<PAGE>

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


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                  FORM 10-QSB

(Mark One)

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

               For the quarterly period ended September 30, 2000

                                       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 33-7841


                          FiberNet Telecom Group, Inc.



       (Exact Name of Small Business Issuer as Specified in its Charter)

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

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

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

     Securities registered under Section 12(b) of the Exchange Act:   None
         Securities registered under Section 12(g) of the Exchange Act:
                    Common Stock, par value $.001 per share
                                (Title of Class)

     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
October 31, 2000, was 32,405,732 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 September 30, 2000 and December 31, 1999  .............         9
               Consolidated Statements of Operations for the nine months ended September 30, 2000 and
               1999  ...................................................................................        10
               Consolidated Statements of Operations for the three months ended September 30, 2000 and
               1999  ...................................................................................        11
               Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and
               1999  ...................................................................................        12
               Notes to Consolidated Financial Statements  .............................................        13
Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations  ..         1
PART II.       OTHER INFORMATION  ......................................................................         5
</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

     FiberNet owns and operates fiber-optic networks designed to provide
comprehensive transmission services to communications service providers in major
metropolitan areas. The Company's technologically advanced, all-optical network
architecture enables it to extend a carrier-class communications network from
carrier points of presence directly to the offices of end-users in commercial
buildings.

     FiberNet's networks originate in carrier point facilities, where the
Company offers colocation space and interconnects with other carriers to
transfer their traffic onto its metropolitan transport networks. Each of the
Company's metropolitan transport networks consists of out-of-building lit fiber-
optic rings that enable FiberNet to establish connectivity between carrier point
facilities and commercial office buildings in the local loop. FiberNet
transports its customers' traffic directly to their retail end-users located in
multi-tenant class A office buildings where the Company has installed its
advanced in-building infrastructure, known as its FiberNet In-Building Networks,
or FINs, by interconnecting its metropolitan transport network and its FINs.
FiberNet's FINs, consist of fully redundant, self-healing, synchronous optical
network, or SONET, rings. The Company refers to each of the buildings in which
it installed a FIN as an on-net building. FiberNet's FINs provide a central
distribution system within on-net buildings, extending from the basement of the
building to each floor.

     FiberNet believes that its metropolitan network solution addresses the need
for bandwidth in the metropolitan local loop, where there is insufficient
network capacity to meet the growing demand for data-intensive applications.
Communications service providers that use the Company's networks are able to
access the high-bandwidth capacity necessary to offer broadband data, voice and
video services without having to build the infrastructure themselves or use
their competitors' networks. In addition, FiberNet's technologically advanced
fiber-optic networks and rapid provisioning times allow its customers to deliver
their services reliably, quickly and efficiently.

     The Company also manages communications access and infrastructure for
commercial office properties nationwide. For the owners and managers of these
buildings, FiberNet provides the in-building infrastructure necessary to meet
the connectivity needs of tenants and controls service providers' access to
these off-net buildings.

     FiberNet commenced operations in the New York metropolitan area in 1999 and
began providing services in January 2000. The Company is currently expanding its
operations into Chicago and Los Angeles

                                       1
<PAGE>

and intends to establish its metropolitan networks in other gateway cities,
including San Francisco and Boston.


Results of Operations

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

     Revenues.   Revenues for the nine months ended September 30, 2000 were $6.4
million. The Company generated revenues by providing transport, colocation and
communications access management services to its customers. FiberNet recognized
$4.8 million in transport services, $1.1 million in colocation services and $0.5
million in communications access management and other services during the
period. During this period, three of the Company's customers, 360networks,
Network Plus and Qwest, accounted for approximately 87% of its revenues. The
Company expects such customer concentration to diminish as it expands its
operations. Prior to the nine months ended September 30, 2000, the Company had
no commercial operations and did not generate any revenues.

     Direct Costs.   Direct costs for the nine months ended September 30, 2000
were $2.9 million in expenses associated with the operation of the Company's
networks. These costs included on-net and off-net building license fees,
maintenance and repair costs, rent expense at carrier point facilities and on-
net and off-net buildings, and related utility costs. For the nine months ended
September 30, 1999, the Company did not record any direct costs because it was
not offering services during that period.

     Selling, General and Administrative Expenses.   Selling, general and
administrative expenses for the nine months ended September 30, 2000 were $16.0
million compared to $4.0 million for the nine months ended September 30, 1999.
This increase is consistent with the rapid expansion of the Company's
operations. FiberNet has experienced significant growth in personnel costs,
marketing and advertising expenses, and network construction overhead to support
its business strategy. The number of significant transactions that FiberNet has
undertaken this year has also contributed to professional fees, including legal
and accounting costs, of $2.2 million for the nine months ended September 30,
2000, included in selling, general and administrative expenses.

     Stock Related Expense.   Stock related expense for the nine months ended
September 30, 2000 was $2.8 million. This non-cash expense relates to the
granting of stock options to the Company's employees. FiberNet did not incur any
stock related expense for the nine months ended September 30, 1999.

     Depreciation and Amortization.   Depreciation and amortization expense for
the nine months ended September 30, 2000 was $5.1 million compared to $0.3
million of depreciation and amortization expense for the nine months ended
September 30, 1999. 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 nine months ended
September 30, 2000 was $2.9 million compared to $3.8 million of interest
expense, net for the nine months ended September 30, 1999. Interest expense was
generated as a result of borrowings under the Company's senior secured credit
facility and its outstanding capital lease obligations. In the nine months ended
September 30, 1999, the Company recorded interest expense due to a beneficial
conversion feature of $3.2 million, related to the issuance of convertible
notes.

     Preferred Stock Dividends.   For the nine months ended September 30, 2000,
FiberNet paid $5.5 million and accrued $3.9 million in non-cash dividends on its
series of preferred stock in the form of additional shares of each respective
series of preferred stock. The book value of the dividends is based on the
closing price per share of the underlying common stock at the end of the period.
The liquidation value of all of the dividends paid and accrued is $1.7 million.
All of the series of preferred stock are convertible into shares of the
Company's common stock. The Company also recorded a beneficial conversion
feature of $27.6 million upon the issuance of the Series G, H and I Preferred
Stock. The Series G Preferred Stock was cancelled upon the issuance of Series H.
Each share of Series H and I Preferred Stock is convertible into ten common
shares at a price of $10.00 per common share and $12.00 per common share,
respectively. The amounts of the beneficial conversion feature for the Series G,
H and I Preferred Stock are based on the closing price per share on their
respective issuance dates of the underlying common stock of $17.00, $16.125 and
$14.25, respectively. The Company did not pay or accrue any preferred stock
dividends for the nine months ended September 30, 1999.

                                       2
<PAGE>

     Net Loss Applicable to Common Stockholders.   The Company reported a net
loss applicable to common stockholders of $60.4 million for the nine months
ended September 30, 2000, compared to a loss of $8.1 million for the nine months
ended September 30, 1999. The increase is a result of the aforementioned changes
in the Company's operations.


Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

     Revenues.   Revenues for the three months ended September 30, 2000 were
$4.6 million. The Company generated revenues by providing transport, colocation
and communications access management services to its customers. FiberNet
recognized $3.5 million in transport services, $0.6 million in colocation
services and $0.5 million in communications access management and other services
during the period. During this period, three of the Company's customers,
360networks, Network Plus and Qwest, accounted for approximately 78% of its
revenues. The Company expects such customer concentration to diminish as it
expands its operations. For the three months ended September 30, 1999, the
Company had no commercial operations and did not generate any revenues.

     Direct Costs.   Direct costs for the three months ended September 30, 2000
were $2.1 million in expenses associated with the operation of the Company's
networks. These costs included on-net and off-net building license fees,
maintenance and repair costs, rent expense at carrier point facilities and on-
net and off-net buildings, and related utility costs. For the three months ended
September 30, 1999, FiberNet did not record any direct costs because it was not
offering services during that period.

     Selling, General and Administrative Expenses.   Selling, general and
administrative expenses for the three months ended September 30, 2000 were $6.2
million compared to $1.0 million for the three months ended September 30, 1999.
This increase is consistent with the rapid expansion of the Company's
operations. FiberNet has experienced significant growth in personnel costs,
marketing and advertising expenses, and network construction overhead to support
its business strategy.

     Stock Related Expense.   Stock related expense for the three months ended
September 30, 2000 was $0.5 million. This non-cash expense relates to the
granting of stock options to the Company's employees. FiberNet did not incur any
stock related expense for the three months ended September 30, 1999.

     Depreciation and Amortization.   Depreciation and amortization expense for
the three months ended September 30, 2000 was $2.7 million compared to $0.2
million of depreciation and amortization expense for the three months ended
September 30, 1999. The increase resulted from commencement of the depreciation
of certain network related fixed assets that were placed into service.

     Interest Expense, Net.   Interest expense, net for the three months ended
September 30, 2000 was $1.6 million compared to $3.6 million of interest
expense, net for the three months ended September 30, 1999. Interest expense was
generated as a result of borrowings under the Company's senior secured credit
facility, its outstanding capital lease obligations. In the three months ended
September 30, 1999, the Company recorded interest expense due to a beneficial
conversion feature of $3.2 million, related to the issuance of convertible
notes.

     Preferred Stock Dividends.   For the three months ended September 30, 2000,
FiberNet accrued non-cash dividends on its series of preferred stock of $3.9
million in the form of additional shares of each respective series of preferred
stock. Each series of preferred stock is convertible into shares of the
Company's common stock. The liquidation value of the accrued dividends was
$1.0. million. The Company also recorded a beneficial conversion feature of
$13.6 million relating to the issuance of the Series H and I Preferred Stock.
Each share of Series H and I Preferred Stock is convertible into ten shares of
common stock at a price of $10.00 per share and $12.00 per share, respectively.
The amounts of the beneficial conversion feature for the Series H and I
Preferred Stock are based on the closing price per share on their respective
issuance dates of the underlying common stock of $16.125 and $14.25,
respectively. The Company did not pay or accrue any preferred stock dividends
for the three months ended September 30, 1999.

                                       3
<PAGE>

     Net Loss Applicable to Common Stockholders.   The Company reported a net
loss applicable to common stockholders of $26.2 million for the three months
ended September 30, 2000, compared to a loss of $4.8 million for the three
months ended September 30, 1999. The increase is a result of the aforementioned
changes in the Company's operations.


Liquidity and Capital Resources

     As a result of FiberNet's developmental activities and the deployment of
its networks and facilities, the Company has incurred significant losses from
inception to date. The Company expects such losses to continue, as it further
executes its business plan and expands its operations. Consequently, the Company
has been dependent upon external sources of capital to fund its operations.
Prospectively, the Company will continue to incur losses and will not be able to
fund its operations with internally generated funds. Therefore, it will require
additional external capital. Additionally, the Company has no relevant
operating history upon which an evaluation of its performance and prospects can
be made. The Company is 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, FiberNet has financed its operations through direct equity
investments from its 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. The Company has incurred an EBITDA loss and a
net loss for the nine months ended September 30, 2000 of $12.6 million and $60.4
million, respectively, and $4.0 million and $8.1 million, respectively, during
the nine months ended September 30, 1999. During the nine months ended September
30, 2000, cash used to fund operating activities was $13.4 million, and cash
purchases of property, plant and equipment were $51.5 million, compared to $4.9
million and $6.8 million, respectively, for the nine months ended September 30,
1999.

     During the nine months ended September 30, 2000, the Company received $83.2
million in net cash proceeds from financing activities. The net borrowings under
its debt financings were $31.0 million. The Company received $3.3 million in
cash proceeds from the exercise of outstanding options to purchase shares of
common stock and $50.0 million from the private placement of Series G, H and I
Preferred Stock to Nortel. For the nine months ended September 30, 1999, the
Company received $22.0 million in net cash proceeds from equipment financings
and the private placement of certain debt and equity securities.

     FiberNet's planned operations will require significant additional capital
to fund equipment purchases, engineering and construction costs, marketing
costs, administrative expenses and other operating activities. The Company
anticipates spending $75 million to $100 million during the fiscal year 2000 for
the deployment of its FINs, expansion of its metropolitan transport networks,
the development of additional carrier point facilities and other network
programs and management systems.

     As a result, the Company will require significant additional financing to
complete its networks. FiberNet continues to have on-going discussions with
sources of additional financing. On August 15, 2000 The Company filed a
registration statement on Form S-1 with the Securities and Exchange Commission
for a proposed public offering of common stock. In November 2000, the Company
entered into a commitment letter with Deutsche Bank AG, New York Branch,
Deutsche Bank Securities Inc., First Union Investors, Inc., First Union
Securities, Inc., Toronto Dominion (USA) Securities Inc. and other lenders to
replace its existing $75 credit facility with a senior secured credit facility
with a minimum of $160 million and a maximum of $175 million of availability.
The new credit facility would have a term of six years and consist of multi-draw
term loan facility and a revolving loan facility. The closing of the transaction
contemplated in the commitment letter is subject to certain conditions,
including the consummation of the proposed equity offering.

     From time to time, FiberNet may consider additional private or public sales
of equity or debt securities and other financings, depending upon market
conditions, in order to finance the continued operations of its business. There
can be no assurance that the Company will be able to successfully consummate the
contemplated financings discussed above or any such financing on acceptable
terms, or at all.


                                       4
<PAGE>

                                    PART II

                               OTHER INFORMATION

Item 1.   Legal Proceedings

          None.


Item 2.   Changes in Securities and Use of Proceeds

     On July 31, 2000 FiberNet entered into a securities purchase agreement with
Nortel Networks Inc. ("Nortel"), under which the Company issued 426,333 shares
of Series H Preferred Stock, $.001 par value per share, to Nortel for an
aggregate purchase price of $22.5 million plus the cancellation of the 2,000,000
shares of the Series G Preferred Stock, including all accrued and unpaid
dividends thereon, previously issued to Nortel. Each share of Series H Preferred
Stock is convertible into ten shares of common stock at $10.00 per share,
subject to certain customary anti-dilution adjustments made from time to time
pursuant to the certificate of designation of the Series H Preferred Stock. This
transaction was a private placement and exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended.

     On August 11, 2000 FiberNet entered into a securities purchase agreement
with Nortel, under which the Company issued 62,500 shares of Series I Preferred
Stock, $.001 par value per share, to Nortel for an aggregate purchase price of
$7.5 million. Each share of Series I Preferred Stock is convertible into ten
shares of common stock at $12.00 per share, subject to certain customary anti-
dilution adjustments made from time to time pursuant to the certificate of
designation of the Series I Preferred Stock. This transaction was a private
placement and exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended


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:

<TABLE>
<CAPTION>
           Exhibit Name
           ------------
<S>        <C>
  27.1     Financial Data Schedule
</TABLE>

           (b) The following reports were filed on Form 8-K during the
               quarter ended September 30, 2000:

                                       5
<PAGE>

<TABLE>
<CAPTION>
  Item Number                                  Description                                  Filing Date
  -----------                                  -----------                                  -----------
  <S>                     <C>                                                            <C>

       5                  A report dated June 30, 2000 regarding the Company's             July 11, 2000
                          issuance and sale of 2,000,000 shares of its Series G
                          Preferred Stock, $.001 par value per share to Nortel
                          for an aggregate purchase price of $20 million.
     2,5,7                A report dated July 31, 2000 regarding the Company's             August 4, 2000
                          corporate reorganization and acquisition of Devnet
                          L.L.C. pursuant to an Agreement and Plan of
                          Reorganization dated June 2, 2000 and the Company's
                          issuance of 426,333 shares of its Series H Preferred
                          Stock, $.001 par value per share to Nortel for an
                          aggregate purchase price of $22.5 million in cash plus
                          the transfer by Nortel to the Company of 2,000,000
                          shares of the Company's Series G Preferred Stock.
       5                  A report dated August 11, 2000 regarding the Company's            August 15, 2000
                          issuance of 62,500 shares of its Series I Preferred
                          Stock, $.001 par value per share to Nortel for an
                          aggregate purchase price of $7.5 million.
</TABLE>
                                       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: November 9, 2000        FIBERNET TELECOM GROUP, INC.

                              By:   /s/   Jon A. DeLuca
                                    --------------------------
                              Name:  Jon A. DeLuca
                              Title: Chief Financial Officer
                                     (principal financial and
                                     accounting 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
September 30, 2000, and the related consolidated statements of operations for
the three-month and nine-month periods ended September 30, 2000 and 1999, and
the consolidated statements of cash flows for the nine-month periods ended
September 30, 2000 and 1999. 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
                                  Arthur Andersen LLP

New York, New York
October 4, 2000

                                       8
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                          CONSOLIDATED BALANCE SHEETS

                                   (IN 000'S)

<TABLE>
<CAPTION>
<S>                                                                                     <C>            <C>
                                                                                         September 30,     December 31,
                                                                                         -------------     ------------
                                                                                              2000            1999
                                                                                           ---------       --------
                                                                                          (Unaudited)
                                            ASSETS
Current assets:
  Cash and cash equivalents  ...................................................           $  10,148       $  9,512
  Accounts receivable, net .....................................................               3,654             26
  Prepaid expenses and other  ..................................................                 618            134
                                                                                           ---------       --------
     Total current assets  .....................................................              14,420          9,672
Property, plant and equipment, net  ............................................             104,369         55,177
Goodwill and intangibles, net  .................................................              70,660          8,667
Deferred charges, net  .........................................................              13,789          3,698
Other assets    ................................................................                 729            374
                                                                                           ---------       --------
TOTAL ASSETS  ..................................................................            $203,967       $ 77,588
                                                                                           =========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable  ............................................................           $   5,895       $  3,733
  Accrued expenses  ............................................................               9,055          4,447
  Deferred revenues  ...........................................................               5,560             --
  Capital lease obligation--current portion  ...................................                 226            203
                                                                                           ---------       --------
     Total current liabilities  ................................................              20,736          8,383
Notes payable, less discount  ..................................................              20,979             --
Capital lease obligation  ......................................................                 785            956
                                                                                           ---------       --------
     Total liabilities  ........................................................              42,500          9,339
Stockholders' equity:
  Common Stock, $.001 par value, 150,000,000 and 50,000,000 shares authorized
    and 32,371,765 and 25,932,464 shares issued and outstanding, respectively  .                  32             26
  Series C Voting Preferred Stock $.001 par value 83,688 and 133,333 issued and
    outstanding, respectively. (Preference in involuntary liquidation value,
    $1.50 per share)  ..........................................................                 125            200
  Series D Preferred Stock $.001 par value, 316,376 and 310,173 shares issued
    and outstanding, respectively. (Preference in involuntary liquidation value,
    $15.00 per share)  .........................................................              23,623         22,553
  Series E Preferred Stock $.001 par value, 305,627 and 293,872 shares issued
    and outstanding, respectively. (Preference in involuntary liquidation value,
    $15.00 per share)  .........................................................              23,457         21,430
  Series F Preferred Stock $.001 par value, 361,731 and 347,819 shares issued
    and outstanding, respectively. (Preference in involuntary liquidation value,
    $30.00 per share)  .........................................................              27,763         25,329
  Series H Preferred Stock $.001 par value, 426,333 shares issued and
    outstanding (Preference in involuntary liquidation value, $100.00 per share)              63,800             --
  Series I Preferred Stock $.001 par value, 62,500 shares issued and
    outstanding (Preference in involuntary liquidation value, $120.00 per share)               8,885             --
  Additional paid in capital and other  ........................................             149,990         74,507
  Accumulated deficit  .........................................................            (136,208)       (75,796)
                                                                                           ---------       --------
     Total stockholders' equity  ...............................................             161,467         68,249
                                                                                           ---------       --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  ....................................           $ 203,967       $ 77,588
                                                                                           =========       ========
</TABLE>

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

                                       9
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                      Nine Months Ended September 30,
                                                                                     ---------------------------------
<S>                                                                                  <C>              <C>
                                                                                           2000              1999
                                                                                        -----------       -----------
Revenues  ......................................................................        $     6,366       $        --
Operating expenses:
  Direct costs  ................................................................              2,940                --
  Selling, general and administrative expenses  ................................             16,027             4,011
  Stock related expense  .......................................................              2,777                --
  Depreciation and amortization  ...............................................              5,134               284
                                                                                        -----------       -----------
Total operating expenses  ......................................................             26,878             4,295
                                                                                        -----------       -----------
Loss from operations  ..........................................................            (20,512)           (4,295)
Interest expense, net  .........................................................              2,851             3,772
                                                                                        -----------       -----------
Net loss  ......................................................................            (23,363)           (8,067)
Preferred stock dividends  .....................................................             37,049                --
                                                                                        -----------       -----------
Net loss applicable to common stockholders  ....................................        $   (60,412)      $    (8,067)
                                                                                        ===========       ===========
Net loss applicable to common stockholders per share--basic and diluted  .......             $(2.11)           $(0.50)
Weighted average shares outstanding  ...........................................         28,641,519        16,135,203
</TABLE>

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


                                      10
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                     Three Months Ended September 30,
                                                                                     ---------------------------------
<S>                                                                                  <C>             <C>
                                                                                          2000               1999
                                                                                       -----------        -----------
Revenues  ......................................................................       $     4,599        $        --
Operating expenses:
  Direct costs  ................................................................             2,128                 --
  Selling, general and administrative expenses  ................................             6,235              1,025
  Stock related expense  .......................................................               541                 --
  Depreciation and amortization  ...............................................             2,719                173
                                                                                       -----------        -----------
Total operating expenses  ......................................................            11,623              1,198
                                                                                       -----------        -----------
Loss from operations  ..........................................................            (7,024)            (1,198)
Interest expense, net  .........................................................             1,626              3,574
                                                                                       -----------        -----------
Net loss  ......................................................................            (8,650)            (4,772)
Preferred stock dividends  .....................................................            17,517                 --
                                                                                       -----------        -----------
Net loss applicable to common stockholders  ....................................       $   (26,167)       $    (4,772)
                                                                                       ===========        ===========
Net loss applicable to common stockholders per share--basic and diluted  .......            $(0.84)            $(0.29)
Weighted average shares outstanding  ...........................................        30,990,996         16,351,529
</TABLE>


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



                                      11
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                             Nine Months Ended
                                                                                               September 30,
                                                                                         --------------------------
<S>                                                                                      <C>           <C>
                                                                                              2000          1999
                                                                                            --------      --------
Cash flows from operating activities:
  Net loss applicable to common stockholders  ............................................  $(60,412)      $(8,067)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization  ......................................................     5,134           284
     Preferred stock dividends  ..........................................................    37,049            --
     Stock related expense  ..............................................................     2,777            --
     Other non-cash expense  .............................................................     1,761         3,884
     Change in assets and liabilities:
        (Increase) decrease in accounts receivable, prepaid expenses and other
          assets  ........................................................................    (3,826)            4
        Increase (decrease) in accounts payable, accrued expenses and deferred
          revenues  ......................................................................     4,155        (1,024)
                                                                                            --------      --------
Cash used in operating activities  .......................................................   (13,362)       (4,919)
Cash flows from investing activities:
  Acquisition of Devnet L.L.C.- net of cash received   ...................................   (17,715)           --
  Capital expenditures  ..................................................................   (51,516)       (6,754)
                                                                                            --------      --------
Cash used in investing activities  .......................................................   (69,231)       (6,754)
Cash flows from financing activities:
  Net proceeds from debt financings  .....................................................    30,960        19,438
  Net proceeds from issuance of equity securities  .......................................    52,419         2,606
  Repayment of capital lease obligation  .................................................      (150)           --
                                                                                            --------      --------
Cash provided by financing activities  ...................................................    83,229        22,044
                                                                                            --------      --------
Net increase in cash  ....................................................................       636        10,371
Cash at beginning of period  .............................................................     9,512           257
                                                                                            --------      --------
Cash at end of period  ...................................................................  $ 10,148      $ 10,628
                                                                                            ========      ========
Supplemental disclosures of cash flow information:
  Interest paid  .........................................................................  $    464      $     --
  Income taxes paid  .....................................................................        --            --
</TABLE>


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



                                      12
<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.   BUSINESS OPERATIONS

     FiberNet Telecom Group, Inc. ("FiberNet" or the "Company") 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 metropolitan area and has expanded
operations into Chicago and Los Angeles. The Company expects to expand into
other target markets, including San Francisco and Boston.

     FiberNet is a holding company that owns all of the outstanding common stock
of FiberNet Operations, Inc., a Delaware corporation, 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.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The interim unaudited consolidated financial statements in this report have
been prepared in accordance with the United States Securities and Exchange
Commission's Regulation S-X and consequently do not include all disclosures
required under generally accepted accounting principles. The interim unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of the Company and accompanying notes for the
year ended December 31, 1999, contained in the Company's Annual Report on Form
10-KSB. The Form 10-KSB includes information with respect to the Company's
significant accounting and financial reporting policies and other pertinent
information. The Company believes that all adjustments of a normal recurring
nature that are necessary for a fair presentation of the results of the interim
periods presented in this report have been made. Certain balances have been
reclassified to conform to the current period presentation. 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 certain 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.


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-

                                      13
<PAGE>

term contracts, typically three to five years in length. 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 in-building
      networks. Over its metropolitan transport networks, the Company can
      provision circuits from one of its carrier point facilities to another
      carrier point 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 point facility
      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 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
      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 all of its off-net buildings and some of its on-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.

     The Company recognizes revenue on transport services, colocation facility
services and communication access management and other services ratably over the
term of the contract with each customer.

Impairment of Long-Lived Assets

     The Company reviews the carrying value of long-lived 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 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.

                                      14
<PAGE>

3.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                 September 30, 2000  December 31, 1999
                                                                                 ------------------  -----------------
<S>                                                                              <C>                 <C>
  Computer software  ................................................................     $  1,925            $   307
  Computer equipment  ...............................................................        1,131                235
  Leasehold improvements  ...........................................................          965                297
  Office equipment and furniture  ...................................................          631                381
  Construction in progress  .........................................................       39,976             54,393
  Network equipment and infrastructure  .............................................       63,220                 --
                                                                                          --------            -------
   Total  ...........................................................................      107,848             55,613
  Accumulated depreciation  .........................................................       (3,479)              (436)
                                                                                          --------            -------
  Property, plant and equipment, net  ...............................................     $104,369            $55,177
                                                                                          ========            =======
</TABLE>


4.  ACQUISITIONS

  On July 31, 2000, FiberNet acquired the remaining 97% of the membership
interests of Devnet not already beneficially owned by the Company pursuant to
the Agreement and Plan of Reorganization, dated as of June 2, 2000. Devnet
manages the communications access and infrastructure for approximately 40
million square feet of class A commercial real estate in major markets
nationwide. In connection with the acquisition, the Company issued 3,461,162
shares of its common stock and paid approximately $15 million in exchange for
approximately 97% of the membership interests in Devnet. The acquisition was
accounted for under the purchase method of accounting. FiberNet had previously
acquired approximately 3% of the Devnet membership interests for a purchase
price of $3 million in April 2000. The acquisition of the remaining Devnet
membership interests gave the Company control of 100% of Devnet. The Company has
preliminarily allocated the purchase price of approximately $60 million to the
assets and liabilities of Devnet and will complete the allocation within one
year.

The purchase price of Devnet was allocated as follows:

     Devnet assets acquired......................................     $ 2,433
     Devnet liabilities assumed..................................      (6,253)
     Goodwill and intangible assets..............................      63,485
                                                                      -------
     Total purchase price........................................     $59,665
                                                                      =======

The following pro forma financial information reflects FiberNet's acquisition of
Devnet on July 31, 2000. The pro forma statements of operations are intended to
demonstrate how the combined companies might have looked if the acquisition of
Devnet had been completed on January 1, 1999. On July 31, 2000 FiberNet entered
into an employment agreement with a senior executive of Devnet for a one year
term. In connection with the acquisition, the Company paid an aggregate of
$500,000 to related parties for financial advisory services.


Pro forma statement of operations for the nine month period ended:
<TABLE>
<CAPTION>
                                                                          September 30, September 30,
                                                                              2000          1999
                                                                          ------------- -------------
<S>                                                                         <C>           <C>
Revenues.................................................................       $8,062        $1,348
Net loss applicable to common shareholders...............................     $(66,379)     $(17,513)
Net loss applicable to common shareholders per share-basic and diluted...       $(2.12)       $(0.89)
</TABLE>

5.   SIGNIFICANT EVENTS

     On August 15, 2000 the Company filed a registration statement on Form S-1
with the Securities and Exchange Commission for a proposed public offering of
common stock. In November 2000, the Company entered into a commitment letter
with Deutsche Bank AG, New York Branch, Deutsche Bank Securities Inc., First
Union Investors, Inc., First Union Securities, Inc., Toronto Dominion (USA)
Securities Inc. and other lenders to replace its existing $75 credit facility
with a senior secured credit facility with a minimum of $160 million and a
maximum of $175 million of availability. The new credit facility would have a
term of six years and consist of a multi-draw term loan facility and a revolving
loan facility. The closing of the transaction contemplated in the commitment
letter is subject to certain conditions, including the consummation of the
proposed equity offering. Concurrently with the completion of the proposed
equity offering, all of the Company's outstanding shares of preferred stock,
including accrued and unpaid dividends thereon as of September 30, 2000, will
automatically convert into 14,974,478 shares of common stock.


                                      15
<PAGE>

     Through three transactions, Nortel has invested a total of $50.0 million in
preferred stock of the Company. On August 11, 2000 FiberNet issued and sold
62,500 shares of Series I Preferred Stock to Nortel in a private placement for
an aggregate purchase price of $7.5 million. Each share of Series I Preferred
Stock is convertible into ten shares of common stock at $12.00 per share,
subject to anti-dilution adjustments. In connection with this transaction, the
Company recorded a non-recurring, non-cash beneficial conversion feature in the
amount of $1.4 million to reflect the market price of the underlying common
stock as of the date of issuance.

     On July 31, 2000 FiberNet issued and sold 426,333 shares of Series H
Preferred Stock to Nortel in a private placement for an aggregate purchase price
consisting of $22.5 million in cash plus the cancellation of the 2,000,000
shares of Series G Preferred Stock, including all accrued and unpaid dividends
thereon, previously issued by the Company to Nortel. Each share of Series H
Preferred Stock is convertible into ten shares of common stock at $10.00 per
share, subject to anti-dilution adjustments. This amount is reflected in the
accompanying balance sheet net of the value of warrants to purchase 425,000
shares of common stock of the Company issued in connection with this
transaction. The value of these warrants was estimated on the date of issuance
using an acceptable pricing model. In connection with this transaction, the
Company recorded a non-recurring, non-cash beneficial conversion feature in the
amount of $12.2 million to reflect the market price of the underlying common
stock as of the date of the issuance.

     On June 30, 2000, FiberNet issued and sold 2,000,000 shares of Series G
Preferred Stock to Nortel in a private placement for an aggregate purchase price
of $20.0 million. Each share of Series G Preferred Stock was convertible into
one share of Common Stock of FiberNet at $10.00 per share, subject to anti-
dilution adjustments. In connection with this transaction, the Company recorded
a nonrecurring non-cash charge for a beneficial conversion feature in the amount
of $14.0 million to reflect the market price of the underlying common stock as
of the date of the issuance.

     On June 22, 2000, the Company amended its master purchase agreement with
Nortel to expand the scope of this agreement from $60.0 million to $260.0
million and to extend the term of the agreement to 2002. On December 31, 1999,
FiberNet entered into this master purchase agreement giving it the right to
purchase optical networking equipment and related services at predetermined
volume-based pricing.

     On May 26, 2000, FiberNet entered into an amended, expanded agreement with
Tishman Speyer Properties, L.P. ("TSP"). Under the agreement, FiberNet will
issue up to 1.6 million shares of its Common Stock to TSP as the Company enters
into license agreements for the deployment and operation of its in-building
networks in certain class A commercial office properties owned or managed by
TSP. As of September 30, 2000, approximately 700,000 shares have been issued
under the agreement for a total value of $6.4 million, based on fair market
value on the date of issuance. This amount is included in deferred charges on
the accompanying balance sheet and is being amortized over 15 years, the term of
the underlying license agreement. In a related transaction, TSP exchanged a
warrant it held for membership interests in Equal Access, an indirect wholly-
owned subsidiary of FiberNet. This exchange had no impact on the financial
statements of the Company.


                                      16