cancelled contracts with new
contracts. As a result, our revenues, business operations and liquidity may
continue to be negatively affected by the market environment.

Factors Affecting Future Operations

Revenues. We generate revenues from selling network capacity and related
services to other communications service providers. We recognize revenues when
earned as services are provided throughout the life of each contract with a
customer. Revenues are derived from three general types of services:

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

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

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o        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 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, if such networking infrastructure
         is available.

Our revenues are generated on a monthly recurring basis under contracts with our
customers. The terms of these contracts can range from month-to-month to five
years in length. During the past year, we experienced a trend of entering into
shorter-term contracts with our customers. Previously, our customers typically
entered into contracts with terms of three to five years. Increasingly, our
customers are electing to purchase services on a month-to-month basis or for a
contracted period of only one year.

Our services are typically sold under fixed price agreements. In the case of
transport services, we provide an optical circuit or other means of connectivity
for a fixed price. Revenues from transport services are not dependent on
customer usage or the distance between the origination point and termination
point of a circuit. The pricing of colocation services is based upon the size of
the colocation space or the number of colocation units, such as cabinets,
provided to the customer. Revenues from access management services are typically
determined by the square footage of the commercial office properties to which a
customer purchases access. The pricing of all of our services have declined
significantly over the past year, although we believe not to the extent that the
pricing in other segments of the telecommunications market has declined.

The growth of our revenues is dependent upon our ability to provide additional
services in our existing facilities. We also believe that the majority of the
growth in our revenues will come from our existing customers. Consequently, our
growth in revenues is dependent on the underlying growth of our customers'
businesses and their need for our services within the facilities that we already
operate. We continue to add additional customers. However, we believe the number
of companies that are potential customers is decreasing, due to the industry
environment. In addition, we currently do not anticipate expanding our network
infrastructure to other carrier point facilities or on-net buildings and off-net
buildings. Within each of our existing facilities, 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 management services.

Cost of Services. Cost of services are associated with the operation of our
networks and facilities. The largest component of our cost of services is the
occupancy expenses at our carrier point facilities, on-net buildings and off-net
buildings. Other specific costs include maintenance and repair costs and utility
costs. Our license agreements for our on-net and off-net buildings require us to
pay license fees to the owners of these properties. In addition, our lease for
our meet-me-room at 60 Hudson Street in New York City also requires us to pay a
license fee. 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 cost of services are generally fixed in nature. We do not anticipate
that cost of services will change commensurately with any change in our
revenues.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses generally include all of our personnel costs, occupancy
costs for our corporate offices, insurance costs, professional fees, sales and
marketing expenses and other miscellaneous expenses. Personnel costs, including
wages, benefits and sales commissions, are our largest component of selling,
general and administrative expenses. We have reduced the number of our employees
from 108 as of December 31, 2001 to 86 as of March 31, 2002, and our personnel
costs have decreased significantly. Prospectively, we do not anticipate
significant changes in headcount, and we believe that our personnel costs will
increase moderately. We do expect our insurance costs to increase materially
upon our annual renewals as a result of increases in coverage premiums.

Stock Related Expense. Stock related expense relates to the granting of certain
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. Certain options granted to employees
are accounted for using variable plan accounting. Under variable plan
accounting, the stock related expense is adjusted for changes in the

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market price of the underlying common stock.

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 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. As a result of the
impairment to fixed assets that we recorded during 2001, depreciation and
amortization expense may decrease going forward.

We review the carrying value of its assets 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 the fourth quarter of 2001, we determined that our forecasts for revenues for
certain of our facilities would not be achieved due to the significant adverse
change in the business climate. We further determined that the dramatic change
in the operating environment for the telecommunications industry resulted in a
significantly less demand for our services in these facilities. We believe that
the decrease in demand was a result of the significant number of bankruptcies of
telecommunications companies that were existing or potential customers of ours
and the overall economic recession. We also determined that a rebound in demand
for our services would not occur in the near term. As a result, we revised our
business plan and conducted extensive reviews of our assets and operations. The
revisions to the business plan primarily included reductions in forecasts of
revenues and capital expenditures. The projected amounts of certain cost of
services and overhead expenses were reduced as well to reflect the decrease in
our expected business activity. We also determined that certain financial
covenants in our credit facility would need to reflect the revised business
plan, including our reduced revenue forecasts. Consequently, we amended our
credit facility in December 2001.

We used an undiscounted forecasted cash flow model to determine if there was an
impairment based on the cash flows expected to be generated from these assets,
and used a discounted cash flow model to measure the impairment. As a result of
this analysis, we have recorded an asset impairment of approximately $51.8
million in the fourth quarter of 2001, based on the amount by which the carrying
amount of these assets exceeded their fair value. Of this amount, $40.4 million
relates to assets held for use, and $11.4 million represents assets to be
disposed of.

The assets that we identified for disposition were abandoned, as we determined
that these assets had no value. Consequently, there was no cost to us for this
abandonment, nor do we expect to receive any proceeds or other consideration
from this abandonment. We recorded no reserves, accruals or other liabilities
related to this abandonment. These assets primarily related to engineering and
network architecture design costs and general contracting and project management
costs for facilities that we are no longer pursuing.

During the third quarter of 2001, we evaluated the carrying value of certain
long-lived assets and acquired equity investments, consisting primarily of
goodwill resulting from our acquisition of Devnet. Pursuant to APB Opinion No.
16, "Business Combinations", the purchase price was determined and goodwill was
recorded based on the stock price at the time the merger agreement was executed
and announced. An assessment of the goodwill related to the Devnet acquisition
was performed pursuant to SFAS No. 121, due to the negative industry and
economic trends affecting certain of our current operations and expected future
revenues, as well as the general decline in the valuations of telecommunications
companies. The conclusion of that assessment was that the decline in market
conditions within the telecommunications industry was significant and other than
temporary.

Devnet had entered into exclusive license agreements to manage communications
access to commercial office properties, and we associated the related goodwill
primarily to those agreements. We used an undiscounted forecasted cash flow
model to determine if there was an impairment based on the cash flows expected
to be generated from business activities in the commercial office properties
underlying the license agreements and used a discounted cash flow model to
measure the impairment. As a result, we recorded a charge of $56.5 million
during the third quarter of 2001 to reduce goodwill associated with the purchase
of Devnet. The charge was based on the amount by which the carrying amount of
the asset exceeded its fair value. In June 2001, the FASB issued SFAS No. 142,
"Goodwill and Other Intangible Assets", applicable for fiscal years beginning
after December 15, 2001. SFAS No. 142, which we adopted effective January 1,
2002, requires that goodwill and certain intangible assets resulting from
business combinations entered into prior to June 30, 2001 no longer be
amortized, but instead be reviewed for recoverability. Any write-down of
goodwill would be charged to results of operations as accumulative change in
accounting principle upon adoption of the new accounting standard if the
recorded value of goodwill and certain intangibles exceeds its fair value. Any
write-down of goodwill up to and including December 31, 2001 would not be
subject to the rules of this new standard. We are evaluating the impact of the
adoption of SFAS No. 142 and expect to complete our analysis by June 30, 2002.

Restatement of Financial Statements

We restated our consolidated financial statements for the quarter ended March
31, 2001 to record a beneficial conversion feature of $21.0 million in
connection with the reduction of the conversion price on our series H and I
preferred stock on February 9, 2001. Other than with respect to the consolidated
financial statements for the quarter ended March 31, 2001, this restatement has
no impact on our assets or total stockholders' equity, and it resulted in an
increase in additional paid-in-capital and an increase in net loss. The change
increased net loss by $21.0 million and increased net loss applicable to common
stockholders per share by $0.56. The change has no impact on our cash flows.
This change was already reflected in our annual report on Form 10-K for the
fiscal year ended December 31, 2001.

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

Revenues.  Revenues for the three months ended March 31, 2002 were $7.0 million
compared to $7.4 for the three months ended March 31, 2001, a decrease of $0.4
million. We generated revenues by providing transport, colocation and
communications access management services to our customers. For the three months
ended March 31, 2002, we recognized $4.4 million in transport services,

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$1.5 million in colocation and other services and $1.1 million in communications
access management services. For the three months ended March 31, 2001, we
recognized $5.1 million in transport services, $0.8 million in colocation and
other services and $1.5 million in communications access management services.
During the three-months ended March 31, 2002, two of our customers, 360networks
and Qwest, accounted for approximately 31.4% of our revenues.

The decrease in revenues was due to the elimination of certain reciprocal
agreements that were terminated during the first quarter of 2002. Reciprocal
agreements accounted for $0.4 million, or 6.0%, of our revenues in the first
quarter of 2002, down from $1.2 million, or 16.3%, of our revenues for the first
quarter of 2001.

Cost of services. Cost of services for the three months ended March 31, 2002 and
March 31, 2001 were $2.4 and $2.9 million, respectively. The decrease of $0.5
million was due to reduction in expenses associated with 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. Reciprocal agreements accounted for $0.4 million of our
cost of services in the first quarter of 2002 and $1.2 million of our cost of
services in the first quarter of 2001.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 2002 were $4.2
million compared to $9.9 million for the three months ended March 31, 2001. This
decrease is a result of our aggressive cost savings initiatives to reduce
corporate overhead in line with our current outlook for business activity. Cost
reductions were realized in nearly all components of selling, general and
administrative expenses, including advertising and marketing costs, professional
fees and travel and entertainment expenses. The greatest decrease in overhead
came in personnel costs, as we reduced headcount from 194 employees at the
beginning of 2001 to 86, as of March 31, 2002.

Stock Related Expense.  Stock related expense for the three months ended March
31, 2002 was $0.1 million compared to ($0.1) million for the three months ended
March 31, 2001. 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 during the first quarter of 2001.

Depreciation and Amortization. Depreciation and amortization expense for the
three months ended March 31, 2002 was $2.6 million compared to $3.1 million of
depreciation and amortization expense for the three months ended March 31, 2001.
The decrease resulted from the impairment of property, plant and equipment that
we recorded in 2001.

Interest Expense. Net. Interest expense, net for the three months ended March
31, 2002 was $2.2 million compared to $2.1 million, net for the three months
ended March 31, 2001. 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, 2002, we accrued
approximately $28,000 in non-cash dividends on our series H preferred stock,
payable in the form of additional shares of preferred stock, based on the
closing price per share at the end of the period. For the three months ended
March 31, 2001 we accrued $0.7 million in non-cash dividends on our series D, E,
F, H and I 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, 2002 the liquidation
value of all of the dividends accrued was $0.2 million. Both of our series H and
J of preferred stock, currently outstanding, are convertible into shares of
common stock.

Preferred Stock - Beneficial Conversion. In February 2001, the conversion price
of the Series H and Series I was reduced to $4.38, in accordance with the
original terms of the issuance transactions. The certificates of designation of
the Series H and Series I include provisions requiring the conversion prices to
be lowered to the per share price at which we issue any shares of common stock,
subject to certain exceptions, subsequent to the initial issuance of the Series
H and Series I. In February 2001, we issued shares of common stock in a directed
public offering at a price of $4.38 per share, resulting in the reduction of the
conversion price. The Company recorded a beneficial conversion charge of $21.0
million as a result of the reduction of the conversion price. Additionally, in
connection with the conversion of the Series H and I preferred stock, the
conversion price of the remaining 100,000 shares of Series H preferred stock was
reduced to $1.31. However, as all of the proceeds from the issuances of the
Series H and Series I had been allocated to beneficial conversion features, no
additional proceeds were allocated upon the reset of the conversion price of the
Series H preferred stock to $1.31. No additional beneficial conversion feature
was recorded during the first quarter of 2002 on our Series J preferred stock
based upon our evaluation of changes in the conversion price of the Series J
preferred stock and the public market price of our common stock.

Net Loss Applicable to Common Stockholders. We reported a net loss applicable to
common stockholders of $4.5 million for the three months ended March 31, 2002,
compared to a loss of $39.7 million for the three months ended March 31, 2001.
The decrease is a result of the aforementioned changes in our operations and two
non-recurring charges recorded in the first quarter of 2001: 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 and the preferred stock - beneficial
conversion of $21.0 million recorded in February 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

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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 to achieve 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 (as defined) profit and a net loss
applicable to common stockholders for the three months ended March 31, 2002 of
$0.4 million and $4.5 million, respectively, compared to an EBITDA (as defined)
loss of $5.4 million and net loss applicable to common stockholders of $39.7
million, respectively, for the three months ended March 31, 2001. During the
three months ended March 31, 2002, cash used to fund operating activities was
$3.7 million, and cash purchases of property, plant and equipment were $0.3
million, compared to $6.9 million and $18.0 million, respectively, for the three
months ended March 31, 2001. During the three months ended March 31, 2002, we
received $2.7 million in net cash proceeds from financing activities, including
$2.0 million in gross proceeds from the issuance of a subordinated convertible
note, as discussed below, and $1.0 million from an additional draw under our
credit facility.

On March 15, 2002, we received gross proceeds of $2.0 million from the issuance
of a subordinated note to an existing investor. The issuance of the note was in
lieu of a second closing on our series J convertible preferred stock, as was
previously contemplated. The subordinated note has a maturity date of June 14,
2002 and bears interest, which is due and payable on the maturity date, at an
annual rate of 8%. The subordinated note may be converted into equity in our
company, on terms to be determined, as part of a larger equity financing and in
connection with a broader recapitalization that we are pursuing. Additionally,
in connection with this financing, the lenders under our credit facility agreed
to extend the due date of the current quarterly interest payment to April 15,
2002. On April 15, 2002, in connection with our ongoing efforts to seek
additional financing and to undertake this broader recapitalization, the lenders
agreed to further extend the due date of the current quarterly interest payment
to May 6, 2002, and possibly, depending on the satisfaction of certain
conditions, to May 27, 2002.

On May 6, 2002 the lenders again agreed to extend the due date of the current
quarterly interest payment to May 28, 2002, and we reached a conditional
agreement with the lenders to convert $25 million of indebtedness into
convertible preferred stock with a conversion price of $0.40 per share. Under
the arrangement the lenders would convert $25 million of indebtedness into a
minimum of 2,500 shares of new series K preferred stock. The closing of this
transaction is subject to a number of conditions, including, but not limited to
final credit approval of each of the lenders, the completion of an acceptable
equity financing and the conversion of all of our currently outstanding
convertible securities, excluding certain options and warrants. Each share of
series K preferred stock would have a stated value of $10,000 per share and
would convert into 25,000 shares of common stock.

Concurrently with the consummation of the transaction and the related equity
issuance and conversions, the holders of the series K preferred stock would be
issued a sufficient number of warrants to purchase shares of common stock to
ensure that they would hold on an aggregate basis a fully-diluted ownership
position in the company of at least 30%. The exercise price of such warrants
issued to the holders of the series K preferred stock would be the lower of 125%
of the market price as of the closing date or 110% of the exercise price of any
warrants issued to investors in the concurrent equity financing, and the term of
the warrants would be five years.

This arrangement would also involve certain amendments to the provisions of the
senior secured credit facility, including the reduction of the maximum
availability to approximately $77 million and the reduction in the interest rate
currently from LIBOR + 4.5% to LIBOR + 3.75%.

It is anticipated that, if these conditions are met, the closing of these
transactions will occur as soon as practicable. However, there can be no
assurance that we will be able to successfully effectuate any or all of the
transactions described above. In addition, any financing or broader
recapitalization we undertake will be substantially dilutive to our existing
stockholders.

As of March 31, 2002, the outstanding borrowings under our credit facility were
$96.0 million, and the weighted average interest rate on our outstanding
borrowings under the facility was 6.6%. Outstanding letters of credit under the
credit facility totaled $7.4 million. We were in full compliance with all of the
covenants contained in the credit agreement underlying the facility. Our access
to the additional availability under the credit facility is subject to our
compliance with the covenants, and other terms and conditions, in the credit
agreement. Material financial covenants monitored on a quarterly basis include
minimum requirements for cumulative revenues and EBITDA (as defined), a maximum
limitation on capital expenditures, and compliance with ratios of total debt to
consolidated capitalization and total debt to property, plant and equipment, net
of accumulated depreciation. Non-compliance with any of these covenants,
requirements, or other terms and conditions, constitutes an event of default
under the credit agreement, prohibiting access to any additional funds available
under the credit facility and potentially accelerating the outstanding balance
for immediate payment.

On January 2, 2002 we entered into an interest rate swap transaction with
Deutsche Bank AG for a notional amount of $25.0 million and a term of two years.
Pursuant to this transaction, we were obligated to make quarterly interest
payments at a fixed, annual interest

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rate of 3.7%. Because such interest rate excludes the applicable margin of 4.5%
that we pay on our credit facility, the total interest rate for us on this swap
transaction was 8.2%. As part of this agreement, Deutsche Bank AG was obligated
to pay to us on a quarterly basis a floating rate of interest based upon LIBOR
with a designated maturity of three months. On March 20, 2002 we terminated this
interest rate swap transaction with Deutsche Bank AG with no payments of other
amounts owed by either party. As a result, all of our outstanding borrowings
under our credit facility bear interest at a floating rate.

When we filed our Form 10-K for the fiscal year ended December 31, 2001 on March
1, 2002, our then existing shelf registration statement on Form S-3 was deemed
post-effectively amended and no longer effective. As of March 1, 2002, we were
no longer eligible to use Form S-3 for shelf registrations since we did not
satisfy an eligibility requirement of Form S-3 for primary issuances which
requires that the aggregate market value of voting common stock held by
non-affiliates be at least $75 million. Accordingly, no further issuances of our
securities may be made pursuant to that shelf registration statement.

We anticipate spending $7.0 million to $9.0 million during the fiscal year 2002
on capital expenditures for the implementation of customer orders and the
maintenance of our networks. We have substantially completed the deployment of
our FINs, carrier hotel facilities and metropolitan transport networks. We may
expend additional capital for the selected expansion of our network
infrastructure, depending upon market conditions, customer demand and our
liquidity and capital resources.

Our planned operations continue to require additional capital to fund equipment
purchases, engineering and construction costs, marketing costs, administrative
expenses and other operating activities. Although we reported that we generated
positive EBITDA (as defined) for the three months ended March 31, 2002, there
can be no assurance that we will be able to achieve such a result prospectively.
We cannot fund our operating and investing activities with internally generated
cash flows. We continue to require external sources of capital. The successful
completion of our recapitalization, as discussed above, and the related equity
financing is critical to our liquidity. 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. We do
not have any off-balance sheet financing arrangements, nor do we anticipate
entering into any.

EBITDA (as defined), as discussed above, is defined as net loss before income
taxes and minority interest, interest expense, interest income, depreciation and
amortization, stock related expense and other non-cash, non-recurring charges.
EBITDA (as defined) is commonly used in the communications industry and by
financial analysts, and others who follow the industry, to measure operating
performance. EBITDA (as defined) should not be construed as an alternative to
operating income or cash flows from operating activities, both of which are
determined in accordance with generally accepted accounting principles, or as a
measure of liquidity. Because it is not calculated under generally accepted
accounting principles, our EBITDA (as defined) may not be comparable to
similarly titled measures used by other companies.

                                                  Consolidated Financial Data
                                                       (in thousands)
                                                         (unaudited)

                                                        Quarter Ended
                                                          March 31,
                                                --------------------------------
                                                   2002                 2001
                                                ------------        ------------
                                                                    restated (1)

Calculation of EBITDA (as defined):

Net loss ....................................     $(4,488)             $(17,934)

Plus:
Operating expenses:
Stock related expense for selling,
  general, and administrative matters .......          74                  (137)
Depreciation and amortization ...............       2,642                 3,105
Extraordinary loss on early
  extinguishments of debt ...................          --                 7,398
Interest expense, net .......................       2,157                 2,126

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

EBITDA (as defined) .........................      $   385              $(5,442)

(1) See Footnote 5 to the notes of the consolidated financial statements for a
discussion of the restatement of our financial results for the quarter ended
March 31, 2001.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to financial market risk, including changes in interest rates,
relates primarily to our credit facility and marketable security investments.
Borrowings under our credit facility bear interest at floating rates, based upon
LIBOR or a base rate plus an applicable margin. As a result, we are subject to
fluctuations in interest rates. A 100 basis point increase in LIBOR would
increase

                                       8

<PAGE>

our annual interest expense by less than $1.0 million per year. As of March 31,
2002, we had borrowed $96.0 million under our credit facility. We are subject to
fluctuations in interest rates on the entire portion of our outstanding balance,
with a current weighted average interest rate of 6.6%.

On January 2, 2002 we entered into an interest rate swap transaction with
Deutsche Bank AG for a notional amount of $25.0 million and a term of two years.
Pursuant to this transaction, we were obligated to make quarterly interest
payments at a fixed, annual interest rate of 3.7%. Because such interest rate
excludes the applicable margin of 4.5% that we pay on our credit facility, the
total interest rate for us on this swap transaction was 8.2%. As part of this
agreement, Deutsche Bank AG was obligated to pay to us on a quarterly basis a
floating rate of interest based upon LIBOR with a designated maturity of three
months. On March 20, 2002 we terminated this interest rate swap transaction with
Deutsche Bank AG with no payments of other amounts owed by either party. As a
result, all of our outstanding borrowings under our credit facility bear
interest at a floating rate.

We generally place our marketable security investments in high credit quality
instruments, primarily U.S. government obligations and corporate obligations
with contractual maturities of less than one year. We operate only in the United
States, and all sales have been made in U.S. dollars. We do not have any
material exposure to changes in foreign currency exchange rates.

                                       9

<PAGE>

                                     PART II

                                OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Changes in Securities and Use of Proceeds

None.

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, 2002:

On March 18, 2002, we filed a report regarding our issuance of a $2.0 million
subordinated note.

                                       10

<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, thereunto duly
authorized.

Date: May 15, 2002 FIBERNET TELECOM GROUP, INC.

                                                     By:   /s/   Jon A. DeLuca
                                                         ----------------------
                                                     Name:   Jon A. DeLuca
                                                     Title:  Senior Vice
                                                             President - Finance
                                                             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.

                                       11

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS

                               (DOLLARS IN 000'S)


<TABLE>
<CAPTION>
<S>                                                                                             <C>            <C>



                                                                                             March 31,     December 31,
                                                                                                2002           2001
                                                                                              -------        -------
                                            ASSETS                                           (unaudited)

Current Assets:
     Cash and cash equivalents .....................................................        $   2,119        $  3,338
     Accounts receivable, net of allowance of $1,909 and $2,245 at
      March 31, 2002 and December 31, 2001, respectively ...........................            3,109           2,659
     Prepaid expenses and other ....................................................              453             700
                                                                                            ---------        --------
          Total current assets .....................................................            5,681           6,697
Property, plant and equipment, net .................................................          107,630         109,837
Other Assets:
     Goodwill, net of accumulated amortization of $1,159 and $1,159 at
      March 31, 2002 and December 31, 2001, respectively ...........................            7,509           7,509
     Deferred charges, net of accumulated amortization of $2,269 and $1,937 at
      March 31, 2002 and December 31, 2001, respectively ...........................           11,940          12,099
     Other assets ..................................................................              456             445
                                                                                            ---------        --------
          Total other assets .......................................................           19,905          20,053
                                                                                            ---------        --------
TOTAL ASSETS .......................................................................        $ 133,216       $ 136,587
                                                                                            =========        ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable ..............................................................        $   5,185        $  6,742
     Accrued expenses ..............................................................            7,889           7,452
     Deferred revenues .............................................................            5,608           6,071
     Capital lease obligation--current portion .....................................              248             250
     Subordinated note payable .....................................................            2,000              --
     Note payable, affiliate .......................................................            1,793           2,321
                                                                                             --------        --------
          Total current liabilities ................................................           22,723          22,836
Long-Term Liabilities:
     Notes payable, less original issue discount of $5,773 and $6,071 at
      March 31, 2002 and December 31, 2001, respectively ...........................           90,227          88,929
     Capital lease obligation ......................................................              412             474
                                                                                             --------        --------
          Total liabilities ........................................................          113,362         112,239
Stockholders' Equity:
     Common stock, $.001 par value, 150,000,000 and 50,000,000 shares authorized
      and 62,400,351 and 61,572,613 shares issued and outstanding at March 31,
      2002 and December 31, 2001, respectively ......................................              62              62
     Series H preferred stock $.001 par value, 100,556 and 100,556 shares issued
      and outstanding at March 31, 2002 and December 31, 2001, respectively
      (Preference in involuntary liquidation value, $100.00 per share) ..............          17,096          17,096
     Series J preferred stock $.001 par value, 334 and 356 shares issued and
      outstanding at March 31, 2002 and December 31, 2001, respectively
      (Preference in involuntary liquidation value, $10,000.00 per share) ...........           1,147           7,063
     Subscription receivable from Series J preferred stock ..........................              --          (5,700)
     Additional paid-in-capital and other ...........................................         295,889         295,649
      Accumulated deficit ...........................................................        (294,340)       (289,822)
                                                                                             ---------       ---------
          Total stockholders' equity ................................................          19,854          24,348
                                                                                             ---------       ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..........................................       $ 133,216       $ 136,587
                                                                                             =========       =========
</TABLE>

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

                                       12

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

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


<TABLE>
<CAPTION>
<S>                                                                    <C>            <C>

                                                                  Three Months Ended March 31,
                                                                  ----------------------------
                                                                     2002               2001
                                                                  ----------        ----------
                                                                                    As restated -
                                                                                     see Note 5

Revenues ...................................................    $     7,014          $   7,374
Operating expenses:
Cost of services (exclusive of items shown
 separately below) .........................................          2,403              2,921
Selling, general and administrative expense
 excluding stock related expense ...........................          4,226              9,895
Stock related expense for selling, general,
 and administrative matters ................................             74               (137)
Depreciation and amortization ..............................          2,642              3,105
                                                                   ---------          ---------
Total operating expenses ...................................          9,345             15,784
                                                                   ---------          ---------
Loss from operations .......................................         (2,331)            (8,410)
Interest expense, net ......................................         (2,157)            (2,126)
                                                                   ---------          ---------
Loss from operations before income taxes ...................         (4,488)           (10,536)
Income Taxes ...............................................             --                 --
                                                                   ---------          ---------
Loss before extraordinary item .............................         (4,488)           (10,536)
Extraordinary loss on early extinguishment of debt .........             --             (7,398)
                                                                   ---------          ---------
Net loss ...................................................         (4,488)           (17,934)
Preferred stock dividends ..................................            (28)              (731)
Preferred stock - beneficial conversion ....................             --            (21,019)
                                                                   ---------          ---------
Net loss applicable to common
  stockholders .............................................      $  (4,516)         $ (39,684)
                                                                   =========         =========
Net loss applicable to common stockholders per
  share--basic and diluted .................................      $   (0.07)         $   (1.06)
Weighted average common shares
  outstanding - basic and diluted ..........................          62,212            37,461

</TABLE>

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

                                       13

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                               (DOLLARS IN 000'S)

<TABLE>
<CAPTION>
<S>                                                                                    <C>           <C>


                                                                                    Three Months Ended March 31,
                                                                                   -----------------------------
                                                                                        2002        2001
                                                                                      --------    --------
                                                                                                   As restated -
                                                                                                   see Note 5
Cash flows from operating activities:
  Net loss applicable to common stockholders ....................................     $(4,516)     $(39,684)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Extraordinary item .........................................................          --         7,398
     Depreciation and amortization ..............................................       2,642         3,105
     Preferred stock dividends ..................................................          28           731
     Preferred stock - beneficial conversion ....................................          --        21,019
     Stock related expense ......................................................          74          (137)
     Other non-cash items .......................................................         477           744
     Change in assets and liabilities:
        (Increase) decrease in accounts receivable, prepaid expenses and other
          assets ................................................................        (263)        3,218
        Increase (decrease) in accounts payable, accrued expenses and deferred
          revenues ..............................................................      (2,113)       (3,292)
                                                                                      --------     --------
Cash used in operating activities ...............................................      (3,671)       (6,898)
Cash flows from investing activities:
  Capital expenditures ..........................................................        (254)      (18,005)
                                                                                      --------     --------
Cash used in investing activities ...............................................        (254)      (18,005)
Cash flows from financing activities:

  Net proceeds/(repayments) of debt financings ..................................       2,819        (1,404)
  Net proceed from issuance of equity securities ................................         (50)       26,011
  Repayment of capital lease obligation .........................................         (63)          (55)
                                                                                      --------      --------
Cash provided by financing activities ...........................................       2,706        24,552
                                                                                      --------      --------
Net decrease in cash ............................................................      (1,219)         (351)
Cash at beginning of period .....................................................       3,338         1,582
                                                                                      --------      --------
Cash at end of period ...........................................................    $  2,119      $  1,231
                                                                                      ========      ========
Supplemental disclosures of cash flow information:
  Interest paid .................................................................    $    165         1,160
  Income taxes paid .............................................................          --            --

</TABLE>

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

                                       14

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

FiberNet is holding a 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 Telecom 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, L.L.C. ("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 has agreements with other entities, including telecommunications
license agreements with on-net building landlords, interconnection agreements
with other telecommunications service providers and leases with carrier hotel
property owners. FiberNet also has entered into 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 consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, FiberNet Operations, Inc., Devnet, FiberNet
Telecom, Inc., FiberNet Equal Access and Local Fiber and have been prepared in
accordance with generally accepted accounting principles in the United States.
All significant intercompany balances and transactions have been eliminated.

Use of Estimates

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

The Company's operations and ability to grow may be affected by numerous
factors, including the difficulty inherent in operating an early-stage company
in a new and rapidly evolving market; its history of operating losses and
accumulated deficit; its limited financial resources and uncertainty as to the
availability of additional capital to fund its operations on acceptable terms,
if at all; its success in obtaining additional carrier hotel lease agreements
and license agreements with building owners; growth in demand for its services;
the frequency of service interruptions on its networks; the potential
development by competitors of competing products and technologies; restrictions
imposed on it as a result of its debt; and changes in the regulatory
environment. The failure of the Company to achieve certain operational results
would violate certain debt covenants thereby potentially accelerating the
outstanding balance for immediate payment.

                                       15

<PAGE>

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less when purchased. 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 calculated 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 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, based upon discounted expected
future cash flows.

Revenue Recognition

FiberNet generates revenues from selling network capacity and related services
to other communications service providers. The Company recognizes revenues when
earned as services are provided throughout the life of each contract with a
customer. The majority of the Company's revenues are generated on a monthly
recurring basis under contracts of various lengths, ranging from one month to
five years. 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.

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 vertically on its
in-building networks. The Company also offers vertical dark fiber in certain of
its carrier hotel facilities and on-net and off-net buildings. The meet-me-room
facility offers customers a single location within the carrier hotel to
facilitate network cross connections.

Colocation services. FiberNet's colocation services include providing customers
with the ability to locate their communications and networking equipment at its
carrier point facilities in a secure technical operating environment. The
Company also can provide its customers with colocation services in the central
equipment rooms of certain of its on-net buildings. If a customer purchases
colocation services, the Company may require 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 of 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 end-user tenants, if such
networking infrastructure is available.

                                       16

<PAGE>

As of March 31, 2002 the Company had one reciprocal agreement. During the fiscal
year ended December 31, 2001, the Company had four reciprocal agreements. The
services provided and obtained through these agreements were priced at fair
market value as of the date of the agreements and are included in revenues and
cost of services in the accompanying consolidated statements of operations. The
Company recorded revenues for transport services and colocation services of
approximately $0.4 million and $1.2 million for the three months ended March 31,
2002 and 2001, respectively, from these reciprocal agreements. The Company
leased colocation facilities under these agreements, and the total amounts
expensed for services rendered under the reciprocal agreements for the three
months ended March 31, 2002 and 2001, were approximately $0.4 million and $1.2
million, respectively.

Fair Value of Financial Instruments

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

Goodwill and Intangibles

Cost in excess of net assets of acquired business, principally goodwill, is
accounted for under SFAS No. 142, "Goodwill and Other Intangible Assets". Other
intangible assets include the cost to access buildings and deferred financing
costs. Costs to access buildings are amortized over 15 years, which represents
the term of the related contracts. Deferred financing costs are amortized over
the term of the related debt instrument.

Earnings Per Share

Basic earnings per share have been computed using the weighted average number of
shares during the period. Diluted earnings per share is computed by including
the dilutive effect on common stock that would be issued assuming conversion of
stock options, warrants and other dilutive securities. Dilutive options,
warrants and other securities did not have an effect on the computation of
diluted earnings per share in 2002 and 2001, as they were anti-dilutive.

Concentration of Credit Risk

The Company has concentration of credit risk among its customer base. The
Company performs ongoing credit evaluations of its customers' financial
condition. As of March 31, 2002, two customers in the aggregate accounted for
27.6% of the Company's total accounts receivable, and as of December 31, 2001
one customer accounted for 19.4% of the Company's total accounts receivable.

For the quarter ended March 31, 2002, two customers in the aggregate accounted
for 31.4% of the Company's total revenue, and for the quarter ended March 31,
2001, three customers in the aggregate accounted for 60.5% of the Company's
total revenue.

As of December 31, 2001, the Company had an allowance for doubtful accounts of
$2.2 million. During the quarter ended March 31, 2002, FiberNet wrote off $0.4
million of this allowance and recorded $50,000 of bad debt expense, resulting in
an allowance for doubtful accounts of $1.9 million, as of March 31, 2002. For
the quarter ended March 31, 2001, the Company also recorded $50,000 of bad debt
expense.

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 resulting
expense is charged against operations ratably over the vesting period of the
options.

Accounting for Income Taxes

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

Accounting for Derivative Instruments

The Company accounts for derivative instruments in accordance with SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended. SFAS
No. 133 establishes standards of accounting and reporting for derivative
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 reporting
in earnings. The adoption of SFAS No. 133 did not have a material impact on the
Company's consolidated financial statements, as the Company has did not have any
derivative instrument

                                       17

<PAGE>

contracts for the quarters ended March 31, 2002 and 2001.

Reclassifications

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

Segment Reporting

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

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations", applicable for fiscal years beginning after
December 15, 2001. SFAS No. 141 establishes new standards of accounting for
business combinations, eliminating the use of the pooling-of-interests method
and requires that the purchase method be used for business combinations
initiated at June 30, 2001.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", applicable for fiscal years beginning after December 15, 2001. SFAS No.
142, which was adopted by the Company effective January 1, 2002, requires that
goodwill and certain intangible assets resulting from business combinations
entered into prior to June 30, 2001 no longer be amortized, but instead be
reviewed for recoverability. Any write-down of goodwill would be charged to
results of operations as accumulative change in accounting principle upon
adoption of the new accounting standard if the recorded value of goodwill and
certain intangibles exceeds its fair value. Any write-down of goodwill up to and
including December 31, 2001 would not be subject to the rules of this new
standard. The company is evaluating the impact of the adoption of SFAS No. 142
and expects to be completed with its analysis by June 30, 2002.

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." The Statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its then present value, and the capitalized
cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, an entity either settles the obligation for its recorded
amount or incurs a gain or loss upon settlement. The Statement is effective for
fiscal years beginning after June 15, 2002, with earlier application encouraged.
The Company does not expect the adoption of the Statement to have a material
impact on its results of operations.

In October, 2001 the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The Statement replaces SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," although it retains the impairment testing methodology used in SFAS No.
121. The accounting and reporting provisions of Accounting Principals Board
Opinion (APB) 30, "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," are superceded by SFAS No. 144,
except that the Statement preserves the requirement of APB 30 to report
discontinued operations separately from continuing operations. The Statement
covers a variety of implementation issues inherent in SFAS No. 121, unifies the
framework used in accounting for assets to be disposed of and discontinued
operations, and broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. The Statement is effective for fiscal years
beginning after December 15, 2001. FiberNet adopted SFAS No. 144 on January 1,
2002. The Company does not expect the adoption of SFAS No. 144 to have a
material impact on our financial statements.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>


                                                     March 31,     December 31,
                                                        2002           2001
                                                     ---------      ---------
<S>                                                  <C>            <C>
Computer software .................................. $     175      $     178
Computer equipment .................................       278            293
Leasehold improvements .............................        30             30
Office equipment and furniture .....................       146            146
Construction in progress ...........................        --          4,425
Network equipment and infrastructure ...............   125,220        120,523
                                                     ---------      ---------
</TABLE>
                                       18

<PAGE>
<TABLE>
<CAPTION>

<S>                                                  <C>            <C>
                                                       125,849        125,595
Accumulated depreciation ...........................   (18,219)       (15,758)
                                                     ---------      ---------
Property, plant and equipment, net ................. $ 107,630      $ 109,837
                                                      =========      ========
</TABLE>


4. SIGNIFICANT EVENTS

On March 15, 2002, the Company received gross proceeds of $2.0 million from the
issuance of a subordinated note to an existing investor. The issuance of the
note was in lieu of a second closing on our series J convertible preferred
stock, as was previously contemplated. The subordinated note has a maturity date
of June 14, 2002 and bears interest, which is due and payable on the maturity
date, at an annual rate of 8%. The subordinated note may be converted into
equity, on terms to be determined, upon the occurrence of certain events.
Additionally, in connection with this financing, the lenders under the Company's
credit facility agreed to extend the due date of the current quarterly interest
payment to April 15, 2002.

5. RESTATEMENT

The Company restated its consolidated financial statements for the quarter ended
March 31, 2001 to record a beneficial conversion feature of $21.0 million in
connection with the reduction of the conversion price on Series H and I
preferred stock on February 9, 2001. Other than with respect to the consolidated
financial statements for the quarter ended March 31, 2001, this restatement has
no impact on the Company's assets or total stockholders' equity, and it resulted
in an increase in additional paid-in-capital and an increase in net loss. The
change increased net loss by $21.0 million and increased net loss applicable to
common stockholders per share by $0.56. The change has no impact on the
Company's cash flows.

6. SUBSEQUENT EVENTS

On April 15, 2002, in connection with the Company's ongoing efforts to seek
additional financing and to undertake a recapitalization, the lenders under the
Company's credit facility agreed to further extend the due date of the current
quarterly interest payment to May 6, 2002, and, depending on the satisfaction of
certain conditions, to May 27, 2002.

On May 6, 2002 the lenders again agreed to extend the due date of the current
quarterly interest payment to May 28, 2002, and the Company reached a
conditional agreement with the lenders to convert $25 million of indebtedness
into convertible preferred stock with a conversion price of $0.40 per share.
Under the arrangement the lenders would convert $25 million of indebtedness into
a minimum of 2,500 shares of new series K preferred stock. The closing of this
transaction is subject to a number of conditions, including, but not limited to
final credit approval of each of the lenders, the completion of an acceptable
equity financing and the conversion of all of the Company's currently
outstanding convertible securities, excluding certain options and warrants. Each
share of series K preferred stock would have a stated value of $10,000 per share
and would convert into 25,000 shares of common stock.

Concurrently with the consummation of the transaction and the related equity
issuance and conversions, the holders of the series K preferred stock would be
issued a sufficient number of warrants to purchase shares of common stock to
ensure that they would hold on an aggregate basis a fully-diluted ownership
position in the company of at least 30%. The exercise price of such warrants
issued to the holders of the series K preferred stock would be the lower of 125%
of the market price as of the closing date or 110% of the exercise price of any
warrants issued to investors in the concurrent equity financing, and the term of
the warrants would be five years.

This arrangement would also involve certain amendments to the provisions of the
senior secured credit facility, including the reduction of the maximum
availability to approximately $77 million and the reduction in the interest rate
currently from LIBOR + 4.5% to LIBOR + 3.75%.

It is anticipated that, if these conditions are met, the closing of these
transactions will occur as soon as practicable. However, there can be no
assurance that the Company will be able to successfully effectuate any or all of
the transactions described above. In addition, any financing or broader
recapitalization the Company undertakes will be substantially dilutive to the
Company's existing stockholders.

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