<PAGE>

                            UNITED STATES SECURITIES
                             AND EXCHANGE COMMISSION

                                    FORM 10-Q

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

For the quarterly period ended: March 31, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _________ to ____________

Commission file number: 333-53841


                                  WAM!NET Inc.
             (Exact name of registrant as specified in its charter)

        Minnesota                                       41-1795247
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


                                 655 Lone Oak Dr
                             Eagan, Minnesota 55121
                    (Address of principal executive offices)
                                   (Zip Code)


                                 (651) 256-5100
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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  [ ]

As of April 30, 2001 there were 12,220,203 shares of the Corporation's Common
Stock, par value $.01 per share, outstanding.

Total number of pages in this report: 33
<PAGE>

                                  WAM!NET Inc.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
Part I--Financial Information
                                                                                                        Page No.
                                                                                                        --------
          Item 1--Financial Statements

<S>                                                                                                     <C>
                 Consolidated Balance Sheets as of March 31, 2001 and December 31,
                   2000...............................................................................     3

                 Consolidated Statements of Operations for the three month periods
                   ended March 31, 2001 and 2000......................................................     5

                 Consolidated Statements of Cash Flows for the three month periods
                   ended March 31, 2001 and 2000......................................................     6

                 Notes to Consolidated Financial Statements...........................................     8

                 Risk Factors.........................................................................     10

          Item 2--Management's Discussion and Analysis of Financial Condition
                  and Results of Operations...........................................................     21

          Item 3--Quantitative and Qualitative Disclosures About Market Risk..........................     28

Part II--Other Information

          Item 2--Changes in Sercurities and Use of Proceeds..........................................     29

          Item 6--Exhibits and Reports on Form 8-K....................................................     29

Signature--        ...................................................................................     30

Exhibit Index--    ...................................................................................     31
</TABLE>

                                      -2-
<PAGE>

                          Part I--FINANCIAL INFORMATION


Item 1--Financial Information


                                  WAM!NET Inc.

                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                          March 31,    December 31,
                                                                                            2001          2000
                                                                                         ----------    ------------
<S>                                                                                      <C>            <C>
  Assets
  Current assets:
       Cash and cash equivalents.....................................................    $    4,614     $   3,207
       Accounts receivable, net of allowance of $957 and $1,570, respectively........         6,543         8,344
       Inventory.....................................................................           546           533
       Prepaid expenses and other current assets.....................................         4,636         6,919
                                                                                         ----------     ---------
  Total current assets...............................................................        16,339        19,003

  Property, plant, and equipment, net................................................        92,654       369,796
  Goodwill, net......................................................................        13,660        15,475
  Deferred financing charges, net....................................................        12,460        12,392
  Other assets.......................................................................           668         1,105
                                                                                         ----------     ---------
  Total assets.......................................................................    $  135,781     $ 417,771
                                                                                         ==========     =========
</TABLE>

                                      -3-
<PAGE>

                                  WAM!NET Inc.

                     Consolidated Balance Sheets (continued)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                           March 31,     December 31,
                                                                                             2001           2000
                                                                                          ----------     ------------
<S>                                                                                        <C>            <C>
  Liabilities and shareholders' deficit
  Current liabilities:
       Accounts payable................................................................    $  20,048      $  17,407
       Accrued salaries and wages......................................................        5,894          5,246
       Accrued expenses................................................................        8,239          7,654
       Deferred revenue................................................................        6,546          7,069
       Current portion of long-term debt...............................................        7,792         27,931
                                                                                           ---------      ---------
  Total current liabilities............................................................       48,519         65,307
  Deferred revenue.....................................................................       10,000         10,000
  Network Facilities Financing.........................................................           --        235,786
  Long-term debt, less current portion.................................................      284,399        264,387
  Class A Redeemable Preferred Stock...................................................        1,320          1,300
  Class E Convertible Preferred Stock..................................................      109,407        107,515
  Class H Convertible Preferred Stock..................................................       61,216         40,340
  Shareholders' deficit:
       Class B Convertible Preferred Stock.............................................           57             57
       Class C Convertible Preferred Stock.............................................            9              9
       Class D Convertible Preferred Stock.............................................           22             22
       Class F Convertible Preferred Stock.............................................           --             --
       Class G Convertible Preferred Stock.............................................           --             --
       Common Stock ...................................................................          122            121
       Additional paid-in capital......................................................      168,150        170,951
       Accumulated deficit.............................................................     (544,448)      (475,789)
       Accumulated other comprehensive loss............................................       (2,992)        (2,235)
                                                                                           ---------      ---------
  Total shareholders' deficit..........................................................     (379,080)      (306,864)
                                                                                           ---------      ---------
  Total liabilities and shareholders' deficit..........................................    $ 135,781      $ 417,771
                                                                                           =========      =========
</TABLE>

                             See accompanying notes.

                                      -4-
<PAGE>

                                  WAM!NET Inc.

                      Consolidated Statements of Operations
             (Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                                                                Three months ended
                                                                                                     March 31,
                                                                                          -----------------------------
                                                                                               2001               2000
                                                                                          --------------     ----------
<S>                                                                                       <C>                <C>
Revenues:
Net service revenue...................................................................    $    14,227        $    6,183
Software and hardware sales...........................................................          1,326             1,712
                                                                                          -----------        ----------
Total revenue.........................................................................         15,553             7,895

Operating expenses:
Network communications ...............................................................          7,067             7,172
Cost of other service revenue.........................................................          3,980                --
Cost of software and hardware.........................................................            371               546
Technical operations..................................................................          6,473             5,421
Selling, general and administrative...................................................         11,268            11,617
Depreciation and amortization.........................................................         10,859             8,653
Loss on termination of network facilities agreement...................................         35,204                --
                                                                                          -----------        ----------
                                                                                               75,222            33,409
                                                                                          -----------        ----------
Loss from operations..................................................................        (59,669)          (25,514)

Other income (expense):
     Interest income..................................................................             92               206
     Interest expense.................................................................        (10,037)          (15,261)
     Other income.....................................................................            955               792
                                                                                          -----------        ----------
Net loss..............................................................................    $   (68,659)       $  (39,477)
Less preferred dividends..............................................................         (5,054)           (2,244)
                                                                                          -----------        ----------
Net loss applicable to common stock...................................................    $   (73,713)       $  (42,021)
                                                                                          ===========        ==========

Net loss applicable per common share - basic and diluted..............................    $     (6.06)      $     (4.41)
                                                                                          ===========       ===========

Weighted average number of common shares outstanding..................................     12,166,538         9,524,227
                                                                                          ===========       ===========
</TABLE>

                             See accompanying notes.

                                      -5-
<PAGE>

                                  WAM!NET Inc.

                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                    Three months ended
                                                                                        March 31,
                                                                                -------------------------
                                                                                    2001          2000
                                                                                -----------    ----------
<S>                                                                             <C>            <C>
Operating activities
Net loss....................................................................    $  (68,659)    $ (39,777)
Adjustments to reconcile net loss to net cash used in operating activities:
     Gain on sale of building...............................................          (359)           --
     Loss on termination of network facilities agreement....................        35,204            --
     Depreciation and amortization..........................................        10,861         8,653
     Noncash interest expense, including related warrants values............         7,484         7,118
     Value of stock options issued to employees and consultants.............           113           161
     Changes in operating assets and liabilities:
          Accounts receivable...............................................         1,801           296
          Prepaid expenses and other assets.................................         2,692           100
          Accounts payable..................................................         2,639        (7,828)
          Deferred Revenue..................................................          (522)           --
          Accrued expenses..................................................         1,234         1,993
                                                                                ----------     ---------
Net cash used in operating activities.......................................        (7,512)      (29,284)

Investing activities
Purchases of property and equipment.........................................        (7,159)       (5,091)
Patent Expenditures.........................................................           (10)           --
Proceeds from sale of building..............................................           830            --
Business acquisitions (net of cash acquired)................................            --          (353)
                                                                                ----------     ---------
Net cash used in investing activities.......................................        (6,339)       (5,444)

Financing activities
Proceeds from sale of preferred stock.......................................        19,847        69,098
Proceeds from borrowings (net of financing costs)...........................        14,149           477
Proceeds from exercise of stock options.....................................            30           199
Payments on borrowings......................................................       (18,011)      (24,576)
                                                                                ----------     ---------
Net cash provided by financing activities...................................        16,015        45,198
Effect of foreign currencies on cash........................................          (757)         (358)
                                                                                ----------     ---------
Net increase in cash and cash equivalents...................................         1,407        10,112
Cash and cash equivalents at beginning of period............................         3,207        27,180
                                                                                ----------     ---------
Cash and cash equivalents at end of period..................................    $    4,614     $  37,292
                                                                                ==========     =========
</TABLE>

                             See accompanying notes.

                                      -6-
<PAGE>

                                  WAM!NET Inc.

                Consolidated Statements of Cash Flows (continued)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                     Three months ended
                                                                                         March 31,
                                                                                   ----------------------
                                                                                     2001          2000
                                                                                   -------        -------
<S>                                                                                <C>            <C>
Supplemental schedule of noncash financing activities
        Dividends declared but unpaid........................................        2,941             20
     Change in market value of investments...................................           --         14,286
     Issuance of common stock relating to acquisition........................           --             62
        Exchange of preferred stock for investment...........................           --         50,000
Supplemental schedule of cash flow information
     Cash paid for interest..................................................      $ 2,495        $ 7,577
</TABLE>

                             See accompanying notes.

                                      -7-
<PAGE>

                                  WAM!NET INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             (Amounts in thousands, except share and per share data)

1.   Consolidated Financial Statements

     The accompanying consolidated financial statements have been prepared by
WAM!NET Inc. (the "Company") without audit and reflect all adjustments
(consisting only of normal and recurring adjustments and accruals) which are, in
the opinion of management, necessary to present a fair statement of the results
for the interim periods presented. The statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of regulation
S-X, but omit certain information and footnote disclosures necessary to present
the statements in accordance with generally accepted accounting principles. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full fiscal year. These
financial statements should be read in conjunction with the Company's audited
Consolidated Financial Statements for the year ended December 31, 2000. The
December 31, 2000 balance sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles. Certain amounts for the prior year have been reclassified to conform
to current year presentation.

2.   Consolidation Policy and Foreign Currency Translations

     The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and its 60% owned joint venture. All significant
intercompany accounts and transactions have been eliminated in consolidation.
All assets and liabilities are translated to U.S. dollars at period-end exchange
rates, while elements of the income statement are translated at average exchange
rates in effect during the period. The functional currencies of the Company's
foreign subsidiaries are considered to be the respective subsidiary's local
currency. All translation gains and losses resulting from fluctuations in
currency exchange rates of these subsidiaries are recorded in equity as a
component of accumulated other comprehensive loss.

3.   Preferred Stock

In accordance with the Securities Purchase Agreement entered into with Winstar
in September 2000, the Company sold the remaining 20,000 shares of Class H
convertible preferred stock for an aggregate of $20 million in January 2001. As
a result Winstar received a warrant for 1,450,000 shares of common stock at an
exercise price of $0.01. The warrant is immediately exercisable and expires on
December 31, 2005.

4.   Termination of Network Facilities Agreement

In December 1999 the Company entered an agreement with Winstar Wireless, Inc.
pursuant to which the Company acquired an indefeasible right over 20 years to
use backbone capacity and wireless local loop facilities. Under this agreement,
and other related agreements, the Company made a $20 million initial paymentin
January 2000 for the indefeasible right to use these facilities with additional
contemplated quarterly payments of $5.0 million and increasing to approximately
$24.9 million over the seven-year period ending December 15, 2006. The
indefeasible right of use was capitalized in property, plant and equipment, and
the Company recorded a related liability of $260.3 that bore an effective
interest rate of 8.3%. At December 31, 2000, the outstanding balance of the
liability was $239.6 million.

Due to continuing non-performance by Winstar as specified in the agreement,
which non-performance resulted in an Event of Default, on April 12, 2001, the
Company sent a notice to Winstar terminating these arrangements effective April
30, 2001, citing (1) breaches of representations and warranties by Winstar, (2)
breaches of Winstar's obligations to meet deadlines to deliver and install
facilities and (3) Winstar's failure to insure that these facilities

                                      -8-
<PAGE>

performed to applicable specifications. On April 18, 2001, Winstar and a number
of related entities filed for protection under Chapter 11 of the United States
Bankruptcy Code. On or about April 27, 2001, Winstar responded to the Company's
termination notice by alleging that the giving of the notice was a breach of the
arrangements (and, consequently, did not terminate these arrangements) and
seeking to make the Company commence certain dispute resolution procedures. No
formal litigation or arbitration proceedings have been initiated as of May 18,
2001. Although the Company and Winstar are engaging in discussions, there can be
no assurance that any settlement of this dispute will be reached or as to the
possible terms of any resolution.

The Company believes that the notice of termination was properly given. The
Company wrote off the related asset of $275 million and the related obligation
of $240 million and has recorded a $35 million loss on termination in the first
quarter of 2001.


5.   Bank Credit Facilities

The Company had a $25,000 line of credit agreement with a bank, which was
orginally due in September 2000 and was subsequently extended to January 10,
2001. The line of credit was guaranteed by MCI WorldCom. At December 31, 2000,
the amount outstanding on the line of credit was $15,000. On January 10, 2001,
the Company repaid the remaining $15,000 and closed the line of credit.

In February 2001, the Company entered into a $30,000 bank credit facility, which
expires in January 2003. The credit facility is a revolving credit facility
under which the bank will lend the Company up to the $30,000 based upon a
borrowing base consisting of the Company's cash collections. Amounts outstanding
under the credit facility incur interest at the banks reference rate plus 3.25%
(11.25% at March 31, 2001). The credit facility is secured by a lien on certain
unencumbered and lienable assets. The credit facility requires the Company to
maintain certain financial covenants. The credit facility is automatically
renewable at maturity until cancelled in accordance with its terms. As of March
31, 2001, the Company has borrowed $14,060 under the credit facility.

In addition subsequent to March 31, 2001, the Company obtained additional
financing of $5.64 million under the bank credit facility.

On April 27, 2001 the Company obtained a $2.4 million term loan under the bank
credit faciliy. The term loan expires in accordance with the original bank
credit facility and has a fixed interest rate of 12%.

On May 15, 2001 the Company obtained a $3.24 million term loan under the bank
credit facility. The term loan expires in accordance with the original bank
credit facility and has a fixed interest rate of 19.5%. Up to $3 million of the
term loan can be converted into 4.9% of the issued and the outstanding shares of
common stock of the Company on a fully diluted basis. Such security is subject
to registration rights and anti dilution provisions. The creditor may convert
the credit facility or in the alternative may exercise a five warrant for such
amount.

6.   Purchase Committment

On February 1, 2001 the Company entered into an agreement with a strategic
vendor. Under the agreement the Company will purchase a minimum of 250 media
transport devices over three years. The media transport devices range in prices
from $25 to $71 per device.

7.   Comprehensive Income

Comprehensive income for the Company includes net loss, the effects of currency
translation which are charged or credited to the cumulative translation
adjustment account within stockholders' equity, and the unrealized gain/loss on
investments available for sale which is recorded within stockholders equity.
Comprehensive income for the three months ended March 31, 2001 and 2000 was as
follows:

                                      -9-
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------- ------------------------ ------------------------
                                                     For the three months
                                                     ended March 31,
---------------------------------------------------- ------------------------ ------------------------
(Dollars in thousands)                                        2001                     2000
---------------------------------------------------- ------------------------ ------------------------
<S>                                                         <C>                      <C>
Netloss                                                     $(68,659)                $(39,777)
---------------------------------------------------- ------------------------ ------------------------
Changes in cumulative translation adjustments                 (757)                    (358)
---------------------------------------------------- ------------------------ ------------------------
Unrealized gain/loss on investments                            --                     14,286
---------------------------------------------------- ------------------------ ------------------------
Comprehensive loss                                          $(69,416)                $(25,849)
---------------------------------------------------- ------------------------ ------------------------
</TABLE>

Additional Factors That May Affect Future Results

The following risk factors and other information included in this Quarterly
Report should be carefully considered. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also may impair our
business operations. If any of the following risks occur, our business,
financial condition, operating results and cash flows could be materially
adversely affected.

Liquidity and Capital Resources

Since inception, we have incurred net losses and experienced negative cash flow
from operating activities. Net losses since inception have resulted in an
accumulated deficit of $544.4 million as of March 31, 2001. Management expects
to continue to operate at a net loss and experience negative cash flow from
operating activities through the foreseeable future. At March 31, 2001, our cash
resources and available borrowings are insufficient to fund operations for the
next 12 months without raising additional debt and/or equity capital. These
factors raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the amount or
classification of liabilities, which might result from the outcome of this
uncertainty.

Management is currently in the process of negotiating a revolving credit
facility with a financial investor. However, there is no assurance that such
funds will be available or available on terms acceptable to the Company. If the
Company is not successful in obtaining additional funding, it may not be able to
continue as a going concern.

The report of our independent auditors on our consolidated financial statements
for the fiscal year ended December 31, 2000 includes an explanatory paragraph,
which states that the recurring losses from operations, working capital
deficiency, net capital deficiency and limited liquid resources raise
substantial doubt about our ability to continue as a going concern.

Our limited operating history makes it difficult for you to evaluate our
performance.

Although we commenced operations in March 1995, we only recently began offering
several services from which we expect to generate a substantial portion of our
revenues in the future. Our prospects must be considered in light of the recent
release of these services, and the uncertainties, expenses and difficulties
frequently encountered by companies at a comparable stage of development. To
address these risks and uncertainties, we must, among other things:

     o    increase the size of our customer base and utilization of our network
          and services;

     o    successfully perform our NMCI subcontract;

     o    raise additional capital;

     o    successfully manage our relationships and activities with our
          strategic partners and distributors, including EDS, SGI, Sumitomo and
          3M, and develop new relationships and activities with influential
          suppliers and channel distributors in our target markets;

                                      -10-
<PAGE>

     o    successfully market our branded services;

     o    continue to attract and retain qualified personnel;

     o    accurately assess potential markets and effectively respond to
          competitive developments;

     o    continue to maintain and upgrade our operational, support and business
          systems;

     o    comply with evolving governmental regulatory requirements and obtain
          any required governmental authorizations;

     o    continue to upgrade our services and applications to address new
          technologies;

     o    provide acceptable customer service; and

     o    effectively manage our operations.

We cannot assure you that we will be successful in accomplishing any or all of
the above, and our failure to do so could have an adverse effect on our
business.

We have experienced substantial negative cash flow from operating activities,
operating losses and net losses and may not be able to achieve profitability.

We have incurred substantial losses. Our substantial operating costs have
resulted in our cash flow being insufficient to pay our operating expenses or
fund our capital expenditures. There can be no assurance that we will be able to
increase our revenue in an amount sufficient to generate positive cash flow or
to achieve and maintain profitability.

We had negative cash flow from operating activities, operating losses and net
losses of approximately, $55.9 million, $102.4 million and $121.9 million in
1998, $65.7 million, $104.9 million and $145.1 million in 1999 and $73.1
million, $105.1 million and $186.6 million in 2000. As of March 31, 2001, we had
an accumulated deficit of approximately $544.4 million. We expect to continue to
experience negative cash flow and substantial operating and net losses for the
foreseeable future due to the significant costs involved at this stage of our
development, including the following:

     o    costs relating to performance of our NMCI subcontract with EDS;

     o    costs relating to the sales and marketing of our branded services;

     o    costs to be incurred in maintaining our network, hosting and storage
          infrastructure;

     o    recurring telephony, hardware and installation costs resulting from
          providing service to subscribers to our Direct Service;

     o    costs relating to significant recurring operating and general
          administrative expenses.

To fund our operating losses, pay our operating costs and meet our capital needs
we will need additional financing, which may not be available to us.

As a result of our lack of positive cash flow, our ability to continue to fund
our operating losses, to maintain our technology, network and infrastructure and
to successfully market our services on a worldwide scale depends largely on our
ability to obtain cash from our financing activities. There can be no assurance
that we will be able to

                                      -11-
<PAGE>

raise the additional working capital necessary for us to continue to implement
our business plan or fund our operations.

We have historically derived substantially all of our cash from the issuance of
short-term and long-term debt instruments and equity securities. Our future
financing activities will most likely consist of equipment financings,
borrowings in the bank and capital markets and private or public sales of our
capital stock. We are already highly leveraged, and to the extent that we incur
additional debt, the risks described under "-- Our substantial leverage creates
financial and operating risks" below will increase. However, our ability to
incur indebtedness is subject to restrictions contained in our financing
agreements. See "-- We may not be able to incur sufficient debt to finance our
future operations or capital needs due to restrictions in our financing
agreements" below. To the extent that we raise funds through the sale of a
significant number of shares of common stock or other equity securities, the
trading price of our common stock may be adversely affected. Any equity
securities we sell could have rights senior to those of our common stock.

We cannot, in any event, assure you that we will be able to obtain sufficient
funding from our future financing activities. If we are unable to obtain
sufficient funding, we may be required to, among other things:

     o    slow the expansion of our network, hosting and storage infrastructure;

     o    scale back or delay the development of new services and applications;

     o    reduce our marketing efforts; and

     o    reduce the number of our employees.

If any of the actions listed above are taken, the rate at which we are able to
add customers to our network and increase network utilization could be slowed,
and we could suffer some erosion in our subscriber base. A decrease in the rate
at which we add subscribers and increase network utilization may delay or
preclude our ability to generate positive cash flow and achieve profitability.

Because our market is new and evolving, we cannot predict its future evolution,
growth or ultimate size.

We believe that we are the first company to offer business-to-business
e-services to the media industry that enable businesses to digitally collaborate
on-line with their workflow chains. Because this market is relatively new, we
cannot accurately predict the ultimate size of the market or the rate at which
we will be able to add customers or otherwise increase the utilization of our
network and services. Furthermore, we cannot be certain that this market will
evolve in the manner we predicted when we designed our network and services or
that a demand for our services will exist in the future. If the market for our
services grows more slowly or evolves differently than anticipated or fails to
materialize at all, our business could be adversely affected.

Our ability to increase our customer base depends in part on the active
participation of existing customers and channel distributors in our marketing
efforts.

Part of the marketing efforts for our services involves collaborating with
existing customers to promote the use of our service by their workflow partners.
This can often involve customers participating in joint presentations and
implementing suitable workflow solutions. In addition to our direct sales force,
our marketing efforts utilize authorized channel partners who are responsible
for ascertaining potential customers' requirements and who may work with our
software developers to create attractive and cost-effective solutions. These
authorized channel partners may also be responsible for ongoing support of our
customers. The failure of our customers to remain actively involved in our
marketing efforts or the inability of our channel distributors to properly
manage customer accounts could adversely impact our business. Because our
authorized channel partners may use our WAM!NET and WAM!BASE brands, if these
agents are not successful, they could damage our brand and reputation.

                                      -12-
<PAGE>

Our operating results in one or more future periods may fluctuate significantly
or fail to meet or exceed the expectations of securities analysts or investors.

Our annual and quarterly operating results may fluctuate significantly in the
future due to numerous factors, many of which are outside of our control. These
factors include:

     o    the rate of customer acquisition and turnover;

     o    the amount and timing of expenditures relating to the expansion of our
          infrastructure and the introduction of new services;

     o    the amount and timing of expenditures relating to the performance of
          our NMCI subcontract with EDS;

     o    introduction of new services or technologies by our competitors;

     o    price competition;

     o    the ability of our equipment and service suppliers to meet our needs;

     o    regulatory developments, including interpretations of the 1996
          Telecommunications Act;

     o    technical difficulties or network downtime;

     o    the success of our strategic alliances; and

     o    the condition of the telecommunications and network service industries
          in general.


Because of these factors, our operating results in one or more future periods
may fail to meet the expectations of securities analysts or investors. In that
event, the trading price of our common stock could decline.

Our substantial leverage creates financial and operating risks.

We are highly leveraged. As of March 31, 2001, we had approximately $464.1
million of outstanding debt, including redeemable preferred stock. The most
significant portion of the debt is attributable to our 13.25% senior discount
notes due 2005, which have a principal amount at maturity of $208.5 million. The
13.25% senior discount notes had an accreted principal amount of $185.5 million
at March 31, 2001, and will begin to accrue interest, payable in cash, on March
1, 2002. We are committed to make principal payments in the total amount of $6.1
million during the remainder of 2001. We have recorded as quasi-equity on our
balance sheet as of March 31, 2001, redeemable and convertible preferred stock
of $171.9 million.

We are not currently generating sufficient cash flow with which to repay our
substantial indebtedness, fund our operating losses or meet our capital
requirements. Hence, we expect to seek additional financing in the future.

Our substantial indebtedness could have important consequences. For example, it
could:

     o    impair our ability to obtain additional financing to fund our
          operating losses or meet our working capital and capital expenditure
          requirements;

     o    require that we devote a significant portion of the cash we receive
          from our operating and

                                      -13-
<PAGE>

          financing activities to make debt service payments, thereby reducing
          the amount we can use for other purposes;

     o    hinder our ability to adjust rapidly to changes in market conditions,
          including changes in technology that might affect our competitive
          position; and

     o    make us more vulnerable in the event of a downturn in our business or
          in general economic conditions.

We may not be able to raise sufficient capital to finance our future operations
or capital needs due to restrictions in our financing agreements.

The operating and financial restrictions and covenants in the indenture
governing our 13.25% senior discount notes may adversely affect our ability to
finance our future operations and capital needs. We may also enter into credit
arrangements in the future that have the same effect.

The indenture governing our 13.25% senior discount notes contains financial and
operating covenants that may limit our ability to:

     o    borrow more funds (other than equipment financing);

     o    incur liens;

     o    make minority investments;

     o    sell assets;

     o    engage in transactions with stockholders and affiliates; and

     o    engage in mergers, including mergers that result in a change of
          control.

In the case of borrowing funds, we are generally prohibited from obtaining
additional indebtedness other than equipment financing unless, after giving
effect thereto, the ratio of our consolidated indebtedness to our consolidated
operating cash flow for the four fiscal quarters of 2000 is less than or equal
to 5 to 1. We incurred negative cash flow from operating activities for the
first fiscal quarter ended March 31, 2001. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

The restrictions contained in the indenture for our 13.25% senior discount notes
could have the following adverse effects, among others:

     o    we could be unable to obtain additional financing in the future to:

     o    fund our operating losses;

     o    meet our capital expenditure requirements;

     o    further develop or deploy services and applications; or

     o    allow us to conduct necessary corporate activities;

     o    we could be unable to obtain lower borrowing costs than are available
          from secured lenders;

                                      -14-
<PAGE>

     o    we could be unable to engage in strategic joint ventures in which we
          are a minority partner; or

     o    we could be unable to engage in some mergers, including mergers that
          could provide a substantial premium to our shareholders for their
          stock.

The success of our business depends upon our ability to prevent system failure.

Our commercial business depends on the efficient and uninterrupted operation of
our network and service offerings. We believe that our reputation for providing
reliable service to our customers is critical to our future success. Despite our
efforts to protect our network infrastructure against damage, the occurrence of
a natural disaster or other unanticipated problem may cause an interruption in
our services. We have structured our network backbone with redundant circuits
obtained from telecommunications providers to minimize interruption of our
services; however, we generally do not obtain redundant circuits for local loop
connections between our network and our customers. As a result, we have
experienced occasional interruption of service to individual customer sites due
to loss of service in these local loop circuits. To date, we believe these
interruptions have not had a significant effect on our business.

Our commercial services use a combination of telecommunications equipment,
computer hardware and software, operating protocols and proprietary applications
for high-speed transportation and storage of large quantities of digital data.
Given the complexity of our services, it is possible that data files may be lost
or distorted. Moreover, most of our customers' needs are extremely
time-sensitive, and delays in data delivery may cause significant losses to a
customer using our services. Despite our testing efforts, our network and
services, including future enhancements and adaptations, may contain undetected
design faults and software "bugs" that are discovered only after use by our
customers. The failure of any equipment or facility on our network could result
in the interruption of service to the customers serviced by that equipment or
facility until necessary repairs are effected or replacement equipment is
installed. Such failures, faults or errors could cause delays or require
modifications that could have a material adverse effect on our business.

Our commercial service is vulnerable to unauthorized access, computer viruses
and other disruptive problems.

Despite our security systems, our network, hosting and storage infrastructure
and commercial services may be vulnerable to unauthorized access, computer
viruses and other disruptive problems. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to our customers, which could have an adverse effect on our
business.

We depend in part on the Internet for the quality of our Internet Gateway
Service.

Our Internet Gateway Service customers are dependent on the Internet to
transport their data to our network and to receive files from other customers on
our network. The recent growth in the Internet has placed strains on its
infrastructure and has required the upgrade of routers, switches,
telecommunications links and other components forming this infrastructure. The
benefits of our Internet Gateway Service and its commercial acceptance are
therefore dependent in part on the activities of Internet service providers and
other third-parties, over whom we have no control, to ensure the continued
upgrading of the Internet to avoid any degradation in its performance. If the
security, reliability or performance of the Internet is compromised or degraded,
the success of our Internet-based services, and the pricing of those services,
could be materially and adversely impacted.

We are exposed to liability for damages resulting from failure of data
transportation or loss of data.

Our contracts with customers generally contain provisions limiting our liability
for failure of data transportation or

                                      -15-
<PAGE>

loss of stored data to $100 per occurrence, with a maximum liability equal to
the subscriber's cumulative monthly payments for a year and, in the case of
rendering services, to replacement service. Nevertheless, we may be subject to
significant claims and potential liabilities for data losses or delays in the
transportation, storage or rendering of data through our network.

In addition to general business liability insurance, we maintain $10 million of
errors and omissions insurance coverage for our services, $10 million of
business interruption insurance coverage for losses from fire and natural
disasters, and $10 million of insurance coverage for losses of data due to
physical damage to our data archive. We also maintain $25 million of umbrella
coverage for loss or liability above our other policies. We cannot be certain
that this amount of insurance coverage will be adequate to cover all data loss
claims or that additional insurance will be available on affordable terms.

Adaptation of our network infrastructure may be necessary in order to respond
to:

     o    demands for transmission and storage of larger amounts of data; and
     o    changes to our customers' service requirements.

The adaptation of our network, hosting and storage infrastructure will require
substantial financial, operational and managerial resources. We cannot be
certain that we will be able to adapt our infrastructure and manage it to meet
the evolving requirements of our targeted industries and customers on a timely
basis or at a commercially reasonable cost.

We face uncertain and changing regulatory restrictions which could limit our
operating flexibility or increase our costs.

We purchase telephone equipment, computer hardware, routers and relays for use
in our network, and we combine that equipment with our software and connect the
assembly with telephone circuits provided by common carriers. The common
carriers are regulated by the FCC, the Canadian Radio-Television and
Telecommunications Commission, or CRTC, and various state regulatory agencies.
We believe that under the FCC's current interpretation of the Communications Act
of 1934, the services that we offer to our customers are interstate information
(enhanced) services. Consequently, we are not required to obtain licenses or
other approvals from the FCC or state regulatory agencies to offer these
services. However, if at some time our services are deemed to be intrastate
services, certain state regulatory agencies might seek to assert jurisdiction
over our products and services. We would then be required to spend substantial
time and money to acquire the appropriate licenses and to comply with state
regulations. We believe that under the CRTC's interpretation of Canadian law,
our services do not require us to obtain telecommunications permits or approvals
in Canada.

We believe that European Union directives permit us to provide our services in
E.U. member states without the need to obtain licenses or other governmental
approvals. Bilateral agreements exist between the U.S. and Japan and the U.S.
and Hong Kong that encourage unimpeded cross-border provision of enhanced
services like the ones we offer. Pursuant to the World Trade Organization's
General Agreement on Trade and Services, over 50 governments have agreed to
permit the competitive provision of value-added services by nationals of WTO
member countries. Nevertheless, certain other countries in Europe, Asia and
elsewhere might seek to license and regulate our services. Any such license or
regulation may limit, delay or increase the costs of operations associated with
additional international locations to which we may desire to expand our
operations.

In addition to telecommunication regulations, we may become subject to other
current or future regulations in the U.S. or abroad as our business continues to
develop and as governments respond to changes brought about by the growth of the
Internet and e-commerce. These regulations may affect data privacy, marketing or
distribution, or may be applicable to specific industries or businesses to which
we may offer services. Such regulations could result in economic burdens or
technical or legal constraints that could adversely affect our business.

                                      -16-
<PAGE>

If we are unable to retain our key personnel, our business may suffer.

Our successful operation depends on the services of key executives and
significant employees, some of whom we have only recently employed. The loss of
the services of any of these persons could have a material adverse effect on us.
We have entered into employment agreements with substantially all of our
officers and significant employees, and have purchased life insurance policies
on certain employees. See "Management." We believe our future success will
depend on our ability to retain the services of these personnel and to attract
and retain qualified technical and marketing personnel. We cannot be certain
that we will be able to continue to attract and retain the personnel necessary
for the successful conduct of our business.

Our failure to manage growth could adversely affect us.

We have rapidly and significantly expanded our operations. We are expanding the
geographic coverage and capacity of our network, providing new services and
media workflow applications as we seek to expand our customer base and achieve
our business objectives. Moreover, we have rapidly expanded our workforce in
recent months in order to perform our NMCI subcontract with EDS. To manage the
growth of our operations, we must:

     o    effectively manage our operational, managerial, financial and
          accounting resources;

     o    hire, train and manage additional qualified personnel;

     o    maintain our sales force, external installation capacity, customer
          service teams and information systems;

     o    continue to expand our NMCI implementation work force;

     o    expand and upgrade our core technologies; and

     o    effectively manage multiple relationships with our customers,
          suppliers, strategic partners and other third-parties.


We may not be able to install management information and control systems in an
efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
Failure to manage our future growth effectively could adversely affect the
expansion of our customer base and service offerings. Any failure to
successfully address these issues could have a material adverse effect on our
business.

We depend on third-party suppliers for equipment and services, and our business
could be adversely affected if these relationships are disrupted.

Our business depends on third-party local and long distance carriers and on
third-party suppliers of the computers, software, routers and related components
used on our network and the disk drives, software systems and controllers used
in our hosting and storage infrastructure. Many of these supplier arrangements
are for terms of less than one year and are terminable by the other party in
specified circumstances. We also depend on the services of third-parties for
Direct Service customer site installations, routine maintenance and on-call
repair services. We may experience delays and additional costs if any of these
relationships are terminated and we are unable to reach suitable agreements with
alternate vendors, suppliers or carriers in a timely manner. Furthermore, to the
extent that we are unable to secure suitable installation, maintenance or
on-call repair services from third-party vendors, we may be required to
substantially increase our own workforce to perform these services, and our
growth may be constrained while we build and train our workforce. There can be
no assurances that we will be able to maintain our relationships with
third-party suppliers for equipment and services or that we will be able to find
suitable alternative

                                      -17-
<PAGE>

products and services at a commercially reasonable price, or at all.

The loss of our affiliation with SGI or MCI WorldCom could adversely impact our
ability to operate our business.

We have significant investment, supply and/or distribution relationships with
each of SGI, Winstar and MCI WorldCom.

SGI currently holds convertible preferred stock that entitles it to elect one
director to our board. If SGI were to convert all of its convertible preferred
stock, it would own 10,437,096 shares of our common stock, or 46.1% of our
outstanding shares of common stock as of April 30, 2001, assuming none of the
other holders of our options, warrants or convertible securities exercised their
conversion rights. Because of its holdings and representation on our board, SGI
may be able to exercise significant influence over our affairs. SGI is currently
a primary supplier of components for network access devices, which we use to
connect customers directly to our network. A loss of our strategic relationship
with SGI could have a material adverse effect on our business.

Winstar currently holds convertible preferred stock that entitles it to elect
one director to our board. If Winstar were to convert all of its convertible
preferred stock and exercisable warrants, it would own 31,593,974 shares of our
common stock, or 72.1% of our outstanding shares of common stock as of April 30,
2001, assuming none of the other holders of our options, warrants or convertible
securities exercised their conversion rights. Because of its holdings and right
to representation on our board, Winstar may also be able to exercise significant
influence over our affairs.

MCI WorldCom currently holds convertible debt and preferred stock and
exercisable warrants, which, if converted or exercised in full, would result in
MCI WorldCom owning at least 11,181,257 shares of our common stock, or 47.8% of
our outstanding shares of common stock, as of April 30, 2001, assuming that none
of our other holders of options, warrants or convertible securities exercised
their conversion rights See "Use of Proceeds." MCI WorldCom previously had three
designees on our Board of Directors. In August 1999, MCI WorldCom agreed to
become a passive investor and maintain a strategic relationship with us.
Accordingly, its three designees resigned from our Board and MCI WorldCom
relinquished its right to elect directors to our Board. Because of its
significant holdings, however, MCI WorldCom continues to be able to exercise
significant influence over our affairs. MCI WorldCom and its affiliates are our
largest supplier of meshed DS3, ATM backbone which interconnects our
distribution hubs, and of local loop connections between our distribution hubs
and network access devices on our customers' premises. We also co-locate a
significant portion of the routers and switches for our distribution hubs at MCI
WorldCom's points of presence on a month-to-month basis. A loss of our strategic
relationship with MCI WorldCom could have a material adverse effect on our
business.

Our business may be affected by competition.

We face competition from a variety of companies in the provision of data
transport, hosting, storage and workflow management services to the media
industry as well in the provision of services to the government. Many of our
competitors have an established market presence and substantially greater
financial, technological, marketing and research and development resources than
we do, and may offer competitive services and applications. Our competitors and
potential competitors for our commercial services include overland and air
carrier service providers, digital courier and digital file transfer service
providers, large telecommunication carriers and service providers, data network
and application service providers, and disk and tape storage equipment
companies; and for our government services include many of the same competitors
as well as others specializing in the provision of services to the government.

Technological changes could render our services obsolete or non-competitive.

We are at risk from fundamental technological changes in the development of
digital data delivery and archiving solutions. Evolving industry standards, new
product and service introductions, demand and market acceptance for

                                      -18-
<PAGE>

recently introduced products and services are subject to uncertainty of customer
acceptance. There can be no assurance that we will be able to adapt to future
technological changes or that developments by competitors will not render our
services and related applications obsolete or noncompetitive.

We may not be able to maintain proprietary rights in our intellectual property.

Our ability to maintain our proprietary rights in our technology will affect the
success of our business. We have applications for four U.S. patents pending for
certain aspects of our technology. We rely on a combination of trade secrets and
copyright protection, as well as patents to protect our proprietary rights in
our technology. We also rely on trademark protection concerning various names,
marks, logos and other devices that serve to identify us as the source for and
originator of our services and applications.

We offer our services and applications in foreign countries. Some of these
countries lack intellectual property protection comparable to that afforded by
the intellectual property laws of the U.S. Our proprietary rights in the
technology underlying our network, hosting and storage infrastructure and
related services and applications will be protected only to the extent that
patent, trade secret, copyright or other protection is available in countries in
which we market our services and applications, and only to the extent we are
able to obtain such protection and enforce such rights. We cannot be certain
that the steps taken by us to protect our intellectual property and proprietary
rights will be adequate to deter misappropriation of our technology or
development of technologies that are substantially equivalent to our technology.
Misappropriation of our technology or development of competitive technologies
could have a material adverse effect on our business. We could incur substantial
expense in protecting and enforcing our intellectual property rights.

Intellectual property litigation is complex, and we cannot be certain of its
outcome. We have conducted a limited inquiry regarding the possibility of
infringement on patents and intellectual property rights of others. We are not
aware of any infringements nor have we received any claims for such
infringements. Any future intellectual property litigation, regardless of
outcome, could result in substantial expense to us and significant diversion of
the efforts of our technical and management personnel. An adverse determination
in any such proceeding could subject us to significant liabilities to
third-parties, require disputed rights to be licensed from such parties or
require us to cease using disputed technology.

Loss of significant customers and their workflow chains could have a significant
effect on our business.

During the year ended December 31, 2000, EDS, Time and Quebecor World, Inc. were
our largest customers, representing 8.4%, 1.8% and 2.5%, respectively, of our
total revenue. Although Time and Quebecor World do not individually represent a
significant percentage of our revenue, both companies have developed important
workflow chains of vendors, suppliers and customers who use our network. If
either Time or Quebecor World were to significantly reduce or terminate (at the
end of their current service contract or otherwise) their use of our network and
services, their workflow partners might do the same, and our business, financial
condition and results of operations could be materially adversely affected. The
loss of EDS as a customer would have a significant adverse effect on future
revenues.

We are subject to the risks associated with foreign investment and international
operations.

Our operations extend outside of the U.S. During 1999 and 2000, a significant
portion of our revenue was generated in Europe, and, to a lesser extent, Asia.
We are exposed to the risk of changes to laws and policies that govern foreign
investment in countries where we have operations, as well as changes in U.S.
laws and regulations relating to investing in or trading with countries in which
we may have investments.

Certain countries in which we operate or may operate are subject to a
substantially greater degree of social, political and economic instability than
in the U.S. Risks associated with social, political and economic instability in
a particular country could materially adversely affect our business and could
result in the loss of our assets in that

                                      -19-
<PAGE>

country. In addition, some markets in which we have undertaken or may in the
future undertake international expansion have technology and communications
industries that are less developed than in the U.S.

Risks inherent in doing business in international markets include the following:

     o    uncertainty of acceptance of our services by different cultures;

     o    unforeseen changes in regulatory requirements;

     o    differing technology standards;

     o    difficulties in staffing and managing multinational operations;

     o    government-imposed restrictions on the repatriation of funds;

     o    difficulties imposed by language barriers;

     o    difficulties in finding appropriate distribution channels; and

     o    potentially adverse tax consequences.

These factors could harm our ability to successfully operate internationally and
could have a material adverse effect on our business.

We are subject to risks related to foreign currency exchange rates and
repatriation.

As we maintain our operations outside of the U.S., our results of operations and
the value of our assets will be affected by the currency exchange rates between
the U.S. dollar and the functional currency of countries in which we transact
business. During the years ended December 31, 2000 and 1999, 28.1% and 35.7%,
respectively, of our revenue was generated outside of the U.S. We typically sell
our services and applications in foreign countries in the local functional
currency. As a result, we may experience an economic loss solely as a result of
foreign currency exchange rate fluctuations. Currently, we do not employ
currency hedging strategies to reduce the risks associated with the fluctuation
of foreign currency exchange rates.

We may acquire interests in companies that operate in countries where the
removal or conversion of currency is restricted. We cannot be certain that
countries that do not have such restrictions at the time we establish operations
will not subsequently impose them, especially in situations where there is a
deterioration in a country's balance of payments or where the local currency is
being heavily converted into other currencies.



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


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

     The following discussion and analysis is based on the historical results of
WAM!NET Inc. (the "Company") and should be read in conjunction with the
Company's Financial Statements included herein. The following discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements.

                                      -20-
<PAGE>

Overview

We own and operate an integrated global Information Technology (IT)
infrastructure that we market and sell as a utility to commercial and government
customers. Customers use our services to digitize mission-critical business
processes and integrate these into their enterprise or supply chains.

We offer our customers a suite of managed data services including 1) digital
transport services 2) digital storage services 3) application hosting services
4) managed hosting services and 5) professional services. Customers purchase our
services on an outsourced basis in which they pay a transactional charge per
use, similar to a utility. By using our services, customers gain access to
leading-edge technology without the high cost and challenges of managing
technology themselves.

Our services and IP-based network, storage and hosting infrastructure provide
businesses a common electronic platform to seamlessly integrate their production
processes and accelerate the adoption of online digital collaboration. In the
commercial marketplace our global customer base is primarily made up of
companies in the entertainment, broadcast, advertising, publishing, printing,
retail, financial services, and consumer goods industries. These customers use
our services to collaborate on-line within their supply chains to produce,
manage and distribute rich media content such as: advertising, product packaging
and general brand marketing materials; TV programming; films, video games,
recorded music and other entertainment; news content and publications; video;
and web materials. Creating these materials is a highly collaborative process
involving many firms.

In July 2000, we initiated direct sales to the government with the receipt of
approval to sell on the General Services Administration (GSA) Schedule for
Electronic Commerce Services. The GSA listing permits government entities to
purchase our service without the need for lengthy and time-consuming bidding or
request-for-proposal processes. In October of 2000, WAM!NET, as a tier one
subcontractor, was part of the EDS-led team that won the $6.9 billion Navy
Marine Corps Intranet (NMCI) contract. This intranet is a common computing and
communications environment to link more than 300 Navy and Marine Corps bases
throughout the U.S., Iceland, Puerto Rico, Guam, Hawaii and Guantanamo Bay,
Cuba. It is designed to enhance communication and the readiness of the U.S.
Armed Forces. Under our subcontract with EDS, we will provide Base Area and
Local Area Network design, installation and management at each base.

We have made substantial investments in building our global network, hosting and
storage infrastructure. In addition, we have developed an array of digital
workflow services to meet the needs and demands of a broad-based customer group.
We have also invested in and developed substantial and skilled customer service
and professional service groups, which make our services more valuable to
existing customers and more attractive to potential customers. Finally, we have
made substantial investments in recruiting, training and developing a skilled
and knowledgeable sales force, operations and development workforce. We use a
consultative approach in our sales and marketing efforts to both identify and
meet our customers' diverse needs. Our initial focus and investment has been in
building an installed base of influential customers. We seek to increase the
utilization of our service offerings among our existing customers, as well as to
broaden our market penetration through the addition of new customers.

In March 1998, we established our presence in Europe with the acquisition of
4-Sight Limited, a developer and worldwide marketer of ISDN based digital data
transmission applications. 4-Sight had primarily sold software and hardware
supporting digital transmission of data to its customer base. We have integrated
the 4-Sight technology into our managed digital transport services.

In September 1999 we opened an office in Tokyo and established a joint venture
with Sumitomo to support the sales and marketing of our services to the Japanese
market. In July 2000 we opened an office in Sydney, Australia, to develop
business opportunities in the Australian market.

In November, 2000, we purchased all of the outstanding common stock of is.com
for 500,000 shares of the

                                      -21-
<PAGE>

Company's common stock. The acquisition was accounted for under the purchase
method of accounting and, accordingly, the operating results of is.com have been
included in the consolidated operating results since the date of acquisition.
The inclusion of the is.com operating results for periods prior to the date of
acquisition would not have materially affected results of operations. In
connection with the acquisition, the Company issued a warrant to the sole owner
of is.com to purchase 100,000 shares of common stock.

Access to our services is provided through our Direct Service, Tracked Service
and Internet Gateway Service. Our initial focus through 1998 was our Direct
Service. This is our fastest, most secure and reliable managed transport
service, providing direct, guaranteed access and transport over our managed
network. Our Customer Point of Presence (CPOP) devices are installed on our
customers' premises and are connected to our network with a dedicated leased
line.

In the first quarter of 1999 we began to provide access to our network through
our Tracked Service. This service offers the security and predictability of
dial-up connectivity to our network at a slower transmission speed without the
performance guarantee of Direct Service. This service does not require a
dedicated onsite CPOP device or a dedicated connection to our network. We
introduced our Internet Gateway Service in the third quarter of 1999. Internet
Gateway Service allows connection to our network and services over the Internet.
We provide media production-tailored tools with our managed transport services
including InfoCenter, Electronic Job Tickets and Remote Proofing.

We commercially introduced our WAM!BASE Digital Storage Service in the first
quarter of 2000 and our web-based storage service, Workspace, in fourth quarter
of 2000. Direct service is required to access WAM!BASE storage service.

Also in the first quarter of 2000, we began offering Rendering on Demand, a
hosted service that requires specialized software and extensive computing power
to generate high-resolution computer animation for film and broadcast special
effects. In the first quarter of 2000 we began offering our Compressed Video
Service, our transport service for compressed video in MPEG 1 and MPEG 2
formats.

We introduced our managed hosting services in third quarter 2000. These services
are designed to enable reliable, scalable, mission-critical e-business
applications for a wide range of customers. In the fourth quarter 2000, we
acquired is.com, a 50-member professional services firm specializing in
e-business solutions and workflow to augment our service offering.

As of March 31, 2001, we had over 2,000 customer points-of-presence consisting
of dedicated CPOP devices and local bandwidth connectivity. Of these, about 90
have WAM!NET storage services that customers access through the CPOP. In
addition, we had over 15,700 users of our Internet and dial-up services
globally.


Revenues

Net service revenue

Our net service revenue from commercial customers is directly related to the
number of customers, type of service, and volume of data moved, stored or
processed. This revenue is derived primarily from media market customers who are
purchasing our managed transport, managed storage, hosted applications and
managed hosted services. Revenue is based on annual or multi-year service
contracts, many of which have automatic renewal or extension provisions. These
contracts generally include a minimum monthly fee and additional charges for
usage that exceeds a minimum monthly usage level. We record monthly service
revenue for Direct Service, Compressed Video Service and Tracked Service based
upon contracts signed with customers, following installation of equipment and
commencement of service at a customer's premises. Our Internet Gateway Service
is priced primarily on a per-megabyte basis and recognized as revenue in the
month the service is provided. Our Render on Demand service is

                                      -22-
<PAGE>

billed per computer processing unit hour and revenues are recognized as the
service is provided to the customer. Our WAM!BASE digital storage and Workspace
services are priced on the basis of megabytes stored per month. We began earning
storage revenue in first quarter of 2000. Our managed hosting services are
typically custom-oriented solutions and are priced according to the customers'
equipment and capacity requirements.

We began earning Professional Services revenues in fourth quarter 2000,
primarily from our acquisition of a 50-member firm that specializes in
e-commerce and workflow consulting services. Revenues are based on consulting
engagements that are billed on an hourly rate, depending on the expertise
required to meet customer requirements. Revenues are included in net service
revenue in the Consolidated Statement of Operations.

Our revenue from government customers primarily includes revenue from our
subcontract with EDS for NMCI, as well as revenue generated from other
government customers.

On February 9, 2001, we entered into a definitive Subcontract Agreement with
EDS. The contract, which was awarded under the Federal Acquisition Regulation
(FAR) Part 12 procedures, is an indefinite quantity type contract (with minimum
purchase commitments) where delivery or performance shall be made only as
authorized by orders issued by the Navy under the ordering clause of the NMCI
contract with EDS. The contract contains a base period of five program years
effective October 7, 2000, and an option to extend the period of performance an
additional three years. We record and recognize revenue based upon performance
on the number of seats ordered. We began recognizing revenue from the
subcontract with EDS in the fourth quarter of 2000 under a Pre-Subcontract
Authorization Agreement.

Our full range of services are also sold to government entities through the GSA
listing, direct marketing efforts and channel activity. These services are
billed to government customers using the same billing model as used for our
commercial customers.

Software and hardware sales

Revenue from software and hardware sales has resulted primarily from the sale of
4-Sight ISDN Manager software and ISDN cards. Our ISDN Tracked Service customers
may choose to make a single up-front payment to purchase our software or to pay
a monthly service fee. In both cases these purchases appear as software and
hardware revenue. We continue to shift the existing 4-Sight customers from
software to our managed transport service. We expect that software and hardware
sales will decline in 2001.

Operating Expenses

Network communication

Network communication expense represents the largest direct cost associated with
providing our Direct Service. Network communication expense includes the costs
of providing local loop telephone circuits connecting our network access devices
from a customer's premises to the nearest distribution hub and the costs of the
high bandwidth backbone carrier services which connect the distribution hubs
with our network operation and data storage centers.

Local telephone circuit connections provided by local exchange carriers account
for the substantial majority of these charges. National and international
service carrier charges account for the balance of these charges. Network
communication expense is generally a fixed monthly cost per circuit. We believe
that growing competition among telephony and communications providers may reduce
the future costs of local telephone circuit and backbone connections. We
actively seek to obtain and deploy technologies that will reduce the costs of
local telephone circuit connections, such as wireless technologies, remote
dial-up capabilities and DSL. We also intend to use our network management tools
to optimize the use of existing and planned network capacity as volume increases
and traffic patterns emerge.

                                      -23-
<PAGE>

Cost of other service revenues

Cost of other service revenues represents direct labor costs associated with our
professional service revenue and costs directly associated with performing under
the NMCI contract.

Cost of software and hardware

Software and hardware expense reflects the costs of software and hardware sold.

Technical operations

Technical operations expense represents costs directly associated with
developing, maintaining, managing and servicing our global private network and
expanding our service offerings. These costs include direct labor, vendor
service fees, point-of-presence charges and research and development charges,
which are often incurred in advance of receiving revenue. Our currently
installed network operation centers account for the substantial majority of
these direct labor and operating costs. Most of the costs associated with the
development of new services and applications, such as WAM!BASE Data Archiving
Service, WAM!PROOF, ISDN Tracked Service, Internet Gateway Service and Render on
Demand service, are accounted for as technical operations expenses and are
incurred in advance of receiving revenue.

Selling, general and administrative

Our selling expense consists primarily of the salaries and commissions of our
direct sales force and our global marketing groups, commissions for channel
partners, and the costs of ongoing marketing activities such as promotions and
channel development. Our sales and marketing efforts are focused on expanding
our customer base and increasing utilization on our network. Accordingly, we
offer new and existing services and develop new channels to sell and support our
services. We also seek to increase the utilization of our network with the
assistance of our influential customers who encourage their workflow partners to
use our services.

Our general and administrative expense includes administrative salaries, related
overhead and professional service fees. These costs reflect expenditures related
to the rapid growth and expansion of our administrative infrastructure necessary
to manage our globally expanding operations, and professional service fees
incurred in connection with financing activities, contract negotiations and
business acquisitions.

Depreciation and amortization

We generally retain ownership of the customer premise equipment and most of the
hardware and software necessary for our customers to use our services on a
turn-key basis. Depreciation and amortization expense includes depreciation of
this hardware and software as well as the equipment located in our distribution
hubs and network operation, hosting and data storage centers. We also amortize
certain costs relating to the acquisitions of is.com, 4-Sight and Freemail,
which we acquired using the purchase method of accounting. We anticipate
additional capital investments in our network, hosting and storage
infrastructure commensurate with customer demand and market opportunity.


Results of Operations

Three Month Period Ended March 31, 2001 Compared with Three Month Period Ended
March 31, 2000 Revenues

Total revenue for the quarters ended March 31, 2001 and 2000 was $15.6 million
and $7.9 million representing an

                                      -24-
<PAGE>

increase of $7.7 million. This increase is due to net service revenues
increasing $8.0 million offset by a decrease of $0.4 million in software and
hardware revenues.

Net service revenues for the quarters ended March 31, 2001 and 2000 was $14.2
million and 6.2 million. The increase of $8.0 million in net service revenue is
primarily due to the following. We recognized $4.3 million from government
service revenue primarily related to the NMCI contract with EDS. The remaining
increase relates to the expanded service offerings introduced in first quarter
2000 and the increased number of subscribers purchasing our services and
increased utilization on our network.

Revenues from software and hardware sales for the quarters ended March 31, 2001
and 2000, were $1.3 million and $1.7 million. The decrease in software and
hardware sales is the direct result of our shifting from sales of 4-Sight
software and hardware as stand-alone products to sales of service contracts,
partially offset by software purchases associated with ISDN Tracked Service
agreements.

Operating Expenses

Network communication

Network communication expense for the quarters ended March 31, 2001 and 2000,
was $7.1 million and $7.2 million. Average monthly communication expense per
Direct Service customer has declined and is expected to continue to decline, as
a result of increased customer utilization of our backbone capacity and
declining costs of North American local loop connections. We continue to incur
substantial network communication expense as we deploy our network and related
services and applications globally; however, we expect the network
communications expense as a percentage of revenue to decline.

Other service revenue costs

Other service revenue costs for the quarter ended March 31, 2001 were $4.0
million. These costs are related to our direct costs of professional services
and our direct costs associated with the subcontract with EDS for the NMCI
project.

Software and hardware

The cost of software and hardware for the quarters ended March 31, 2001 and 2000
was $0.4 million and $0.5 million. The decreases reflects the decline in
software and hardware sales.

Technical operations

Technical operations expense for the quarters ended March 31, 2001 and 2000 was
$6.5 million and $5.4 million. The expenses increased from 2000 to 2001 as a
direct result of our increased government activity.

Selling, general and administrative

Selling, general and administrative expense for the quarters ended March 31,
2001 and 2000 was $11.3 million and $11.6 million. Selling, general and
administrative expenses decreased $0.3 million due to reduced marketing expenses
in 2001 compared to 2000. The decrease was offset with costs incurred for
establising our government business and our acquisition of is.com.

Depreciation and amortization

Depreciation and amortization for the quarters ended March 31, 2001 and 2000 was
$10.9 million and $8.7 million. This increase was primarily due to depreciation
of additional network and related equipment purchased for network

                                      -25-
<PAGE>

expansion. Included in these totals for 2001 and 2000 was $1.8 million and $1.7
million of amortization expense relating to the goodwill recorded in connection
with acquisitions.

Interest expense

Interest expense for the quarters ended March 31, 2001 and 2000 was $10.0
million and $15.3 million. The decrease in interest exepense is due to the
termination of the network facilites agreement with Winstar resulting in the
writeoff of the related asset and obligation in the first quarter of 2001 (see
footnote 4 to the financial statements). Included in interest expense for the
quarters ended March 31, 2001 and 2000 are non-cash charges of $7.5 million and
$7.1 million related to the amortization of deferred financing charges, the
amortization of the value of warrants issued in connection with debt financing
transactions and the accretion of debt.

Loss on termination of network facilities agreement

In December 1999 the Company entered an agreement with Winstar Wireless, Inc.
pursuant to which the Company acquired an indefeasible right over 20 years to
use backbone capacity and wireless local loop facilities. Under this agreement,
and other related agreements, the Company made a $20 million initial paymentin
January 2000 for the indefeasible right to use these facilities with additional
contemplated quarterly payments of $5.0 million and increasing to approximately
$24.9 million, over the seven-year period ending December 15, 2006. The
indefeasible right of use was capitalized in property, plant and equipment, and
the Company recorded a related liability of $260.3, which bore an effective
interest rate of 8.3%. At December 31, 2000, the outstanding balance of the
liability was $239.6 million.

Due to continuing non-performance by Winstar as specified in the agreement,
which non-performance resulted in an Event of Default, on April 12, 2001 the
Company sent a notice Winstar terminating these arrangements effective April 30,
2001, citing (1) breaches of representations and warranties by Winstar, (2)
breaches of Winstar's obligations to meet deadlines to deliver and install
facilities and (3) Winstar's failure to insure that these facilities performed
to applicable specifications. On April 18, 2001 Winstar and a number of related
entities filed for protection under Chapter 11 of the United States Bankruptcy
Code. On or about April 27, 2001 Winstar responded to the Company's termination
notice by alleging that the giving of the notice was a breach of the
arrangements (and, consequently, did not terminate these arrangements) and
seeking to make the Company go through certain dispute resolution procedures. No
formal litigation or arbitration proceedings has been initiated as of May 18,
2001. Although the Company and Winstar are engaging in discussions, there can be
no assurance that any settlement of this dispute will be reached or as to the
possible terms of any resolution.

The Company believes that the notice of termination was properly given and that
these arrangements with Winstar have been terminated. The Company wrote off the
related asset of $275 million and related obligation of $240 million, and
recorded a $35 million loss on termination in the first quarter of 2001.


Other income

Other income for the quarters ended March 31, 2001 and 2000 was $1.0 million and
$0.8 million. Other income primarily relates to rental income received from SGI
in connection with leasing a portion of the corporate campus facility in Eagan
which we received as part of an investment by SGI in March 1999.

Income taxes and net loss

At March 31, 2001, we had $335 million of United States net operating loss
carryforwards. These carryforwards are available to offset future taxable income
through the year 2020 and are subject to the limitations of Section 382 of the
Internal Revenue Code of 1986. These limitations may result in the expiration of
net operating loss carryforwards before they can be utilized.

                                      -26-
<PAGE>

Liquidity and Capital Resources

Through March 31, 2001, we have issued equity and debt securities and incurred
other borrowings resulting in cash received by us of $505.2 million. We have
used the majority of these proceeds to expand our global network, to build our
customer base and for geographic expansion. In addition, we expanded our
operations in Europe through the acquisition of 4-Sight for $16.4 million in
cash and the issuance of equity securities. Our ability to achieve profitability
and positive cash flow from operations will be dependent on substantially
growing our revenues and realizing increased operating efficiencies.

In 2001, we entered into the following financing transactions in order to
continue to fund our operating and capital requirements:

The Company had a $25 million line of credit agreement with a bank, which was
orginally due in September 2000 and was subsequently extended to January 10,
2001. The line of credit was guaranteed by MCI WorldCom. At December 31, 2000,
the amount outstanding on the line of credit was $15 million. On January 10,
2001, the Company repaid the remaining $15 million and closed the line of
credit.

In February 2001, the Company entered into a $30 million bank credit facility,
which expires in January 2003. The credit facility is a revolving credit
facility under which the bank will lend the Company up to the $30 million based
upon a borrowing base consisting of the Company's cash collections. Amounts
outstanding under the credit facility incur interest at the banks reference rate
plus 3.25% (11.25% at March 31, 2001). The credit facility is secured by a lien
on certain unencumbered and lienable assets. The credit facility requires the
Company to maintain certain financial covenants. The credit facility is
automatically renewable at maturity until cancelled in accordance with its
terms. As of March 31, 2001, the Company has borrowed $14.1 million under the
credit facility.

In addition subsequent to March 31, 2001, the Company obtained additional
financing of $5.64 million under the bank credit facility.

On April 27, 2001 the Company entered into amendment number one to the bank
credit faciliy. This amendment resulted in the Company receiving an additional
$2.4 million term loan. The term loan expires in accordance with the original
bank credit facility and has a fixed interest rate of 12%.

On May 15, 2001 the Company entered into amendment number two to the bank credit
facility. This amendment resulted in the Company receiving an additional $3.24
million term loan. The term loan expires in accordance with the original bank
credit facility and has a fixed interest rate of 19.5%. Up to $3 million of the
term loan can be converted into 4.9% of the issued and the outstanding shares of
common stock of the Company on a fully diluted basis. This right will be granted
in the form of a five year warrant. This warrant also contains demand
registration rights and anti dilution provisions.

Since inception, we have incurred net losses and experienced negative cash flow
from operating activities. Net losses since inception have resulted in an
accumulated deficit of $544.4 million as of March 31, 2001. Management expects
to continue to operate at a net loss and experience negative cash flow from
operating activities through the foreseeable future. At March 31, 2001, our cash
resources and available borrowings are insufficient to fund operations for the
next 12 months without raising additional debt and/or equity capital. These
factors raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the amount or
classification of liabilities, which might result from the outcome of this
uncertainty.

Management is currently in the process of negotiatng a revolving credit facility
with a financial investor. However, there is no assurance that such funds will
be available or available on terms acceptable to the Company. If the

                                      -27-
<PAGE>

Company is not successful in obtaining additional funding, it may not be able to
continue as a going concern.

The report of our independent auditors on our consolidated financial statements
for the fiscal year ended December 31, 2000 includes an explanatory paragraph,
which states that the recurring losses from operations, working capital
deficiency, net capital deficiency and limited liquid resources raise
substantial doubt about our ability to continue as a going concern.



Item 3--Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Rates

During the three month period ended March 31, 2001, our revenue originating
outside the U.S. was 18.1% of total revenue, substantially all of which was
denominated in the local functional currency. Currently, we do not employ
currency hedging strategies to reduce the risks associated with the fluctuation
of foreign currency exchange rates.

Our international business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility. Accordingly, our future
results could be materially adversely impacted by changes in these or other
factors.

Interest Rates

Cash balances in foreign currencies overseas are operating balances and are
invested in short-term deposits of the local operating bank.

We are exposed to market risk from changes in the interest rates on some of our
outstanding debt. The outstanding loan balance under our revolving credit
facility bears interest at a variable rate based on prevailing short-term
interest rates in the U.S. and Europe. Based on the average outstanding bank
debt for the quarter ended March 31, 2001, a 100 basis point change in interest
rates would not change interest expense by a material amount. For fixed rate
debt such as our 13.25% senior discount notes, interest rate changes affect its
fair market value, but do not impact earnings or cash flows.


                           Part II--OTHER INFORMATION


Item 2 - Changes in Securities and Use of Proceeds

         (c) The information required by this Item 2 of Part II has been
previously reported in Item 2 of Part I of this Form 10-Q, and is incorporated
herein by reference. For a complete discussion of the transactions involving
recent sales of unregistered securities of the Company please see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

Item 6--Exhibits and Reports on Form 8-K

(a)  Exhibits

See Exhibit Index

(b) Reports on Form 8-K

                                      -28-
<PAGE>

No reports on Form 8-K were filed on behalf of the Company during the three
months period ending March 31, 2001.

                                      -29-
<PAGE>

                                    SIGNATURE

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


                                               WAM!NET Inc.

Date: May 21, 2001



                                               By: /s/ Terri F. Zimmerman
                                                   ------------------------
                                                   Terri F. Zimmerman
                                                   Chief Financial Officer

                                      -30-
<PAGE>

                                  EXHIBIT INDEX

Item
Number            Description
------            -----------
2.1      (1)      Agreement for the Sale and Purchase of the entire issued share
                  capital of WAM!NET U.K. Limited dated February 11, 1998, among
                  the Company, WAM!NET (UK) Limited and the Selling Shareholders
                  listed therein
2.2      (1)      Agreement and Plan of Reorganization dated December 17, 1997
                  by and among NetCo Communications Corporation, NetCo Acquiring
                  Corporation, FreeMail, Inc. and the shareholders listed
                  therein
2.3      (4)      June 1, 1999 Amendment to the Agreement and Plan of
                  Reorganization, dated December 17, 1997, by and among the
                  Company, NetCo Acquisition Corporation, FreeMail, Inc. and the
                  shareholders listed therein.
3.1      (7)      Amended and Restated Articles of Incorporation of the Company.
3.2      (1)      By-Laws of the Company.
4.1      (1)      Indenture dated as of March 5, 1998, between the Company, as
                  Issuer, and First Trust National Association, as Trustee.
4.2a     (1)      Certificate for the Rule 144A Original Notes ($200.0 million).
4.2b     (1)      Certificate for the Rule 144A Original Notes ($8.0 million).
4.3      (1)      Certificate for the Regulation S Original Notes.
4.4      (1)      Certificate for the Rule 144A Warrants.
4.5      (1)      Certificate for the Regulation S Warrants.
4.6a     (1)      Rule 144A Unit Certificate. (200,000 Units)
4.6b     (1)      Rule 144A Unit Certificate. (8,030 Units)
4.7      (1)      Certificate for the Regulation S Units.
4.8      (1)      Form of Certificate for the Exchange Notes (incorporated
                  herein by reference and included in Exhibit 4.1 to the
                  Company's Registration Statement on Form S-4 filed with
                  Securities and Exchange Commission on May 28, 1998).
4.9      (1)      Common Stock Certificate.
4.10     (1)      Registration Rights Agreement, dated March 5, 1998, among the
                  Company and Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated, Credit Suisse First Boston Corporation and First
                  Chicago Capital Markets, Inc
4.11     (1)      Common Stock Registration Rights Agreement, dated as of March
                  5, 1998, among the Company, MCI WorldCom, Inc., Merrill Lynch,
                  Pierce, Fenner & Smith Incorporated, Credit Suisse First
                  Boston Corporation and First Chicago Capital Markets, Inc.
4.12     (1)      Warrant Agreement, dated as of March 5, 1998, by and between
                  the Company and First Trust National Association, as Warrant
                  Agent, to purchase Common Stock of the Company.
4.13              Intentionally omitted.
4.14     (2)      Warrants to purchase 4,157,500 Shares of Common Stock of the
                  Company exercisable on or before December 31, 2000, issued to
                  MCI WorldCom, Inc. on December 16, 1996 (Incorporated herein
                  by reference to exhibit 10.6 of the Company's Registration
                  Statement on Form S-4 (File No. 333-53841) filed with the
                  Securities and Exchange Commission on May 28, 1998).
4.15     (2)      Certificate for 13.25% Subordinated Unsecured Convertible Note
                  due August 28, 2005, ($25.0 million Note) issued to MCI
                  WorldCom, Inc. on January 13, 1999 .
4.16     (2)      Certificate for 1,679,234 Class A Warrants and 2,840,967 Class
                  B Warrants to purchase Common Stock of the Company, issued to
                  MCI WorldCom Inc. on September 26, 1997 (Incorporated herein
                  by reference to Exhibit 10.9 of the Company's Registration
                  Statement on Form S-4 (File No. 333-53841) filed with the
                  Securities and Exchange Commission on May 28, 1998).
4.17     (2)      Subordinate Unsecured Convertible Note and Warrant Purchase
                  Agreement between the Company and MCI WorldCom, Inc. dated
                  January 13, 1999.
4.18     (2)      Preferred Stock Purchase Agreement by and between the Company
                  and Silicon Graphics, Inc. dated as of March 3, 1999.
4.19     (2)      Certificate for 150,000 Warrants to purchase shares of Common
                  Stock for the purchase price of $.01 per share dated January
                  13, 1999.
4.20     (2)      Certificate of Designation of Rights and Preferences of Class
                  A Preferred Stock of the Company filed with the Secretary of
                  State of the State of Minnesota on March 4, 1999, as corrected
                  and filed with the Secretary of State of the State of
                  Minnesota on March 5, 1999.
4.21     (2)      Certificate of Designation of Rights and Preferences of Class
                  B Convertible Preferred Stock of the Company filed with the
                  Secretary of State of the State of Minnesota on March 4, 1999.
4.22     (2)      Certificate of Designation of Rights and Preferences of Class
                  C Convertible Preferred Stock of the Company filed with the
                  Secretary of State of the State of Minnesota on March 4, 1999.
4.23     (2)      Certificate of Designation of Rights and Preferences of Class
                  D Convertible Preferred Stock of the Company filed

                                      -31-
<PAGE>

                  with the Secretary of State of the State of Minnesota on March
                  4, 1999.
4.24     (2)      Certificate representing 115,206 shares of Class A Preferred
                  Stock of the Company issued to MCI WorldCom. Inc. on March 4,
                  1999.
4.25     (2)      Certificate representing 5,710,425 shares of Class B
                  Convertible Preferred Stock of the Company issued to Silicon
                  Graphics, Inc. on March 4, 1999.
4.26     (2)      Certificate representing 878,527 shares of Class C Convertible
                  Preferred Stock of the Company issued to Silicon Graphics,
                  Inc. on March 4, 1999.
4.27     (2)      Certificate representing 2,196,317 shares of Class D
                  Convertible Preferred Stock of the Company issued to MCI
                  WorldCom. Inc. on March 4, 1999.
4.28     (2)      Stockholders Agreement by and among the Company, Silicon
                  Graphics, Inc. and MCI WorldCom, Inc. dated as of March 4,
                  1999.
4.29     (2)      Class A Preferred Stock Exchange Agreement by and between the
                  Company and MCI WorldCom, Inc. dated as of March 4, 1999.
4.30     (2)      Class D Preferred Stock Conversion Agreement by and between
                  the Company and MCI WorldCom, Inc. dated as of March 4, 1999.
4.31     (6)      Certificate of Designation of Rights and Preferences of Class
                  E Convertible Preferred Stock of the Company filed with the
                  Secretary of State of the State of Minnesota on February 16,
                  2000, as corrected and filed with the Secretary of State of
                  the State of Minnesota on March 1 and March 8, 2000.
4.32     (6)      Certificate of Designation of Rights and Preferences of Class
                  F Convertible Preferred Stock of the Company filed with the
                  Secretary of State of the State of Minnesota on February 11,
                  2000, as corrected and filed with the Secretary of State of
                  the State of Minnesota on March 1 and March 9, 2000.
4.33     (6)      Certificates of Designation of Rights and Preferences of Class
                  G Convertible Preferred Stock of the Company filed with the
                  Secretary of State of the State of Minnesota on February 6,
                  2000.
4.34     (6)      Securities Purchase Agreement, dated as of December 31, 1999,
                  by and between the Company and Winstar Communications, Inc.
4.35     (6)      Securities Purchase Agreement, dated as March 14, 2000, by and
                  between the Company and Cerberus Partners, L.P.
4.36     (6)      Securities Purchase Agreement, dated February 3, 2000, by and
                  between the Company and Silicon Graphics, Inc.
4.37     (6)      Preferred Stock Purchase Agreement, dated as of February 18,
                  2000, by and between the Company and the buyers listed on
                  Schedule 1.1 thereto.
4.38     (6)      Form of Certificate for Shares of Class E Convertible
                  Preferred Stock of the Company.
4.39     (6)      Form of Certificate for shares of Class F Convertible
                  Preferred Stock of the Company.
4.40     (6)      Form of Certificate for shares of Class G Convertible
                  Preferred Stock of the Company.
4.41     (6)      Certificate for 200,000 Warrants to purchase shares of Common
                  Stock for the purchase price of $.01 per share issued to MCI
                  WorldCom, Inc. in connection with the 13.25% subordinated
                  unsecured convertible Note, dated January 13, 1999.
4.42     (8)      Securities Purchase Agreement, dated as of March 14, 2000, by
                  and between the Company and the buyers listed on Schedule 1.1
                  thereto.
4.43     (8)      Securities Purchase Agreement, dated as of September 29, 2000,
                  by and between the Company, Winstar Communications, Inc. and
                  Winstar Credit Corp.
4.44     (8)      Certificate for 3,000,000 Warrants to purchase shares of
                  Common Stock for the purchase price of$.01 per share issued to
                  Winstar Communications, Inc. in connection with the Securities
                  Purchase Agreement, dated September 29, 2000.
4.45     (8)      Certificate of Designation of Rights and Preferences of Class
                  H Convertible Preferred Stock of the Company filed with the
                  Secretary of State of the State of Minnesota on October 3,
                  2000.
4.46     (8)      Form of Certificate for shares of Class H Convertible
                  Preferred Stock of the Company.
10.1     (1)      Credit Agreement among the Company, the Lending Institutions
                  party thereto, as Lenders, The First National Bank of Chicago,
                  as Agent, dated as of September 26, 1997.
10.2     (1)      Ten Percent Convertible Note Purchase Agreement between the
                  Company and MCI WorldCom, Inc., dated September 12, 1996 ($5.0
                  million Note).
10.3     (1)      Preferred Stock, Subordinated Note and Warrant Purchase
                  Agreement between the Company and MCI WorldCom, Inc., dated
                  November 14, 1996.
10.4     (1)      $28.5 million Seven Percent Subordinated Note due December 31,
                  2003, payable to MCI WorldCom, Inc.
10.5              Intentionally omitted.
10.6              Intentionally omitted.
10.7     (1)      Right of Refusal Agreement Among WorldCom Inc., Edward
                  Driscoll III and Alan L. Witters dated December 16, 1996.
10.8     (1)      Guaranty Agreement dated September 26, 1997, by and between
                  the Company and MCI WorldCom, Inc.
10.9     (9)      Loan and Security Agreement dated February 13, 2001 by and
                  among the Company and each of its subsidiaries as Borrowers
                  and the Lenders that are Signatories thereto as the Lenders,
                  and Foothill Capital Corporation as the Arranger and
                  Administrative Agent.
10.10    (1)      Sublease dated September 24, 1997 between the Company and
                  1250895 Ontario Limited, relating to the property

                                      -32-
<PAGE>

                  located at 6100 110th Street West, Bloomington, Minnesota.
10.11    (1)      Service Provision Agreement dated as of July 18, 1997, by and
                  between the Company and Time Inc.
10.12    (1)      Standby Agreement dated as of July 19, 1997 by and between MCI
                  WorldCom, Inc. and Time Inc.
10.13    *        Amendment No. 1 to the Loan and Security Agreement dated
                  February 13, 2001 by and among the Company and each of its
                  subsidiaries as Borrowers and the Lenders that are Signatories
                  thereto as the Lenders, and Foothill Capital Corporation as
                  the Arranger and Administrative Agent.
10.14    *        Amendment No. 2 to the Loan and Security Agreement dated
                  February 13, 2001 by and among the Company and each of its
                  subsidiaries as Borrowers and the Lenders that are Signatories
                  thereto as the Lenders, and Foothill Capital Corporation as
                  the Arranger and Administrative Agent.
10.15             Intentionally omitted.
10.16             Intentionally omitted.
10.17    (1)      Agreement dated February 11, 1998 between the Company and MCI
                  WorldCom, Inc. modifying certain terms of the (i) 10%
                  Convertible Subordinated Note, due September 30, 1999, (ii) 7%
                  Subordinated Note, due December 31, 2003, and (iii) 100,000
                  shares of Series A Preferred Stock, all of which are held by
                  MCI WorldCom, Inc. (incorporated herein by reference to
                  exhibit No. 4.17 to the Company's Registration Statement on
                  Form S-4 (File No. 333-53841) filed with the Securities and
                  Exchange Commission on May 28, 1998)
10.18    (1)      1994 Stock Option Plan
10.19    (1)      Amended and Restated 1994 Stock Option Plan
10.20    (1)      1998 Combined Stock Option Plan.
10.21    (1)      Agreement dated June 5, 1997 between the Company and WorldCom,
                  Inc. regarding data services provided by MCI WorldCom, Inc. to
                  the Company.
10.22    (3)      Preferred Provider Agreement by and between the Company and
                  Silicon Graphics, Inc., dated as of March 4, 1999 (portions of
                  this exhibit have been omitted pursuant to a request for
                  confidential treatment and have been filed with the Securities
                  Commission under separate cover).
10.23    (2)      Sale and Purchase Agreement by and between Silicon Graphics,
                  Inc., on behalf of itself and its wholly-owned subsidiary,
                  Cray Research, L.L.C., and the Company dated as of March 4,
                  1999.
10.24    (2)      Lease by and between the Company and Silicon Graphics, Inc. on
                  behalf of itself and its wholly-owned subsidiary, Cray
                  Research, L.L.C., with respect to the Company's corporate
                  campus facility located in Eagan, Minnesota dated as of March
                  4, 1999.
10.25             Intentionally omitted.
10.26             Intentionally omitted.
10.27    (4)      Loan and Security Agreement, dated July 16, 199, by and
                  between Foothill Capital Corporation and the Company.
10.28    (5)      Purchase and Sale Agreement and Escrow Instructions, dated
                  September 30, 1999, between the Company and CCPRE-Eagan, LLC.
10.29    (5)      Amendment No. 1 to the Purchase and Sale Agreement and Escrow
                  Instructions, dated September 30, 1999 between the Company and
                  CCPRE-Eagan, LLC.
10.30    (5)      Net Lease, dated September 30, 1999 between the Company and
                  CCPRE-Eagan, LLC.
10.31    (6)      Master Agreement by and between Winstar Wireless, Inc. and the
                  Company, dated December 31, 1999.

(1)      Incorporated herein by reference to our Registration Statement on Form
         S-4 (File No. 333-53841), filed with the SEC on May 28, 1998.

(2)      Incorporated herein by reference to our Annual Report on Form 10-K,
         filed with the SEC on March 31, 1999.

(3)      Incorporated herin by reference to our Quarterly Report on Form 10-Q,
         filed with the SEC on May 17, 1999.

(4)      Incorporated herin by reference to our Quarterly Report on Form 10-Q,
         filed with the SEC on August 4, 1999.

(5)      Incorporated herin by reference to our Quarterly Report on Form 10-Q,
         filed with the SEC on November 12, 1999.

(6)      Incorporated herin by reference to our Annual Report on Form 10-K,
         filed with the SEC on March 15, 2000.

(7)      Incorporated herin by reference to our Quarterly Report on Form 10-Q,
         filed with the SEC on May 15, 2000.

(8)      Incorporated herin by reference to our Quarterly Report on Form 10-Q,
         filed with the SEC on November 14 , 2000.

(9)      Incorporated herin by reference to our Annual Report on Form 10-K,
         filed with the SEC on April 16, 2001.

*        Filed herewith.

                                      -33-