1003111--12/28/2006--GLOBIX

related topics

{system, service, information}

{product, market, service}

{control, financial, internal}

{capital, credit, financial}

{regulation, government, change}

{stock, price, share}

{acquisition, growth, future}

{cost, contract, operation}

{customer, product, revenue}

{personnel, key, retain}

{debt, indebtedness, cash}

{tax, income, asset}

{cost, regulation, environmental}

{property, intellectual, protect}

{cost, operation, labor}

{regulation, change, law}

Risks Related to Our Financial Condition and Capital Requirements We have a history of losses which, if continued in the future, could eventually make us unable to meet our financial obligations. We may continue to need capital to maintain and upgrade our systems and support our operations. We may need new financing to fund our existing business and plans for expansion. We may not be able to secure financing on terms acceptable to us, if at all. Any new financing could contain terms that limit our financial and operating flexibility and place us at a competitive disadvantage. Risks Related to Our Acquisition and Divestiture Strategy Our acquisition strategy may prove to be unsuccessful, which could result in further losses and an inability to meet our financial obligations. We may not be able to use some of our net operating losses for U.S. federal income tax purposes, which may increase our future tax liability. We continue to have indemnification obligations and other possible post-closing liabilities relating to the hosting business we divested and the headquarters building we sold. Risks Related to Our Business Generally Our revenues could decline significantly if we lose customers or if our existing customers reduce their level of spending on our services. Our largest five customers represent approximately 54.9% of our revenues from continuing operations in 2006. If we are unable to maintain and upgrade our network and facilities, we could lose customers and revenues or be unable to offer competitive services. Our business could suffer from a loss of management personnel, which may reduce our efficiency and control over our operations and reduce our revenues or earnings. We may not be able to attract or retain the personnel we need in critical areas of our business, which could reduce our efficiency, impair the quality of our services or otherwise adversely affect the ability of our business to perform its functions. Our communications systems, network and infrastructure are vulnerable to physical damage, catastrophic outages, power loss, service limitations and other disruptions, which could result in immediate loss of revenues, payment of outage credits to our customers and, more importantly, the loss of customer confidence and business reputation. If our security measures proved to be inadequate, we could lose customers. Intense competition in the telecommunications industry from a broad range of competitors may prevent us from obtaining customers, require us to lower prices and reduce our revenues. Our business relies on third-party data communications and telecommunications providers that could increase prices or interrupt service, which in turn could cause us to lose customers and revenues. We may not be able to obtain hardware and software on the scale and at the times we need at an affordable cost, and failure to do so could cause us to lose customers or be unable to offer competitive service. Our dependence on a limited number of telecommunications carriers exposes us to possible interruptions that could delay or prevent us from providing our services. Our business requires us to adapt to technological changes, and significant technological changes could render our existing services obsolete. Due to rapidly evolving technologies in the fiber optic network industry and the uncertainty of future government regulation, our current business plan may become obsolete and we may lose customers and revenue if we are unable to successfully adjust our products, services and business strategies as required. We could be liable for violating the intellectual property rights of third parties, which could result in us having to pay a license fee or damages to third parties, which would reduce our revenues. The cost-effective expansion of our fiber optic network within the Northeast and mid-Atlantic regions is crucial to our business plan, and depends upon numerous factors beyond our control. We could lose the contract rights upon which we rely to operate and maintain our fiber optic network in the event of bankruptcy proceedings relating to one or more of the third parties that have granted to us the right to build and operate our fiber optic network using their rights-of-way. Despite our existing rights-of-way, we may be forced to make substantial additional payments to the affected landowners or remove our network from their property, which would significantly harm our business and results of operations. Because significant portions of our fiber optic network are constructed upon rights-of-way controlled by utility companies and municipalities which generally place the operation of their facilities ahead of the operation of our fiber optic network, we may be unable to construct and operate our fiber optic network in the affected areas without periodic interruptions and delays caused by the day-to-day operations of these entities. Municipal regulation of our access to public rights-of-way is subject to change and could impose administrative burdens that would result in additional costs to us or limit our fiber optic network operations. Federal regulation of the telecommunications industry is changing rapidly and we could become subject to unfavorable new rules and requirements which could impose substantial financial and administrative burdens on us and interfere with our ability to successfully execute our fiber optic network business strategies. Revenues from telecommunications provided to end-users are subject to contributions to the FCC s universal service fund, and increases in the amount of the required contributions could increase our costs unexpectedly. If NEON becomes subject to regulation as a common carrier in the future, we would be subject to additional regulatory requirements. State regulation of companies providing telecommunications services varies substantially from state to state and NEON may become subject to burdensome and restrictive state regulations as it expands its fiber optic network into a broader geographic area, which could interfere with its operations and our ability to meet our strategic objectives. Risks Relating to Financial Accounting Failure to hire and train sufficient finance and accounting resources could impact our ability to file timely financial reports. Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price. Risks Related to Our Common Stock Because our common stock is thinly traded, prices are more likely to be volatile and it may be harder for our stockholders to sell any sizable number of shares. Future sales of our common stock may depress our stock price.

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1003111--12/28/2006--GLOBIX_CORP