CHOICE ONE COMMUNICATIONS INC
10-Q, 2000-11-14
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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                          Quarterly Report on Form 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

         For the quarterly period ended September 30, 2000

                                       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: 0-29279

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

                         CHOICE ONE COMMUNICATIONS INC.
             (Exact name of registrant as specified in its charter)


STATE OF DELAWARE                                                   16-1550742
(State or other jurisdiction                                  (I.R.S. Employer
of incorporation or organization)                          Identification No.)

               100 CHESTNUT STREET, ROCHESTER, NEW YORK 14604-2417
               (Address of principal executive offices) (Zip Code)

                                 (716) 246-4231
              (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 for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for the past 90 days. Yes X No _____

As of  November  1,  2000  there  were  outstanding  37,911,771  shares  of  the
registrant's common stock, par value $.01 per share.



<PAGE>





              CHOICE ONE COMMUNICATIONS AND SUBSIDIARIES FORM 10-Q

                                      INDEX


PART I.  FINANCIAL INFORMATION

         Management's Discussion and Analysis of Financial Condition and
         Results of Operations................................................1

         Quantitative and Qualitative Disclosures about Market Risk...........11

         Financial Statements.................................................13

         Condensed Consolidated Balance Sheets as of September 30, 2000 and
         December 31, 1999....................................................13

         Condensed Consolidated Statements of Operations for the three months
         ended September 30, 2000 and September 30, 1999......................14

         Condensed Consolidated Statements of Operations for the nine months
         ended September 30, 2000 and September 30, 1999......................15

         Condensed Consolidated Statements of Cash Flow for the nine months
         ended September 30, 2000 and September 30, 1999......................16

         Notes to Condensed Consolidated Financial Statements.................17

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings....................................................25

Item 2.  Changes in Securities and Use of Proceeds............................25

Item 3.  Defaults Upon Senior Securities......................................25

Item 4.  Submission of Matters to a Vote of Security Holders..................25

Item 5.  Other Information....................................................25

Item 6.  Exhibits and Reports on Form 8-K.....................................25

Signatures    ................................................................26

                                       (i)
<PAGE>



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

OVERVIEW

         We are an integrated  communications  provider offering  broadband data
and  voice  telecommunications  services  primarily  to small  and  medium-sized
businesses in second and third tier markets in the  northeastern  and midwestern
United  States.  Our offerings  include  high-speed  data and Internet  service,
principally  utilizing DSL  technology,  local exchange  service,  long distance
service,  Web design,  development and hosting  services.  We seek to become the
leading  integrated service provider in each of our target markets by offering a
single   source   for   competitively    priced,   high   quality,    customized
telecommunications  services.  A key element of our strategy is to be one of the
first integrated service providers to provide comprehensive  coverage in each of
the markets we serve.  We are achieving this market  coverage by installing both
data and voice network equipment in the central offices of established telephone
companies,  a  process  known  as  collocation.   We  also  intend  to  increase
utilization of our market  network  coverage by offering data and voice services
on a wholesale basis to Internet service and other telecommunications providers.
Through our strategy of connecting  substantially all of our clients directly to
our own switches, we are able to more efficiently route traffic,  ensure quality
service and control costs.

         The results of operations for the Company for the three months and nine
months ended September 30, 2000 include the  consolidated  results of US Xchange
for two months since the acquisition date of August 1, 2000.

         The Company was formed on June 2, 1998 and our initial public  offering
was completed in February 2000. Through January 1999, we were in the development
stage of operations and did not generate any revenue.  Our principal  activities
through  January 1999  consisted of hiring  management  and other key personnel,
raising capital, procurement of governmental authorizations and space in central
offices, acquisition of equipment and facilities,  development,  acquisition and
integration  of  operations  support  systems and other back office  systems and
negotiation of interconnection agreements.

         Our revenue is not  indicative  of revenue  that may be attained in the
future.  As  a  result  of  our  development  activities,  we  have  experienced
significant  operating  losses and negative  adjusted  EBITDA to date. We do not
expect to achieve  positive  adjusted  EBITDA  while we  emphasize  development,
construction and expansion of our telecommunications services business and until
we establish a sufficient  revenue-generating client base. We expect to continue
to experience  increasing  operating  losses and negative  adjusted EBITDA as we
expand our operations.

         Included in our  management's  discussion  and  analysis  of  financial
condition  and  results  of  operations  is  adjusted  EBITDA.  Adjusted  EBITDA
represents   earnings   before   interest,   income  taxes,   depreciation   and
amortization,  non-cash deferred  compensation,  non-cash management  allocation
charges,  accretion on preferred  stock and accrued PIK (paid in kind) dividends
on preferred stock.  Adjusted EBITDA is used by management and certain investors
as an indicator of a company's  historical  ability to service debt.  Management
believes that an increase in adjusted EBITDA is an indicator of improved ability
to service  existing debt, to sustain  potential future increases in debt and to
satisfy  capital  requirements.  However,  adjusted  EBITDA is not  intended  to
represent cash flows for the period, nor has it been presented as an alternative
to either  operating  income,  as  determined by generally  accepted  accounting


                                      -1-
<PAGE>


principles,  nor as an  indicator of  operating  performance  or cash flows from
operating,  investing  and  financing  activities,  as  determined  by generally
accepted accounting principles, and is thus susceptible to varying calculations.
Adjusted  EBITDA as presented may not be comparable  to other  similarly  titled
measures of other companies.

         Inasmuch as the Company has significantly  increased the scope and size
of its operations  from its infancy during the three months ended  September 30,
1999, a comparison of the three months ended September 30, 2000 results with the
three months ended September 30, 1999 is not meaningful.

         The net loss  applicable  to common  stock for the three  months  ended
September  30, 2000 was $53.7  million.  The net loss for the three months ended
September  30,  1999 was $9.1  million.  Adjusted  EBITDA was a  negative  $21.4
million for the three months  ended  September  30, 2000 versus a negative  $6.7
million for the three months ended September 30, 1999.

         Gross profit,  revenue less direct network  costs,  was $3.8 million or
17.7% of revenue during the three months ended  September 30, 2000 versus a loss
of $1.0 million for the three months ended September 30, 1999.

         We have rapidly deployed our networks since commencing service. We were
operational in 24 markets across the northeastern  United States as of September
30, 2000. The table below provides  selected key operational  data as of and for
the three months ended:

                                        September 30, 2000    September 30, 1999

    Markets Served                                   24                 5

    Number of switches-voice                         22                 5

    Number of switches-data                          42                 8

    Total Central Office Collocations                290                67

    Central Office Collocations-voice & data         202                25

    Central Office Collocations-voice only           54                 42

    Central Office Collocations-data only            34                 --

    Estimated Addresssable Market (Business Lines)   3.0 million        880,000

    Lines Sold in quarter-total                      40,573             5,274

    Lines sold in quarter-voice                      39,199             5,136

    Lines sold in quarter-data                       1,374              138

    Lines Installed in quarter-total                 28,755             4,660

    Lines installed in quarter-voice                 27,896             4,603

    Lines installed in quarter-data                  859                57

    Lines in service-total                           148,086            6,986

    Lines in service-voice                           145,397            6,929

    Lines in service-data                            2,689              57

    Total Employees                                  1,302              271

    Sales Employees                                  530                112


                                      -2-
<PAGE>


         During the three months ended  September  30,  2000,  we continued  our
progress  in the area of  electronic  bonding.  In order  to  minimize  the time
between a client order and service  installation we have  established an on-line
and real-time  connection of our operations  support systems,  called electronic
bonding,  with Verizon South.  In the second quarter of 2000, we had established
electronic bonding with Verizon North.  Electronic bonding automates the service
provisioning process,  leading to enhanced quality of service and a reduction in
the overall processing intervals for our clients.

         We have also rolled out online,  web-based billing to our clients.  The
ChoiceInvoice(TM) will help businesses manage their telecommunications expenses.
Our clients will have the ability to sort and select information  providing them
a method to analyze  data and make  decisions.  The  ChoiceInvoice(TM)  provides
local and long  distance  call  detail,  invoices for  multiple  locations,  and
twelve-month  past  billing  activity.  The  ChoiceInvoice(TM)  will enhance the
Company's  operational  efficiency and significantly reduce paper,  handling and
processing costs.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000

Revenue

         The Company  generated $21.4 million in revenue during the three months
ended September 30, 2000.  Revenue for the three months ended September 30, 2000
represents a 105%  increase  compared to revenue for the three months ended June
30,  2000.  The Company  installed  28,755  lines  during the three months ended
September  30,  2000;  an increase of 54% compared  with 18,635 lines  installed
during the three months ended June 30, 2000. At September 30, 2000,  the Company
has a total  installed base of 148,086 lines,  which compares with 51,745 access
lines in service as June 30,2000.  Sales are expected to increase from the level
realized  during the three  months ended  September  30, 2000 as new markets are
opened and as existing markets achieve full sales staffing levels.

         The Company continues to focus on sales of  facilities-based  lines. At
September 30, 2000,  facility-based  lines  represent 85% of the total installed
base as  compared  to 93% of the  total  installed  base at June 30,  2000.  The
decrease  from 93% to 85% is  attributed  to the  acquisition  of US  Xchange on
August 1, 2000. US Xchange,  prior to being  acquired,  had sold resale lines in
cities where it had no collocations.

         Revenue was generated  from local  calling and long distance  services,
DSL and other data services, and E-services,  including Web design,  development
and hosting  services.  The market for local and long distance  services is well
established  and we expect revenue growth  principally  from taking market share
away from other  service  providers.  Similarly,  we expect  revenue from access
charges that are based on long  distance  calls made by and to our customers and
reciprocal  compensation  that  entitles  us to bill the  established  telephone
companies for calls in the same local  calling area,  placed by their clients to
our  clients,  to increase as revenue  increases  but at a declining  rate as we
increase our client base.  Access and  reciprocal  compensation  as a percent of
revenue was 15% and 7%  respectively,  for the three months ended  September 30,
2000.

         The market for  high-speed  data  communications  services and Internet
access is rapidly growing.  We expect to generate revenue from the sale of these
services  to end user  clients  in the small and  medium-sized  business  market
segments.


                                      -3-
<PAGE>


         We  price  our  services  competitively  in  relation  to  those of the
established telephone companies and offer combined service discounts designed to
give clients incentives to buy a portfolio of services and enter into multi-year
service agreements.  Although pricing will be an important part of our strategy,
we believe that direct  relationships  with our customers and  consistent,  high
quality service and customer support will be key to generating customer loyalty.

         Our  experience   demonstrates  that  there  is  significant  churn  of
customers within the  telecommunications  industry, and we believe that churn is
especially  high when  customers are only buying long  distance  services from a
carrier or when  customers  are buying  resold  services.  We expect to minimize
churn by providing  superior  customer care, by offering a competitively  priced
portfolio of local, long distance,  data and Internet services,  and by focusing
on offering our own facilities  based services.  Churn for the nine months ended
September 30, 2000 has been below 1% per month.

Network Costs

         Network costs for the three months ended  September 30, 2000 were $17.6
million  representing  an 81% increase  compared to network  costs for the three
months  ended  June  30,  2000.  This  sharp  increase  is  consistent  with the
deployment  of our  networks and growth of our services as well as the impact of
the financial results of US Xchange for the two months in the period from August
1, 2000 (date of  acquisition)  to  September  30,  2000.  Gross profit was $3.8
million or 17.7% of revenue  during the three  months ended  September  30, 2000
versus  gross  profit of $0.7  million or 6.7% of revenue  for the three  months
ended June 30, 2000.

         Under our network  buildout  strategy,  we are deploying voice and data
switches with local and long distance capability and leasing  transmission lines
from the established  telephone  companies and other  competitive local exchange
carriers to connect our switch with our transmission equipment collocated in the
established  telephone  company's  central offices.  We will lease  transmission
lines from the established  telephone companies to connect our clients and other
carriers'  networks  to our  network.  We plan to lease  capacity  or  overbuild
specific  network  segments  in certain  markets as  economically  justified  by
traffic  volume growth.  In addition,  we expect to increase the capacity of our
switches,  and may install additional switches,  in a market as demand warrants.
We have  acquired the rights to two fiber optic lines  between  Springfield  and
Worcester, Massachusetts and have an option to purchase the rights to additional
fiber optic lines.

         We entered into a master facilities  agreement with Fiber Technologies,
a company that designs, constructs and leases high performance fiber networks in
second and third tier markets in the Northeast and  Mid-Atlantic  regions of the
United States.  The agreement provides us with a 20-year lease for fiber without
electronics in 13 of our markets. Fiber deployment will allow us to
optimize network costs and enhance the quality and reliability of our network.
Fiber  Technologies  commenced  construction  in three markets  during the third
quarter.  We expect to take  possession of the completed fiber networks in these
markets  by early  2001 and expect to begin  installing  electronics  during the
first quarter of 2001.

         In August 2000, we entered into a fiber optic and grant of indefeasible
right to use agreement  with RVP Fiber L.L.C.  The agreement  provides us with a
fiber network consisting of 485 intra-city and 1,691 inter-city miles within the
nine markets of the former US Xchange.  On September  30, 2000,  the  intra-city
fiber network was operational and 112 miles of the inter-city


                                      -4-
<PAGE>


fiber network was operational. We expect the remaining fiber network to be
activated in these nine markets during 2001.

         We expect  switch  site lease costs will be a  significant  part of our
ongoing  cost of  services.  The  costs to  lease  transmission  lines  from the
established  telephone companies will vary by company and are regulated by state
authorities. Collocation costs are also expected to be a significant part of our
network development and ongoing cost of services.  We will be required to invest
a significant  amount of funds to develop the central office  collocation  sites
and to deploy the  transmission and  distribution  electronics.  We have entered
into an agreement with Lucent Technologies, Inc. to purchase Lucent equipment at
a discount to their standard pricing with a term expiring in December 2002.

         In order to  enter a  market,  we must  enter  into an  interconnection
agreement with the established  telephone company to make comprehensive  calling
available to our clients.  Typically these agreements set the cost per minute to
be  charged  by each  party for the calls  which  have  traversed  between  each
carrier's  network,  often referred to as reciprocal  compensation.  These costs
grow in  proportion  to  outbound  call  volume and are  expected  to be a major
portion of our cost of services. To the extent our clients' outbound call volume
is equivalent to their inbound call volume,  we expect that our  interconnection
costs  paid to the  established  telephone  companies  (reciprocal  compensation
expense) will be substantially  offset by the  interconnection  revenue received
from the established telephone companies (reciprocal compensation revenue).

         We have entered into a resale agreement with Frontier Communications of
the West Inc.  to  provide us with long  distance  transmission  services.  This
agreement  provides  for the resale of long  distance  services on a  per-minute
basis and contains minimum volume commitments.  In the event we fail to meet our
minimum volume commitments, we may be obligated to pay under-utilization charges
and in the event we underestimate our need for transmission  capacity, we may be
required to obtain capacity through more expensive means.  Transmission capacity
costs will increase as our clients' long distance calling volume increases,  and
we expect  that these  costs will be a  significant  portion of our cost of long
distance  services.  As traffic on specific routes  increases,  however,  we may
lease or otherwise  acquire  transmission  capacity which, over time, would have
the  effect  of  reducing  our  per  unit  network  costs  and   increasing  our
depreciation and amortization expense.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses for the three months ended
September  30,  2000  were  $33.5  million  compared  to  selling,  general  and
administrative  expenses of $21.7 million during the three months ended June 30,
2000.  These increased  expenses  resulted  primarily from the acquisition of US
Xchange since August 1, 2000 and the related growth in employees. Revenue growth
has  exceeded  the  increase in selling,  general and  administrative  expenses.
Revenue  increased  105%  from  June  30,  2000,  while  selling,   general  and
administrative expenses have grown 54%.

         The number of employees  increased  to 1,302 as of September  30, 2000,
from 671 as of June 30, 2000 and 271 as of September  30, 1999.  As of September
30, 2000, sales employees  (which include direct sales,  sales support and sales
management)  increased to 530.  This compares to 283 as of June 30, 2000 and 112
as of September  30,  1999.  We expect the number


                                      -5-
<PAGE>


of sales employees and total employees to increase throughout the remainder
of 2000 as we continue to expand in Columbus, Dayton and Akron, Ohio.

         Our selling,  general and  administrative  expenses include selling and
marketing costs, client care, billing,  corporate administration,  personnel and
network maintenance.

         We have  developed a customized  information  system and procedures for
operations  support  systems and other back office  systems that are required to
enter,  schedule,  provision  and track a client order from point of sale to the
installation  and testing of service  and that will  include or  interface  with
trouble  management,  inventory,  billing,  collection  and client care  service
systems.  Along with the  development  cost of the  systems,  we will also incur
ongoing expenses for client care and billing. We currently outsource our billing
under an agreement  with ADC  Communications,  Inc.  (formerly  Saville  Systems
Inc.).  This agreement  provides for the  processing of our billing  records and
includes  minimum  monthly  transaction  fees  based on the  number of calls and
access lines billed to customers.  Billing is expected to be a significant  part
of our ongoing administrative expenses.

         We will incur other costs and expenses,  including the costs associated
with the maintenance of our network,  administrative overhead, office leases and
bad debt.  We expect that these costs will grow  significantly  as we expand our
operations  and that  administrative  overhead  will be a large portion of these
expenses during the start-up phase of our business.  However,  we expect most of
these  expenses to become smaller as a percentage of our revenue as we build our
client base.

Management Ownership Allocation Charge and Deferred Compensation

         The  magnitude  of the loss for the three  months and nine months ended
September 30, 2000 is impacted by the  management  ownership  allocation  charge
included  in  selling,  general  and  administrative   expenses.   Institutional
investors of Choice One  Communications  L.L.C. and 27 members of our management
owned approximately 95.0% and 5.0%, respectively,  of the ownership interests of
Choice One  Communications  L.L.C., the entity that owned all of our outstanding
capital stock.  As a result of the  successful  completion of the initial public
offering,  Choice One Communications  L.L.C. was dissolved and its assets, which
consisted  almost  entirely  of  our  capital  stock,  were  distributed  to our
institutional investors and management. Approximately 68.5% of the stock held by
the  L.L.C.  was  distributed  to our  institutional  investors  and  31.5%  was
distributed  to  management,  which is the full amount  allocable to  management
under the L.L.C. agreement.

         Under generally accepted  accounting  principles,  upon consummation of
the initial  public  offering,  we were  required  to record the $119.9  million
increase  in the  assets  of  Choice  One  Communications  L.L.C.  allocated  to
management as an increase in additional  paid-in  capital,  with a corresponding
increase in deferred  compensation,  of which we were  required to record  $64.5
million as a non-cash,  non-recurring  charge to  operating  expense  during the
period in which this offering is  consummated  and $55.4 million was recorded as
deferred  management  ownership  allocation  charge. The deferred charge will be
amortized at $19.0 million,  $23.9 million, $11.6 million and $.9 million during
2000, 2001, 2002 and 2003, respectively. During the three months and nine months
ended  September  30,  2000 the  company  recognized  amortization  of  deferred
management  ownership  allocation  charge of $6.3  million  and  $77.2  million,
respectively.


                                      -6-
<PAGE>


         In addition to the above expenses,  we recognized $2.0 million and $4.4
million of non-cash deferred  compensation  amortization during the three months
and nine months ended September 30, 2000,  respectively.  Deferred  compensation
was recorded in connection  with membership  units of Choice One  Communications
LLC sold to certain management  employees and grants to employees under our 1998
Stock Option Plan. In August 2000,  deferred  compensation  of $14.8 million was
recorded to  stockholders'  equity in connection with the issuance of restricted
shares to the employees of the former US Xchange, Inc.

Depreciation and Amortization

         Depreciation  and amortization for the three months ended September 30,
2000 was $14.7 million representing a 267% increase compared to depreciation and
amortization  expenses for the three months ended June 30, 2000. The increase is
consistent  with the deployment of our networks and initiation of services in 24
markets by September 30, 2000  including  the nine markets  within the former US
Xchange.  Our  depreciation and  amortization  expense includes  depreciation of
switch  related  equipment,  non-recurring  charges and equipment  collocated in
established telephone company central offices, network infrastructure equipment,
information systems and furniture and fixtures.

         It also includes  amortization  of goodwill,  customer base and an IRU.
Goodwill from the acquisitions of US Xchange,  Atlantic  Connections and EdgeNet
Inc. was $329.5 million, $7.0 million and $3.5 million,  respectively.  Customer
base acquired through the acquisitions of US Xchange,  Atlantic  Connections and
EdgeNet Inc. was $31.0 million, $3.3 million and $0.5 million, respectively. The
value  assigned to the IRU from the  acquisition of US Xchange was $42.0 million
and is being  amortized  over 20  years.  Goodwill  and  customer  base is being
amortized over a 10-year and five-year period, respectively.  We expect that our
depreciation  and  amortization  expense  will  increase  as we continue to make
capital expenditures,  acquire long-term rights in telecommunications facilities
and acquire other businesses.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000

Revenue

         The Company  generated  $38.6 million in revenue during the nine months
ended  September 30, 2000 compared to $0.9 million  during the nine months ended
September 30, 1999. The Company  installed,  or obtained through the incremental
gain from the  acquisition  of US Xchange,  127,990 lines during the nine months
ended September 30, 2000 , compared with 6,986 lines  installed  during the nine
months ended  September 30, 1999. At September 30, 2000, the Company has a total
installed  base of 148,086  lines,  which  compares  with 6,986  access lines in
service as  September  30, 1999.  Sales are expected to increase  from the level
realized  during the nine  months  ended  September  30, 2000 as new markets are
opened and as existing markets achieve full sales staffing levels.

Network Costs

         Network  costs for the nine months ended  September 30, 2000 were $34.3
million  compared to network  costs of $2.6  million  for the nine months  ended
September 30, 1999. This sharp increase is consistent with the deployment of our
networks and growth of our services in 24 markets as compared to 5 markets as of
September 30, 1999.


                                      -7-
<PAGE>


         During the nine months ended  September 30, 2000, we achieved  positive
gross  margin of $4.3  million or 11.1% of revenue  during the nine months ended
September  30,  2000 versus a loss of $1.6  million  for the nine  months  ended
September 30, 1999.

Selling, General and Administrative Expenses

         Selling,  general and administrative expenses for the nine months ended
September  30,  2000 were  $132.5  million  compared  to  selling,  general  and
administrative  expenses of $14.2 million during the nine months ended September
30, 1999. These increased  expenses  resulted  primarily from the recording of a
$77.2 million non-cash management allocation charge during the nine months ended
September  30,  2000 as a result of the  company's  initial  public  offering in
February  2000 and from the  acquisition  of US Xchange since August 1, 2000 and
the related  growth in  employees.  Revenue  growth has exceeded the increase in
selling, general and administrative expenses. Revenue increased 376% as compared
to the nine  months  ended  September  30,  1999,  while  selling,  general  and
administrative expenses, excluding the non-cash management allocation charge and
amortization  of  deferred  compensation,  have grown 297% for the same  period.
Excluding the non-cash management allocation charge and amortization of deferred
compensation,  selling,  general and administrative  expenses were $50.9 million
for the nine months ended  September  30, 2000 as compared to $12.8  million for
the nine months ended September 30, 1999.

         The number of employees  increased  to 1,302 as of September  30, 2000,
from 271 as of September  30, 1999. As of September  30, 2000,  sales  employees
(which include direct sales,  sales support and sales  management)  increased to
530.  This  compares to 112 as of September  30,  1999.  We expect the number of
sales  employees  and total  employees to increase  throughout  the remainder of
2000.

Management Ownership Allocation Charge and Deferred Compensation

         Under generally accepted  accounting  principles,  upon consummation of
the initial  public  offering,  we were  required  to record the $119.9  million
increase  in the  assets  of  Choice  One  Communications  L.L.C.  allocated  to
management as an increase in additional  paid-in  capital,  with a corresponding
increase in deferred  compensation,  of which we were  required to record  $64.5
million as a non-cash,  non-recurring  charge to  operating  expense  during the
period in which this offering is  consummated  and $55.4 million was recorded as
deferred  management  ownership  allocation  charge. The deferred charge will be
amortized at $19.0 million,  $23.9 million, $11.6 million and $.9 million during
2000, 2001, 2002 and 2003, respectively.  During the nine months ended September
30, 2000 the company recognized  amortization of deferred  management  ownership
allocation charge of $77.2 million.

         In addition to the above expenses,  we recognized $4.4 million and $1.4
million of non-cash deferred  compensation  amortization  during the nine months
ended  September  30, 2000 and 1999,  respectively.  Deferred  compensation  was
recorded in connection with membership  units of Choice One  Communications  LLC
sold to certain  management  employees  and grants to  employees  under our 1998
Stock Option Plan. In August 2000,  deferred  compensation  of $14.8 million was
recorded to  stockholders'  equity in connection with the issuance of restricted
shares to the employees of the former US Xchange, Inc.


                                      -8-
<PAGE>

Depreciation and Amortization

         Depreciation  and  amortization for the nine months ended September 30,
2000  was  $21.7  million  as  compared  to $3.4  million  of  depreciation  and
amortization expenses for the nine months ended September 30, 1999. The increase
is consistent  with the deployment of our networks and initiation of services in
24 markets by September 30, 2000 including the nine markets within the former US
Xchange.  Our  depreciation and  amortization  expense includes  depreciation of
switch  related  equipment,  non-recurring  charges and equipment  collocated in
established telephone company central offices, network infrastructure equipment,
information systems and furniture and fixtures.

         It also includes  amortization  of goodwill,  customer base and an IRU.
Goodwill from the acquisitions of US Xchange,  Atlantic  Connections and EdgeNet
Inc. was $329.5 million, $7.0 million and $3.5 million,  respectively.  Customer
base acquired through the acquisitions of US Xchange,  Atlantic  Connections and
EdgeNet Inc. was $31.0 million, $3.3 million and $0.5 million, respectively. The
value  assigned to the IRU from the  acquisition of US Xchange was $42.0 million
and is being  amortized  over 20  years.  Goodwill  and  customer  base is being
amortized over a 10-year and five-year period, respectively.  We expect that our
depreciation  and  amortization  expense  will  increase  as we continue to make
capital expenditures,  acquire long-term rights in telecommunications facilities
and acquire other businesses.

         The net loss  applicable  to  common  stock for the nine  months  ended
September  30, 2000 was $160.4  million.  The net loss for the nine months ended
September  30,  1999 was $20.1  million.  Adjusted  EBITDA was a negative  $46.6
million for the nine months  ended  September  30, 2000 versus a negative  $14.5
million for the nine months ended September 30, 1999.

Interest Expense and Income.

         Interest  expense for the three months and nine months ended  September
30, 2000 was approximately $4.0 million and $6.2 million, respectively. Interest
expense includes interest  payments on borrowings under our credit facility.  It
also includes  amortization  of deferred  financing  costs related to our credit
facility.  Interest expense for the three months and nine months ended September
30, 1999 was $0.3 million and $0.8 million, respectively.

         Interest  income for the three months and nine months  ended  September
30, 2000 was approximately $0.3 million and $1.4 million, respectively. Interest
income results from the investment of cash and cash equivalents, mainly from the
cash proceeds  generated from the initial public offering of our common stock in
February  2000.  Interest  income  for the three  months and nine  months  ended
September 30, 1999 was $66,000.

Income Taxes

         We have not generated  any taxable  income to date and do not expect to
generate  taxable  income in the next few years.  Use of our net operating  loss
carryforwards,  which  begin to expire in 2018,  may be subject  to  limitations
under  Section 382 of the  Internal  Revenue Code of 1986,  as amended.  We have
recorded a full  valuation  allowance  on the  deferred  tax  asset,  consisting
primarily of net operating  loss  carryforwards,  due to the  uncertainty of its
realizability.


                                      -9-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Credit Facility.  Our credit facility permits us to borrow up to $350.0
million, subject to various conditions,  covenants and restrictions with maximum
borrowing  limits  to be  reduced  starting  in  2003 by  5.0%  with  increasing
reductions  thereafter  for each year until  maturity  in February  2009.  As of
September 30, 2000, there were $47.9 million in borrowings outstanding under the
revolving  portion,  and  $125.0  million  under  the term B loan of the  credit
facility. The credit facility, which is secured by liens on substantially all of
our and our subsidiaries' assets and a pledge of our subsidiaries' common stock,
contains  covenants  and events of default that are customary for credit of this
nature.

         Cash Flows. We have incurred significant operating and net losses since
our inception.  We expect to continue to experience  increasing operating losses
and negative  adjusted  EBITDA as we expand our  operations and build our client
base. As of September 30, 2000, we had an accumulated deficit of $197.9 million.
Net cash used for operating  activities was approximately  $46.5 million for the
nine months ended  September  30, 2000 and  approximately  $16.7 million for the
nine months ended September 30, 1999. The net cash used for operating activities
during the nine months ended September 30, 2000 was primarily due to net losses.

         Net cash provided by financing  activities  was $458.8  million for the
nine months ended September 30, 2000 and $48.3 million for the nine months ended
September  30,  1999.  Net cash  provided by financing  activities  for the nine
months ended  September  30, 2000 was  primarily  related to the initial  public
offering  completed in February  2000,  issuance of Series A preferred  stock in
August  2000 and  borrowings  under the credit  facility.  Net cash  provided by
financing activities for the nine months ended September 30, 1999 was related to
borrowings under the credit facility and proceeds from capital contributions.

         Capital Requirements. Capital expenditures were $88.4 million and $33.0
million for the nine months ended  September  30, 2000 and  September  30, 1999,
respectively. Capital expenditures were $34.9 million for the three months ended
September  30, 2000.  We expect that our capital  expenditures  will continue at
this rate through the fourth quarter of 2000 in connection  with the purchase of
infrastructure  equipment  necessary  for the  development  and expansion of our
network, the development of new markets and potential acquisitions,  investments
and  strategic  alliances.  The rate of  capital  expenditures  is  expected  to
gradually slow in 2001 as we near completion of our 29 market plan.

         Further,  our commitment for fiber network,  as part of our original 29
market  plan,  could  be up to  $100.0  million  over  the  20-year  term of the
agreement,  subject to certain  performance  criteria  and price  reductions  in
accordance with the related fiber optic agreement.

         To expand and develop our business,  we will need a significant  amount
of cash.  The actual amount and timing of our future  capital  requirements  may
differ  materially from our estimates as a result of the demand for our services
and regulatory, technological and competitive developments, including additional
market  developments and new opportunities in the industry and other factors. We
may require additional financing,  or require financing sooner than anticipated,
if our development  plans or projections  change or prove to be inaccurate or to
complete  our  roll-out  plan to 29  markets.  We may  also  require  additional
financing in order to take advantage of unanticipated  opportunities,  to effect
acquisitions of businesses,  to develop new services or to otherwise  respond to
changing business conditions or unanticipated competitive pressures.  Sources of
additional financing may include commercial bank

                                      -10-
<PAGE>

borrowings, vendor financing or the private or public sale of equity or
debt securities. Our ability to obtain additional financing is uncertain.

         At September  30, 2000, we had  approximately  $1.2 million in cash and
cash  equivalents.  In addition,  the Company has a $350.0 million senior credit
facility and $180.0 million  subordinated debt facility.  At September 30, 2000,
there were borrowings of $173.0 outstanding on the credit facility.  On November
10, 2000,  the Company  borrowed  $180.0  million  under its  subordinated  debt
facility of which cash  proceeds  were $146.4  million,  after fees and escrowed
interest.  The Company  believes that its cash  resources  and available  credit
facilities are sufficient to meet the future capital and operating  requirements
for its 29 market plan which extends beyond the next twelve months.

CERTAIN FACTORS EFFECTING FORWARD-LOOKING STATEMENTS

         Certain   statements   contained   in   this   Form   10-Q   constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995, and the Company intends that such forward-looking
statements be subject to the safe harbors created thereby. The words "believes",
"expects", "estimates",  "anticipates",  "will be" and "plans" and similar words
or expressions identify  forward-looking  statements made by or on behalf of the
Company. These forward-looking  statements are subject to many uncertainties and
factors  that may cause the  actual  results  of the  Company  to be  materially
different from any future results  expressed or implied by such  forward-looking
statements.  Examples of such  uncertainties  and factors  include,  but are not
limited to,  availability of financing and regulatory  approvals,  the number of
potential  customers in a target market, the existence of strategic alliances or
relationships,  technological, regulatory or other developments in the Company's
business,  changes in the competitive  climate in which the Company operates and
the emergence of future  opportunities,  all of which could cause actual results
and experiences of Choice One to differ materially from anticipated  results and
expectations expressed in the forward-looking statements contained herein. These
and other  applicable  risks are summarized under the caption "Risk Factors" and
elsewhere in the Company's  Registration Statement on Form S-1, Registration No.
333-91321,  filed with the  Securities  and  Exchange  Commission  and  declared
effective on February 16, 2000.

         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         At September  30,  2000,  the  carrying  value of our debt  obligations
excluding  capital lease  obligations  was $172.9  million and the fair value of
those obligations was $173.2 million.  A hypothetical  decrease of approximately
1% from  prevailing  interest  rates at September  30, 2000,  would result in an
increase in fair value of long-term debt by approximately $8.2 million.

         Also,  a  hypothetical  increase of  approximately  1% from  prevailing
interest rates at September 20, 3000, would result in an approximate increase in
cash  required  for  interest on variable  rate debt during the next five fiscal
years of $0.6 million per year.

         We  do  not  use  derivative  financial   instruments  for  speculative
purposes. Interest rate swap agreements are used to reduce our exposure to risks
associated  with interest rate  fluctuations  and,  subject to  limitations  and
conditions,  are  required  by our  credit  facility.  By  their  nature,  these
instruments  would  involve  risk,  including  the  risk  of  nonperformance  by
counterparties,  and our maximum potential loss may exceed the amount recognized
in our balance sheet.  We would attempt to control our exposure to  counterparty
credit  risk  through  monitoring  procedures  and  by  entering  into  multiple
contracts.


                                      -11-
<PAGE>

         At September  30, 2000,  we had an interest  rate swap  agreement for a
notional amount of $125.0 million.  Based on the fair value of the interest rate
swap at September  30, 2000, it would have cost us $1.1 million to terminate the
agreement.  A hypothetical 1% decrease in the rate would decrease the fair value
by approximately $0.4 million.



                                      -12-
<PAGE>



                          PART I FINANCIAL INFORMATION

                 CHOICE ONE COMMUNICATIONS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
             (amounts in thousands, except share and per share data)

                                                    September 30,   DECEMBER 31,
                                                    2000            1999
                                                    (Unaudited)
                  ASSETS

Current Assets:
       Cash and cash equivalents ...................    $   1,174     $   3,615
       Accounts receivable, net ....................       18,125         2,929
       Prepaid expenses and other current assets ...        2,788           709
                                                        ---------     ---------
Total current assets ...............................       22,087         7,253

Property and Equipment:

       Property and equipment ......................      306,397        77,318
       Less - accumulated depreciation .............      (18,160)       (4,891)
                                                        ---------     ---------
       Total property and equipment ................      288,237        72,427

Other assets, net ..................................      383,146        14,832
                                                        ---------     ---------
       Total assets ................................    $ 693,470     $  94,512
                                                        =========     =========



                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

<S>                                                             <C>          <C>
Current Liabilities:
         Current portion of long-term debt ..................   $      30    $    --
         Accounts payable ...................................      15,021        5,060
         Accrued expenses ...................................      28,520       11,228
                                                                ---------    ---------
         Total current liabilities ..........................      43,571       16,288

Long-Term Debt and Other Liabilities:
         Long-term debt, less current portion ...............     172,851       51,500
         Other long-term liabilities ........................       1,675         --
                                                                ---------    ---------
         Total long-term debt and other liabilities .........     174,526       51,500

Commitments and Contingencies

Stockholders' Equity:
         Preferred stock, $0.01 par value, 5,000,000
         shares authorized; and 200,000 shares

         issued and outstanding, ($214,000 liquidation value)           2         --
         Common stock, $0.01 par value, 150,000,000 and
         47,730,196 shares authorized, 37,910,973
         and 22,022,056 shares issued and outstanding
         as of September 30, 2000 and December 31, 1999,
         respectively .......................................         379          220
         Additional paid-in capital .........................     735,338       72,454
         Deferred compensation ..............................     (62,414)      (8,401)
         Accumulated deficit ................................    (197,932)     (37,549)
                                                                ---------    ---------
         Total stockholders' equity .........................     475,373       26,724
                                                                ---------    ---------
         Total liabilities and stockholders' equity .........   $ 693,470    $  94,512
                                                                =========    ---------
</TABLE>



           The accompanying notes to consolidated financial statements
                  are an integral part of these balance sheets.



                                      -13-
<PAGE>



                 CHOICE ONE COMMUNICATIONS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             (amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                                THREE MONTHS ENDED
                                                                                   SEPTEMBER 30,

                                                                                 2000           1999
                                                                                (unaudited)     (unaudited)

<S>                                                                         <C>             <C>
Revenue .................................................................   $     21,354    $        793

Operating expenses:
      Network costs .....................................................         17,579           1,780
     Selling, general and administrative, including
        non-cash  deferred  compensation  of $1,958 and $730 in 2000 and 1999,
        respectively and non-cash management ownership allocation charge
        of $6,342 and $0 in 2000 and 1999, respectively .................         33,457           6,405
     Depreciation and amortization ......................................         14,690           1,464
                                                                            ------------    ------------

           Total operating expenses .....................................         65,726           9,649
                                                                            ------------    ------------

Loss from operations ....................................................        (44,372)         (8,856)

Interest income/(expense):
     Interest income ....................................................            281              66
     Interest expense ...................................................         (3,990)           (311)
                                                                            ------------    ------------

Total interest income/(expense), net ....................................         (3,709)           (245)
                                                                            ------------    ------------

Net loss ................................................................        (48,081)         (9,101)

Accretion on preferred stock ............................................            962            --
Accrued dividends on preferred stock ....................................          4,667            --
                                                                            ------------    ------------

Net loss applicable to common stock .....................................   $    (53,710)   $     (9,101)
                                                                            ============    ============

Net loss per share, basic and diluted ...................................   $      (1.50)   $      (0.41)
                                                                            ============    ============

Weighted average number of shares outstanding,
     basic and diluted ..................................................     35,851,310      22,022,256
                                                                            ============    ============

</TABLE>



           The accompanying notes to consolidated financial statements

               are an integral part of these financial statements.




                                      -14-
<PAGE>



                 CHOICE ONE COMMUNICATIONS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             (amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                                          NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,

                                                                                       2000                1999
                                                                                       (unaudited)        (unaudited)

<S>                                                                                <C>             <C>
Revenue ........................................................................   $     38,555    $        947

Operating expenses:
      Network costs ............................................................         34,280           2,577
     Selling, general and administrative, including
       non-cash  deferred  compensation  of $4,435  and $1,410 in 2000 and 1999,
       respectively and non- cash management ownership allocation charge
       of $77,212 and $0 in 2000 and 1999, respectively ........................        132,544          14,236
      Depreciation and amortization ............................................         21,668           3,373
                                                                                   ------------    ------------

          Total operating expenses .............................................        188,492          20,186
                                                                                   ------------    ------------

Loss from operations ...........................................................       (149,937)        (19,239)

Interest income/(expense):
     Interest income ...........................................................          1,426              66
     Interest expense ..........................................................         (6,243)           (898)
                                                                                   ------------    ------------

Total interest income/(expense), net ...........................................         (4,817)           (832)
                                                                                   ------------    ------------

Net loss .......................................................................       (154,754)        (20,071)

Accretion on preferred stock ...................................................            962            --
Accrued dividends on preferred stock ...........................................          4,667            --
                                                                                   ------------    ------------

Net loss applicable to common stock ............................................   $   (160,383)   $    (20,071)
                                                                                   ============    ============

Net loss per share, basic and diluted ..........................................   $      (5.18)   $      (0.91)
                                                                                   ============    ============

Weighted average number of shares outstanding,
   basic and diluted ...........................................................     30,963,595      22,022,256
                                                                                   ============    ============

</TABLE>



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



                                      -15-
<PAGE>



                 CHOICE ONE COMMUNICATIONS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)
<TABLE>
<CAPTION>

                                                                  NINE MONTHS ENDED
                                                                    SEPTEMBER 30,
                                                              2000          1999
                                                             (unaudited)   (unaudited)

<S>                                                         <C>          <C>
Cash flows from operating activities:
         Net loss .......................................   $(160,383)   $ (20,071)
         Adjustments to reconcile net loss to net cash
         used in operating activities
             Depreciation and amortization ..............      21,668        3,373
             Amortization of deferred
                   financing costs ......................         667          161
             Accretion on preferred stock ...............         962         --
             Accrued dividends on preferred stock .......       4,667         --
             Deferred compensation and management
               ownership allocation charge ..............      81,647        1,410
             Changes in assets and liabilities:
                Accounts receivable, net ................      (6,330)        (685)
                Prepaid expenses and other assets .......      (6,163)        (346)
                Accounts payable ........................       2,562        1,737
                Accrued expenses ........................      14,240       (2,319)
                                                            ---------    ---------
         Net cash used in operating activities ..........     (46,463)     (16,740)

Cash flows from investing activities:
         Capital expenditures ...........................     (88,413)     (33,043)
         Cash payments for acquisition of business,
           net of cash acquired .........................    (326,374)        --
                                                            ---------    ---------
         Net cash used in investing activities ..........    (414,787)     (33,043)

Cash flows from financing activities:
         Additions to long-term debt ....................     185,751       33,000
         Principal payments of long-term debt ...........     (64,400)     (28,000)
         Proceeds from capital contributions and issuance
           of common stock ..............................     150,276       43,951
         Proceeds from issuance of preferred stock ......     198,002         --
         Payments of financing costs ....................     (10,820)        (656)
                                                            ---------    ---------
         Net cash provided by financing activities ......     458,809       48,295
                                                            ---------    ---------
Net increase/(decrease) in cash and cash equivalents ....      (2,441)      (1,488)

Cash and cash equivalents, beginning of period ..........       3,615        1,491
                                                            ---------    ---------
Cash and cash equivalents, end of period ................   $   1,174    $       3
                                                            =========    =========

Supplemental disclosures of cash flow information:
         Interest paid ..................................   $   3,552    $     736
                                                            =========    =========
         Income taxes paid ..............................   $       2    $      10
                                                            =========    =========
</TABLE>

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



                                      -16-
<PAGE>



                 CHOICE ONE COMMUNICATIONS INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                   NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000

                                   (Unaudited)


NOTE 1.  GENERAL

         Choice  One  Communications  Inc.,  (the  "Company")  is an  integrated
communications  provider  offering  broadband data and voice  telecommunications
services primarily to small and medium-sized businesses in second and third tier
markets  in the  mid-western  and  northeastern  United  States.  The  Company's
services include  high-speed data and Internet  service,  principally  utilizing
digital subscriber line (DSL) technology,  local exchange service, long distance
service,  Web design,  development  and hosting  services.  The Company seeks to
become the leading integrated  communications  provider in each target market by
offering a single source for  competitively  priced,  high  quality,  customized
telecommunications services.

         Until  February  1999,  the Company was in the  development  stage,  as
defined  by  Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  7,
"Accounting  and  Reporting by  Development  Stage  Enterprises."  The Company's
principal   activities  included   developing  its  business  plans;   procuring
governmental  authorizations;  raising capital;  hiring management and other key
personnel;  developing, acquiring and integrating operations support systems and
other back office systems;  acquiring equipment and facilities;  and negotiating
interconnection  agreements.  Accordingly,  the Company has  incurred  operating
losses and operating cash flow deficits. Expenses are expected to exceed revenue
in each location in which the Company offers service until a sufficient customer
base is established. It is anticipated that obtaining a sufficient customer base
will take a number of years,  and positive  cash flows from  operations  are not
expected in the near future.

NOTE 2.  BASIS OF PRESENTATION

         The accompanying  unaudited interim  consolidated  financial statements
have  been  prepared  in  accordance  with  the  rules  and  regulations  of the
Securities  and  Exchange  Commission  (the  "SEC").  The  interim  consolidated
financial   statements   include  the   consolidated   accounts  of  Choice  One
Communications  Inc.  and  its  wholly-owned  subsidiaries  (collectively,  "the
Company") with all  significant  intercompany  transactions  eliminated.  In the
opinion of management,  all  adjustments  (consisting  only of normal  recurring
adjustments)  necessary for a fair statement of the financial position,  results
of operations and cash flows for the interim  periods  presented have been made.
Certain footnote  disclosures normally included in financial statements prepared
in accordance with generally  accepted  accounting  principles  (GAAP) have been
condensed or omitted pursuant to such SEC rules and regulations. These financial
statements  should be read in conjunction with the Company's  audited  financial
statements  as of and for the year  ended  December  31,  1999.  The  results of
operations  for the nine months  ended  September  30, 2000 are not  necessarily
indicative of the results to be expected for the full year.

         Certain amounts in the prior period's consolidated financial statements
have been reclassified to conform to the current period presentation.

         Unless otherwise stated,  all amounts are in thousands except share and
per share data.


                                      -17-
<PAGE>

NOTE 3.  ACCOUNTING POLICIES


         In June 1998, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No. 133 (SFAS No.  133),  "Accounting  for
Derivative Instruments and Hedging Activities". The Company is expected to adopt
the  statement in its first fiscal  quarter of 2001.  SFAS No. 133 requires that
all derivative financial instruments,  such as interest rate swap agreements, be
recognized in the financial  statements and measured at fair value regardless of
the  purpose or intent for holding  them.  Due to the  Company's  limited use of
derivatives,  the  adoption  of SFAS No. 133 is not  expected to have a material
effect on the Company's financial statements.

         Derivative  instruments  are used by the Company to manage its interest
rate  exposures.  The  Company  does  not use the  instruments  for  speculative
purposes.  Interest  rate swaps are employed as a  requirement  of the Company's
senior credit facility.  The facility  requires a hedge of interest rate for 50%
of the  outstanding  principal  balance once the Company has utilized 50% of the
aggregate  funding under the facility.  The interest  differential to be paid or
received under the related  interest rate swap agreements is recognized over the
life of the related debt and is included in interest  expense or income.  Credit
risk  associated with  nonperformance  by  counterparties  is mitigated by using
major financial institutions with high credit ratings.


NOTE 4.  ACQUISITION

         On August 1, 2000, the Company acquired US Xchange,  Inc. a corporation
headquartered  in Grand  Rapids,  Michigan,  which is engaged in the business of
integrated  communications  services  within the midwest,  primarily  third tier
cities. The purchase price was approximately  $324.5 million in net cash and 6.2
million  shares of common  stock  issued to the sole  shareholder.  The net cash
consideration paid consists of $303.0 disbursed upon closing and $21.5 disbursed
prior to and subsequent to the closing date in connection with the  acquisition.
The  acquisition  was accounted for using the purchase method of accounting and,
accordingly,  the net assets and results of operations of US Xchange,  Inc. have
been  included in the  Company's  consolidated  financial  statements  since the
acquisition date.

         The  purchase  price was  allocated  based  upon the fair  value of the
assets acquired and liabilities assumed with any excess reflected as intangibles
consisting  of goodwill  ($329.5  million) and customer  base ($31  million) and
property plant and equipment  consisting of an  indefeasible  right to use fiber
($42 million),  which is being amortized on a straight-line basis over 10 years,
five years and 20 years, respectively. The assets and liabilities of US Xchange,
Inc. have been  recorded at their  estimated  fair value subject to  adjustments
based  on the  results  of an  independent  appraisal.  In  connection  with the
acquisition, liabilities assumed and cash paid were as follows (in thousands):

Fair value of assets acquired, including cash acquired.............     $535,028

Less-liabilities assumed...........................................       10,347
                                                                          ------

Total consideration paid...........................................      524,681

Less-cash acquired.................................................       29,086

Less-common stock issued...........................................      171,083
                                                                         -------

Net cash paid for acquisition......................................     $324,512
                                                                        ========

                                      -18-
<PAGE>

         On February 24, 2000, the Company acquired EdgeNet,  Inc. a corporation
based in  Buffalo,  New York,  which is engaged  in the  business  of  providing
Internet home page design and development.  The purchase price was approximately
$4.3 million,  approximately $1.9 million in cash and approximately $2.4 million
in a promissory  note that was  converted  into 132,148  shares of the Company's
common stock on September 9, 2000. The  acquisition  was accounted for using the
purchase  method of accounting and,  accordingly,  the net assets and results of
operations of EdgeNet,  Inc.  have been  included in the Company's  consolidated
statement since the acquisition date.

         The  purchase  price was  allocated  based  upon the fair  value of the
assets  acquired and liabilities  assumed with any excess  reflected as goodwill
($3.5  million),  which is being  amortized  on a  straight-line  basis over ten
years. In connection  with the  acquisition,  liabilities  assumed and cash paid
were as follows:

Fair value of assets acquired, including cash acquired.............       $4,397

Less-liabilities assumed...........................................          134
                                                                        --------

Total consideration paid...........................................        4,263

Less-cash acquired.................................................            1

Less-amounts borrowed..............................................        2,400
                                                                           -----

Net cash paid for acquisition......................................       $1,862
                                                                          ======

NOTE 5.         PRO FORMA RESULTS OF OPERATIONS

         The following audited pro forma condensed results of operations combine
the  operations  of the Company  with those of US Xchange  acquired on August 1,
2000 as well as Atlantic  Connections  acquired  on November 3, 1999,  as if the
acquisitions  had  occurred  on January 1, 1999.  The pro forma  information  is
presented  after  giving  effect  to  certain   adjustments  for   depreciation,
amortization of intangible assets, interest expense on the acquisition financing
and non-cash deferred  compensation  charge on restricted shares of common stock
issued on August 1, 2000. The acquisitions were accounted for using the purchase
method of accounting.

         The unaudited pro forma results of operations  are based upon currently
available information and upon certain assumptions that the Company believes are
reasonable.  The unaudited pro forma statements do not purport to represent what
the Company's  financial  position or results of operations  would actually have
been if the transaction in fact occurred on such date or at the beginning of the
period indicated or to project the Company's  financial  position or the results
of operations at any future date or for any future period.


                                                   Pro Forma Nine Months Ended
                                          September 30, 2000  September 30, 1999

Revenue                                              $65,400             $25,311

Loss from operations                              $(208,705)          $(106,475)

Net loss                                          $(224,883)          $(121,710)


                                      -19-
<PAGE>


Net loss applicable to common stock               $(257,655)          $(147,412)

Net loss per share, basic and diluted                $(7.27)             $(5.12)

Weighted average number of shares
   outstanding, basic and diluted                 35,442,495          28,765,215

NOTE 6.  PROPERTY AND EQUIPMENT

         Property and equipment, at cost consisted of the following at September
30, 2000 and December 31, 1999:

                                           September 30, 2000  December 31, 1999

         Switch equipment                           $191,225            $56,263

         Computer equipment and software              28,260             11,416

         Office furniture and equipment                9,749              2,687

         Leasehold improvement                        16,484              1,675

         Indefeasible right to use fiber              43,703                 --

         Construction in progress                     16,976              5,277
                                                      ------              -----

                                                    $306,397            $77,318
                                                    ========            =======

NOTE 7.  OTHER ASSETS

         Other  assets  consisted of the  following  at  September  30, 2000 and
December 31, 1999:

                                      September 30, 2000    December 31, 1999

          Goodwill                              $340,390               $5,464

          Deferred financing costs                16,125                5,305

          Customer base                           34,800                3,300

          Other assets                             1,540                1,406
                                                   -----                -----

                                                 392,855               15,475

          Less-Accumulated amortization            9,709                  643
                                                   -----                  ---

                                                $383,146               14,832
                                                ========               ======




                                      -20-
<PAGE>



NOTE 8.  ACCRUED EXPENSES

         Accrued  expenses  consisted of the following at September 30, 2000 and
December 31, 1999:

                                          September 30, 2000   December 31, 1999

          Accrued network costs                      $12,330          $4,489

          Accrued payroll and payroll
          related benefits                             4,699           1,093

          Accrued collocation costs                    3,825           2,494

          Accrued interest                             2,384             547

          Other                                        5,282           2,605
                                                       -----           -----

                                                     $28,520         $11,228
                                                     =======         =======



NOTE 9.  LONG-TERM DEBT

         In February 2000, in connection  with the  acquisition of EdgeNet,  the
Company entered into $2.4 million of promissory  notes with the  shareholders of
EdgeNet.  The  promissory  notes  were  converted  into  132,148  shares  of the
Company's common stock on September 9, 2000.

         In August 2000, the Company  amended and restated its Credit  Agreement
(the "Second Amended Agreement"). The Second Amended Agreement, which terminates
on eight and  one-half  years from August 1, 2000,  provides the Company with an
eight-year  revolving credit facility of $100.0 million,  an eight-year multiple
draw term A loan of $125.0 million and an eight and one-half year term B loan of
$125.0 million.  The Second Amended  Agreement was used, in part, to finance the
acquisition of US Xchange and will be used to finance capital  expenditures  and
to provide working capital.  Borrowings  under the Second Amended  Agreement are
secured by substantially all of the assets of the Company and bear interest,  at
the Company's  option,  at either the LIBOR rate or the base rate (the higher of
the prime  interest  rate or the  federal  funds  rate plus 0.5  percent),  with
additional  percentage  points added based on the Company's  leverage  ratio, as
defined  in the Second  Amended  Agreement.  In  addition,  the  Company is also
required to pay a commitment  fee of 0.75 percent to 1.5 percent per annum based
on the unutilized portion of the credit facility.

         As of  September  30,  2000,  the term B loan was fully  funded,  $47.9
million of the revolving  credit  facility was funded,  $52.1  million  remained
available  under the  revolving  credit  facility  and $125.0  million  remained
available under the term A loan.

         The Second Amended Agreement revised certain covenants  including total
debt to contributed capital,  minimum revenue, maximum earnings before interest,
taxes,   depreciation   and  amortization   (EBITDA)  losses,   maximum  capital
expenditure levels,  minimum asset coverage,  leverage ratio, fixed charge ratio
and  interest  coverage  ratio,  all as defined  in the  Amended  Agreement.  At
September 30, 2000, the Company was in compliance with these covenants.


                                      -21-
<PAGE>

         On August 1, 2000, the Company entered into a $180.0 million  unsecured
subordinated  debt facility  which is a one-year  overfunded  facility and, upon
draw down of the loan, up to $30.0 million of the loan proceeds will be credited
into escrow to make cash interest  payments on the loan.  Morgan  Stanley Senior
Funding,  a  related  party to the  Company,  was  sole  lead  arranger  for the
subordinated debt facility. The subordinated debt facility commitment expires on
August 1, 2001. The one-year  overfunded  facility maturity date is the earliest
of one year from drawdown or November 30, 2001. On the maturity date, subject to
certain  conditions,  any outstanding balance will be redeemed with the issuance
of rollover  notes.  The rollover  notes mature on the ninth  anniversary of the
rollover  issuance date. On the date of the issuance of the rollover notes,  the
Company will issue  warrant's representing  up to 5% of the fully diluted common
stock of the Company on such date. All warrants will be exercisable at 10% above
the then current  trading price for the common stock of the Company for a period
of five years from the warrants' issuance date.

         On  November  10,  2000,  the  Company  funded the  subordinated  debt.
Borrowings,  net of escrowed  interest and funding  fees,  were $146.4  million.
Interest will be payable quarterly, based on LIBOR plus applicable margin, which
was 14.31% on November 10, 2000.

NOTE 10. DERIVATIVE INSTRUMENTS

         Under the Second  Amended  Agreement,  the Company is required to enter
into hedging agreements with respect to interest rate exposure with an aggregate
notional amount equal to 50% of the outstanding  borrowings once at least 50% of
the aggregate commitment has been utilized.  The Company uses interest rate swap
agreements to reduce its exposure to interest rate changes. On August 31,
2000 the Company entered into a swap contract related to $125.0 million borrowed
on the term B loan. The swap expires in 2006 and is based on three-month  LIBOR,
which is fixed at 6.94%, plus applicable margin. The differential to be received
or paid under the interest  rate swap  agreement is recognized as a component of
interest expense.

         At September 30, 2000,  the notional  principal  amount of the interest
rate swap agreement was $125.0  million  expiring in 2006. The fair value of the
swap  agreement was $(1.1)  million as of September 30, 2000.  The fair value of
the interest rate swap  agreement is estimated  based on quotes from brokers and
represents  the  estimated  amount  that  the  Company  would  expect  to pay to
terminate the agreement at the reporting date.


NOTE 11. CAPITALIZATION

         On January 17, 2000,  the Company's  Board of Directors  voted to amend
the  Certificate  of  Incorporation  of the  Company to  increase  the number of
authorized  common  shares and  preferred  shares to 150  million  and 5 million
respectively.

         On January  25,  2000,  the  Company's  Board of  Directors  approved a
354.60-for-one  stock  split,  the  effect of which is  retroactively  reflected
within these financial statements for all periods presented.

         On February  16,  2000,  the  Company  raised  $164.3  million of gross
proceeds in an initial public offering of Common Stock (the "Equity Offering").


                                      -22-
<PAGE>


         Prior to the Equity Offering, the Company's institutional investors and
management  owned 95.0 percent and 5.0 percent,  respectively,  of the ownership
interests  of  Choice  One   Communications,   L.L.C.,   an  entity  that  owned
substantially all of the Company's outstanding capital stock. As a result of the
Equity Offering, Choice One Communications,  L.L.C was dissolved and its assets,
which consisted  almost entirely of such capital stock,  were distributed to the
Company's  institutional  investors and  management  in accordance  with the LLC
Agreement.  The LLC Agreement  provided that the Equity  Allocation  between the
Company's institutional investors and management be 68.5 percent to the Investor
Members and 31.5 percent to management  based upon the valuation  implied by the
Equity Offering.

         Under generally accepted accounting  principles,  upon the consummation
of the initial public offering,  the Company was required to record the increase
(based upon the valuation of the Common Stock implied by the Equity Offering) in
the  assets  of Choice  One LLC  allocated  to  management  as a $119.9  million
increase  in  additional  paid-in  capital,  with a  corresponding  increase  in
non-cash  deferred  compensation,  of which the Company  was  required to record
$64.5 million as a non-cash,  nonrecurring charge to operating expense and $55.4
million as a deferred  management  ownership  allocation  charge.  The  deferred
charge will be amortized at $19.0 million, $23.9 million, $11.6 million and $0.9
million during 2000, 2001, 2002 and 2003, respectively, which is the period over
which the Company has the right to  repurchase  the  securities  (at fair market
value or the price paid by the employee,  if that price is less than fair market
value) in the event the  management  employee's  employment  with the Company is
terminated.

         On August 1, 2000, the Company issued 200,000 shares of Series A senior
cumulative  preferred  stock and  related  warrants in a private  placement  for
$200.0  million.  The Series A Preferred Stock was issued to Morgan Stanley Dean
Witter Capital Partners, a related party to the Company.  Each share of Series A
preferred  stock has a stated  value of $1,000  and ranks  senior to each  other
class or series of the Company's capital stock.  Dividends will accrue quarterly
at the rate of 14.0% per annum, cumulative and compounded quarterly.  The Series
A preferred  stock  matures on August 1, 2012,  at which time the  Company  must
redeem the shares for their  stated  value plus any unpaid  dividends.  Prior to
August 1, 2005 (the fifth  anniversary  of the issue  date) the  Company may pay
dividends quarterly in additional shares of Series A preferred stock or in cash,
at the Company's option. Thereafter until maturity,  dividends are to be paid in
cash.

         In connection  with the issuance of the Series A preferred  stock,  the
Company  issued  warrants to the holders of the Series A  preferred  stock.  The
warrants to purchase  1,747,454  shares of our common stock are  exercisable  in
whole or in part at any time and represent 4.25% of our outstanding common stock
as of August 1, 2000 (on a pro forma fully  diluted  basis to give effect to the
acquisition  of US Xchange).  The warrant  exercise  price is $0.01 per share of
common stock. The warrants will expire on August 1, 2012.

         In connection with the acquisition of US Xchange on August 1, 2000, the
Company issued 6,742,959 shares.  The shares were issued to the sole shareholder
and  employees  of US Xchange.  The  issuance of shares to the  employees  of US
Xchange consisted of 535,296  restricted  shares.  The shares will vest over two
years at 50% per annum.


                                      -23-
<PAGE>


NOTE 12. RELATED PARTIES

         The  Company  entered  into a master  facilities  agreement  with Fiber
Technologies,  a company that designs,  constructs  and leases high  performance
fiber   networks  in  second  and  third  tier  markets  in  the  Northeast  and
Mid-Atlantic  regions of the United States.  The agreement  provides the Company
with a 20-year  indefeasible  right to use (IRU) fiber without  electronics in
13 of Choice One's market cities. Fiber deployment will allow the Company
to optimize network costs and enhance the quality and reliability of its
network.  The  Company  has  committed  to four  fibers in each  cable in the 13
cities. The Company's  commitment could be up to $100.0 million over the 20-year
term of the  agreement,  subject  to  certain  performance  criteria  and  price
reductions in accordance with the agreement.

         In  addition to the master  facilities  agreement,  the Company  made a
minority  equity  investment  in Fiber  Technologies,  in  return  for which the
Company has the right to appoint one  representative  to the board of directors,
and has a vote in determining the new markets in which Fiber  Technologies  will
develop and build local loops.

         In addition,  Fleet Equity Partners LP, a related party to the Company,
has a significant  equity  investment in Fiber  Technologies and a member of the
Company's  board of  directors  is a  member  of  Fiber  Technologies'  board of
directors.

         Morgan  Stanley Dean Witter  Capital  Partners,  a related party to the
Company,  purchased  200,000 shares of the Company's series A senior  cumulative
preferred stock on August 1, 2000.

         Morgan Stanley Senior Funding, a related party to the Company, was sole
lead  arranger  and one of the  lenders  for  the  Company's  subordinated  debt
facility and was one of the lenders for the Company's senior credit facility.

         In August  2000,  the Company  entered  into a fiber optic and grant of
indefeasible   right  to  use  agreement  with  RVP  Fiber  L.L.C.  The  20-year
indefeasible  right to use was acquired as part of the acquisition of US Xchange
and a value of $42.0 million has been ascribed to that right. Mr.  Vanderpol,  a
shareholder  of RVP Fiber  L.L.C.  is also a  shareholder  of the  Company.  Mr.
Vanderpol has the right to appoint one  representative to the board of directors
of the Company, pursuant to the merger agreement with US Xchange.


                                      -24-
<PAGE>

                            PART II OTHER INFORMATION

Item 1.           Legal Proceedings

                  Not applicable.

Item 2.           Changes in Securities and Use of Proceeds

                  Not applicable.

Item 3.           Defaults Upon Senior Securities

                  Not applicable.

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

                  Not applicable.

Item 5.           Other Information

                  Not applicable.

Item 6.           Exhibits and Reports for Form 8-K

                  A.       Exhibits

                           See Exhibit Index

                  B.       Reports on Form 8-K

                  A Form  8-K was  filed  on  August  11,  2000  announcing  the
                  completion of the acquisition of US Xchange, Inc. No financial
                  statements were included.

                  A Form 8-K/A was filed on September  15, 2000 relating the pro
                  forma financial information for the acquisition of US Xchange,
                  Inc. Audited Financial Statements of US Xchange, Inc. for each
                  of the three years in the period ended  December 31, 2000 were
                  included.



                                      -25-
<PAGE>

                                   SIGNATURES

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

                           CHOICE ONE COMMUNICATIONS INC.
                           Registrant


DATE:  November 14, 2000   By:      /s/ Steve Dubnik
                               -------------------------------------------------
                           Steve M. Dubnik, Chairman and Chief Executive Officer


                           By:      /s/ Ajay Sabherwal
                               -------------------------------------------------
                           Ajay Sabherwal, Executive Vice President, Finance
                           and Chief Financial Officer
                           (Principal Financial Officer)



                                      -26-
<PAGE>




                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT
NUMBER         DESCRIPTION                                           LOCATION
------         -----------                                           --------
<S>            <C>                                                   <C>
3.1            Amended and Restated Certificate of Incorporation     Incorporated by reference from Exhibit 3.1 to
                                                                     Choice One Communication Inc.'s
                                                                     Registration Statement on Form S-1 declared
                                                                     effective on February 16, 2000 located under
                                                                     Securities and Exchange Commission File
                                                                     No. 333-91321 ("February 2000 Registration
                                                                     Statement")

3.2            Amended and Restated Bylaws                           Incorporated by reference from Exhibit 3.2 to
                                                                     the February 2000 Registration Statement

3.3            Certificate of Designations for Series A Senior       Incorporated by reference from Exhibit 3.1
               Cumulative Preferred Stock                            to the August 10, 2000 8-K filing located
                                                                     under Securities and Exchange Commission
                                                                     File No. 29279.

10.1           1998 Employee Stock Option Plan of Choice             Incorporated by reference from Exhibit 4.1 to
               One Communications Inc. (May 2000 Restatement)        the September 29, 2000 S-8 located under
                                                                     Securities and Exchange Commission File
                                                                     No. 333-47002.

10.2           1999 Directors Stock Incentive Plan of Choice One     Incorporated by reference from Exhibit 4.1 to
               Communications Inc.                                   the September 29, 2000 S-8 located under
                                                                     Securities and Exchange Commission File
                                                                     No. 333-47008.

10.3           Transaction Agreement, dated as of July 8, 1998,      Incorporated by reference from Exhibit 10.3 to
               among Choice One Communications Inc., Choice          the February 2000 Registration Statement
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity

10.4           Amendment No. 1 dated as of December 18, 1998         Incorporated by reference from Exhibit 10.4 to
               to Transaction Agreement, dated as of July 8, 1998,   the February 2000 Registration Statement
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity

10.5           Amendment No. 2 dated as of February 18, 1999 to      Incorporated by reference from Exhibit 10.5 to
               Transaction Agreement, dated as of July 8, 1998,      the February 2000 Registration Statement
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity

10.6           Amendment No. 3 dated as of May, 14 1999 to           Incorporated by reference from Exhibit 10.6 to
               Transaction Agreement, dated as of July 8, 1998,      the February 2000 Registration Statement
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity

10.7           Amendment No. 4 dated as of June 30, 1999 to          Incorporated by reference from Exhibit 10.7 to
               Transaction Agreement, dated as of July 8, 1998,      the February 2000 Registration Statement
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity


                                      -27-
<PAGE>

10.8           Amendment No. 5 dated as of June 30, 1999 to          Incorporated by reference from Exhibit 10.8 to
               Transaction Agreement, dated as of July 8, 1998,      the February 2000 Registration Statement
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity

10.9           Amendment No. 6 dated as of November 18, 1999         Incorporated by reference from Exhibit 10.9 to
               to Transaction Agreement, dated as of July 8, 1998,   the February 2000 Registration Statement
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity.

10.10          Amendment No. 7 dated as of August 1, 2000 to         Incorporated by reference from Exhibit 10.2 to
               Transaction Agreement, dated as of July 8, 1998,      the Company's 8-K filed on August 10, 2000
               among Choice One Communications Inc., Choice
               One Communications L.L.C. and holders of
               Investor Equity and Management Equity.

10.11          Registration Rights Agreement dated as of July 8,     Incorporated by reference from Exhibit 10.10
               1998, among Choice One Communications Inc., the       to the February 2000 Registration Statement
               Investor Holders and the Management Holders

10.12          Amendment No. 1 dated as of February 18, 1999 to      Incorporated by reference from Exhibit 10.11
               Registration Rights Agreement dated as of July 8,     to the February 2000 Registration Statement
               1998, among Choice One Communications Inc., the
               Investor Holders and the Management Holders

10.13          Amendment No. 2 dated as of June 30, 1999 to          Incorporated by reference from Exhibit 10.12
               Registration Rights Agreement dated as of July 8,     to the February 2000 Registration Statement
               1998, among Choice One Communications Inc., the
               Investor Holders and the Management Holders

10.14          Amendment No. 3 dated as of June 30 1999 to           Incorporated by reference from Exhibit 10.13
               Registration Rights Agreement dated as of July 8,     to the February 2000 Registration Statement
               1998, among Choice One Communications Inc., the
               Investor Holders and the Management Holders

10.15          Amendment No. 4 dated as of August 1, 2000 to         Incorporated by reference from Exhibit 10.1 to
               Registration Rights Agreement dated as of July 8,     the Company's 8-K filed on August 10, 2000
               1998, among Choice One Communications Inc., the
               Investor Holders and the Management Holders

10.16          Form of Executive Purchase Agreement dated July       Incorporated by reference from Exhibit 10.14
               8, 1998 among the Choice One Communication            to the February 2000 Registration Statement
               Inc., Choice One Communications L.L.C. and
               Certain Executives of the Registrant

10.17          Executive Purchase Agreement dated as of July 8,      Incorporated by reference from Exhibit 10.15
               1998 among the Choice One Communication Inc.,         to the February 2000 Registration Statement
               Choice One Communications L.L.C. and Steve M.
               Dubnik

10.18          Executive Purchase Agreement dated as of July 8,      Incorporated by reference from Exhibit 10.16
               1998 among the Choice One Communication Inc.,         to the February 2000 Registration Statement
               Choice One Communications L.L.C. and Mae
               Squire-Dow


                                      -28-
<PAGE>

10.19          Executive Purchase Agreement dated as of July 8,      Incorporated by reference from Exhibit 10.17
               1998 among the Choice One Communication Inc.,         to the February 2000 Registration Statement
               Choice One Communications L.L.C. and Philip
               Yawman

10.20          Executive Purchase Agreement dated as of July 8,      Incorporated by reference from Exhibit 10.18
               1998 among the Choice One Communication Inc.,         to the February 2000 Registration Statement
               Choice One Communications L.L.C. and Kevin
               Dickens

10.21          Executive Purchase Agreement dated as of July 8,      Incorporated by reference from Exhibit 10.19
               1998 among the Choice One Communication Inc.,         to the February 2000 Registration Statement
               Choice One Communications L.L.C. and Ajay
               Sabherwal

10.22          Second Amended and Restated Credit Agreement          Incorporated by reference from Exhibit 10.8 to
               dated as of August 1, 2000 among the Registrant as    the Company's 8-K filed on August 10, 2000
               Guarantor, subsidiaries of the Registrant, as
               Borrowers, First Union Investors, Inc., as
               Administrative Agent, General Electric Capital
               Corporation, as Syndication Agent, and Morgan
               Stanley Senior Funding, Inc. as Documentation
               Agent and the lenders thereto

10.23          Lease between the Registrant and Bendersen-           Incorporated by reference from Exhibit 10.21
               Rochester Associates, LLC dated October 14, 1998,     to the February 2000 Registration Statement
               as amended

10.24          Unit Purchase Agreement dated as of October 21,       Incorporated by reference from Exhibit 10.22
               1999 among the Registrant, Atlantic Connections       to the February 2000 Registration Statement
               L.L.C., ACL Telecommunications, LTD., Paul
               Cissel, Antonio Lopez, Jr. and North Atlantic
               Venture Fund II, L.P.

10.25          General Agreement between the Registrant and          Incorporated by reference from Exhibit 3.1 to
               Lucent Technologies effective as of July 17, 1999,    the Company's 10-Q for the quarter ended
               as amended.                                           June 30, 2000


10.26          Service Bureau Agreement between the Registrant       Incorporated by reference from Exhibit 10.24
               and Saville Systems Inc. effective September 30,      to the February 2000 Registration Statement
               1998

10.27          Agreement and Plan of Merger by and among             Incorporated by reference from Exhibit 99.2 to
               Choice One Communications Inc., Barter                the Company's 8-K/A filed on May 16, 2000
               Acquisition Corporation, US Xchange, Inc. and the
               Stockholder of US Xchange, Inc. dated as of May
               14, 2000

10.28          Securities Purchase Agreement dated as of August      Incorporated by reference from Exhibit 10.7 to
               1, 2000 among Morgan Stanley Dean Witter Capital      the Company's 8-K filed on August 10, 2000
               Partners IV, L.P., Morgan Stanley Dean Witter
               Capital Partners IV 892 Investors, L.P., Morgan
               Stanley Dean Witter Capital Investors IV, L.P., and
               Choice One Communications Inc. relating to the
               purchase and sale of securities of Choice One
               Communications Inc.


                                      -29-
<PAGE>


10.29          Warrants for the purchase of shares of Common         Incorporated by reference from Exhibit 10.4,
               Stock of Choice One Communications Inc.               10.5 and 10.6 to the Company's 8-K filed on August 10, 2000


10.30          Bridge Financing Agreement dated as of August 1,      Incorporated by reference from Exhibit 10.3 to
               2000 among Choice One Communications Inc., the        the Company's 8-K filed on August 10, 2000
               Lenders party hereto, and Morgan Stanley Senior
               Funding, Inc., as Administrative Agent.

10.31          Fiber Optic Agreement and Grant of IRU dated          Incorporated by reference from Exhibit 10.9 to
               August 1, 2000 by and between Choice One              the Company's 8-K filed on August 10, 2000
               Communications Inc. and RVP Fiber Company,
               L.L.C.

10.32          Form of Executive Employment Agreement                Incorporated by reference from Exhibit 10.10
               between former executives of US Xchange, Inc. and     to the Company's 8-K filed on August 10,
               Choice One Communications Inc.                        2000


10.33          Master Facilities Agreement between Fiber             Incorporated by reference from Exhibit 10.1 to
               Technologies Operating Company, LLC and Choice        the Company's 10-Q for the quarter ended
               One Communications Inc. dated as of May 31,           June 30, 2000
               2000.*


10.34          Addendum Number One 5ESS(R) switch and                Incorporated by reference from Exhibit 10.1 to
               transmission systems Purchase Agreement between       the Company's 10-Q for the quarter ended
               Choice One Communications Inc and Lucent              March 31, 2000
               Technologies Inc. dated as of January 1, 2000.**

10.35          Choice One Communications 401(k) Plan                 Incorporated by reference from Exhibit 10.1 to
                                                                     the Company's 10-Q for the quarter ended
                                                                     March 31, 2000

11.1           Statement regarding computation of per share          Filed Herewith
               loss for the three month period ending September
               30, 2000

11.2           Statement regarding computation of per share          Filed Herewith
               loss for the nine month period ending September
               30, 2000

11.3           Statement regarding computation of per share          Filed Herewith
               loss for the three month period ending September
               30, 1999


11.4           Statement regarding computation of per share          Filed Herewith
               loss for the nine month period ending September
               30, 1999

27.1           Financial Data Schedule                               Filed herewith
</TABLE>

   *Portions of this agreement have been omitted and filed  separately  with the
Commission  pursuant to an application  for  confidential  treatment  under Rule
24b-2, which was granted by the Commission until May 31, 2003.

**Portions of this  agreement  have been omitted and filed  separately  with the
Commission  pursuant to an application  for  confidential  treatment  under Rule
24b-2, which was granted by the Commission until December 31, 2002.



                                      -30-
<PAGE>


                                  EXHIBIT 11.1

                         CHOICE ONE COMMUNICATIONS INC.
                          COMPUTATION OF PER SHARE LOSS
                      THREE MONTHS ENDED SEPTEMBER 30, 2000

                                                                     Equivalent
                  Title               Number of Shares    Percent    Shares

Choice One Communications, Inc.        31,009,797         100.0%     31,009,797

Choice One Communications, Inc.         6,875,107          70.0%      4,817,376

1998 Employee Stock Option Plan            26,069          92.6%         24,137

Weighted Average Share Outstanding                                   35,851,310

Net Loss Applicable to Common Stock                                $(53,709,469)

Net Loss Per Share, Basic and Diluted                                    $(1.50)



                                      -31-
<PAGE>



                                  EXHIBIT 11.2

                         CHOICE ONE COMMUNICATIONS INC.
                          COMPUTATION OF PER SHARE LOSS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000

                                                                     Equivalent
                  Title               Number of Shares  Percent      Shares

Choice One Communications, Inc.            22,022,256   100.0%       22,022,256

Choice One Communications, Inc.             7,645,898    27.8%        2,125,263

February 2000 Stock Offering                8,216,750    82.8%        6,803,396

1998 Employee Stock Option Plan                26,069    48.6%           12,680

Weighted Average Share Outstanding                                   30,963,595

Net Loss Applicable to Common Stock                               $(160,383,367)

Net Loss Per Share, Basic and Diluted                                    $(5.18)






                                      -32-
<PAGE>


                                  EXHIBIT 11.3

                         CHOICE ONE COMMUNICATIONS INC.
                          COMPUTATION OF PER SHARE LOSS
                      THREE MONTHS ENDED SEPTEMBER 30, 1999

                                                                     Equivalent
                  Title               Number of Shares   Percent     Shares

Choice One Communications, Inc.            22,022,256    100.0%      22,022,256

Weighted Average Share Outstanding                                   22,022,256

 Net Loss Applicable to Common Stock                                $(9,101,279)

 Net Loss Per Share, Basic and Diluted                                   $(0.41)




                                      -33-
<PAGE>



                                  EXHIBIT 11.4

                         CHOICE ONE COMMUNICATIONS INC.
                          COMPUTATION OF PER SHARE LOSS
                      NINE MONTHS ENDED SEPTEMBER 30, 1999

                                                                      Equivalent
                  Title                   Number of Shares  Percent    Shares

Choice One Communications, Inc.             22,022,256       100.0%   22,022,256

Weighted Average Share Outstanding                                    22,022,256

Net Loss Applicable to Common Stock                                $(20,071,696)

Net Loss Per Share, Basic and Diluted                                    $(0.91)






                                      -34-
<PAGE>



                                  EXHIBIT 27.1



         THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED  BALANCE  SHEET AT  SEPTEMBER  30,  2000 AND FROM THE  CONSOLIDATED
STATEMENT  OF  OPERATIONS  FOR THE NINE MONTHS ENDED  SEPTEMBER  30, 2000 AND IS
QUALIFIED  IN  ITS  ENTIRETY  BY  REFERENCE  TO  SUCH   CONSOLIDATED   FINANCIAL
STATEMENTS.

         0001091953

         Choice One Communications Inc.

         1,000

PERIOD-TYPE                                                       9-MOS

FISCAL-YEAR-END                                             DEC-31-2000

PERIOD-START                                                JAN-01-2000

PERIOD-END                                                  SEP-30-2000

CASH                                                              1,174

SECURITIES                                                            0

RECEIVABLES                                                      18,125

ALLOWANCES                                                            0

INVENTORY                                                             0

CURRENT-ASSETS                                                    2,788

PP&E                                                            306,397

DEPRECIATION                                                     18,160

TOTAL-ASSETS                                                    693,470

CURRENT-LIABILITIES                                              43,571

BONDS                                                                 0

PREFERRED-MANDATORY                                                   0

PREFERRED                                                             2

COMMON                                                              379

OTHER-SE                                                        474,992


                                      -35-
<PAGE>


TOTAL-LIABILITY-AND-EQUITY                                      693,470

SALES                                                            38,555

TOTAL-REVENUE                                                    38,555

CGS                                                              34,280

TOTAL-COSTS                                                     188,492

OTHER-EXPENSES                                                        0

LOSS-PROVISION                                                        0

INTEREST-EXPENSE                                                  4,817

INCOME-PRETAX                                                 (154,754)

INCOME-TAX                                                            0

INCOME-CONTINUING                                             (154,754)

DISCONTINUED                                                          0

EXTRAORDINARY                                                         0

CHANGES                                                               0

NET-INCOME                                                    (160,383)

EPS-BASIC                                                        (5.18)

EPS-DILUTED                                                      (5.18)




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