<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

       (Mark One)

       /X/  Quarterly report under Section 13 or 15(d) of the Securities 
            Exchange Act of 1934

       For the quarterly period ended:      September 30, 1998

       / /  Transition report under Section 13 or 15(d) of the Exchange Act

       For the transition period from_____________to_____________

       Commission file number:       333-7841

                          FIBERNET TELECOM GROUP, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)


            Nevada                                               13-3859938
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

            121 Erie Canal Drive, Suite A, Rochester, New York 14626
                    (Address of Principal Executive Offices)

                                  716-225-0440
                 Issuer's Telephone Number, Including Area Code)


              (Former Name, Former Address and Former fiscal Year,
                          if Changed Since Last Report)


       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.

    X
Yes___   No___


                      APPLICABLE ONLY TO CORPORATE ISSUERS

       The number of shares outstanding of each of issuer's classes of common
equity, as of November 11, 1998, was 16,000,000 shares of Common Stock, $.001
par value.

       Transitional Small Business Disclosure Format (check one):

            X 
 Yes___  No___     


    
<PAGE>   2
                         PART I -- FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

             See attached.

ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
             RESULTS OF OPERATIONS

COMPANY OVERVIEW

FiberNet Telecom Group, Inc. (the "Company") is a holding company that conducts
substantially all of its business through its direct and indirect subsidiaries,
FiberNet Telecom, Inc., a wholly owned subsidiary, Local Fiber, LLC ("Local
Fiber") and FiberNet Equal Access, LLC ("Equal Access").

The Company has had no commercial operations to date. Since its inception, the
Company has engaged principally in organizational activities, including
developing a strategic operating plan, entering into contracts, hiring
personnel, and securing debt and equity commitments to fund its plan.
Accordingly, the Company has no relevant operating history upon which an
evaluation of its performance and prospects can be made. The Company is subject
to all of the business risks associated with a new enterprise, including, but
not limited to, risks of unforeseen capital requirements, failure of market
acceptance, failure to establish business relationships, and competitive
disadvantages as against larger and more established companies.

The Company has generated no significant revenues to date, and will not generate
any until after the Company successfully completes the development and
installation of the Equal Access intra-building fiber optic transmission
networks as well as the installation of Local Fiber's local and long distance
switch. As of the end of the third quarter, Equal Access' initial seven
contracted buildings were in varying stages of construction. The Company
anticipates three of the seven buildings to be operational in the fourth quarter
and the remaining four in the first quarter 1999.

Local Fiber, the Company's CLEC subsidiary, began reselling services using Bell
Atlantic's switch and network in Manhattan with its initial revenue beginning in
September 1998. Local Fiber expects to have its switch and network operational
by the first quarter 1999 at which time its resale customers will be transferred
to Local Fiber's facilities.

LIQUIDITY AND CAPITAL RESOURCES

The Company has to date financed its development efforts through direct equity
investments from its shareholders. The Company has sustained losses for the
period for the three months ended September 30, 1998 of $570,736 and from August
10, 1994 (date of inception) to September 30, 1998 of $2,271,856. These
operating losses are due to the development of its telecommunications services
businesses and the Company anticipates that such losses to continue as it
executes its business plan. Cash used to fund negative EBITDA during the three
months ended September 30, 1998 was approximately $442,000, and purchases of
property and equipment during the three months ended September 30, 1998 was
$1,607,783. In addition, the Company paid a deposit totaling $155,575 to secure
its sales office space in Manhattan.

The Company's planned operations will require significant capital to fund
equipment purchases, engineering costs, and installation. Local Fiber will spend
approximately $12 million over the next twelve months to purchase a local and
long distance switch, electronics equipment, DACS equipment, network control
center and monitoring equipment, fiber and copper cable, construction,
engineering, and installation. Equal Access

                                        2
<PAGE>   3
has projected to complete twenty-five buildings in the next twelve months and
has budgeted approximately $22 million in capital expenditures. The completion
of these twenty-five buildings is subject to the execution of additional
contracts with building owner/managers as well as securing additional financing
commitments. The capital will be used for the purchase of transmission
equipment, fiber and copper cable, network engineering, installation and the
construction of network interface equipment rooms in the basements of each
building .

The Company has secured a commitment for an equipment lease line of credit
totaling $5.1 million. This line will fund the Company's central office switch,
SONET electronics for both the switch location and within the Equal Access
buildings and DACS. The Company is in the process of negotiating with other
lenders regarding debt and equity financing, but as of to date a final
commitment has not been secured.

The companies will experience a significant growth in employees over the next
twelve months as its business plans for Local Fiber and Equal Access begin to
develop into fully operating businesses. Projected employees will increase from
the current total of nine to approximately forty with the majority of the
increase in sales, customer service, engineering and operations.

YEAR 2000 ISSUES

The Year 2000 issue is the result of computer programs written using two digits
rather than four to define the applicable year. Without corrective action,
programs with time-sensitive software could potentially recognize a date ending
in "00" as the year 1900 rather than the year 2000, causing many computer
applications to fail or create erroneous results.

As a result of modifications or upgrades planned, the Company believes that the
Year 2000 issue will not pose significant problems for the Company's business,
operations, or operating systems. The Company expects that any additional
modifications or upgrades of software or hardware required for Year 2000
compatibility will be accomplished using existing resources and will not have a
material impact on the Company's financial position or results of operations in
future periods.

The Company will contact customers, suppliers, and other critical business
partners to determine if they have an effective plan in place to address Year
2000 issues. The Company expects to develop contingency plans as needed.


                          PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

ITEM 2.  CHANGE IN SECURITIES

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.


                                        3
<PAGE>   4
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF  SECURITY HOLDERS

         None.

ITEM 5.  EXHIBITS

         10.1     Agreement of Lease between 570 Lexington Company, L.P. and
                  FiberNet Telecom Group, Inc. dated as of August 3, 1998.

         27.1     Financial Data Schedule



                                        4
<PAGE>   5
                                   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.

                                            FIBERNET TELECOM GROUP, INC.


Date: November 12, 1998                     By:    /s/ John J. Marchaesi        
                                               ---------------------------------
                                            Name: John J. Marchaesi
                                            Title:   Sr. Vice President Finance


                                        5
<PAGE>   6
                          FIBERNET TELECOM GROUP, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                           CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30,       DECEMBER 31,
                                                                                          1998               1997
                                                                                       -----------        -----------
ASSETS
Current Assets:
<S>                                                                                    <C>                <C>        
   Cash and cash equivalents                                                           $   929,798        $ 5,146,327
   Accounts receivable                                                                      38,128               --
   Other current assets                                                                     26,648              3,954
                                                                                       -----------        -----------
       Total current assets                                                                994,574          5,150,281
Plant and equipment, net                                                                 4,266,821             92,223
Deposits                                                                                   352,478              2,837
Deferred charges                                                                           212,452            129,000
                                                                                       -----------        -----------
   TOTAL ASSETS                                                                        $ 5,826,325        $ 5,374,341
                                                                                       ===========        ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                    $ 1,062,152        $   490,125
   Accounts payable - related party                                                      1,379,389            240,000
   Other accrued expenses                                                                  404,130               --
                                                                                       -----------        -----------
       Total current liabilities                                                         2,845,671            730,125
                                                                                       -----------        -----------
Minority interest                                                                          116,841             (1,142)
Stockholders' Equity
   Common Stock, $0.001 par value, 50,000,000 shares authorized, 16,000,000 and
     15,000,000 shares issued and outstanding at September 30, 1998 and December
     31, 1997, respectively
                                                                                            16,000             15,000
   Series A Convertible Preferred Cumulative Stock, $0.001 par value, 5,000,000
     shares authorized, 1,000,000 shares issued and outstanding at December 31,
     1997 (Preference in involuntary
     liquidation value, $5.125 per share)                                                     --                1,000
   Series B voting Preferred Stock $0.001 par value, 80,000 shares
     issued and outstanding (Preference in involuntary liquidation
     value, $1.00 per share)                                                                    80                 80
   Capital in excess of par value                                                        5,119,589          5,382,901
   Deficit accumulated during the development stage                                     (2,271,856)          (753,623)
                                                                                       -----------        -----------
   Total stockholders' equity                                                            2,863,813          4,645,358
                                                                                       -----------        -----------
   TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                                            $ 5,826,325        $ 5,374,341
                                                                                       ===========        ===========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.
<PAGE>   7
                          FIBERNET TELECOM GROUP, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
    AND FOR THE PERIOD FROM INCEPTION (AUGUST 10, 1994) TO SEPTEMBER 30, 1998

                                    UNAUDITED


<TABLE>
<CAPTION>
                                                                                                                 PERIOD FROM
                                           FOR THE THREE MONTHS ENDED           FOR THE NINE MONTHS ENDED        INCEPTION TO
                                         SEPTEMBER 30,     SEPTEMBER 30,     SEPTEMBER 30,       SEPTEMBER 30,   SEPTEMBER 30,
                                             1998              1997              1998              1997              1998
                                         ------------      ------------      ------------      ------------      ------------
<S>                                      <C>               <C>               <C>               <C>               <C>         
Sales                                    $      1,024      $       --        $      1,024      $       --        $      1,024
Cost of sales                                     763              --                 763              --                 763
                                         ------------      ------------      ------------      ------------      ------------
Gross profit                             $        261      $       --        $        261      $       --        $        261
Operating expenses:
       General and administrative        $    634,557      $    178,431      $  1,716,875      $    402,924      $  2,399,916
       Other - Related party                   12,501            60,000            51,644           180,000           171,644
                                         ------------      ------------      ------------      ------------      ------------
Total operating expenses                 $    647,058      $    238,431      $  1,768,519      $    582,924      $  2,571,560
                                         ------------      ------------      ------------      ------------      ------------
Loss from operations                         (646,797)         (238,431)       (1,768,258)         (582,924)       (2,571,299)
Interest income                                27,859              --             126,519              --             152,698
                                         ------------      ------------      ------------      ------------      ------------
       Loss before minority interest         (618,938)         (238,431)       (1,641,739)         (582,924)       (2,418,601)
Minority interest                              48,202             4,889           123,505            14,257           146,745
                                         ------------      ------------      ------------      ------------      ------------
Net loss                                 $   (570,736)     $   (233,542)     $ (1,518,234)     $   (568,667)     $ (2,271,856)
                                         ============      ============      ============      ============      ============
Earning per share
       Basic and diluted                        (0.04)            (0.02)            (0.10)            (0.04)            (0.14)
                                         ------------      ------------      ------------      ------------      ------------

Weighted average shares outstanding        16,000,000        15,000,000        15,800,000        15,000,000        15,800,000
                                         ------------      ------------      ------------      ------------      ------------
</TABLE>



The accompanying notes are an integral part of these consolidated statements.
<PAGE>   8
                          FIBERNET TELECOM GROUP, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
    AND FOR THE PERIOD FROM INCEPTION (AUGUST 10, 1994) TO SEPTEMBER 30, 1998

                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                                                                      FROM INCEPTION
                                                                                                                         ON THROUGH
                                                      FOR THE THREE MONTHS ENDED       FOR THE NINE MONTHS ENDED
                                                    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,   SEPTEMBER 30,
                                                        1998             1997             1998            1997             1998
                                                     -----------      -----------      -----------      ----------      -----------
Cash flows from operating activities:
<S>                                                  <C>                 <C>           <C>              <C>             <C>         
Net loss                                             $  (570,736)        (233,542)     $(1,518,234)     $ (568,667)     $(2,271,856)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
   Depreciation                                           12,497             --             22,577            --             24,419
   Deferred compensation                                  31,875             --             95,625            --             95,625
   Minority interest                                     (48,202)              34         (100,492)         (4,029)        (106,939)
   Changes in assets and liabilities:
   (Increase) decrease in other assets                  (184,969)         (30,831)        (493,914)        (14,529)        (560,868)
   Increase (decrease) in accounts payable             1,440,909          201,727        2,050,084         446,730        2,681,209
                                                     -----------      -----------      -----------      ----------      -----------
   Net cash used in operating activities                 681,374          (62,612)          55,646        (140,495)        (138,410)
Cash flows from investing activities:
     Capital expenditures                             (2,886,746)            --         (4,197,175)           --         (4,291,240)
                                                     -----------      -----------      -----------      ----------      -----------
Cash used in investing activities                     (2,886,746)            --         (4,197,175)           --         (4,291,240)
Cash flows from financing activities:
   Dividend paid on preferred stock                         --               --            (75,000)           --            (75,000)
   Capital contributed                                      --             62,247             --           141,042        5,434,448
                                                     -----------      -----------      -----------      ----------      -----------
Cash provided by financing activities                       --             62,247          (75,000)        141,042        5,359,448
Net increase (decrease) in cash                       (2,205,372)            (365)      (4,216,529)            547          929,798
Cash at beginning of period                            3,135,170            1,652        5,146,327             740             --
                                                     -----------      -----------      -----------      ----------      -----------
Cash at end of period                                $   929,798      $     1,287      $   929,798      $    1,287      $   929,798
                                                     ===========      ===========      ===========      ==========      ===========
</TABLE>


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

<PAGE>   9
                          FIBERNET TELECOM GROUP, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                          (A DEVELOPMENT STAGE COMPANY)

                                    UNAUDITED

1.     GENERAL

       The condensed interim financial statements included herein have been
       prepared by FiberNet Telecom Group, Inc. (the Company), without audit,
       pursuant to the rules and regulations of the Securities and Exchange
       Commission (SEC) and reflect all adjustments which are of a normal
       recurring nature and which, in the opinion of management, are necessary
       for a fair statement of the results for interim periods. Certain
       information and footnote disclosures have been condensed or omitted
       pursuant to such rules and regulations. Although FiberNet Telecom Group,
       Inc. believes that the disclosures are adequate to make the information
       presented not misleading, it is suggested that these condensed financial
       statements be read in conjunction with the financial statements and the
       notes thereto included in the Company's latest annual report to
       stockholders.


2.     LEASE CONTRACTS

       The Company has entered into lease agreements for office space in
       Rochester, a switching center in New York City, and for collocation space
       in seven buildings. Lease expense for the nine months ended September 30,
       1998 was $163,414. Estimated future minimum lease payments are:

                                       1998               $     149,773
                                       1999                   1,101,096
                                       2000                   1,106,402
                                       2001                   1,111,973
                                       2002                   1,117,823
                                       Thereafter             4,831,171
                                                           ============


3.     EARNINGS PER SHARE

       Basic earnings per share were computed by dividing net income by the
       weighted average number of common shares outstanding during the quarter
       as required by FASB Statement No. 128, "Earnings per Share" ("SFAS 128").
       As shown in the statement of operations, basic earnings per share as of
       September 30, 1997 is calculated using shares outstanding as of December
       31, 1997. Since the loss per share decreases, when outstanding options
       are included in the computation, those options are antidilutive and are
       ignored in the computation of diluted earning per share.

<PAGE>   10

<TABLE>
<CAPTION>
                                            FOR THE PERIODS ENDED
                                             SEPTEMBER 30, 1998
                                     -------------------------------
                                     THREE MONTHS      NINE MONTHS
                                     ------------      -------------
<S>                                  <C>               <C>          
Net loss                             $   (570,936)     $ (1,518,234)

Less:  Preferred stock dividends
                                                            (44,837)
                                     ------------      ------------ 
Basic and diluted earnings per
  share
Loss available to common
  shareholders                       $   (570,936)     $ (1,563,071)

  Shares                               16,000,000        15,800,000
Per - Share Amount                   $      (0.04)     $      (0.10)
                                     ============      ============ 
</TABLE>



4.     RECENTLY ISSUED ACCOUNTING STANDARDS

       In June 1998, the Financial Accounting Standards Board issued Statement
       of Financial Accounting Standards No. 133, Accounting for Derivative
       Instruments and Hedging Activities. Since the Company does not use
       derivative instruments nor hedging activities in its operations, adopting
       Statement 133 on our financial statements will not have material impact.