<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                (Amendment No. 1)

(Mark One)

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

                  For the quarterly period ended June 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 the past 90 days. Yes [X] No
[_]

     The number of shares outstanding of the issuer's common stock, as of June
25, 2002, was 64,331,722 shares of Common Stock, $.001 par value.

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                                      INDEX

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<S>                                                                             <C>
PART I.  FINANCIAL INFORMATION ...............................................    1
Item 1.  Consolidated Financial Statements
         Consolidated Balance Sheets as of June 30, 2001 and December
         31, 2000 ............................................................   12
         Consolidated Statements of Operations for the six months ended
         June 30, 2001 and 2000 ..............................................   13
         Consolidated Statements of Operations for the three months
         ended June 30, 2001 and 2000 ........................................   14
         Consolidated Statements of Cash Flows for the six months ended
         June 30, 2001 and 2000 ..............................................   15
         Notes to Consolidated Financial Statements ..........................   16
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 ...................................................    9
Item 2.  Changes in Securities and Use of Proceeds ...........................    9
Item 4.  Submission of Matters to a Vote of Security Holders .................    9
Item 6.  Exhibits and Reports on Form 8-K ....................................   10
</TABLE>

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                                EXPLANATORY NOTE

         The purpose of this amendment is to amend and restate Part I of our
Form 10-Q, which was originally filed on August 14, 2001. We restated our
consolidated financial statements for the quarter ended March 31, 2001 to record
a beneficial conversion feature of $21.0 million in connection with the
reduction of the conversion price on our series H and I preferred stock on
February 9, 2001. Other than with respect to the consolidated financial
statements for the quarter ended March 31, 2001, this restatement has no impact
on our assets or total stockholders' equity, and it resulted in an increase in
additional paid-in-capital and an increase in net loss. The change increased net
loss by $21.0 million and increased net loss applicable to common stockholders
per share by $0.54 for the six months ended June 30, 2001. The change has no
impact on our cash flows. This change was previously reflected in our annual
report on Form 10-K for the fiscal year ended December 31, 2001, as amended.

                                     PART I

                              FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

         See attached.

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

         This report contains certain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Investors are cautioned
that there can be no assurance that actual results or business conditions will
not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
following: the difficulty inherent in operating an early-stage company in a new
and rapidly evolving market; our history of operating losses and accumulated
deficit; our limited financial resources and uncertainty as to the availability
of additional capital to fund our operations on acceptable terms, if at all; our
success in obtaining additional carrier hotel lease agreements and license
agreements with building owners; growth in demand for our services; the
frequency of service interruptions on our networks; the potential development by
competitors of competing products and technologies; restrictions imposed on us
as a result of our debt; and changes in the regulatory environment. As a result,
our future operations involve a high degree of risk. Except as required by law,
we undertake no obligation to update any forward- looking statement, whether as
a result of new information, future events or otherwise.

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

Overview

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

         We have experienced significant operating losses, net losses and
negative cash flows from operating activities. We expect to continue to
experience such losses and negative cash flows as we continue to operate our
business. We also have a limited operating history. Consequently, prospective
investors have limited operating history and financial data upon which to
evaluate our performance.

         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 June 30, 2001, we had accomplished
the following:

         .    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

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              in Chicago.

         .    We 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.

         .    We had 77 customers and entered into 89 interconnection agreements
              with existing and potential customers, establishing the basis for
              purchase orders from them.

         .    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.

         .    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. We recognize revenues when
earned as services are provided throughout the life of each contract with a
customer.

     Revenues are derived from three general types of services:

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

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

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

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

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

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

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carrier point facilities or on-net buildings and off-net buildings. Within each
of our existing facilities, our revenues will depend upon the demand for our
services, the competition that we face and our customer service.

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

     In the second quarter of 2001, our colocation and access services produced
approximately one-third of our revenues. In the future we anticipate generating
significantly more of our revenues from transport services than from colocation
or access management services. The scalability of our network architecture
allows us to increase transport capacity to a greater degree than is possible
with our colocation and access management services.

     Cost of Services. Cost of services are associated with the operation of our
networks and facilities. 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 cost of services are generally fixed
in nature. After the significant capital for our networks and facilities is
expended, we do not anticipate that cost of services 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. Certain options granted to employees
are accounted for using variable plan accounting. Under variable plan
accounting, the stock related expense is adjusted for changes in the market
price of the underlying common stock

     Depreciation and Amortization. Depreciation and amortization expense
includes the depreciation of our network equipment and infrastructure, computer
hardware and software, furniture and fixtures, and leasehold improvements, as
well as the amortization of 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.
We review the carrying value of its assets for impairment whenever events and
circumstances indicate the carrying value of an asset may not be recoverable
from the estimated future cash flows expected to result from its use and
eventual disposition.

Restatement of Financial Statements

     We restated our consolidated financial statements for the quarter ended
March 31, 2001 to record a beneficial conversion feature of $21.0 million in
connection with the reduction of the conversion price on our series H and I
preferred stock on February 9, 2001. The conversion price of the series H and
series I was reduced to $4.38, in accordance with the original terms of the
issuance transactions. The certificates of designation of the series H and
series I include provisions requiring the conversion prices to be lowered to the
per share price at which we issue any shares of common stock, subject to certain
exceptions, subsequent to the initial issuance of the series H and series I. In
February 2001, we issued shares of common stock in a directed public offering at
a price of $4.38 per share, resulting in the reduction of the conversion price.
As a result, we recorded a beneficial conversion charge of $21.0 million as a
result of the reduction of the conversion price. Other than with respect to the
consolidated financial statements for the quarter ended March 31, 2001, this
restatement has no impact on our assets or total stockholders' equity, and it
resulted in an increase in additional paid-in-capital and an increase in net
loss. The change increased net loss by $21.0 million and increased net loss
applicable to common stockholders per share by $0.54 for the six months ended
June 30, 2001. The change has no impact on our cash flows. This change was
already reflected in our annual report on Form 10-K for the fiscal year ended
December 31, 2001, as amended.

Results of Operations

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

         Revenues.  Revenues for the six months ended June 30, 2001 were $15.5
million compared to $1.8 million for the six months ended June 30, 2000, a $13.7
million increase. We generated revenues by providing transport, colocation and
communications access


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management services to our customers. For the six months ended June 30, 2001 and
2000, we recognized $10.4 million and $1.2 million in transport services, $2.1
million and $0.5 million in colocation services and $3.0 million and $0.1
million in communications access management and other services, respectively.
During this six-month period ending June 30, 2001, three of our customers,
360networks, Qwest and Network Plus accounted for approximately 60.3% of our
revenues. We expect such customer concentration to diminish as we continue to
expand our operations and diversify our customer base. Reciprocal agreements
accounted for $2.6 million, or 16.6%, of our revenues in the first six months of
2001, up from $0.3 million, or 18.1%, of our revenues for the same period in
2000.

         Cost of Services. Cost of services for the six months ended June 30,
2001 were $6.8 million compared to $0.8 million for the six months ended June
30, 2000. The increase of $6.0 million was due to expenses associated with the
expansion of our network facilities. The majority of our cost of services are
occupancy expenses, consisting of rent and utility costs, for our carrier hotel
facilities, on-net buildings and off-net buildings. Other cost of services
include license fees, maintenance and repair costs, and professional fees.
Reciprocal agreements accounted for $2.6 million of our cost of services in the
first six months of 2001 and $0.4 million of our cost of services for the same
period in 2000.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended June 30, 2001 were $19.7
million compared to $9.8 million for the six months ended June 30, 2000. This
increase of $9.9 million 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 do not expect to experience the same growth
in selling, general and administrative expenses that we have historically.

         Stock Related Expense. Stock related expense for the six months ended
June 30, 2001 was $(1.3) million compared to $2.2 million for the same period
ending June 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.

         Depreciation and Amortization. Depreciation and amortization expense
for the six months ended June 30, 2001 was $6.5 million compared to $2.4 million
for the six months ended June 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 six months ended
June 30, 2001 was $4.2 million compared to $1.2 million of interest expense, net
for the six months ended June 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 six months ended June 30, 2001, we
paid $0.6 million, compared to $5.5 million for the six months ending June 30,
2000, in non-cash dividends on our preferred stock in the form of additional
shares of each respective series of preferred stock, based on the closing price
per share of our common stock at the end of the period. The liquidation value of
all of the dividends paid on June 30, 2001 was $2.8 million. All of the series
of preferred stock are convertible into shares of our common stock.

         Preferred Stock - Beneficial Conversion. In February 2001, the
conversion price of the series H and series I was reduced to $4.38, in
accordance with the original terms of the issuance transactions. The
certificates of designation of the series H and series I include provisions
requiring the conversion prices to be lowered to the per share price at which we
issue any shares of common stock, subject to certain exceptions, subsequent to
the initial issuance of the series H and series I. In February 2001, we issued
shares of common stock in a directed public offering at a price of $4.38 per
share, resulting in the reduction of the conversion price. We recorded a
beneficial conversion charge of $21.0 million as a result of the reduction of
the conversion price. The amounts of the charge assume the market price per
share of the underlying common stock, as of the date the charge is incurred, in
accordance with EITF Issue 98-05, "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratio."
Included in the amount for the prior period, we recorded a beneficial conversion
feature of $14.0 million upon the issuance of our series G preferred stock.

         Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $49.4 million for the six months ended June
30, 2001 compared to a loss of $34.2 million for the six months ended June 30,
2000, an increase of $15.2 million. The increase is a result of the
aforementioned changes in our operations, a non-cash charge of $7.4 million
related to an early extinguishment of debt from the modification of our credit
facility on February 9, 2001, and a beneficial conversion feature of $21.0
million recorded in February 2001.

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

         Revenues. Revenues for the three months ended June 30, 2001 were $8.2
million compared to $1.7 for the three months ended June 30, 2000, a $6.5
million increase. We generated revenues by providing transport, colocation and
communications access management services to our customers. For the three months
ended June 30, 2001 and June 30, 2000, we recognized $5.3 million and

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$1.2 million in transport services, $1.4 million and $0.4 million in colocation
services and $1.5 million and $0.1 million in communications access management
and other services, respectively. During the three-month period ending June 30,
2001, three of our customers, 360networks, Qwest and Network Plus, accounted for
approximately 60.2% of our revenues. We expect such customer concentration to
diminish as we further expand our operations and diversify our customer base.
Reciprocal agreements accounted for $1.4 million, or 17.0%, of our revenues in
the second quarter of 2001, up from $0.3 million, or 19.3%, of our revenues for
the second quarter of 2000.

         Cost of Services. Cost of services for the three months ended June 30,
2001 were $3.9 million compared to $0.6 million for the three months ended June
30, 2000. The increase of $3.3 million was due to expenses associated with the
expansion of our network facilities. The majority of our cost of services are
occupancy expenses, consisting of rent and utility costs, for our carrier hotel
facilities, on-net buildings and off-net buildings. Other cost of services
includes license fees, maintenance and repair costs, and professional fees.
Reciprocal agreements accounted for $1.3 million of our cost of services in the
second quarter of 2001 and $0.4 million of our cost of services for the same
period in 2000.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended June 30, 2001 were $9.8
million compared to $5.5 million for the three months ended June 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 do not expect to experience the same growth in selling,
general and administrative expenses that we have historically.

         Stock Related Expense. Stock related expense for the three months ended
June 30, 2001 was $(1.1) million compared to $0.5 million for the three months
ended June 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.

         Depreciation and Amortization. Depreciation and amortization expense
for the three months ended June 30, 2001 was $3.4 million compared to $1.2
million of depreciation and amortization expense for the three months ended June
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
June 30, 2001 was $2.1 million compared to $1.3 million of interest expense, net
for the three months ended June 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 June 30, 2001, we
recorded a reversal of an accrual in the amount of $(0.1) million, based on the
closing price per share of our common stock at the end of the period. This
reversal of a dividend expense accrued during the first quarter of 2001 was the
result of a decline in the price per share of our common stock since the
beginning of the current period. For the three months ended June 30, 2000 we
paid $2.7 million in non-cash dividends on our preferred stock, payable in the
form of additional shares of each respective series of preferred stock, based on
the closing price per share at the end of the period. All of the series of
preferred stock are convertible into shares of common stock.

         Preferred Stock - Beneficial Conversion. In June 2000, we recorded a
beneficial conversion feature of $14.0 million upon the issuance of our series G
preferred stock.

         Net Loss Applicable to Common Stockholders. We reported a net loss
applicable to common stockholders of $9.7 million for the three months ended
June 30, 2001 compared to a loss of $24.2 million for the three months ended
June 30, 2000. The decrease is a result of the beneficial conversion feature
recorded in the second quarter of 2000 offset by 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
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 (as defined below) loss
and a net loss applicable to common stockholders for the six months ended June
30, 2001 of $10.9 million and $49.4 million, respectively, compared to $8.8
million and $34.2 million, respectively, for the six months ended June

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30, 2000. During the six months ended June 30, 2001, cash used to fund operating
activities was $12.6 million, and cash purchases of property, plant and
equipment were $31.4 million, compared to $10.5 million and $14.1 million,
respectively, for the six months ended June 30, 2000.

         During the six months ended June 30, 2001, we received $43.5 million in
net cash proceeds from financing activities. On February 2, 2001, we completed a
$28.2 million directed public offering of our common stock under our existing
shelf registration statement. We issued 6,440,000 shares of common stock at a
purchase price of $4.375 per share as well as warrants to purchase an additional
1,288,000 shares at an exercise price of $6.56 per share. We may redeem the
warrants when the stock trades at $11.48 or above for 20 consecutive trading
days. As of Aug 15, 2001 we were eligible to sell an additional $121.8 million
of common stock, preferred stock, debt securities and warrants under our
existing shelf registration statement. Net proceeds from the issuance of equity
securities during the six months ended June 30, 2001 were $26.0 million.

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

         As of June 30, 2001 the outstanding borrowings under our credit
facility were $71.0 million, and we were in compliance with all of the covenants
contained therein, which gives us full access to the remaining balance available
under such credit facility. We anticipate spending approximately $55.0 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 defined), as discussed above, is defined as net loss before
income taxes and minority interest, interest expense, interest income,
depreciation and amortization, stock related expense and other non-cash,
non-recurring charges. EBITDA (as defined) is commonly used in the
communications industry and by financial analysts, and others who follow the
industry, to measure operating performance. EBITDA (as defined) should not be
construed as an alternative to operating income or cash flows from operating
activities, both of which are determined in accordance with generally accepted
accounting principles, or as a measure of liquidity. Because it is not
calculated under generally accepted accounting principles, our EBITDA (as
defined) may not be comparable to similarly titled measures used by other
companies.

<TABLE>
<CAPTION>
                                                       Consolidated Financial Data       Consolidated Financial Data
                                                             (in thousands)                    (in thousands)
                                                               (unaudited)                      (unaudited)
                                                            Six months Ended                 Three months Ended
                                                                June 30,                          June 30,
                                                     --------------------------------  --------------------------------
                                                         2001                 2000         2001                2000
                                                     ------------          ----------  ------------        ------------
                                                     Restated (1)                      Restated (1)
<S>                                                  <C>                   <C>         <C>                 <C>
Calculation of EBITDA (as defined):

Net loss .........................................     $(27,742)            $(14,713)    $ (9,807)           $ (7,509)

Plus:
Operating expenses:
Stock related expense for selling,
  general, and administrative matters ............       (1,282)               2,237       (1,146)                541
Depreciation and amortization ....................        6,480                2,415        3,375               1,240
Extraordinary loss on early
  extinguishments of debt ........................        7,398                   --           --                  --
Interest expense, net ............................        4,209                1,223        2.083               1,273

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

EBITDA (as defined) ..............................     $(10,937)            $ (8,838)    $ (5,495)           $ (4,455)
</TABLE>

(1) See Footnote 4 to the notes of the consolidated financial statements for a
discussion of the restatement of our financial results for the quarter ended
March 31, 2001.

                                       8

<PAGE>

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.

                                     PART II
                                OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities and Use of Proceeds

         On May 22, 2001, a stockholders agreement by and among us and the
stockholders listed therein was amended to terminate the lock-up provision that
restricted the transfer of capital stock owned by parties to the stockholders
agreement. Such amendment was filed as part of a current report on Form 8-K,
filed on May 23, 2001.

Item 3.  Defaults Upon Senior Securities

         None.

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

         We held our annual meeting of stockholders on June 5, 2001, at which
time the stockholders voted on the following proposals:

         (1) Election of eight directors for a one-year term each.


         Name of Candidate                                 For          Withheld
         -----------------                              ----------      --------
         Timothy P. Bradley .......................     36,059,184        13,100
         Steven G. Chrust .........................     36,058,684        13,600
         Philip L. DiGennaro ......................     36,059,184        13,100
         Roy (Trey) D. Farmer III .................     36,046,151        26,133
         Michael S. Liss ..........................     35,786,547       285,737
         Charles J. Mahoney .......................     36,057,984        14,300
         Richard E. Sayers ........................     36,058,984        13,300
         William Vrattos ..........................     36,057,109        15,175


         There were no abstentions and no broker non-votes.

         (2) Approval of an Amendment to the Equity Incentive Plan, to increase
the number of shares of common stock authorized under the Equity Incentive Plan
to 12,644,000.

         The vote was 30,710,673 for, 643,192 against, and there were 115,436
abstentions. There were 4,602,983 broker non-votes.

         (3) Ratification of appointment of Arthur Andersen LLP as auditors.

         The vote was 36,044,330 for, 12,255 against, and there were 15,699
abstentions. There were no broker non-votes.

                                       9

<PAGE>

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 report was filed on Form 8-K, under Item 5, during
the quarter ended June 30, 2001:

         On May 23, 2001, a report was filed regarding an amendment to the
stockholders agreement, dated as of January 31, 2001, by and among us and the
stockholders listed therein.


                                       10

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: June 28, 2002                    FiberNet Telecom Group, Inc.


                                       By:  /S/ Jon A. DeLuca
                                            ------------------------------------
                                       Name:    Jon A. DeLuca
                                       Title:   Senior Vice President--Finance
                                                Chief Financial Officer*


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



                                       11

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      June 30,           December 31,
                                                                                        2001                 2000
                                                                                   --------------        ------------
                                                                                    (Unaudited)
                                                                                    As Restated-
                                     ASSETS                                          See Note 4
<S>                                                                                <C>                   <C>
Current assets:
  Cash and cash equivalents ....................................................      $   1,046           $   1,582
  Accounts receivable, net of allowance of $2,183 and $482 at
      June 30, 2001 and December 31, 2000, respectively ........................          9,103              14,030
  Prepaid expenses and other ...................................................            575                 960
                                                                                      ---------           ---------
    Total current assets .......................................................         10,724              16,572
Property, plant and equipment, net .............................................        153,852             126,114
Goodwill and intangibles, net of accumulated amortization of $5,101
 and $2,696 at June 30, 2001 and December 31, 2000, respectively ...............         66,651              69,057
Deferred charges, net of accumulated amortization of and $749 at
 June 30, 2001 and December 31, 2000, respectively .............................         12,664              14,293
Other assets ...................................................................            863               1,129
                                                                                      ---------           ---------
TOTAL ASSETS ...................................................................      $ 244,754           $ 227,165
                                                                                      =========           =========
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable .............................................................      $  13,124           $  11,119
  Accrued expenses .............................................................          7,030              10,590
  Deferred revenues ............................................................         12,210              14,381
  Capital lease obligation--current portion ....................................            249                 233
                                                                                      ---------           ---------
    Total current liabilities ..................................................         32,613              36,323
Notes payable, less original issue discount of $6,667 and $4,164
 at June 30, 2001 and December 31, 2000, respectively ..........................         64,333              45,836
Capital lease obligation .......................................................            595                 723
                                                                                      ---------           ---------
    Total liabilities ..........................................................         97,541              82,882

Stockholders' equity:
  Common Stock, $.001 par value, 150,000,000 shares authorized and 39,699,712
   and 33,238,346 shares issued and outstanding, respectively ..................             40                  33
  Series C Voting Preferred Stock $.001 par value 83,688 issued and
   outstanding (Preference in involuntary liquidation value,
   $1.50 per share) ............................................................            126                 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, 330,610 and 317,853 shares issued
   and outstanding, respectively. (Preference in involuntary liquidation value,
   $15.00 per share) ...........................................................         24,274              24,130
  Series F Preferred Stock $.001 par value, 391,144 and 376,202 shares issued
   and outstanding, respectively. (Preference in involuntary liquidation value,
   $30.00 per share) ...........................................................         28,728              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) ..........................................................         64,766              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 .........................................        194,795             146,719
  Accumulated deficit ..........................................................       (202,166)           (152,792)
                                                                                      ---------           ---------
    Total stockholders' equity .................................................        147,213             144,283
                                                                                      ---------           ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .....................................      $ 244,754           $ 227,165
                                                                                      =========           =========
</TABLE>

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

                                       12

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                              Six Months Ended
                                                                                                  June 30,
                                                                                      ------------------------------
                                                                                          2001              2000
                                                                                      ------------      ------------
                                                                                      As Restated-
                                                                                       See Note 4
<S>                                                                                   <C>               <C>
Revenues .......................................................................      $     15,530      $      1,768
Operating expenses:
  Cost of services (exclusive of items shown
   separately below) ...........................................................             6,778               813
  Selling, general and administrative expense
   excluding stock related expense .............................................            19,689             9,793
  Stock related expense for selling, general,
   and administrative matters ..................................................            (1,282)            2,237
  Depreciation and amortization ................................................             6,480             2,415
                                                                                      ------------      ------------
Total operating expenses .......................................................            31,665            15,258
                                                                                      ------------      ------------
Loss from operations ...........................................................           (16,135)          (13,490)
Interest expense, net ..........................................................            (4,209)           (1,223)
                                                                                      ------------      ------------
Net loss before extraordinary item .............................................           (20,344)          (14,713)
Extraordinary loss on early extinguishment of debt .............................            (7,398)               --
                                                                                      ------------      ------------
Net loss .......................................................................           (27,742)          (14,713)
Preferred stock dividends ......................................................              (614)           (5,532)
Preferred stock - beneficial conversion ........................................           (21,019)          (14,000)
                                                                                      ------------      ------------
Net loss applicable to common stockholders .....................................      $    (49,375)     $    (34,245)
                                                                                      ============      ============
Net loss applicable to common stockholders per share--basic and diluted ........      $      (1.28)     $      (1.25)
Weighted average shares outstanding ............................................        38,581,411        27,453,872
</TABLE>


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

                                       13

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                   Three Months Ended
                                                                                       June 30,
                                                                             ----------------------------
                                                                                 2001            2000
                                                                             ------------    ------------
                                                                             As Restated-
                                                                              See Note 4
<S>                                                                          <C>             <C>
Revenues .................................................................   $      8,156    $      1,657
Operating expenses:
  Cost of services (exclusive of items shown separately below) ...........          3,858             610
  Selling, general and administrative expense ............................
   excluding stock related expense .......................................          9,793           5,502
  Stock related expense for selling, general,
   and administrative matters ............................................         (1,146)            541
  Depreciation and amortization ..........................................          3,375           1,240
                                                                             ------------    ------------
Total operating expenses .................................................         15,880           7,893
                                                                             ------------    ------------
Loss from operations .....................................................         (7,724)         (6,236)
Interest expense, net ....................................................         (2,083)         (1,273)
                                                                             ------------    ------------
Net loss .................................................................         (9,807)         (7,509)
Preferred stock dividends ................................................            117          (2,680)
Preferred stock - beneficial conversion ..................................             --          (14,000)
                                                                             ------------    ------------
Net loss applicable to common stockholders ...............................   $    ( 9,690)   $    (24,189)
                                                                             ============    ============
Net loss applicable to common stockholders per share--basic and diluted ..   $     ( 0.24)   $     ( 0.86)
Weighted average shares outstanding                                            39,697,604      28,094,644
</TABLE>

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

                                       14

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   (IN 000'S)

<TABLE>
<CAPTION>
                                                                                              Six Months Ended June 30,
                                                                                           -----------------------------
                                                                                              2001                2000
                                                                                           ------------        ---------
                                                                                           As Restated-
                                                                                            See Note 4
<S>                                                                                          <C>               <C>
Cash flows from operating activities:
  Net loss applicable to common stockholders .........................................       $(49,375)         $(34,245)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Extraordinary item ...............................................................          7,398                --
    Depreciation and amortization ....................................................          6,480             2,415
    Preferred stock dividends ........................................................            614             5,532
    Preferred stock - beneficial conversion ..........................................         21,019            14,000
    Stock related expense ............................................................         (1,282)            2,237
    Other non-cash expense ...........................................................          2,666               918
    Change in assets and liabilities:
      (Increase) decrease in accounts receivable, prepaid expenses and other
        assets .......................................................................          3,474            (3,279)
      Increase (decrease) in accounts payable, accrued expenses and deferred
        revenues .....................................................................         (3,551)            1,948
                                                                                             --------          --------
Cash used in operating activities ....................................................        (12,557)          (10,474)
Cash flows from investing activities:
  Acquisition of Devnet L.L.C. .......................................................             --            (3,000)
  Capital expenditures ...............................................................        (31,449)          (14,080)
                                                                                             --------          --------
Cash used in investing activities ....................................................        (31,449)          (17,080)
Cash flows from financing activities:
  Net proceeds from debt financings ..................................................         17,571            18,427
  Net proceeds from issuance of equity securities ....................................         26,011            23,300
  Repayment of capital lease obligation ..............................................           (112)              (98)
                                                                                             --------          --------
Cash provided by financing activities ................................................         43,470            41,629
                                                                                             --------          --------
Net (decrease) increase in cash ......................................................           (536)           14,075
Cash at beginning of period ..........................................................          1,582             9,512
                                                                                             --------          --------
Cash at end of period ................................................................       $  1,046          $ 23,587
                                                                                             ========          ========
Supplemental disclosures of cash flow information:
  Interest paid ......................................................................       $  2,678          $     76
  Income taxes paid ..................................................................             --                --
</TABLE>

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

                                       15

<PAGE>

                          FIBERNET TELECOM GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. ORGANIZATION AND OPERATIONS

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

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

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

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Use of Estimates

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

                                       16

<PAGE>

         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.

         The Company is currently evaluating the carrying value of certain
long-lived assets, consisting primarily of $66.7 million of goodwill and
intangibles on its balance sheet as of June 30, 2001. Pursuant to accounting
rules, the majority of the goodwill and intangibles was recorded based upon the
stock price at the time of the Company's acquisition of Devnet L.L.C. Downturns
in the telecommunications industry and financial markets have created unique
circumstances with regard to the assessment of goodwill. The Company may
determine it is appropriate to record charges to reduce the carrying value of
the unamortized goodwill and other long-lived assets, and such adjustments could
represent a substantial portion of their carrying value.

                                       17

<PAGE>

Revenue Recognition

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

Revenues are derived from three general types of services:

         Transport services. FiberNet's transport services include the offering
of broadband circuits on its metropolitan transport networks and 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 services. FiberNet's colocation services include providing
customers with the ability to locate their communications and networking
equipment at its carrier point facilities in a secure technical operating
environment. The Company also can provide its customers with colocation services
in the central equipment rooms of certain of its on-net buildings. If a customer
purchases colocation services, the Company may require the customer to make a
minimum commitment for transport services, as well.

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

         As of June 30, 2001 the Company had four reciprocal agreements. The
services provided and obtained through these agreements were priced at fair
market value as of the date of the agreements and are included in revenues and
cost of services in the accompanying consolidated statements of operations. The
Company recorded revenues for transport services and colocation services of
approximately $2.6 million and $0.3 million for the six months ended June 30,
2001 and June 30, 2000, respectively, from these reciprocal agreements. The
Company leased colocation facilities under these agreements, and the total
amounts expensed for services rendered under the reciprocal agreements for the
six months ended June 30, 2001 and June 30, 2000, were approximately $2.6
million and $0.4 million, respectively.

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

Fair Value of Financial Instruments

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

Goodwill and Intangibles

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

                                       18

<PAGE>

options, warrants and other dilutive securities. Dilutive options, warrants and
other securities did not have an effect on the computation of diluted earnings
per share in 2001 and 2000, as they were anti-dilutive.

Concentration of Credit Risk

         The Company has some concentration of credit risk among its customer
base. The Company performs ongoing credit evaluations of the financial condition
of its customers. As of June 30, 2001, three customers in the aggregate
accounted for 39.7% of the Company's total accounts receivable. For the six
months ended June 30, 2001, three customers in the aggregate accounted for 60.3%
of the Company's total revenues. The Company recorded an allowance for doubtful
accounts of $2.1 million as of June 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 derivative instruments and hedging
activities and requires that all derivatives be recognized on the balance sheet
at fair value. Changes in the fair value of derivatives that do not meet the
hedge accounting criteria are to be 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. The Company is currently evaluating the effects of
SFAS No. 142 which may have a material impact on the consolidated financial
statements of the Company.

         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.

                                       19

<PAGE>

3. PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                              June 30,       December 31,
                                                                2001            2000
                                                              ---------      -----------
         <S>                                                  <C>             <C>
         Computer software ................................   $   3,728       $   2,963
         Computer equipment ...............................       2,939           1,926
         Leasehold improvements ...........................       1,356           1,111
         Office equipment and furniture ...................         972             810
         Construction in progress .........................      60,896          52,876
         Network equipment and infrastructure .............      92,566          71,322
                                                              ---------       ---------
                                                                162,457         131,008
         Accumulated depreciation .........................      (8,605)         (4,894)
                                                              ---------       ---------
         Property, plant and equipment, net ...............   $ 153,852       $ 126,114
                                                              =========       =========
</TABLE>

4. RESTATEMENT

         The Company restated its consolidated financial statements for the
quarter ended March 31, 2001 to record a beneficial conversion feature of $21.0
million in connection with the reduction of the conversion price on Series H and
I preferred stock on February 9, 2001. The conversion price of the Series H and
Series I was reduced to $4.38, in accordance with the original terms of the
issuance transactions. The certificates of designation of the Series H and
Series I include provisions requiring the conversion prices to be lowered to the
per share price at which the Company issues any shares of common stock, subject
to certain exceptions, subsequent to the initial issuance of the Series H and
Series I. In February 2001, the Company issued shares of common stock in a
directed public offering at a price of $4.38 per share, resulting in the
reduction of the conversion price. The amounts of the charge assume the market
price per share of the underlying common stock, as of the date the charge is
incurred, in accordance with EITF Issue 98-05, "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratio."

         Other than with respect to the consolidated financial statements for
the quarter ended March 31, 2001, this restatement has no impact on the
Company's assets or total stockholders' equity, and it resulted in an increase
in additional paid-in-capital and an increase in net loss. The change increased
net loss by $21.0 million and increased net loss applicable to common
stockholders per share by $0.54 for the six months ended June 30, 2001. The
change has no impact on the Company's cash flows. This change was previously
reflected in the Company's annual report on Form 10-K for the fiscal year ended
December 31, 2001, as amended.

                                       20