<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

(Mark One)

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

                For the quarterly period ended September 30, 2001

                                       OR

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

                        For the transition period from      to

                        Commission file number 000-24661

                          FiberNet Telecom Group, Inc.

             (Exact Name of Registrant as Specified in its Charter)

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

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

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

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

         The number of shares outstanding of the issuer's common stock, as of
November 14, 2001, was 40,464,984 shares of Common Stock, $.001 par value.

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



<PAGE>

                                      INDEX

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<CAPTION>
                                                                                                             Page
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<S>                                                                                                          <C>
PART I.       FINANCIAL INFORMATION ........................................................................      1
Item 1.       Consolidated Financial Statements
              Report of Independent Public Accountants .....................................................     10
              Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 ...................     11
              Consolidated Statements of Operations for the nine months ended September 30, 2001 and
              2000 .........................................................................................     12
              Consolidated Statements of Operations for the three months ended September 30, 2001 and
              2000 .........................................................................................     13
              Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and
              2000 .........................................................................................     14
              Notes to Consolidated Financial Statements ...................................................     15
Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations ........      1
Item 3        Quantitative and Qualitative Disclosures About Market Risk ...................................      7
PART II.      OTHER INFORMATION ............................................................................      8
</TABLE>







<PAGE>

                                     PART I

                              FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements

      See attached.


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

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

Overview

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

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

     We began operating our first metropolitan network in New York City in
January 2000, and we began deploying our infrastructure in Chicago and Los
Angeles in the fourth quarter of 2000. As of September 30, 2001, we had
accomplished the following:

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

o    We have deployed our advanced, vertical in-building networks, known as
     FiberNet In-Building Networks, or FINs, in 13 office buildings in New York
     City and seven in Chicago.

o    We have 80 customers and have entered into 98 interconnection agreements
     with existing and potential customers, establishing the basis for purchase
     orders from them.

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





                                       1

<PAGE>

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

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

Factors Affecting Future Operations

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

     Revenues are derived from three general types of services:

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

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

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

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

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

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


                                       2

<PAGE>

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

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

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

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

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

Results of Operations

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

         Revenues. Revenues for the nine months ended September 30, 2001 were
$23.2 million compared to $6.4 million for the nine months ended September 30,
2000, a $16.8 million increase. We generated revenues by providing transport,
colocation and communications access management services to our customers. For
the nine months ended September 30, 2001 and 2000, we recognized $15.1 million
and $4.8 million in transport services, $3.1 million and $1.1 million in
colocation services and $5.0 million and $0.5 million in communications access
management and other services, respectively. During this nine-month period
ending September 30, 2001, three of our customers, 360networks, Qwest and
Network Plus accounted for approximately 57.1% of our revenues. We expect such
customer concentration to diminish as we continue to expand our operations and
diversify our customer base.

         Direct Costs. Direct costs for the nine months ended September 30, 2001
were $10.5 million compared to $2.9 million for the nine months ended September
30, 2000. The increase of $7.6 million was due to expenses associated with the
expansion of our network facilities. The majority of our direct costs are
occupancy expenses, consisting of rent and utility costs, for our carrier hotel
facilities, on-net buildings and off-net buildings. Other direct costs include
license fees, maintenance and repair costs, and professional fees.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 2001 were $27.9
million compared to $16.0 million for the nine months ended September 30, 2000.
This increase is consistent with the rapid expansion of our operations. We have
experienced significant growth in personnel costs, marketing and advertising
expenses, and network construction overhead to support our business strategy.
Prospectively, we expect to experience a decrease in selling, general and


                                       3

<PAGE>

administrative expenses compared to the current period, as a result of the cost
reduction initiatives that we have implemented, including a significant
reduction in headcount.

         Stock Related Expense. Stock related expense for the nine months ended
September 30, 2001 was approximately $(1.3) compared to $2.8 million for the
same period ending September 30, 2000. This non-cash expense relates to the
granting of stock options to our employees. The amount for the current period
reflects a reversal of a previously recorded expense. This reversal is due to a
decline in the price per share of our common stock since the beginning of the
current period.

         Impairment of Goodwill. During the nine months ended September 30,
2001, we recorded a non-cash, non-recurring charge for the impairment of
goodwill, relating to our acquisition of Devnet, LLC in July 2000, in the amount
of $56.5 million. We recorded this write down of goodwill in accordance with
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." No
impairment of goodwill was recorded during the nine months ended September 30,
2000.

         Depreciation and Amortization. Depreciation and amortization expense
for the nine months ended September 30, 2001 was $11.4 million compared to $5.1
million for the nine months ended September 30, 2000. The increase resulted from
commencement of the depreciation of network related fixed assets that were
placed into service.

         Interest Expense, Net. Interest expense, net for the nine months ended
September 30, 2001 was $6.5 million compared to $2.9 million of interest
expense, net for the nine months ended September 30, 2000. Interest expense was
generated as a result of borrowings under our senior secured credit facility and
outstanding capital lease obligations.

         Preferred Stock Dividends. For the nine months ended September 30,
2001, we paid and accrued $0.7 million for preferred stock dividends, compared
to $9.4 million paid and accrued for the nine months ending September 30, 2000,
based on the closing price per share of our common stock at the end of the
period. This decrease in the amount paid and accrued is due to a decline in the
price per share of our common stock since the prior period. Dividends on all of
our series of preferred stock are non-cash, payable in the form of additional
shares of each respective series of preferred stock. All of the series of
preferred stock are convertible into shares of our common stock. The liquidation
value of all of the dividends paid and accrued for the nine months ended
September 30, 2001 is $4.3 million. Included in the prior period, we also
recorded a beneficial conversion feature of $27.6 million upon the issuance of
our series G, H and I preferred stock.

      Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $96.3 million for the nine months ended
September 30, 2001 compared to a loss of $60.4 million for the nine months ended
September 30, 2000. Included in the results for the current period are two
non-recurring items: a non-cash charge of $56.5 million for the impairment of
goodwill and a non-cash charge of $7.4 million related to an early
extinguishment of debt from the modification of our credit facility on February
9, 2001. In addition, expenses increased in the current period due to the
expansion of our operations.

Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000

      Revenues. Revenues for the three months ended September 30, 2001 were $7.7
million compared to $4.6 for the three months ended September 30, 2000, a $3.1
million increase. We generated revenues by providing transport, colocation and
communications access management services to our customers. For the three months
ended September 30, 2001 and September 30, 2000, we recognized $4.7 million and
$3.5 million in transport services, $1.4 million and $0.6 million in colocation
services and $1.6 million and $0.5 million in communications access management
and other services, respectively. During the three-month period ending September
30, 2001, three of our customers, 360networks, Qwest and Network Plus, accounted
for approximately 50.6% of our revenues. We expect such customer concentration
to diminish as we further expand our operations and diversify our customer base.


                                       4

<PAGE>

      Direct Costs. Direct costs for the three months ended September 30, 2001
were $3.7 million compared to $2.1 million for the three months ended September
30, 2000. The increase of $1.6 million was due to expenses associated with the
expansion of our network facilities. The majority of our direct costs are
occupancy expenses, consisting of rent and utility costs, for our carrier hotel
facilities, on-net buildings and off-net buildings. Other direct costs include
license fees, maintenance and repair costs, and professional fees.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 2001 were $8.2
million compared to $6.2 million for the three months ended September 30, 2000.
This increase is consistent with the rapid expansion of our operations. We have
experienced significant growth in personnel costs, marketing and advertising
expenses, and network construction overhead to support our business strategy.
Prospectively, we expect to experience a decrease in selling, general and
administrative expenses compared to the current period, as a result of the cost
reduction initiatives that we have implemented, including a significant
reduction in headcount.

      Stock Related Expense. Stock related expense for the three months ended
September 30, 2001 was approximately $7,000 compared to $0.5 million for the
three months ended September 30, 2000. This non-cash expense relates to the
granting of stock options to our employees. The decrease is due to a decline in
the price per share of our common stock since the prior period.

      Impairment of Goodwill. During the three months ended September 30, 2001,
we recorded a non-cash, non-recurring charge for the impairment of goodwill,
relating to our acquisition of Devnet, LLC in July 2000, in the amount of $56.5
million. We recorded this write down of goodwill in accordance with Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." No impairment of
goodwill was recorded during the three months ended September 30, 2000.

      Depreciation and Amortization. Depreciation and amortization expense for
the three months ended September 30, 2001 was $4.9 million compared to $2.7
million of depreciation and amortization expense for the three months ended
September 30, 2000. The increase resulted from commencement of the depreciation
of network related fixed assets that were placed into service.

      Interest Expense, Net. Interest expense, net for the three months ended
September 30, 2001 was $2.3 million compared to $1.6 million of interest
expense, net for the three months ended September 30, 2000. Interest expense was
generated as a result of borrowings under our senior secured credit facility and
outstanding capital lease obligations.

      Preferred Stock Dividends. For the three months ended September 30, 2001,
we recorded an accrual of approximately $71,000 compared to $3.9 million for the
three-month period ending September 30, 2000. This decrease in the amount
accrued is due to a decline in the price per share of our common stock since the
prior period. Dividends on all of our series of preferred stock are non-cash,
payable in the form of additional shares of each respective series of preferred
stock. All of the series of preferred stock are convertible into shares of our
common stock. The liquidation value of all of the dividends accrued for the
three months ended September 30, 2001 is $1.5 million. Included in the prior
period, we also recorded a beneficial conversion feature of $13.6 million upon
the issuance of our series H and I preferred stock.

      Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $68.0 million for the three months ended
September 30, 2001 compared to a loss of $26.2 million for the three months
ended September 30, 2000. The change was primarily a result of the non-cash
charge of $56.5 million for the impairment of goodwill and increased expenses in
the current period due to the expansion of our operations.

Liquidity and Capital Resources

      As a result of our developmental activities and the deployment of our
networks and facilities, we have incurred significant losses from inception to
date. We expect such losses to continue, as we further execute our business plan
and expand our operations. Consequently, we have been dependent upon external
sources of capital to fund our operations. Prospectively, we will continue to
incur losses and will not be able to fund our operations with internally


                                       5

<PAGE>

generated funds. Therefore, we will require additional, external capital.
Additionally, we have no relevant operating history upon which an evaluation of
our performance and prospects can be made. We are subject to unforeseen capital
requirements, failure of market acceptance, failure to establish and maintain
business relationships, and competitive disadvantages against larger and more
established companies.

      To date, we have financed our operations through direct equity investments
from our stockholders, the issuance of additional debt and equity securities in
private transactions and by arranging a senior secured credit facility with a
group of lenders. We incurred an EBITDA loss (as defined below) and a net loss
applicable to common stockholders for the nine months ended September 30, 2001
of $15.2 million and $96.3 million, respectively, compared to $12.6 million and
$60.4 million, respectively, for the nine months ended September 30, 2000.
During the nine months ended September 30, 2001, cash used to fund operating
activities was $16.1 million, and cash purchases of property, plant and
equipment were $43.7 million, compared to $13.4 million and $51.5 million,
respectively, for the nine months ended September 30, 2000.

      During the nine months ended September 30, 2001, we received $67.4 million
in net cash proceeds from financing activities. On February 2, 2001, we
completed a $28.2 million directed public offering of our common stock under our
existing shelf registration statement. We issued 6,440,000 shares of common
stock at a purchase price of $4.375 per share as well as warrants to purchase an
additional 1,288,000 shares at an exercise price of $6.56 per share. Net
proceeds from the issuance of equity securities during the nine months ended
September 30, 2001 were $26.0 million

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

      As of September 30, 2001 the outstanding borrowings under our credit
facility were $95.0 million, and the weighted average interest rate on our
outstanding borrowings under the facility was 8.1%. Additionally, we were in
full compliance with all of the covenants contained in the credit agreement
underlying the facility.

      As of November 14, 2001 we are eligible to sell an additional $121.8
million of common stock, preferred stock, debt securities and warrants under our
existing shelf registration statement. We recently executed a commitment letter,
that is subject to certain conditions, with an existing institutional investor
to provide up to $8 million in equity capital through three closings over the
next seven months. We expect the initial part of this transaction to close in
the next few weeks. However, there can be no assurance that we will be able to
successfully consummate this financing.

      We anticipate spending approximately between $47.0 and $52.0 million
during the fiscal year 2001 for the deployment of our FINs, expansion of our
metropolitan transport networks, the development of additional carrier hotel
facilities and other network programs and management systems. Our planned
operations may require significant additional capital to fund equipment
purchases, engineering and construction costs, marketing costs, administrative
expenses and other operating activities. 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.

      EBITDA, 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 is commonly used in the communications industry and by financial
analysts, and others who follow the industry, to measure operating performance.
EBITDA 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


                                       6

<PAGE>

accounting principles, or as a measure of liquidity. Because it is not
calculated under generally accepted accounting principles, our EBITDA may not be
comparable to similarly titled measures used by other companies.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

      Our exposure to financial market risk, including changes in interest
rates, relates primarily to our senior secured credit facility and marketable
security investments. Borrowings under our senior secured credit facility bear
interest at floating rates. As a result, we are subject to fluctuations in
interest rates. 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 do not believe
that a 100 basis point increase or decrease in interest rates would
significantly impact our business. We do not have any derivative instruments. 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.


                                       7

<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 during the quarter
ended September 30, 2001:

               None.





                                       8

<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: November 14, 2001             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.


                                       9

<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, 2001, and the related consolidated statements of operations for
the three-month and nine-month periods ended September 30, 2001 and 2000, and
the consolidated statements of cash flows for the nine-month periods ended
September 30, 2001 and 2000. These financial statements are the responsibility
of the Company's management.

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

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

                                             /s/   ARTHUR ANDERSEN LLP

New York, New York
October 12, 2001


                                       10

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                                       September 30,    December 31,
                                                                                                           2001             2000
                                                                                                        -----------     -----------
                                                                                                        (Unaudited)
<S>                                                                                                      <C>              <C>
                                         ASSETS

Current assets:
     Cash and cash equivalents ...................................................................       $   9,220        $   1,582
     Accounts receivable, net ....................................................................           3,395           14,030
     Prepaid expenses and other ..................................................................             489              960
                                                                                                         ---------        ---------
          Total current assets ...................................................................          13,104           16,572
Property, plant and equipment, net ...............................................................         162,231          126,114
Goodwill and intangibles, net ....................................................................           7,654           69,057
Deferred charges, net ............................................................................          12,330           14,293
Other assets .....................................................................................             556            1,129
                                                                                                         ---------        ---------
TOTAL ASSETS .....................................................................................       $ 195,875        $ 227,165
                                                                                                         =========        =========

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable ............................................................................       $  10,615        $  11,119
     Accrued expenses ............................................................................           9,672           10,590
     Deferred revenues ...........................................................................           6,928           14,381
     Capital lease obligation--current portion ...................................................             251              233
                                                                                                         ---------        ---------
          Total current liabilities ..............................................................          27,466           36,323
Notes payable, less discount .....................................................................          88,631           45,836
Capital lease obligation .........................................................................             534              723
                                                                                                         ---------        ---------
          Total liabilities ......................................................................         116,631           82,882
                                                                                                         ---------        ---------
Stockholders' equity:
     Common Stock, $.001 par value, 150,000,000 shares authorized
        and 40,464,984 and 33,238,346 shares issued and outstanding, respectively ................              40               33
     Series C Voting Preferred Stock $.001 par value 78,960 and 83,688 issued and
        outstanding (Preference in involuntary liquidation value, $1.50
        per share) ...............................................................................             118              126
     Series D Preferred Stock $.001 par value, 329,158 and 322,704 shares issued
        and outstanding, respectively. (Preference in involuntary liquidation value,
        $15.00 per share) ........................................................................          24,044           23,971
     Series E Preferred Stock $.001 par value, 291,678 and 317,853 shares issued
        and outstanding, respectively. (Preference in involuntary liquidation value,
        $15.00 per share) ........................................................................          21,418           24,130
     Series F Preferred Stock $.001 par value, 362,943 and 376,202 shares issued
        and outstanding, respectively. (Preference in involuntary liquidation value,
        $30.00 per share) ........................................................................          26,651           28,559
     Series H Preferred Stock $.001 par value, 458,166 and 440,544 shares issued and
        outstanding, respectively. (Preference in involuntary liquidation value, $100.00
        per share) ...............................................................................          64,767           64,568
     Series I Preferred Stock $.001 par value, 67,008 and 64,431 shares issued and
        outstanding, respectively. (Preference in involuntary liquidation value, $120.00
        per share) ...............................................................................          12,606            8,969
     Additional paid in capital and other ........................................................         178,724          146,719
     Accumulated deficit .........................................................................        (249,124)        (152,792)
                                                                                                         ---------        ---------
          Total stockholders' equity .............................................................          79,244          144,283
                                                                                                         ---------        ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................................       $ 195,875        $ 227,165
                                                                                                         =========        =========
</TABLE>


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


                                       11

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (IN 000'S)

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                    Nine Months Ended September 30,
                                                                                                    -------------------------------
                                                                                                        2001                  2000
                                                                                                        ----                  ----
<S>                                                                                              <C>                   <C>
Revenues ...............................................................................         $     23,203          $      6,366
Operating expenses:
      Direct costs .....................................................................               10,495                 2,940
      Selling, general and administrative expenses .....................................               27,881                16,027
      Stock related expense ............................................................               (1,275)                2,777
      Impairment of goodwill ............................................................              56,467                  --
      Depreciation and amortization ....................................................               11,387                 5,134
                                                                                                 ------------          ------------
Total operating expenses ...............................................................              104,955                26,878
                                                                                                 ------------          ------------
Loss from operations ...................................................................              (81,752)              (20,512)
Interest expense, net ..................................................................                6,498                 2,851
                                                                                                 ------------          ------------
Net loss before extraordinary item .....................................................              (88,250)              (23,363)
Extraordinary loss on early extinguishment of debt .....................................                7,398                  --
                                                                                                 ------------          ------------
Net loss ...............................................................................              (95,648)              (23,363)
Preferred stock dividends ..............................................................                  684                37,049
                                                                                                 ------------          ------------
Net loss applicable to common stockholders .............................................         $    (96,332)         $    (60,412)
                                                                                                 ============          ============
Net loss applicable to common stockholders per share--basic and diluted ................         $      (2.46)         $      (2.11)
Weighted average shares outstanding ....................................................           39,179,999            28,641,519
</TABLE>






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


                                       12

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (IN 000'S)

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                    Three Months Ended September 30,
                                                                                                    --------------------------------
                                                                                                        2001                  2000
                                                                                                        ----                  ----
<S>                                                                                              <C>                   <C>
Revenues ...............................................................................         $      7,674          $      4,599
Operating expenses:
     Direct costs ......................................................................                3,717                 2,128
     Selling, general and administrative expenses ......................................                8,192                 6,235
     Stock related expense .............................................................                    7                   541
     Impairment of goodwill ............................................................               56,467                  --
     Depreciation and amortization .....................................................                4,907                 2,719
                                                                                                 ------------          ------------
Total operating expenses ...............................................................               73,290                11,623
                                                                                                 ------------          ------------
Loss from operations ...................................................................              (65,616)               (7,024)
Interest expense, net ..................................................................                2,289                 1,626
                                                                                                 ------------          ------------
Net loss ...............................................................................              (67,905)               (8,650)
Preferred stock dividends ..............................................................                   71                17,517
                                                                                                 ------------          ------------
Net loss applicable to common stockholders .............................................         $    (67,976)         $    (26,167)
                                                                                                 ============          ============
Net loss applicable to common stockholders per share--basic and diluted ................         $    ( 1.70)          $     ( 0.84)
Weighted average shares outstanding ....................................................           39,891,975            30,990,996
</TABLE>






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


                                       13

<PAGE>

                          FIBERNET TELECOM GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (IN 000'S)

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                Nine Months Ended
                                                                                                                  September 30,
                                                                                                                  -------------
                                                                                                              2001            2000
                                                                                                              ----            ----
<S>                                                                                                        <C>             <C>
Cash flows from operating activities:
     Net loss applicable to common stockholders ....................................................       $(96,332)       $(60,412)
     Adjustments to reconcile net loss to net cash used in operating activities:
          Extraordinary item .......................................................................          7,398            --
          Impairment of goodwill ...................................................................         56,467            --
          Depreciation and amortization ............................................................         11,387           5,134
          Preferred stock dividends ................................................................            684          37,049
          Stock related expense ....................................................................         (1,275)          2,777
          Other non-cash expense ...................................................................          3,627           1,761
          Change in assets and liabilities:
               (Increase) decrease in accounts receivable, prepaid expenses and other
                  assets ...........................................................................          9,290          (3,826)
               Increase (decrease) in accounts payable, accrued expenses and deferred
                  revenues .........................................................................         (7,342)          4,155
                                                                                                           --------        --------
Cash used in operating activities ..................................................................        (16,096)        (13,362)
Cash flows from investing activities:
     Acquisition of Devnet, LLC - net of cash received .............................................           --           (17,715)
     Capital expenditures ..........................................................................        (43,678)        (51,516)
                                                                                                           --------        --------
Cash used in investing activities ..................................................................        (43,678)        (69,231)
Cash flows from financing activities:
     Net proceeds from debt financings .............................................................         41,572          30,960
     Net proceeds from issuance of equity securities ...............................................         26,011          52,419
     Repayment of capital lease obligation .........................................................           (171)           (150)
                                                                                                           --------        --------
Cash provided by financing activities ..............................................................         67,412          83,229
                                                                                                           --------        --------
Net increase in cash ...............................................................................          7,638             636
Cash at beginning of period ........................................................................          1,582           9,512
                                                                                                           --------        --------
Cash at end of period ..............................................................................       $  9,220        $ 10,148
                                                                                                           ========        ========
Supplemental disclosures of cash flow information:
     Interest paid .................................................................................       $  4,189        $    464
     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 is an all-optical facilities-based communications provider focused
on providing wholesale broadband connectivity for data, voice and video
transmission on its state-of-the-art fiber optic networks in major metropolitan
areas. The Company offers an advanced high bandwidth, fiber-optic solution to
support the growing demand for network capacity in the intra-city market, or
local loop. The Company has established operations in the New York, Chicago and
Los Angeles metropolitan areas.

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

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

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Use of Estimates

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


                                       15

<PAGE>

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

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

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

Cash and Cash Equivalents

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

Property, Plant and Equipment

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

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

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

Impairment of Long-Lived Assets

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


                                       16

<PAGE>

Revenue Recognition

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

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

      Revenues are derived from three general types of services:

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

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

    Communications access management services. FiberNet's access management
services include providing its customers with the non- exclusive right to market
and provide their retail services to tenants in its on-net and off-net
buildings. Customers typically enter into an agreement with the Company to gain
access to all or a significant number of its properties. For certain 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 retail,
end-user tenants.

Fair Value of Financial Instruments

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

Goodwill and Intangibles

     Cost in excess of net assets of acquired businesses, principally goodwill,
is amortized on the straight-line method over 15 years. Other intangible assets
include the cost to access buildings and deferred financing costs. Costs to
access buildings are amortized over 15 years, which represents the term of the
related contracts. Deferred financing costs are amortized over the term of the
associated debt obligation.

Earnings Per Share

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


                                       17

<PAGE>

Concentration of Credit Risk

     The Company has some concentration of credit risk among its customer base.
The Company performs ongoing credit evaluations of the financial condition its
customers. As of September 30, 2001, two customers in the aggregate accounted
for 42.0% of the Company's total accounts receivable. For the nine months ended
September 30, 2001, three customers in the aggregate accounted for 57.1% of the
Company's total revenues. The Company recorded an allowance for doubtful
accounts of $2.5 million as of September 30, 2001.

Stock Option Plan

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

Accounting for Income Taxes

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

Reclassifications

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

Segment Reporting

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

Recent Accounting Pronouncements

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

     In June 2001, 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. The adoption of SFAS No. 141
does not have a material impact on the consolidated financial statements of the
Company.

     In June 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", applicable for fiscal years beginning after December 15, 2001. SFAS No.
142 establishes new standards of accounting for goodwill and intangible assets
obtained in an acquisition. We do not expect the adoption of SFAS No. 142 to
have a material impact on the consolidated financial statements of the Company.


                                       18

<PAGE>

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

3.   PROPERTY, PLANT AND EQUIPMENT

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

                                                   September 30,  December 31,
                                                       2001          2000
                                                       -----         ----
     Computer software ........................    $   3,674     $   2,963
     Computer equipment .......................        2,957         1,926
     Leasehold improvements ...................        1,324         1,111
     Office equipment and furniture ...........          972           810
     Construction in progress .................        2,887        52,876
     Network equipment and infrastructure .....      162,570        71,322
                                                   ---------     ---------
                                                     174,384       131,008
     Accumulated depreciation .................      (12,153)       (4,894)
                                                   ---------     ---------
     Property, plant and equipment, net .......    $ 162,231     $ 126,114
                                                   =========     =========


4.   IMPAIRMENT OF GOODWILL

     As discussed in the Form 10-Q for the quarter ended June 30, 2001, the
Company has evaluated the carrying value of certain long-lived assets and
acquired equity investments, consisting primarily of goodwill resulting from the
Company's 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.
The Company reviews the carrying value of long-lived assets including goodwill,
deferred charges and property, plant and equipment for impairment whenever
events and circumstances indicate the carrying value of an asset may not be
recoverable from the estimated future cash flows expected to result from its use
and eventual disposition.

     An assessment of the goodwill related to the Devnet acquisition was
performed pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", due to the negative
industry and economic trends affecting certain of the Company's current
operations and expected future sales, 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.

     As a result, the Company 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 these assets
exceeded their fair value. Fair value was determined based on undiscounted
future cash flows from properties associated with the purchase of Devnet.

                                       19