COLO COM, S-1, 2000-07-21

COLO COM
S-1, 2000-07-21
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 2000

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

COLO.COM
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

<TABLE>
<S> <C> <C>
CALIFORNIA 4813 94-3272783
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

COLO.COM
2000 SIERRA POINT PARKWAY, SUITE 601
BRISBANE, CALIFORNIA 94005
(650) 292-2656
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

CHARLES M. SKIBO
CHIEF EXECUTIVE OFFICER
COLO.COM
2000 SIERRA POINT PARKWAY, SUITE 601
BRISBANE, CALIFORNIA 94005
(650) 292-2656
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
MARIO M. ROSATI, ESQ. JAMES S. SCOTT, SR., ESQ.
MICHAEL S. DORF, ESQ. SHEARMAN & STERLING
ALEXANDER D. PHILLIPS, ESQ. 599 LEXINGTON AVENUE
JUDY G. HAMEL, ESQ. NEW YORK, NY 10022
MARK A. METCALF, ESQ. (212) 848-4000
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------
Common stock, no par value............................ $230,000,000.00 $60,720.00
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JULY 21, 2000

[COLO.COM LOGO]

--------------------------------------------------------------------------------
Shares
Common Stock
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--------------------------------------------------------------------------------

This is the initial public offering of COLO.COM and we are offering
shares of our common stock. The initial public offering price of
our common stock is expected to be between $ and $ per share. We
have made application to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "COLC."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COLO.COM
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>

We have granted the underwriters the right to purchase up to
additional shares to cover over-allotments.

DEUTSCHE BANC ALEX. BROWN ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
UBS WARBURG LLC

THE DATE OF THIS PROSPECTUS IS , 2000
--------------------------------------------------------------------------------
<PAGE> 3

PROSPECTUS SUMMARY

The following summary highlights information we present more fully
elsewhere in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of factors described under the heading "Risk Factors" and elsewhere in this
prospectus.

COLO.COM

We are rapidly deploying an international platform of colocation
facilities, called Neutral Optical Hubs, in which our customers can install
equipment, connect to a choice of network providers and connect with our other
customers. We believe our Neutral Optical Hubs will be best-in-class facilities
that will offer a broad choice of network providers and the most flexible means
to access these providers. Our carrier neutral facilities enable our target
customers to use any of the network providers available at our facilities to
deliver high quality broadband services and applications to their end users. We
are not a communications carrier, and because our facilities are carrier
neutral, our customers will be able to connect their communications equipment
located in our facilities to any of the carriers that are connected to our
facilities. As of May 31, 2000, we had signed contracts with 53 customers to
locate equipment in one or more Neutral Optical Hubs, including:

- Internet-based businesses, such as Campsix, Inc., RateXchange Corporation
and ShockWave.com, Inc.;

- application service providers, such as Evolve Software, Inc. and
Musicbank, Incorporated;

- Internet service providers, such as InterNAP Network Services
Corporation, Madge Networks, N.V., The Masterlink Group, Inc. and SAVVIS
Communications Corporation;

- competitive local phone companies, such as Mpower Communications Corp.,
Telseon Inc. and 2nd Century Communications Inc.; and

- other voice and data communications companies, such as MCI WorldCom and
NeuMedia Inc.

The deregulation of the telecommunications industry and the significant
growth in Internet users and bandwidth intensive applications has increased the
demand for the existing communications infrastructure. This demand has strained
the performance of the infrastructure, leading to problems with latency, data
loss and security. These and other problems are impacting the ability of our
target customers to effectively use the Internet for new services such as
voice-over-Internet protocol and some applications that use streaming and
broadcast capabilities. Content distribution companies and advanced switch
providers have been able to improve existing bottlenecks and network congestion
through technology, but depend on others to provide facilities and interconnect
networks.

Internet-based businesses, application service providers, Internet service
providers, competitive local phone companies and other voice and data
communications companies, which are our target customers, are increasingly
turning to colocation options as the need to be close to their end users and the
cost of building in-house facilities increases. These target customers have
traditionally had limited colocation choices in carrier operated facilities,
carrier hotels or web-hosting facilities. International Data Corporation
predicts that the U.S. market for Internet hosting, which consists of shared
server hosting, several categories of dedicated server hosting and related
services, will grow from an estimated $3.7 billion in 2000 to $18.9 billion in
2003. Within this market, IDC predicts that the market for colocation services
will be one of the

1
<PAGE> 4

fastest growing segments, growing from an estimated $710 million in 2000 to $4.2
billion in 2003.

We believe that our carrier neutral colocation solution addresses the
limitations of the traditional alternatives. Our customers will be able to
purchase a variety of colocation, cross connection and technical support
services in all facilities across our broad geographic presence. We believe our
solution provides the foundation for building networks that enable customers to
locate equipment close to end users, thereby enhancing performance and enabling
them to provide more competitive service offerings. Our Neutral Optical Hubs
will offer a number of compelling advantages to our customers, including:

- international platform and rapid time to market;

- network and service neutrality;

- cost savings;

- best-in-class facilities; and

- superior customer service.

To achieve our goal of becoming the premier, international, single-source
supplier for carrier neutral colocation facilities to our targeted customer
base, our strategy is to:

- be first-to-market with broad geographic presence;

- maintain neutrality;

- strategically deploy multiple Neutral Optical Hubs in key geographic
regions;

- enter into strategic and commercial relationships to extend sales reach;

- expand our service offerings and enable marketplace exchanges; and

- build the COLO.COM brand.

We intend to have at least 40 Neutral Optical Hubs generating revenue or
ready for carriers and customers to install their equipment by the end of June
2001. As of May 31, 2000, we had signed leases for 46 facilities in the United
States and Europe totaling more than 1.1 million square feet, of which 11
facilities in the U.S. were ready for carriers and customers to install their
equipment. We believe our Neutral Optical Hubs will become the preferred
platform for companies that want to enhance service for their end users, will
facilitate business-to-business commerce among our customers and will enable the
convergence of Internet and telecommunication services.

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

We were incorporated in California under the name Colomotion, Inc. in April
1997 and changed our name to COLO.COM in July 1999. We reincorporated in
Delaware in 2000. Our principal executive office is located at
2000 Sierra Point Parkway, Brisbane, California 94005, and our telephone number
is (650) 292-2656. Our corporate website is www.colo.com. The information
contained on our website is not incorporated by reference into this prospectus.

2
<PAGE> 5

THE OFFERING

Common stock offered................ shares

Common stock to be outstanding after
this offering....................... shares

Use of proceeds..................... To fund capital expenditures in the
leasing and buildout of colocation
facilities in the U.S. and
internationally, to provide working
capital, including expenses associated
with sales and marketing activities, to
fund operating losses, for general
corporate purposes and potentially to
fund acquisitions.

Proposed Nasdaq National Market
symbol.............................. COLC

Common stock to be outstanding after this offering is based on 62,885,699
shares of common stock outstanding as of May 31, 2000. It does not include:

- 3,199,400 shares issuable upon exercise of stock options outstanding as
of May 31, 2000, with exercise prices ranging from $0.05 to $5.00 per
share; and

- 7,103,945 shares issuable upon exercise of warrants outstanding as of May
31, 2000, with exercise prices ranging from $0.01 to $10.00 per share.

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

Except as otherwise indicated, all of the information in this prospectus:

- reflects the automatic conversion of each outstanding share of preferred
stock into one share of common stock upon the closing of this offering;

- assumes no exercise of the underwriters' over-allotment option; and

- assumes our reincorporation from California into Delaware prior to the
closing of this offering.

3
<PAGE> 6

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used in computing per share
and pro forma per share data below.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED THREE MONTHS ENDED
(APRIL 2) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ----------------- ------------------
1997 1998 1999 1999 2000
------------ ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue...................................... $ 31 $ 190 $ 218 $ 55 $ 192
Operating costs and expenses................. 108 1,740 9,596 1,233 11,804
Loss from operations......................... (77) (1,550) (9,378) (1,178) (11,612)
Net loss..................................... (78) (1,553) (8,887) (1,176) (11,892)
Basic and diluted net loss per share......... $(0.03) $ (0.28) $ (1.86) $ (0.26) $ (1.49)
Shares used in computing
basic and diluted net loss
per share.................................. 2,612 5,554 4,771 4,461 7,985
Pro forma basic and diluted net loss per
share (unaudited).......................... $ (0.34) $ (0.13) $ (0.21)
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)..... 26,460 8,717 57,155
</TABLE>

In the "as adjusted" column below, we have given effect to the receipt of
the net proceeds from the sale of our common stock in this offering at an
assumed initial public offering price of $ per share, after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses.

<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $381,010 $
Property and equipment, net................................. 49,033 49,033
Restricted cash and cash equivalents(1)..................... 3,765 3,765
Restricted investments(2)................................... 77,729 77,729
Total assets................................................ 525,108
Current portion of notes payable, net of discount(3)........ 478 478
Non-current liabilities, net of discount on long term notes
payable(3)................................................ 219,041 219,041
Total stockholders' equity.................................. 279,332
</TABLE>

-------------------------
(1) Reflects funds set aside as collateral for letters of credit issued under
building lease agreements.

(2) Reflects investments set aside as collateral for the first four interest
payments relating to our senior notes.

(3) The unamortized portion of the estimated fair value of warrants issued in
connection with financing transactions is recorded as a discount to the
related note payable. The actual amount payable at maturity on these
obligations at March 31, 2000 is $303.4 million.

4
<PAGE> 7

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Risks and
uncertainties, in addition to those we describe below, that are not presently
known to us or that we believe are immaterial may also impair our business
operations. These risks could, if they occur, harm our business and our
operating results. In addition, the trading price of our common stock could
decline due to the occurrence of any of these risks, and you may lose all or
part of your investment.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

WE ARE A NEW COMPANY AND FACE ALL OF THE RISKS OF A START-UP COMPANY IN A NEW
AND RAPIDLY EVOLVING MARKET.

We will encounter challenges and difficulties frequently experienced by
early-stage companies in new and rapidly evolving markets, including

- a lack of operating experience;

- increasing net losses and negative cash flows;

- lack of sufficient customers;

- insufficient revenue or cash flow to be self sustaining;

- high capital expenditures;

- an unproven business model; and

- difficulties in managing rapid growth.

We can not assure you that we will ever be successful.

WE MAY NOT SUCCEED BECAUSE OF OUR LIMITED EXPERIENCE.

Because we are a new company, we have limited experience in designing,
building and operating Neutral Optical Hubs. As of May 31, 2000, seven of our
Neutral Optical Hubs were generating revenue (excluding our first facility
located in San Francisco (Mission Street) that we intend to close). Our buildout
plan requires that we identify, lease and construct multiple facilities at the
same time. We intend to have at least 40 Neutral Optical Hubs generating revenue
or ready for carriers and customers to install their equipment in metropolitan
areas by the end of June 2001. This business plan is based on our assumption
that it will take approximately ten months from the date that we enter into a
lease until the date a new Neutral Optical Hub begins generating revenue.
Although we have successfully met this time frame for all of our facilities
(excluding our first facility located in San Francisco (Mission Street)) which
were generating revenue as of May 31, 2000, we have previously experienced and
may continue to experience unforeseen delays and expenses in connection with our
facility buildout program. In addition, we have not yet demonstrated that we are
able to manage the buildout of multiple facilities at the same time. We also may
elect to defer construction of a facility until we have the capital available to
complete construction. Accordingly, we cannot assure you that we will
successfully complete the implementation of our buildout plan within our
proposed time frame. In addition, our lack of experience could result in
increased operating and capital costs and delays in our expansion strategy. Our
lack of operating experience could also result in service interruptions for our
customers. In addition, our long-term business strategy calls for us

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<PAGE> 8

to eventually offer higher margin value-added services to our customers.
However, we do not currently provide such services, and have no experience in
developing, implementing and marketing such services. Accordingly, we can not
assure you that we will be successful at providing these additional services, or
that they will not result in additional losses. We may not successfully address
any or all of the risks posed by our lack of experience, and our failure to do
so would seriously harm our business and operating results.

WE MUST BUILD OUT NEW FACILITIES VERY RAPIDLY IN ORDER TO EXECUTE OUR BUSINESS
PLAN.

We must build out new facilities very rapidly in order to execute our
business strategy, which is based upon gaining a first-to-market advantage in
the new market for neutral colocation facilities. To accomplish this goal, we
intend to have at least 40 Neutral Optical Hubs generating revenue or ready for
carriers and customers to install their equipment in metropolitan areas by the
end of June 2001 and intend to open numerous facilities in subsequent years.
Among other things, our aggressive buildout strategy will require us to rapidly:

- locate and secure suitable sites for our Neutral Optical Hubs;

- acquire and install equipment for each of our facilities, including heat,
ventilation and air-conditioning systems, electrical power supply and
backup systems, fire detection and suppression systems, equipment
monitoring and 24 x 7 security systems;

- hire technical personnel for each of our facilities; and

- connect a variety of network providers to each of our facilities.

We have very limited experience doing this. In addition, our existing and
prospective customers expect us to provide broad geographic coverage in the near
future. As a result, delays in successfully completing our buildout strategy
could impair important relationships, damage our reputation and have a material
adverse effect on our results of operations.

WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE EXPECT FUTURE LOSSES.

We have had very low revenues and have generally experienced increasing
quarterly operating losses and negative cash flows since inception. As of March
31, 2000, we had cumulative net losses of $22.4 million and cumulative cash used
in operating activities of $14.0 million. We expect that our net losses and
negative cash flows will increase significantly for the foreseeable future. We
cannot assure you that we will be able to achieve operating income or positive
cash flows in the future. If we cannot, we would not be able to meet our working
capital requirements or make interest and principal payments on our debt.

WE WILL NEED SIGNIFICANT ADDITIONAL FUNDS WHICH WE MAY NOT BE ABLE TO OBTAIN.

To complete the implementation of our intended buildout plan within our
proposed time frame and to fund our anticipated operating losses, we will need
to raise funds through additional private or public equity or debt financings.
We currently anticipate that our available cash resources combined with the net
proceeds from this offering will be sufficient to meet our anticipated operating
losses, interest expense and capital expenditure requirements through at least
the completion of our intended 40-facility buildout plan by the end of June
2001. However, we could be incorrect. Our available cash resources and the net
proceeds from this offering will not be sufficient to complete all of the
facilities for which we may lease sites. However, we are able to control the
deployment of our facilities and do not intend to begin construction on a
facility unless we have the capital available to complete construction. We will
need to raise additional funds to expand beyond 40 facilities and to fund any
related operating losses, to develop new or enhance existing services or
applications, or to respond to

6
<PAGE> 9

competitive pressures. We anticipate that we may incur a substantial amount of
additional debt under a credit facility that we may enter into during 2000.
Financing may not be available to us at the time we need it, or if it is
available, it may only be available on terms that are unfavorable to us. If we
cannot raise sufficient additional funds on acceptable terms we may need to
delay or abandon some or all of our development and expansion plans or otherwise
forego market opportunities, and we may incur additional losses if we need to
terminate any leases or abandon or delay the completion of any facilities under
construction. Equity financing would dilute the ownership interest of our
current stockholders. Debt financing would increase our interest expense.

The anticipated timing and amount of our capital requirements is
forward-looking and therefore inherently uncertain. It may take longer than we
anticipate to build out our Neutral Optical Hubs. We also do not know how long
our sales cycle will be, but it is likely to be lengthy. Once a particular
facility is generating revenue, we expect that it will take an extended period
of time before it will have enough business to provide sufficient revenue to
cover its expenses. Growth in the number of our facilities is likely to increase
the amount and duration of losses and our financing needs. Our future capital
requirements may therefore vary significantly from what we currently project and
may be affected by unforeseen delays and expenses and a lengthier than
anticipated sales cycle. If we encounter any of these problems or if we have
underestimated our working capital, operating losses or capital expenditure
requirements, we may require significantly more financing than we currently
anticipate.

OUR MARKET IS NEW AND WE DO NOT KNOW IF THERE IS SUFFICIENT DEMAND FOR OUR
SERVICES.

Because the market for neutral colocation facilities is just developing, we
do not know whether there will be sufficient demand for our services. Although a
number of emerging companies are developing similar businesses, we are not aware
of any company that has successfully executed a business plan like ours. We will
make large capital expenditures and incur substantial losses before we have much
information about the actual level of demand for our services. If there is not
as much demand as we expect, our revenues may be insufficient to cover our costs
and expenses, and the value of our common stock could be significantly
decreased.

WE EXPECT COMPETITION TO BE INTENSE.

The market for colocation services is expanding. The main barriers to entry
are access to capital, the time needed to assemble a management team and build
out facilities, and the ability to secure a first-to-market advantage. We have
targeted the developing neutral colocation segment of the broader market for
colocation services. Although there are a number of companies developing
businesses similar to ours, in most metropolitan areas there are currently a
limited number of providers of neutral colocation facilities operating. We
expect other companies to enter this market segment if there is sufficient
demand for neutral colocation services.

A substantial portion of the costs and expenses of a neutral colocation
facility are fixed. Once a facility is built and staffed, the marginal cost of
providing colocation space to a customer is relatively low. Therefore, if there
is more than one neutral colocation facility in a metropolitan area, there may
be price competition. If there is significant excess capacity in a metropolitan
area, this could lead to increased price competition and lower margins.

If we are unable to rapidly roll out our Neutral Optical Hubs, we may lose
our first-to-market advantage and other companies may be able to attract the
same customers that we are targeting. Once a potential customer is located in a
competitor's facility, it will be extremely difficult to convince that potential
customer to relocate to our Neutral Optical Hubs because

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<PAGE> 10

moving out of an existing facility could result in service interruptions and
significant costs to reconfigure network connections.

In addition to competing with other neutral colocation providers, we will
compete with traditional colocation providers, including local phone companies,
long distance phone companies, Internet service providers and web hosting
facilities. Most of these competitors have greater resources, more customers,
longer operating histories, greater brand recognition and more established
relationships than we have. We believe our neutrality provides us with an
advantage over these competitors. However, these competitors could offer
colocation on neutral terms, and may start doing so in the metropolitan areas
where we establish operations. If this occurs, we could face increased price
competition.

The Telecommunications Act requires incumbent local exchange carriers to
provide non-discriminatory colocation to telecommunications carriers that wish
to interconnect with the incumbent local exchange carrier's networks or obtain
access to incumbent local exchange carrier-provided unbundled network elements.
In 1996, the Federal Communications Commission adopted initial rules to
implement this provision and, in 1999, adopted additional rules that should
significantly lower the cost and increase the attractiveness of incumbent local
exchange carrier-provided colocation facilities. Consequently, colocation
offered by incumbent local exchange carriers may become more competitive with
our service offerings.

Telephone and Internet companies with which we compete will be able to
provide our target customers with additional benefits, including bundled
communication services, and may do so at reduced prices or in a manner that is
more attractive to our potential customers than obtaining space in our Neutral
Optical Hubs. If these competitors were to provide communication services at
reduced prices together with colocation space, it may lower the total price of
these services in a fashion that we cannot match.

Our competitors include:

- carriers, such as AT&T, Level 3 Communications, MCI WorldCom, Qwest
Communications International, Inc. and Sprint, which offer colocation as
a byproduct of offering access to their networks;

- web-hosting facilities offered by Digital Island, Inc. and Exodus
Communications, Inc.;

- network access points, such as Neutral Nap, PAIX, and Equinix, Inc.;

- carrier hotels, such as One Wilshire in Los Angeles, the Westin Building
in Seattle and 60 Hudson in New York, which offer physical space for
lease, incumbent local exchange carriers; and

- other domestic and international companies offering central office-like
facilities, such as Switch and Data Facilities Co., CO Space, Inc.,
InFlow, Inc., Telehouse International Corporation of America and
TelePlace in the U.S., CityReach International, DigiPlex S.A., Global
Reach, IX Europe, iaxis, InterXion Netherlands BV and Redbus Interhouse
in Europe, and iAsiaWorks, Inc. in Asia.

Several of our competitors are our customers or our potential customers.

WE MUST MANAGE OUR GROWTH AND EXPANSION EFFECTIVELY.

We are experiencing, and expect to continue to experience, rapid growth
with respect to the buildout of our Neutral Optical Hubs, expansion of our
customer base and increasing the number of our employees. This growth has
placed, and we expect it will continue to place a significant strain on our
financial, management, operational and other systems and resources,

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<PAGE> 11

and we cannot assure you that our systems, resources, procedures and controls
will be adequate to support further expansion of our operations. Any failure to
manage growth effectively could seriously harm our business and operating
results. To succeed, we will need to:

- maintain close coordination among our executive, technical, accounting,
finance, marketing, sales, real estate, construction and operations
organizations;

- improve our operating, administrative, financial and accounting
procedures and controls; and

- implement sophisticated management information systems, including
construction management, billing, budget, sales administration and
tracking, human resources and customer support systems, and systems that
enable us to monitor our operations.

We introduced a new management team and replaced substantially all of our
accounting and finance staff in 1999. In connection with the audit of our
financial statements for the period from our inception (April 2, 1997) to
December 31, 1997 and the year ended December 31, 1998, our independent
accountants reported on certain material weaknesses in the system of internal
accounting and financial controls maintained by our former management, which
included deficiencies in the maintenance of supporting documentation and
approvals for disbursements, processes for authorizing significant contracts and
reconciliation of general ledger accounts, and also reported certain
unauthorized stock transactions. During 1999, in addition to hiring new
accounting and financial personnel, our new management team implemented a number
of internal accounting polices and procedures to strengthen our system of
internal controls. We believe that these new policies and procedures have
resolved all of the material weaknesses reported in connection with our 1998
audit. We can not assure you that we will not experience any deficiencies in our
system of internal controls in the future. For example, despite our strengthened
internal control policies and procedures, we discovered an undocumented
transaction involving an option for the purchase of 5,000 shares of our common
stock in mid-1999.

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A SHORT OPERATING HISTORY.

We were founded under prior management in April 1997 and opened our first
facility in San Francisco (Mission Street) in January 1998. As of May 31, 2000,
this facility was one of eight of our Neutral Optical Hubs generating revenue.
Our new management has decided to close this facility because it does not meet
our technical best-in-class criteria. Our operating history through December 31,
1999 consists of less than two years of operations of a single facility which
has relatively few customers and which is scheduled to be closed. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a further description of the costs associated with the closure
of this facility. As a result, you have limited financial and operating data
about our company upon which to evaluate our business operations and our
prospects and the merits of an investment in the common stock in this offering.
Furthermore, the business of providing neutral colocation facilities is a new
industry. Although a number of emerging companies are developing similar
businesses, we are not aware of any company that has successfully executed a
business plan like ours. Accordingly, neither we nor you have the benefit of a
comparable historical business model in order to analyze our business plan and
prospects.

9
<PAGE> 12

WE HAVE A NEW MANAGEMENT TEAM, AND WE DEPEND ON OUR ABILITY TO ATTRACT AND
RETAIN KEY PERSONNEL.

Nearly all of our management team joined us in 1999 and 2000. Although our
management team has significant business experience, the members of the team
have worked together for only a brief period of time. Our ability to effectively
execute our business strategy depends in large part on our new management team's
ability to operate effectively together. If our executives are unable to do so,
our business and results of operations may be materially and adversely affected.

Our success also depends in significant part upon the continued services of
our key technical, sales and senior management personnel. If we lose one or more
of our key employees, we may not be able to find a replacement and our business
and operating results could be adversely affected. In particular, our
performance depends upon the continued service of Charles M. Skibo, our chairman
and chief executive officer. Mr. Skibo joined us in January 1999 and has been
instrumental in designing and leading the execution of our business strategy.
The loss of Mr. Skibo's services would have a material and adverse effect on our
business.

Although most of our senior management personnel are in place, we will need
to hire additional key personnel in positions related to our strategy of rapid
expansion, including mid-level headquarters staff and qualified technical
personnel at each of our Neutral Optical Hubs. We estimate that we will need to
hire at least 300 additional employees in executive, technical, accounting,
finance, marketing, sales, customer service, real estate, construction
management and operational positions by the end of 2000. As of May 31, 2000, we
had 234 employees, compared to 11 employees at December 31, 1998. Our future
success will depend upon our ability to identify, hire, integrate and retain and
train these new employees. In addition, due to generally tight labor markets,
our industry, in particular, suffers from a lack of available qualified
personnel. We may not be successful in attracting, assimilating or retaining
qualified personnel.

OUR SUBSTANTIAL AMOUNT OF DEBT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER OUR OUTSTANDING
INDEBTEDNESS.

We have a substantial amount of debt, with an approximate total
indebtedness of $303.4 million as of March 31, 2000. In addition, we anticipate
that we may incur a substantial amount of additional debt under a credit
facility that we may enter into during 2000. This substantial level of debt
could have important consequences to you. For example, it could:

- make it more difficult for us to satisfy our obligations with respect to
our outstanding debt;

- increase our vulnerability to general adverse economic and industry
conditions or difficulties that our business may experience;

- require us to dedicate a substantial portion of our cash flow from
operations, if any, to payments on our debt, thereby reducing the
availability of funds for working capital, operating losses, capital
expenditures and other general corporate requirements;

- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate or in taking advantage of
significant business opportunities that may arise;

- place us at a competitive disadvantage compared to our competitors that
have less debt or leverage; and

10
<PAGE> 13

- limit our ability to engage in certain business activities, including,
among other things, our ability to borrow additional funds or make
certain investments due to the financial and restrictive covenants in our
debt.

Any of the above factors could have a material adverse effect on our
business, financial condition and results of operations.

We and our subsidiaries and any future subsidiaries may incur substantial
amounts of additional debt in the future, including an unlimited amount of
purchase money debt and up to $200.0 million of debt under credit facilities,
which may be secured. The terms of the indenture governing our senior notes
limit, but do not prohibit, us or our subsidiaries and any future subsidiaries
from doing so. If we or our subsidiaries and any future subsidiaries incur more
debt, the related risks described above could intensify, and it could be more
difficult for us to satisfy our obligations under our senior notes. See
"Capitalization," "Selected Consolidated Financial Data" and "Description of
Indebtedness."

SERVICE AND OTHER INTERRUPTIONS COULD LEAD TO SIGNIFICANT COSTS AND DISRUPTIONS
WHICH COULD REDUCE OUR REVENUE AND HARM OUR BUSINESS REPUTATION AND FINANCIAL
RESULTS.

Service interruptions are a very serious concern for our prospective
customers and a service interruption or breach of security could be very costly
to us and very damaging to our reputation. Our facilities and customers'
equipment are vulnerable to damage from human error, physical or electronic
security breaches, power loss, other facility failures, fire, earthquake, water
damage, sabotage, vandalism and similar events. In addition, our customers would
be adversely affected by the failure of carriers to provide network access to
our facilities as a result of any of these events. Moreover, we are using an
internally developed, standard facility design and are installing substantially
the same equipment at each of our facilities. Any latent flaws in our design or
equipment would affect most or all of our facilities. Although we have designed
our facilities to exacting standards, any of these events or other unanticipated
problems at one or more of our facilities could interrupt our customers' ability
to provide their services from our facilities. This could damage our reputation,
make it difficult to attract new customers and cause our existing customers to
seek to terminate their contracts with us.

DELAYS IN CUSTOMER INSTALLATION COULD REDUCE OUR REVENUE.

We face the risk that too many customers may want to enter our facilities
at the same time. Our business plan calls for a substantial percentage of
available facility space to be occupied within the first year after a facility
is operational. However, only a limited number of customers will be physically
able to install equipment in a facility at the same time. We also face a number
of organizational issues regarding installing multiple customers' equipment in
multiple locations at the same time. Thus, we may be unable to accommodate our
customers' needs as quickly as they would like. This could result in damage to
our reputation and a reduction in the amount of, or delay in receiving, revenue
from the affected customers.

WE DEPEND ON THIRD PARTIES, INCLUDING NETWORK OWNERS WITH WHOM WE COMPETE, TO
PROVIDE NETWORK CONNECTIONS TO OUR NEUTRAL OPTICAL HUBS.

We are not a communications carrier, and therefore, we rely on third
parties to provide our customers with access to voice, data and Internet
networks. We need to secure relationships with third party network providers to
offer our customers a choice of cost-effective access to networks from our
Neutral Optical Hubs. Our facilities will not be attractive to our customers
without these connections. We intend to rely primarily on revenue opportunities
from our existing and prospective customers to encourage carriers to incur the
expenses required to

11
<PAGE> 14

connect from their points of presence to our Neutral Optical Hubs. Carriers will
likely evaluate the revenue opportunity of a Neutral Optical Hub based on their
estimates of demand. Many of these carriers have their own colocation facilities
and may therefore be reluctant to provide network services at our Neutral
Optical Hubs. As a result, carriers may elect not to connect their services to
our Neutral Optical Hubs. If numerous carriers do not connect to our Neutral
Optical Hubs, our business may fail.

In order to attract carriers to connect to our facilities, we plan to place
circuit orders with approximately three carriers prior to completing
construction of each facility. These orders will generally require us to pay an
installation fee and a minimum monthly charge for periods anticipated to be
approximately one to three years. As of May 31, 2000, we had placed orders with
multiple carriers to connect to 24 of our facilities, with aggregate monthly
service charges of approximately $550,000. These charges become payable as
carriers complete their connections to each facility. We expect that as
customers connect to these carriers, these circuits and the related monthly
charges will be assigned to these customers and thereby reduce our obligations
to the carriers. However, we cannot assure you that we will be successful in
assigning these commitments to our customers or that we will not be required to
make substantial payments to carriers before we begin generating revenues from
our customers. In addition to the 24 facilities with carrier service orders to
be charged, 11 of our facilities either had carriers installed or connections on
order without monthly service charges. We may also need to provide additional
incentives to attract carriers to connect to our facilities. We believe that
once the first carriers connect to any given facility, other carriers will be
more likely to do so. In the event that we experience delays in installing
customers in our facilities, or those customers do not want services from the
carriers which we have brought into a facility, we may be required to make
substantial payments to these carriers.

The construction required to connect multiple carriers to our Neutral
Optical Hubs is complex and involves factors outside of our control, including
the availability of local building permits, regulatory processes and the
availability of the carrier's construction resources and vendor equipment. We
have in the past experienced, and may in the future experience, delays in
obtaining access.

OUR ABILITY TO FILL OUR NEUTRAL OPTICAL HUBS IS LIMITED BY THE AVAILABILITY OF
ELECTRICAL POWER.

The availability of an adequate supply of electrical power and the
infrastructure to deliver that power is critical to our ability to attract new
customers and achieve our projected results. We rely on third parties to provide
electrical power to our Neutral Optical Hubs, and cannot be sure that these
parties will provide adequate electrical power to our Neutral Optical Hubs or
that we will have the necessary infrastructure to deliver adequate electrical
power to our users. Even if the utility company provides adequate power to the
building, we still must rely on the landlord to provide adequate electrical
power to our Neutral Optical Hub. If the amount of electrical power delivered to
our facilities is inadequate to support our customer requirements or does not
occur in a timely manner, our operating results and cash flow may be materially
and adversely affected. In addition, the amount of space required to house
generators and batteries limits the amount of sellable space that we have in
each of our Neutral Optical Hubs and restricts our ability to expand the
facilities. Our electrical power specifications are based upon the expected mix
of customers and the expected mix of their equipment. Technological change could
also increase the power requirements of customer equipment. As a result, a
different mix of customers or equipment or different specifications of our
customers equipment than what we expect could cause us to run out of available
power before a facility is fully filled thus reducing our anticipated revenue
stream or requiring us to incur additional costs to increase the amount of
available power and potentially reducing the amount of saleable space.

12
<PAGE> 15

OUR REVENUES FROM EACH NEUTRAL OPTICAL HUB WILL BE AFFECTED BY A MIX OF
CUSTOMERS WITH LARGE AND SMALL DEMANDS FOR SPACE.

Customers will have specific requirements for the configuration of their
space which we may inaccurately predict. We build our sites anticipating roughly
an equal mix of custom fit cage space that is designed to meet the
specifications of our customers with demands for larger space and pre-configured
cabinet and cage space that is designed for customers with demands for small and
medium sized space. If we fail to meet our anticipated customer mix, we may
incur significant costs to retrofit our facilities. We expect our large
customers to purchase large amounts of cage space and outfit it to meet their
own specifications. Our preconfigured cage space is available in 10' x 12', 10'
x 10' and 8' x 7' sizes, and our cabinets are designed to fit standard size
Internet (19-inch) and telecommunications (23-inch) mounts. We expect that some
significant larger customers will drive early revenue and occupancy within each
of our facilities and help us attract smaller customers. If we fail to attract
enough large customers, we may not be able to increase our revenues quickly
enough and may fail to establish ourselves as a credible service provider. We
also expect that we will be able to fill our custom cage space much more quickly
than our pre-configured cabinet and cage space. On the other hand, if we sell
more than the expected amount of our space to large customers, we will have less
space available to sell, on a potentially higher margin basis, to smaller
customers. As a result, if we are unable to achieve a desirable mix of large and
small customers, our financial results may be adversely affected.

WE MAY CONTINUE TO HAVE CUSTOMER CONCENTRATION.

To date, we have relied upon a very small number of customers for most of
our revenue. We expect that we will continue to rely upon a limited number of
customers for a high percentage of our revenue on a per-facility basis and may
also continue to have customer concentration company-wide. As a result of this
concentration of our customer base, a loss of or decrease in business from one
or more of our customers in any single facility could have a material and
adverse effect on that facility, and a loss of or decrease in business from one
or more of our significant customers that have entered into contracts covering
multiple facilities could have a material and adverse effect on our business,
prospects, financial condition and results of operations. In addition, since
customers entering into contracts covering multiple facilities will have a
significant impact on our revenue, they may force us into concessions that will
reduce our profit margins.

WE MAY HAVE DIFFICULTY COLLECTING PAYMENTS FROM SOME OF OUR CUSTOMERS.

We anticipate that a number of our customers will be start-up companies.
There is a risk that these companies will experience difficulty paying their
bills, including money owed to us for our services. Although we believe that the
difficulties and service interruptions associated with relocating communications
equipment may lead these customers to give greater priority to paying for our
services, we might not be able to collect all of the money owed to us by some of
these customers. We intend to remove customers that do not pay us in a timely
manner. However, we may have difficulty collecting from or removing these
customers.

WE MUST RESPOND TO EVOLVING INDUSTRY STANDARDS.

The demand for our Neutral Optical Hubs will be affected by evolving
industry standards and changes in customer demands. Our success will partially
depend on our ability to address the increasingly sophisticated and varied needs
of our existing and prospective customers. Future advances in technology may not
be beneficial to, or compatible with, our business, and we may not be able to
incorporate advances on a cost-effective and timely basis. For example,

13
<PAGE> 16

although we have taken steps to incorporate wireless communications capabilities
into our facilities, the further development of this technology could lead to a
reduced need for our other products and services. If customer requirements for
electrical power increase and we are unable to meet this demand it will have a
material and adverse impact on our business. If evolving industry standards
result in substantial changes in the standard size specifications of our
customers' equipment, and thereby result in the need for different dimensions of
cage or cabinet space, we may need to incur additional costs to retrofit our
facilities and our financial results may be adversely impacted.

WE MUST LOCATE AND SECURE SUITABLE SITES.

We need sites that meet specific infrastructure requirements such as access
to multiple communication carriers, a significant supply of electrical power,
high ceilings, and the capability for heavy floor loading. In many markets, the
supply of facilities with these characteristics is very limited and is in very
high demand. In addition, the completion of lease transactions requires timely
and successful negotiations with landlords. Our ability to secure leases rapidly
can be affected by poor landlord responses. If we are not able to locate and
secure suitable sites for our Neutral Optical Hubs in the markets that we intend
to enter, we will not be able to complete the implementation of our buildout
plan within our proposed time frame, and our business and results of operations
may be adversely affected.

WE FACE RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD HARM OUR
BUSINESS.

A component of our strategy is to expand into international markets,
including Europe and Asia-Pacific. International expansion is important to our
customers who want a colocation provider with broad geographic coverage. Because
our management has limited experience in conducting business outside the U.S.
and may not know particular factors that affect our business in foreign
countries, we will be subject to greater risks there. In addition, we anticipate
that market and regulatory acceptance of the services provided by our Neutral
Optical Hubs will be slower outside the U.S. As a result, we could suffer
material harm to our business, including increased costs, longer sales cycles
and diversion of management's attention, if we experience difficulty in dealing
with some of the risks inherent in conducting our business internationally. Some
of these risks include:

- increased leasing costs and expenses;

- difficulty or increased costs of constructing Neutral Optical Hubs;

- longer construction times and sales cycles;

- difficulty of securing relationships with third party network owners;

- business practices and protectionist laws that favor local competition;

- changes in regulatory requirements, tariffs and other trade barriers;

- challenges in staffing and managing foreign operations, including
differences in employment laws and practices;

- difficulties associated with enforcing agreements through foreign legal
systems; and

- fluctuations in currency exchange rates and imposition of currency
exchange controls.

In addition, in order to develop or expand our international operations, we
may acquire complementary businesses or enter into joint ventures or outsourcing
agreements with third parties. Thus, we may depend on third parties to be
successful in our international operations.

14
<PAGE> 17

WE MAY MAKE ACQUISITIONS, WHICH POSE INTEGRATION AND OTHER RISKS.

We may seek to acquire other colocation providers or additional colocation
facilities from other companies. As a result of these acquisitions, we may:

- pay too much;

- be required to incur significant expenditures to retrofit the acquired
facility to bring it up to our standards;

- have difficulty assimilating customers, technology and personnel from
acquired businesses;

- create goodwill that would reduce our earnings, if any, as it is
amortized; and

- have to make write-offs of acquired assets.

We may also acquire colocation facilities or operators of colocation
facilities in foreign countries to expand our international operations. These
acquisitions would also pose the risks discussed above under "We face risks
associated with international operations that could harm our business." In
addition, we might issue common stock to pay for some or all of the purchase
price for acquired businesses. That would dilute the ownership interests of our
current stockholders. Currently, we have no present understandings, commitments
or agreements with respect to any such acquisitions.

LEGISLATION AND GOVERNMENT REGULATION COULD ADVERSELY IMPACT OUR BUSINESS PLAN
AND OUR OPERATING RESULTS.

Changes in the regulatory environment could affect our operating results by
increasing competition, decreasing revenue, increasing costs or impairing our
ability to offer services. The provision of basic telecommunications services is
subject to significant regulation at the federal and state level. The Federal
Communications Commission regulates telecommunications carriers that provide
interstate and international common carrier services. State public utilities
commissions exercise jurisdiction over intrastate basic telecommunications
services but do not regulate most enhanced services, which involve more than the
pure transmission of customer provided information. Many of our customers,
competitors and vendors, especially incumbent local exchange carriers, are
subject to federal and state regulations. These regulations change from time to
time in ways that are difficult for us to predict. Although we believe the
services we provide today are not subject to any regulation by the Federal
Communications Commission or the state public utilities commissions, changes in
regulation or new legislation may increase the regulation of our current
services. In addition, our intended expansion into international markets could
subject us to regulatory requirements of foreign jurisdictions.

WE MAY BE SUBJECT TO ENVIRONMENTAL RISKS INHERENT IN THE ON-SITE STORAGE OF
DIESEL FUEL AND BATTERIES.

Our Neutral Optical Hubs contain tanks for the storage of diesel fuel and
significant quantities of lead acid batteries to provide back-up power
generation and uninterrupted operation of our customers' equipment. We maintain
an environmental compliance program that includes the implementation of required
technical and operational procedures designed to minimize the potential for
leaks and spills, maintenance of records and manufacturer's recommended
preventative maintenance. However, we cannot assure you that these systems will
at all times remain free from leaks or that the use of these systems will not
result in spills. Any leak or spill, depending on such factors as the material
involved, quantity and environmental setting, could result in interruptions to
our operations and expenditures that could have a material adverse effect on our
business, financial condition and results of operations.

15
<PAGE> 18

RISKS RELATED TO THIS OFFERING

OUR SIGNIFICANT STOCKHOLDERS CAN EXERT CONTROL OVER US, AND MAY NOT MAKE
DECISIONS THAT ARE IN THE BEST INTERESTS OF ALL STOCKHOLDERS.

After this offering, our officers, directors and principal stockholders
(greater than 5% stockholders) will together control approximately % of our
outstanding common stock. As a result, these stockholders, if they act together,
will be able to exert a significant degree of influence over our management and
affairs and over matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control of COLO.COM and might affect the market price of our common
stock, even when such a change may be in the best interests of all stockholders.

WE HAVE BROAD DISCRETION TO USE THE PROCEEDS OF THIS OFFERING, AND OUR
INVESTMENT OF THESE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN.

Our management has broad discretion over the use of proceeds from this
offering and may spend these proceeds in ways with which our stockholders may
not agree. We intend to use the proceeds from this offering to fund capital
expenditures in the leasing and buildout of colocation facilities, to provide
working capital, including expenses associated with sales and marketing
activities, to fund operating losses, for general corporate purposes and
potentially to fund acquisitions. Our use of proceeds may not yield a
significant return or any return at all.

OUR STOCK PRICE MAY FLUCTUATE SUBSTANTIALLY.

Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this offering or, if developed, may not be sustained. We and the
representatives of the underwriters, through negotiations, will determine the
initial public offering price of the shares of common stock. This price will not
necessarily reflect the market price of the common stock following this
offering.

The market price for the common stock following this offering will be
affected by a number of factors, including the following:

- the announcement of new products or services by us or our competitors;

- quarterly variations in our or our competitors' results of operations;

- failure to achieve operating results projected by securities analysts;

- changes in earnings estimates or recommendations by securities analysts;

- developments in our industry; and

- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.

These factors and fluctuations, as well as general economic, political and
market conditions, may materially adversely affect the market price of our
common stock.

16
<PAGE> 19

POTENTIAL SALES OF SHARES ELIGIBLE FOR FUTURE SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE.

If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. The shares sold in this offering will be freely tradable
immediately upon completion of this offering. In addition, on the 181st day
after completion of this offering, approximately shares of our common
stock held by existing stockholders will be freely tradable, subject in some
instances to the volume and other limitations of Rule 144. Sales of these shares
and other shares of common stock held by existing stockholders could cause the
market price of our common stock to decline.

PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN OUR CONTROL, EVEN IF THIS WOULD BE BENEFICIAL TO
STOCKHOLDERS.

Provisions of our amended and restated certificate of incorporation, bylaws
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. These provisions
include:

- a classified board of directors, in which our board is divided into three
classes with three year terms with only one class elected at each annual
meeting of stockholders, which means that a holder of a majority of our
common stock will need two annual meetings of stockholders to gain
control of the board;

- a provision which prohibits our stockholders from acting by written
consent without a meeting;

- a provision which permits only the board of directors, the president or
the chairman to call special meetings of stockholders; and

- a provision which requires advance notice of items of business to be
brought before stockholders meetings.

These provisions can be amended only with the vote of the holders of
66 2/3% of our outstanding capital stock.

AS A NEW INVESTOR, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

If you purchase shares of our common stock in this offering, you will incur
immediate dilution of $ per share in pro forma net tangible book value. If
the holders of outstanding options or warrants exercise those options or
warrants, you will incur further dilution. See "Dilution."

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<PAGE> 20

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"intend," "potential" or "continue."

In addition, these forward-looking statements include statements regarding
the following:

- our business strategy;

- our future operations;

- our financial position and estimated revenues;

- our expected cost and timing of leasing, constructing and equipping each
new facility; and

- our prospects, plans and objectives of management.

These statements are only predictions.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus or to conform these statements to actual results.

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<PAGE> 21

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $ million
from the sale of the shares of common stock in this offering
(approximately $ if the underwriters exercise their over-allotment
option in full), at an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and commissions and estimated
offering expenses. We expect to use the net proceeds to fund capital
expenditures in the leasing and buildout of colocation facilities in the U.S.
and internationally, to provide working capital, including expenses associated
with sales and marketing activities, to fund operating losses, for general
corporate purposes and potentially to fund acquisitions.

The amounts that we will actually expend will vary significantly depending
on a number of factors, including revenue growth, if any, capital expenditures,
the amount of cash generated by our operations, any additional financing that we
may obtain and the use of proceeds of any such financing and other factors, many
of which are beyond our control. Additionally, if we determine that it would be
in our best interests, we may modify the number, selection and timing of entry
into various geographic markets that we may enter. Accordingly, we will retain
broad discretion in the allocation of the net proceeds of this offering.
Although we may use a portion of the net proceeds to pursue acquisitions of
businesses complementary to ours or additional colocation facilities from other
companies, there are no present understandings, commitments or agreements with
respect to any such acquisitions. Pending use of the net proceeds as outlined
above, we will invest these funds in short-term, interest bearing,
investment-grade securities to the extent permitted by the covenants governing
our outstanding senior notes and our existing debt and any statistical asset
tests imposed by the Investment Company Act of 1940 and in government
securities.

DIVIDEND POLICY

We have not paid any dividends since our inception and do not intend to pay
any dividends on our capital stock in the foreseeable future. We anticipate that
we will retain all of our future earnings, if any, for use in our operations and
expansion of our business. In addition, the indenture governing our outstanding
senior notes significantly limits our ability to pay dividends on our capital
stock.

TRADEMARKS

We own applications for federal registration and claim rights in the
service marks COLO.COM(SM), Neutral Optical Hub(SM) and NOH(SM). This prospectus
also refers to service marks, trade names and trademarks of other companies.

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<PAGE> 22

CAPITALIZATION

The following unaudited table sets forth:

- the actual cash, investments and capitalization of COLO.COM at March 31,
2000; and

- the as adjusted cash, investments and capitalization after giving effect
to this offering assuming an initial public offering price of $ per
share, after deducting underwriting discounts and commissions and
estimated offering expenses.

Please read this table in conjunction with our consolidated financial
statements, the notes to those statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included later in
this prospectus.

<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------------------
(UNAUDITED)
ACTUAL AS ADJUSTED
------------ ---------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Cash and cash equivalents................................... $381,010 $
========
Restricted cash and cash equivalents........................ 3,765 3,765
======== ========
Restricted investments...................................... 77,729 77,729
======== ========
Current portion of notes payable, net of discount(1)........ 478 478
======== ========
Long term obligations, net of current portion:
Notes payable, net of discount(1)......................... 1,287 1,287
13 7/8% senior notes due 2010, net of discount(1)......... 216,468 216,468
-------- --------
Total long-term debt...................................... 217,755 217,755
Stockholder's equity:
Series A preferred stock, no par value; 5,250,000 shares
authorized; 4,261,730 shares issued and outstanding (no
shares outstanding as adjusted)........................ 2,079 --
Series B preferred stock, no par value; 24,500,000 shares
authorized; 24,500,000 shares issued and outstanding
(no shares outstanding as adjusted).................... 12,219 --
Series C preferred stock, no par value; 21,000,000 shares
authorized; 20,408,164 shares issued and outstanding
(no shares outstanding as adjusted)(2)................. 194,056 --
Common stock, no par value; 81,000,000 shares authorized;
13,557,555 shares issued and outstanding (62,727,449
shares outstanding as adjusted)(3)..................... 26,003
Warrants(4)................................................. 88,460 88,460
Deferred compensation....................................... (19,698) (19,698)
Notes receivable from stockholders.......................... (1,377) (1,377)
Accumulated deficit......................................... (22,410) (22,410)
-------- --------
Total stockholders' equity............................. 279,332
-------- --------
Total capitalization................................... $497,087 $
======== ========
</TABLE>

-------------------------
(1) The unamortized portion of the estimated fair value of warrants issued in
connection with financing transactions is recorded as a discount to the
related note payable. The actual amount payable on these notes as of March
31, 2000 is $303.4 million.

(2) Excludes 601,655 shares of Series C preferred stock issuable upon the
exercise of currently exercisable warrants outstanding as of March 31, 2000
with a weighted average per share exercise price of $8.35 and per share
exercise prices ranging from $6.44 to

20
<PAGE> 23

$10.00. Upon the closing of this offering, these warrants will become
exercisable for an equal number of shares of common stock at the same
exercise price. In June 2000, we cancelled warrants to purchase 10,000
shares of Series C preferred stock in partial consideration for the issuance
of 10,000 shares of common stock.

(3) Excludes:

- 10,000 shares of common stock that were issued in June 2000 in exchange
for a cash payment and the cancellation of warrants to purchase 10,000
shares of Series C preferred stock as described above in (2);

- 2,860,550 shares of common stock reserved for issuance upon exercise of
outstanding vested and unvested options as of March 31, 2000 with a
weighted average per share exercise price of $2.22 and per share exercise
prices ranging from $0.05 to $5.00;

- 530,000 shares of common stock issuable upon the exercise of currently
exercisable warrants outstanding as of March 31, 2000 with a per share
exercise price of $0.05; and

- 5,991,540 shares of common stock reserved for issuance upon exercise of
the warrants sold in our senior notes offering in March 2000, with a per
share exercise price of $0.01. These warrants will become exercisable
upon the earlier of (a) March 10, 2001 or (b) 180 days following the
closing of our initial public offering.

(4) Reflects the value assigned to warrants issued in connection with our senior
notes offering and other financing transactions. The value assigned to the
warrants was calculated using the Black-Scholes pricing model (see Notes 6
and 8 to Consolidated Financial Statements).

21
<PAGE> 24

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering.

The pro forma net tangible book value of COLO.COM at March 31, 2000, was
$ million, or $ per share. Pro forma net tangible book value per share
represents total tangible assets less total liabilities, divided by the number
of outstanding shares of common stock. After giving effect to the sale of the
shares of common stock we are offering at an assumed initial
public offering price of $ per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses, our pro forma as
adjusted net tangible book value at March 31, 2000, would have been
$ million, or $ per share. This represents an immediate increase in
the pro forma as adjusted net tangible book value per share of $ to our
existing stockholders and an immediate dilution of $ per share to new
investors purchasing common stock in this offering, or approximately % of
the assumed offering price of $ per share. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share................... $
Pro forma net tangible book value per share at March 31,
2000................................................. $
Increase per share attributable to this offering........
--------
Pro forma as adjusted net tangible book value per share
after this offering.....................................
--------
Dilution per share to new investors....................... $
========
</TABLE>

The following table shows on a pro forma as adjusted basis at March 31,
2000, after giving effect to the sale of the shares of common
stock we are offering at an assumed initial public offering price of
$ per share, before deducting estimated underwriting discounts and
commissions and estimated offering expenses, the total consideration paid to us
and the average price paid per share by existing stockholders and by new
investors purchasing common stock in this offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- --------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
-------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ % $ % $
New investors.................... % %
-------- ----- -------- ------ -------
Total.......................... 100.0% $ 100.0% $
======== ===== ======== ====== =======
</TABLE>

The computations in the table above assume no exercise of any stock options
or warrants outstanding at May 31, 2000. As of May 31, 2000 there were options
outstanding to purchase a total of 3,199,400 shares of common stock at a
weighted average exercise price of $2.25 per share, and there were warrants
outstanding to purchase a total of 7,103,945 shares of common stock at a
weighted average exercise price of $0.71 per share. If any of these options or
warrants are exercised, there will be further dilution to new investors
purchasing common stock in this offering.

In addition, we may issue stock, options or warrants in connection with
acquisitions, strategic relationships, investments and attracting, retaining and
compensating employees. These issuances may dilute the ownership interests of
our stockholders, including new investors purchasing common stock in this
offering.

22
<PAGE> 25

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included later in this prospectus. The following selected
consolidated financial data for the period from our inception (April 2, 1997) to
December 31, 1997 and for the years ended December 31, 1998 and 1999 has been
derived from our audited consolidated financial statements included in the back
of this prospectus. The statements of operations data for the three months ended
March 31, 1999 and 2000 and the balance sheet data as of March 31, 2000 are
derived from our unaudited financial statements included in the back of this
prospectus. In management's opinion, the unaudited financial statements include
all adjustments, consisting of only normal recurring adjustments, which we
consider necessary for a fair presentation of our financial position and results
of operations as of this date and for these periods. The results of operations
for the three months ended March 31, 2000 are not necessarily indicative of the
results to be expected for the entire year.

<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED THREE MONTHS ENDED
INCEPTION DECEMBER 31, MARCH 31,
(APRIL 2) TO ----------------- ------------------
DECEMBER 31, 1997 1998 1999 1999 2000
----------------- ------- ------- ------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue...................................... $ 31 $ 190 $ 218 $ 55 $ 192
Operating costs and expenses:
Cost of revenue............................ 92 342 762 164 3,521
Selling, general and administrative........ 14 1,388 6,526 409 5,464
Deferred compensation...................... -- -- 1,248 -- 2,258
Depreciation and amortization.............. 2 10 139 50 561
Loss on lease and leasehold improvements... -- -- 921 610 --
------ ------- ------- ------- --------
Total operating costs and expenses....... 108 1,740 9,596 1,233 11,804
------ ------- ------- ------- --------
Loss from operations......................... (77) (1,550) (9,378) (1,178) (11,612)
Interest income.............................. -- 7 491 2 2,659
Interest expense(1).......................... (1) (10) -- -- (2,939)
------ ------- ------- ------- --------
Net loss..................................... $ (78) $(1,553) $(8,887) $(1,176) $(11,892)
====== ======= ======= ======= ========
Basic and diluted net loss per share......... $(0.03) $ (0.28) $ (1.86) $ (0.26) $ (1.49)
====== ======= ======= ======= ========
Shares used in computing basic and diluted
net loss per share......................... 2,612 5,554 4,771 4,461 7,985
====== ======= ======= ======= ========
Pro forma basic and diluted net loss per
share (unaudited)(2)....................... $ (0.34) $ (0.13) $ (0.21)
======= ======= ========
Shares used in computing pro forma basic and
diluted net loss per share
(unaudited)(2)............................. 26,460 8,717 57,155
======= ======= ========
</TABLE>

23
<PAGE> 26

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1998 1999 2000
----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $138 $198,412 $381,010
Property and equipment, net................................. 495 13,195 49,033
Restricted cash and cash equivalents(3)..................... -- 2,162 3,765
Restricted investments(4)................................... -- -- 77,729
Total assets................................................ 888 215,742 525,108
Current portion of notes payable, net of discount(5)........ -- 1,464 478
Non-current liabilities, net of discount on long term notes
payable(5)................................................ -- 1,918 219,041
Total stockholders' equity.................................. 476 202,688 279,332
</TABLE>

-------------------------
(1) Excludes interest of $930,000 in 1999 and $591,000 in the three months ended
March 31, 2000, which has been capitalized as a component of construction in
progress, in accordance with generally accepted accounting principles.

(2) The calculation of pro forma net loss per share assumes the conversion of
each outstanding share of preferred stock into one share of common stock as
of the original issuance date.

(3) Reflects funds set aside as collateral for letters of credit issued under
building lease agreements.

(4) Reflects investments set aside as collateral for the first four interest
payments relating to our senior notes.

(5) The unamortized portion of the estimated fair value of warrants issued in
connection with financing transactions is recorded as a discount to the
related note payable. The actual amount payable on these obligations at
March 31, 2000 is $303.4 million.

24
<PAGE> 27

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

The following discussion should be read in conjunction with our
consolidated financial statements and the notes to those statements included
later in this prospectus. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and elsewhere in this prospectus, particularly
in "Risk Factors."

OVERVIEW

We are creating an international platform of colocation facilities, which
we refer to as Neutral Optical Hubs, in which our customers can install
equipment, connect to a choice of network providers and connect with our other
customers to deliver high quality, broadband services and applications to their
end users. We offer our customers best-in-class facilities, which provide
environmentally and physically secure centers to deploy their equipment, the
opportunity to interconnect with outside carriers and with our other customers,
and technical assistance and consulting services. Our colocation, cross
connection and service products will scale with our customers' needs both within
facilities and across our international solution. We are not a communications
carrier, and because our facilities are carrier neutral, our customers will be
able to connect their communications equipment located in our facilities to any
of the carriers that are connected to our facilities.

Since our inception in April 1997, our principal activities have included
developing our business plan, raising capital, hiring management and other key
personnel, developing our site selection criteria and our standard facility
design, locating and securing sites, designing and constructing our Neutral
Optical Hubs, and sales and marketing activities. We have generally experienced
increasing quarterly operating losses and negative cash flows since inception,
and we expect that our net losses and negative cash flows will increase
significantly for the foreseeable future.

As of May 31, 2000, we had entered into leases for 46 sites in the United
States and Europe, of which 15 facilities were under construction and 11
facilities were ready for carriers and customers to install their equipment, of
which seven facilities were generating revenue (excluding our first facility
located in San Francisco (Mission Street) that we intend to close). We intend to
have at least 40 Neutral Optical Hubs generating revenue or ready for carriers
and customers to install their equipment in metropolitan areas by the end of
June 2001. As a result of this buildout strategy, we will significantly increase
our cost of revenue and selling, general and administrative expenses.

On average, we expect a new domestic facility of 25,000 square feet to cost
approximately $10 million to construct and equip. Our business plan assumes that
it will take approximately ten months from the date that we enter into a lease
until the date a new Neutral Optical Hub begins generating revenue. Although we
have successfully met this time frame for all of our facilities (excluding our
first facility located in San Francisco (Mission Street)) which were generating
revenue as of May 31, 2000, we have previously experienced and may continue to
experience unforeseen delays and expenses in connection with our facility
buildout program. We also may elect to defer construction of a facility until we
have the capital available to complete construction. In addition, we have not
yet demonstrated that we are able to manage the buildout of multiple facilities
at the same time. We also do not know how long our sales cycle will be, but it
is likely to be lengthy. Once a particular facility is generating revenue, we
expect that it will take an extended period of time before it will have enough
business to

25
<PAGE> 28

provide sufficient revenue to cover its expenses. We expect that it will cost
more and take longer to construct, equip and begin generating revenue in
international locations.

In order to attract carriers to connect to our facilities, we plan to place
circuit orders with approximately three carriers prior to completing
construction of each facility. These orders will generally require us to pay an
installation fee and a minimum monthly charge for periods anticipated to be
approximately one to three years. As of May 31, 2000, we had placed orders with
multiple carriers to connect to 24 of our facilities, with aggregate monthly
service charges of approximately $550,000. These charges become payable as
carriers complete their connections to each facility. We expect that as
customers connect to these carriers, these circuits and the related monthly
charges will be assigned to these customers and thereby reduce our obligations
to the carriers. However, we cannot assure you that we will be successful in
assigning these commitments to our customers or that we will not be required to
make substantial payments to carriers before we begin generating revenues from
our customers. In addition to the 24 facilities with carrier service orders to
be charged, 11 of our facilities either had carriers installed or connections on
order without monthly service charges. We may also need to provide additional
incentives to attract carriers to connect to our facilities. If we accelerate
our expansion plans or develop additional facilities, this will likely increase
the amount and duration of losses and our financing needs.

In early 1999, our new management team determined that our first facility
located in San Francisco (Mission Street) and the adjoining expansion site did
not meet our technical criteria and decided to close it. As a result, we
recognized a charge of $921,000 in 1999 for the writedown of the leasehold
improvements related to this facility, the termination of the lease on the
adjacent expansion site and forfeiture of a security deposit and prepaid rent.
We have made arrangements with all of the customers at our San Francisco
(Mission Street) facility to relocate to our San Francisco (Townsend Street) or
Emeryville, California facilities or to another facility of their choice. We
accounted for the writedown of leasehold improvements and cancellation of the
lease in 1999, but may be required to incur additional expenses in 2000 for
costs related to this facility closure and in connection with relocating
customers.

FACTORS AFFECTING FUTURE OPERATIONS

REVENUE. We enter into contracts with our customers that typically have
terms between one and ten years with varying renewal periods. Our revenue
consists primarily of:

- monthly fees for colocation services;

- monthly fees for cross connecting our customers to communication carriers
and other customers;

- fees for technical support services; and

- fees for installation services.

Our revenue will increase as we open additional Neutral Optical Hubs. Over
time, we intend to build upon our present service offerings by providing
additional value-added services and eventually enabling customers to buy, sell
and exchange services within each facility. Revenue for services other than
installation is recognized as services are provided. Advance payments received
from customers are deferred and recognized as revenue on a straight-line basis
over the period in which service is provided.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues. As of January 1,
2000, we began to recognize installation revenue over the life of the customer
contract. The cost associated with customer installation
26
<PAGE> 29

and other services is expensed as incurred. There is no material impact on prior
years' statements.

COST OF REVENUE. Cost of revenue has historically consisted primarily of
site-related employee salaries and benefits, rental payments on our Neutral
Optical Hubs, payments for equipment, connectivity charges and other
site-related operating expenses. We expect our cost of revenue to increase both
in dollar amounts and as a percentage of revenue for the foreseeable future as a
result of our buildout strategy.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist primarily of headquarters-related employee
salaries and benefits, consulting fees, travel costs, sales commissions, rental
payments and other occupancy costs at our headquarters location. We expect our
selling, general and administrative expenses to increase both in dollar amounts
and as a percentage of revenue for the foreseeable future as we build the
infrastructure necessary to support our anticipated growth. However, we expect
these expenses to eventually decline as a percentage of our revenue as we roll
out additional Neutral Optical Hubs.

DEFERRED COMPENSATION. In connection with the grant of certain stock
options at various dates in 1999 and 2000, we recorded deferred compensation
under stockholders' equity, representing the difference between the estimated
fair value for accounting purposes of our stock on the dates of grant and the
exercise prices. We are amortizing this deferred compensation amount over the
vesting period of the underlying options or upon the lapsing of the restrictions
on the applicable shares. We recorded a stock-based compensation expense
resulting from the amortization of this deferred compensation amount in 1999 and
the first quarter of 2000, and will recognize additional stock-based
compensation expense in future periods as we amortize the $19.7 million deferred
compensation remaining in stockholders' equity at March 31, 2000. All deferred
compensation relates to selling, general and administrative expenses.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
consists of depreciation of capitalized construction costs, leasehold
improvements, site equipment, furniture, fixtures and computer and office
equipment and amortization of other assets. Capitalized costs include
construction, cabling and on-site construction management costs as well as rent,
utilities, direct costs and interest accrued during the construction phase.
Depreciation of these costs begins once construction is complete and the
facility is ready for carriers and customers to install their equipment.

INTEREST INCOME. Interest income has been generated primarily from the
unspent proceeds of our common and preferred stock offerings, our senior notes
and funds received from various financing arrangements.

INTEREST EXPENSE. Interest expense includes interest paid in cash as well
as the amortization of the value of warrants issued in connection with our debt
facilities and the amortization of deferred financing costs incurred in
conjunction with our senior notes offering. We amortize the value of these
warrants over the commitment period of the credit facility or the period in
which the debt is outstanding. In accordance with generally accepted accounting
principles, certain interest expense incurred during construction of our
facilities is capitalized as a component of construction in progress.

INCOME TAXES. We have operated at a net loss since inception and as a
result we do not have a provision for income taxes. Deferred tax assets
resulting from net operating losses and other temporary differences have been
fully reserved.

27
<PAGE> 30

RESULTS OF OPERATIONS

QUARTERS ENDED MARCH 31, 1999 AND 2000

REVENUE. Our revenue increased 249% from $55,000 in the three months ended
March 31, 1999 to $192,000 in the three months ended March 31, 2000. The
increase in revenue resulted primarily from one customer at one of our Neutral
Optical Hubs. The majority of this revenue is related to monthly fees for
colocation services.

COST OF REVENUE. Our cost of revenue increased 2,047% from $164,000 in the
three months ended March 31, 1999 to $3.5 million in the three months ended
March 31, 2000. This increase was primarily the result of increased headcount
and site expenses, consisting of rent, utilities and other related costs at our
Neutral Optical Hubs as well as a one-time non cash charge of $2.3 million for
warrants issued to NEXTLINK.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses increased 1,236% from $409,000 in the three months ended
March 31, 1999 to $5.5 million in the three months ended March 31, 2000. The
increase was primarily due to an increase in headcount and related costs. We
hired additional personnel in anticipation of future growth and increased the
number of employees who perform headquarters-based functions. Our headcount
increased from 11 at March 31, 1999 to 161 at March 31, 2000. Our occupancy and
rental costs increased as a result of the expansion of our corporate office to
accommodate our larger headcount.

DEFERRED COMPENSATION. Amortization of deferred compensation increased from
$0 in the three months ended March 31, 1999 to $2.3 million in the three months
ended March 31, 2000. The increase was due to the increase in deferred
compensation in connection with the grant of stock options subsequent to March
31, 1999. All deferred compensation relates to selling, general and
administrative expenses.

DEPRECIATION AND AMORTIZATION. Our depreciation and amortization expenses
have increased 1,022% from $50,000 in the three months ended March 31, 1999 to
$561,000 in the three months ended March 31, 2000. The increase was the result
of the commencement of depreciation at three additional Neutral Optical Hubs in
the first quarter of 2000. The increase is also due to additional computer
equipment and office furniture at our expanded corporate office.

LOSS ON LEASE AND LEASEHOLD IMPROVEMENTS. Our costs associated with the
loss on lease and leasehold improvements decreased from $610,000 in the three
months ended March 31, 1999 to $0 in the three months ended March 31, 2000. In
early 1999, our new management team determined that our first facility located
in San Francisco (Mission Street) and the adjacent expansion site did not meet
our technical criteria and decided to close it. As a result, we recognized a
charge of $610,000 in the three months ended March 31, 1999.

INTEREST INCOME. Our interest income increased 132,850% from $2,000 in the
three months ended March 31, 1999 to $2.7 million in the three months ended
March 31, 2000. This increase was due to interest earnings on the net proceeds
of our Series C preferred stock offering in December 1999 and our senior notes
offering in March 2000

INTEREST EXPENSE. Our interest expense increased from $0 in the three
months ended March 31, 1999 to $2.9 million in the three months ended March 31,
2000. The increase was due to accrued interest on the $300 million of senior
notes issued in March 2000 and our other financing vehicles. An additional
$591,000 of interest is capitalized and included as construction in progress in
the first quarter of 2000.

28
<PAGE> 31

YEARS ENDED DECEMBER 31, 1998 AND 1999

REVENUE. Our revenue increased 15% from $190,000 in 1998 to $218,000 in
1999. This increase came from additional customers at our San Francisco (Mission
Street) facility as well as increased technical support services provided to
customers.

COST OF REVENUE. Our cost of revenue increased 123% from $342,000 in 1998
to $762,000 in 1999. This increase was primarily the result of increased
headcount at our new Neutral Optical Hubs and variable costs related to the
increased headcount.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses increased 370% from $1.4 million in 1998 to $6.5 million
in 1999. This increase was primarily the result of increased salaries and
related expenses. We hired additional personnel in anticipation of future growth
and increased the number of employees who perform headquarters-based functions
from nine at December 31, 1998 to 64 at December 31, 1999. Our occupancy and
rental costs increased as a result of the expansion of our corporate office to
accommodate our larger headcount. Additionally, consulting costs increased as we
developed our site selection criteria and standardized facility design, located
and secured sites and evaluated our compensation structure.

DEFERRED COMPENSATION. Amortization of deferred compensation increased from
$0 in 1998 to $1.2 million in 1999. The increase was due to the increase in
deferred compensation in connection with the grant of stock options in 1999. All
deferred compensation relates to selling, general and administrative expenses.

DEPRECIATION AND AMORTIZATION. Our depreciation and amortization expense
increased 1,290% from $10,000 in 1998 to $139,000 in 1999. This increase was
primarily the result of depreciation on computer and office furniture and
equipment at our expanded corporate office and depreciation associated with
leasehold improvements at our existing San Francisco (Mission Street) facility.

LOSS ON LEASE AND LEASEHOLD IMPROVEMENTS. Our costs associated with the
loss on lease and leasehold improvements increased from $0 in 1998 to $921,000
in 1999. In early 1999, our new management team determined that our first
facility located in San Francisco (Mission Street) and the adjacent expansion
site did not meet our technical criteria and decided to close it. As a result,
we recognized a charge of $921,000 in 1999, which consisted of $449,000 in the
writedown of the leasehold improvements related to this facility and $472,000
for the termination of the lease on the expansion site and related legal costs,
and forfeiture of a security deposit and prepaid rent.

INTEREST INCOME. Our interest income increased 6,914% from $7,000 in 1998
to $491,000 in 1999. This change was primarily the result of interest earnings
on the unspent proceeds of our Series B preferred stock offering in April 1999
and Series C preferred stock offering in December 1999.

INTEREST EXPENSE. Our interest expense decreased from $10,000 in 1998 to $0
in 1999. This change is primarily the result of capitalizing interest costs
incurred during the construction of various Neutral Optical Hubs in 1999.

FOR THE PERIOD FROM INCEPTION (APRIL 2, 1997) TO DECEMBER 31, 1997 AND FOR THE
YEAR ENDED DECEMBER 31, 1998

REVENUE. Our revenue increased 513% from $31,000 in 1997 to $190,000 in
1998. This increase was due to the fact that our first facility opened in
January 1998, and we recognized minimal revenue from consulting services prior
to the opening of this facility.

29
<PAGE> 32

COST OF REVENUE. Our cost of revenue increased 272% from $92,000 in 1997 to
$342,000 in 1998. This increase was primarily the result of increased salaries
and consulting costs in connection with the increased headcount concurrent with
opening our first facility in January 1998. Rent and other costs have also
increased as a result of opening of our first facility in January 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses increased 9,814% from $14,000 in 1997 to $1.4 million in
1998. This increase was primarily the result of increased salaries and related
expenses, higher marketing costs associated with our initial marketing efforts
and consulting expenses incurred to support our growing business. In
anticipation of future growth, we increased the number of employees who perform
headquarters-based functions from two at December 31, 1997 to nine at December
31, 1998. Our travel and occupancy costs also increased as a result of the
increase in personnel.

DEPRECIATION AND AMORTIZATION. Our depreciation and amortization expense
increased 400% from $2,000 in 1997 to $10,000 in 1998. This increase was
primarily the result of the expansion of our corporate office as well as the
purchase of computer equipment necessary to support our business, as well as the
depreciation of leasehold improvements related to our San Francisco (Mission
Street) facility.

INTEREST INCOME. Our interest income increased from $0 in 1997 to $7,000 in
1998. This change was primarily the result of interest earnings on the unspent
proceeds of our sale of common stock and short-term borrowings during 1998.

INTEREST EXPENSE. Our interest expense increased 900% from $1,000 in 1997
to $10,000 in 1998. This change is primarily the result of additional interest
expense on short-term borrowings in 1998.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our business primarily from approximately
$498.3 million of net proceeds from the sale of our preferred stock to venture
capital firms and other individual, institutional and strategic investors and
issuance of our senior notes. In 1998 and 1999, we received approximately $2.0
million in net proceeds from the sale of our Series A preferred stock. In April
1999, we received $12.2 million in net proceeds from the sale of our Series B
preferred stock. In December 1999, we received $193.6 million in net proceeds
from the sale of our Series C preferred stock. In March 2000, we received $290.3
million of net proceeds from the issuance of our senior notes.

Our capital expenditures were approximately $71,000 in 1997, $436,000 in
1998, $12.4 million in 1999 and $35.7 million in the three months ended March
31, 2000. These expenditures were incurred primarily to build out our colocation
facilities and corporate office. Our capital expenditures will be substantially
higher in future periods in connection with the construction of Neutral Optical
Hubs in the U.S. and internationally. As of March 31, 2000, we had committed
capital expenditures of approximately $52.7 million relating to the build out of
our Neutral Optical Hubs. Through June 2001, we plan to make total capital
expenditures estimated in excess of $400 million, primarily to build out 40
Neutral Optical Hubs, to expand our headquarters and to install and upgrade our
information systems. We will also need to fund our net losses, which we expect
will increase substantially.

As of March 31, 2000, we are obligated to make minimum base payments on
non-cancelable leases for 36 Neutral Optical Hub sites and our corporate office
of $9.7 million in the last nine months of 2000, $17.3 million in 2001, $18.2
million in 2002, $18.7 million in 2003,

30
<PAGE> 33

$18.4 million in 2004 and $122.5 million in subsequent years. Our lease
obligations will increase substantially in future periods as we enter into
additional leases.

Net cash used in operating activities was $66,000 in 1997, $1.3 million in
1998, $7.7 million in 1999 and $4.9 million in the three months ended March 31,
2000. Net cash used in operating activities in each of these periods was
primarily due to our net losses and increases in deposits, prepaid and other
current assets, offset in part by depreciation and increases in accounts
payable, accrued expenses, deferred compensation and the loss on lease and
leasehold improvements.

Net cash used in investing activities was $71,000 in 1997, $436,000 in
1998, $12.0 million in 1999 and $97.5 million in the three months ended March
31, 2000. Net cash used in investing activities in each of these periods was
primarily used to fund capital expenditures. In 1999 and the three months ended
March 31, 2000, we also set aside funds as collateral for letters of credit
issued under building lease agreements. In March 2000, we set aside
approximately $77.7 million of funds as collateral for the first four interest
payments of the senior notes under the terms of that offering.

Net cash provided by financing activities was $172,000 in 1997, $1.8
million in 1998, $218.0 million in 1999 and $285.0 million in the three months
ended March 31, 2000. In 1997, this amount consisted primarily of $119,000 in
net proceeds from our issuance of notes payable and $53,000 from our sale of
common stock. In 1998, this amount included primarily $2.0 million in net
proceeds from our issuance of Series A preferred stock, offset in part by
$160,000 from our repayment of notes payable and $30,000 from our repurchase of
common stock. Net cash provided by financing activities in 1999 consisted
primarily of $12.2 million in net proceeds from our Series B preferred stock
financing, $193.6 million in net proceeds from our Series C preferred stock
financing, $6.1 million in net borrowings under our loan facilities and
revolving line of credit and $205,000 from our sale of common stock. Net cash
provided by financing activities in the three months ended March 31, 2000
consisted primarily of $290.3 million in net proceeds from our senior notes
offering, less preferred stock issuance costs of $5.9 million, which were paid
during the three months ended March 31, 2000.

We have an equipment and tenant improvement financing agreement with
MMC/GATX Partnership and other lenders. This agreement provides financing of up
to $17.0 million for construction costs and the purchase of equipment at our Los
Angeles and Vienna, Virginia, facilities. Amounts may be borrowed under this
agreement through December 31, 2001, subject to certain conditions. The interest
rate is set at the applicable U.S. treasury note yield to maturity plus 3.93%.
The principal and interest on each advance is payable in 42 equal monthly
installments commencing on the first day of the month immediately following the
advance date, plus a final payment of 10% of the original advance. This
agreement is secured by all tangible and intangible assets relating to the
specific facilities funded by the lender. As of March 31,

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2000, we had outstanding borrowings of $1.2 million under this facility, and
$15.7 million was available for future borrowing, subject to certain conditions.

We have an equipment and tenant improvement financing agreement with
Comdisco, Inc. This agreement provides financing of up to $7.0 million for
construction costs and the purchase of equipment at our Chicago and Emeryville,
California facilities. Amounts may be borrowed under this agreement through
August 31, 2000, subject to certain conditions. The credit line bears interest
at 8.25%. The principal and interest on each advance is payable in 42 equal
monthly installments commencing on the first day of the month immediately
following the advance date, plus a final payment of 15% of the original advance.
This agreement is secured by all tangible and intangible assets relating to the
specific facilities funded by the lender. As of March 31, 2000, we had
outstanding borrowings of $2.2 million under this facility, and $4.6 million was
available for future borrowing, subject to certain conditions.

We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
operating losses, interest expense and capital expenditure requirements through
at least the completion of our intended 40-facility buildout plan by the end of
June 2001. However, we could be incorrect. Our available cash resources and the
net proceeds from this offering will not be sufficient to complete all of the
facilities for which we may lease sites. However, we are able to control the
deployment of our facilities and do not intend to begin construction on a
facility unless we have the capital available to complete construction. We will
need to raise additional funds to expand beyond 40 facilities and to fund any
related operating losses, to develop new or enhance existing services or
applications, or to respond to competitive pressures. We anticipate that we may
incur a substantial amount of additional debt under a credit facility that we
may enter into during 2000. If adequate funds are not available on acceptable
terms, our business, results of operations and financial condition could be
harmed. See "Risk Factors -- We will need significant additional funds, which we
may not be able to obtain."

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. We do not use derivative financial instruments in
our investment portfolio. We place our investments with high quality issuing
institutions in the U.S. and, by policy, limit the amount of risk by investing
primarily in demand deposits and government securities. We do not have a
significant amount of floating rate debt, and do not believe that an increase or
decrease in interest rates would significantly increase or decrease our interest
expense on debt obligations. We do not currently have any significant foreign
operations and thus are not currently materially exposed to foreign currency
fluctuations.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which provides guidance on the
capitalization of the costs incurred for computer software developed or obtained
for internal use. We adopted the new standard in 1999, although the impact on
our 1999 financial statements was not significant.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP 98-5 is adopted.
Adoption of this statement in fiscal 1999 did not have a material impact on our
consolidated financial statements; we have historically expensed all of our
startup costs as incurred.
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In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards of derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Subsequently, in June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivatives and Hedging Activities -- Deferral of the Effective Date of SFAS No.
133," which amended SFAS No. 133. We do not currently engage in derivative
activity and do not expect the adoption of this standard to have a material
effect on our results of operations, financial position or cash flows.

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BUSINESS

We are creating an international platform of colocation facilities, which
we refer to as Neutral Optical Hubs, in which our customers can install
equipment, connect to a choice of network providers and connect with our other
customers to deliver high quality broadband services and applications to their
end users. We believe our Neutral Optical Hubs will be best-in-class facilities
that will offer a broad choice of network providers and the most flexible means
to access these providers that allow our target customers to deliver high
quality, broadband services and applications to their end users. We are not a
communications carrier, and because our facilities are carrier neutral, our
customers will be able to connect their communications equipment located in our
facilities to any of the carriers that are connected to our facilities. As of
May 31, 2000, we had signed contracts with 53 customers to locate equipment in
one or more Neutral Optical Hubs. Our customers currently include:

- Internet-based businesses, such as Campsix, Inc., RateXchange Corporation
and ShockWave.com, Inc.;

- Application service providers, such as Evolve Software, Inc. and
Musicbank, Incorporated;

- Internet service providers, such as InterNAP Network Services
Corporation; Madge Networks, N.V., The Masterlink Group, Inc. and SAVVIS
Communications Corporation;

- Competitive local phone companies, such as Mpower Communications Corp.,
Telseon Inc. and 2nd Century Communications Inc.; and

- Other voice and data communications companies, such as MCI WorldCom and
NeuMedia Inc.

We intend to have at least 40 Neutral Optical Hubs generating revenue or
ready for carriers and customers to install their equipment in metropolitan
areas by the end of June 2001, including multiple facilities in certain
geographic regions. With this broad footprint and proximity to our customers'
end users, we believe our Neutral Optical Hubs will become the preferred
platform for companies that want to optimize service for their end users and
will facilitate business-to-business commerce among our customers. As of May 31,
2000, we had signed leases for 46 facilities in the United States and Europe
totaling more than 1.1 million square feet, of which we had 11 facilities in the
U.S. ready for carriers and customers to install their equipment.

MARKET OPPORTUNITY

The deregulation of the telecommunications industry and the significant
growth in Internet users and bandwidth intensive applications has increased the
demand for and strained the performance of the existing communications
infrastructure. According to International Data Corporation, the number of
Internet users worldwide is expected to grow from 160 million at the end of 1998
to 500 million at the end of 2003. This rapid growth has resulted in performance
problems across the Internet, including problems with latency, data loss and
security. These and other problems are impacting the ability of our target
customers to effectively use the Internet for new services such as
voice-over-Internet protocol and some applications that use streaming and
broadcast capabilities. Content distribution companies and advanced switch
providers have been able to improve existing bottlenecks and network congestion
through technology, but depend on others to provide facilities and interconnect
networks.

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Internet-based businesses, application service providers, Internet service
providers, competitive local phone companies and other voice and data
communications companies all face challenges to effectively provide high-quality
services due to the inadequacies of the present infrastructure. Internet-based
businesses and application service providers need reliable, high-performance
delivery of their products and services. This need is growing as bandwidth
intensive applications increase, end-users become more sophisticated and
performance expectations increase. Internet service providers require
sophisticated user connections and peering arrangements in order to deliver
their services to the broadest array of customers by the most efficient means of
transport. Competitive local phone companies need broadly distributed local
access to successfully deliver their services and are still dependent on the
incumbent local phone companies for access. Other voice and data communications
companies need to stay competitive in a market with many emerging providers and
technologies. While attempting to keep pace with new technology and deliver
quality services, each of these businesses rely on an infrastructure that is not
designed for current demands.

In order to enhance performance, businesses require a systems architecture
and platform that is distributed close to their end users. Our target customers
have traditionally had the limited choices of building their own facilities or
colocating their equipment in carrier operated facilities, carrier hotels or
web-hosting facilities. Building a facility can take a substantial amount of
time, capital and expertise that would be better focused on the core business.
In an attempt to improve their service performance and focus on their core
competencies, many Internet-based businesses, application service providers,
Internet service providers, competitive local phone companies and network
providers have turned to colocation, which enables them to outsource key
components of their operations.

The current options available for colocation services all have limitations
that restrict our target customers from providing the necessary service
offerings that their customers demand. The following are the current colocation
alternatives:

CARRIERS. Historically, carrier colocation facilities have provided limited
support of customers' equipment, limited or no flexibility in carrier choice,
and limited availability of space, resulting in dependence on a specific carrier
and higher costs. For example, local phone companies' central offices provide
interconnection to only their networks and do not provide the scalability
essential to our target customers.

CARRIER HOTELS. These facilities may offer flexibility in choice of carrier
and interconnection among tenants, but typically provide limited support and
coordination of network services. In addition, they are typically single site
facilities which do not provide our customers a solution for widespread network
deployment.

WEB-HOSTING FACILITIES. These facilities typically create dependence on the
services and the network provided by the facility operator. In addition, these
facilities do not typically accommodate customers in the telecommunications
industry. In some instances, these operators may require customers to use their
services exclusively, which may result in higher prices and limited flexibility
in network deployment for our target customers.

IDC predicts that the U.S. market for Internet hosting, consisting of
shared server hosting, several categories of dedicated server hosting, including
the colocation market in which we compete, and related services, will grow from
an estimated $3.7 billion in 2000 to $18.9 billion in 2003. Within this market,
IDC predicts that the market for colocation services, will be one of the fastest
growing segments growing from an estimated $710 million in 2000 to $4.2 billion
in 2003. However, all of these estimates include charges for bandwidth, which we
do not provide. Although we are not aware of any similar forecast for growth in
the overall telecommunications services provider market or in the market for
colocation of telecommunications equipment, we expect the growth of these
markets to be significant.
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THE COLO.COM SOLUTION

We believe that our neutral colocation solution addresses the limitations
of the traditional alternatives. We will provide customers with cabinet,
pre-configured and custom cage space for their equipment, connections to a
choice of carriers and technical services and support in all facilities across
our broad geographic presence. Our solution is carrier neutral, cost-effective,
flexible and scalable, and our facilities will be widely deployed and staffed
with trained Internet and telecommunications technicians. We believe our
solution provides the foundation for building networks that enable customers to
locate equipment close to end users, thereby enhancing performance and enabling
them to provide more competitive service offerings to their end users. Our
Neutral Optical Hubs will offer a number of compelling advantages to our
customers, including:

INTERNATIONAL PLATFORM AND RAPID TIME TO MARKET. We believe that the
ability to rapidly deploy equipment close to their end users is a critical
success factor for our customers. We intend to have at least 40 Neutral Optical
Hubs generating revenue or ready for carriers and customers to install their
equipment by the end of June 2001, including multiple locations in certain
metropolitan areas. With such a broad footprint and proximity to our customers'
end users, we offer to our customers the ability to accelerate the deployment
and expansion of their services. By using our Neutral Optical Hubs, we enable
our customers to better focus on their core competencies.

NETWORK AND SERVICE NEUTRALITY. Our Neutral Optical Hub solution is
designed to offer our customers choices in network and service providers to
enable them to meet current and future market needs and technology demands. Each
Neutral Optical Hub will have multiple carrier and connectivity options to
provide a solution that meets each customer's network objectives. We will offer
connectivity choice and flexibility from longhaul to local, Internet protocol to
wireless and dark fiber to gigabit ethernet. We also offer our customers choice
in managed services and network integration, both through our own services and
those developed through strategic relationships with third party service
providers.

COST SAVINGS. Because our facilities are neutral and will have a diverse
population of carriers and service providers, we expect that our customers will
be able to obtain competitive pricing and benefit from the aggregated purchasing
power of colocating with many other high bandwidth users. In addition, we expect
that our professional service offerings will help our customers manage their
equipment in our facilities and reduce their overhead expenses.

BEST-IN-CLASS FACILITIES. We believe that our Neutral Optical Hubs will be
superior or equal to other colocation alternatives. We have designed our
facilities to offer our customers technologically advanced, redundant systems
intended to provide uninterruptible electrical power availability, temperature
and humidity control, fire detection and suppression systems and security
systems. Our facilities are engineered to conform to a high set of standards
that define a rigid and extensive set of performance, quality, environmental and
safety requirements.

SUPERIOR CUSTOMER SERVICE. Substantially all of our facilities have
technicians, who are trained in Internet and telecommunications networks and
equipment, available on site 24 hours a day, seven days a week. Our technicians
are available to assist our customers in diagnosing and repairing customers'
network equipment problems and installing customer equipment. We also may offer
customers access to experienced network technicians to help configure and test
networks as well as for more technically complex tasks. Each of our Neutral
Optical Hubs has an operations control center that monitors all aspects of the
facility through a comprehensive facility management system.

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OUR STRATEGY

To achieve our goal of becoming the premier, international, single-source
supplier of carrier neutral colocation facilities to our targeted customer base,
our strategy is to:

BE FIRST-TO-MARKET WITH BROAD GEOGRAPHIC PRESENCE. Our strategy is to be
first-to-market with a broad geographic presence to provide a Neutral Optical
Hub solution to Internet-based businesses, application service providers,
Internet service providers, competitive local exchange phone companies and other
voice and data communications companies. We intend to quickly build Neutral
Optical Hubs in metropolitan areas across North America and eventually Europe
and Asia to become the first provider of carrier neutral colocation facilities
with a broad domestic and international presence.

MAINTAIN NEUTRALITY. We are not a communications carrier. We believe that
by operating carrier neutral facilities, we will be able to offer our target
customers the opportunity to select among many network providers and to
negotiate terms with the providers of their choice. We also believe that by
remaining neutral, we will be more likely to attract multiple carriers to
connect to our facilities. In addition, we intend to continue to offer our
customers choice in managed services and network integration through services
developed through strategic relationships with third party service providers.

STRATEGICALLY DEPLOY MULTIPLE NEUTRAL OPTICAL HUBS IN KEY GEOGRAPHIC
REGIONS. We believe that by deploying multiple Neutral Optical Hubs in one
geographic region, we will provide the foundation for networks that enable
customers to locate equipment in closer proximity to end users, thereby
enhancing performance and enabling them to provide more competitive service
offerings. We also believe this strategy will enable us to establish a market
presence more quickly and provide benefits from being on different power grids
and with better access to local telecom facilities.

ENTER INTO STRATEGIC AND COMMERCIAL RELATIONSHIPS TO EXTEND OUR SALES
REACH. We intend to enter into strategic and commercial relationships with
companies such as communications service providers, who may attract additional
customers, and communications equipment companies, who may both locate equipment
in our sites and resell our space. We believe that such relationships are
valuable because they could accelerate our revenue growth, support our Neutral
Optical Hub branding process, decrease our cost of sales, extend our sales reach
and contribute to further network provider diversity within our facilities.

EXPAND OUR SERVICE OFFERINGS AND ENABLE MARKETPLACE EXCHANGES. Over time,
we intend to expand upon our current service offerings by providing additional
value-added services, either through internal development, acquisitions or
partnerships. These future service offerings may include developing switching
capabilities among customers, more efficient distribution of content from
peering points to end users, and an expanded scope of technical services for
network consulting and support. Some of these additional service offerings may
eventually enable our customers to efficiently buy, sell and exchange services
with other customers within the same facility, thereby making our Neutral
Optical Hubs more attractive as commerce centers for growth and interconnection
of voice and data networks. In addition, because our Neutral Optical Hubs will
house both Internet and telecommunications network equipment, we may eventually
provide our customers with a platform on which Internet and telecommunications
customers may connect to each other to provide integrated voice, data and
Internet services, facilitating future applications.

BUILD THE COLO.COM BRAND. We intend to build recognition of the COLO.COM
brand through our best-in-class facility design, direct and indirect channel
sales, and an aggressive communications strategy including public relations
campaigns, industry trade show participation, channel marketing programs and
targeted advertising programs. In particular, we have designed

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our Neutral Optical Hubs to provide a standardized layout, color scheme and
overall recognizable look and feel.

SERVICE OFFERINGS

We offer our customers best-in-class colocation facilities, which provide
environmentally and physically secure centers to deploy their equipment, the
opportunity to interconnect with outside carriers and with our other customers,
and technical assistance and consulting services. The colocation, cross
connection and service and support offerings can grow with our customers' needs.
Our current offerings and their benefits include:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
OFFERINGS DESCRIPTION CUSTOMER BENEFIT
<S> <C> <C>
----------------------------------------------------------------------------------------------
COLOCATION
- Cabinets (designed to - Customer controlled, secure - Security
fit standard Internet or equipment areas in multiple
telecom size equipment) size offerings - Flexibility of size
- Cages (available in
preconfigured sizes or
custom sizes)
----------------------------------------------------------------------------------------------
CROSS CONNECTIONS
- DS-1 - Connects customers to - Choice of carriers and
carriers and other customers negotiated terms
- DS-3
- Demuxed DS-3
- Single-mode fiber
- Multi-mode fiber
- 10/100 ethernet
----------------------------------------------------------------------------------------------
SERVICE AND SUPPORT
- Long-term contracts - 24 x 7 on-site technical - No necessity to hire staff
support to support equipment located
- Hourly service at our Neutral Optical
- Technical support services, Hubs
including status reporting,
cross connection testing, - Fast response to customers'
and smart hands equipment and network
problems
- Installation of colocation
equipment and cross
connections
- Comprehensive tracking of
service requests
- Conference facilities
----------------------------------------------------------------------------------------------
</TABLE>

Our pre-packaged service options vary based on the number of hours of
technical support requested. In the future, we plan to build upon our present
offerings by providing additional value-added services, either directly or
through partnerships. These future service offerings may include developing
switching capabilities among customers, more efficient distribution of content
from peering points to end users, web-enabled remote monitoring of customer
equipment, and an expanded scope of technical services for network consulting
and support.

OPERATIONS CONTROL CENTERS AND FACILITIES MONITORING

Each Neutral Optical Hub has an operations control center that monitors all
aspects of the facility through a comprehensive facility management system. This
system collects data on

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more than 200 variables per location and provides real time monitoring of all
aspects of facility health, including customer power utilization, power trend
analysis and power-based alarming. We are currently developing a web extension
of this architecture to provide a common set of customer-viewable facility
metrics, power utilization reports, power trend reports, and to allow both
distributed and centralized monitoring of our facilities. We believe that this
management flexibility will allow individual Neutral Optical Hubs to be
self-supporting, supported from a "sister site," or supported from our corporate
headquarters in Brisbane, California.

CUSTOMER SERVICE

We believe that customer satisfaction is a critical component to growing
our business. We have designed a comprehensive customer service program that
focuses on the customer deployment process and post-deployment requests through
our 24 x 7 customer service center.

Customer deployment phase: We assign a dedicated account specialist to each
customer/account to ensure that the processing of each customer order and
installation is handled expeditiously. Account specialists will be highly versed
in their assigned accounts and will be personally responsible to support the
customer.

Customer post-deployment: Once the installation process is complete,
customers can make service requests through our customer service center
(1-877-FYI-COLO). Based on the nature of the call, a customer service
representative will expedite a service request ticket to one of our 24 x 7
on-site support staff.

On-site support services: Our Internet and telecommunications network and
equipment trained technicians are available at all times to assist our customers
in diagnosing and repairing network equipment problems and installing equipment.
We also may offer customers access to experienced network technicians to help
configure and test networks as well as for more technically complex tasks.

CUSTOMERS

Our target customers are Internet-based businesses, application service
providers, Internet service providers, competitive local phone companies and
other voice and data communications companies. Our customers include:

INTERNET BASED BUSINESSES

- Campsix, Inc., a business-to-business Internet incubator.

- RateXchange Corporation, a centralized, online marketplace that brings
buyers and sellers of telecom capacity together.

- Shockwave.com, Inc., the provider of Shockwave Player, a Web standard for
entertaining, engaging and rich media playback.

APPLICATION SERVICE PROVIDERS

- Evolve Software, Inc., a provider of solutions that automate the service
chain.

- Musicbank, Incorporated, a streaming music service for major record
labels, music retailers, artists and the general public.

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INTERNET SERVICE PROVIDERS

- InterNAP Network Services Corporation, a provider of Internet
connectivity services targeted at businesses seeking to maximize the
performance of Internet-based applications.

- Madge Networks N.V., a networking and Internet services provider,
specializing in managed networks, Web and application hosting, enterprise
local area networking products and video networking.

- The Masterlink Group, Inc., an Internet services company, providing
professional website development and design services, website hosting,
e-commerce development tools, Internet access, and database integration
services.

- SAVVIS Communications Corporation, a global internetworking solutions
provider offering high-quality, high-speed Internet and networking
services to corporate users, web centric companies and local/regional
Internet service providers. Together with its parent company, Bridge
Information Systems, a provider of financial news and information, SAVVIS
provides bundled content, security and managed data networking services.

COMPETITIVE LOCAL PHONE COMPANIES

- Mpower Communications Corp. (formerly MGC Communications, Inc.), a
provider of facilities based integrated communication services including
Internet, voice over DSL, local phone service, custom calling features
and long distance services to small and medium size businesses.

- Telseon Inc. (formerly Cmetric), a provider of gigabit bandwidth
fiber-based data services to enterprises, Internet service providers, and
network provider partners by exploiting ethernet and fiber optics
technology.

- 2nd Century Communications Inc., a provider of advanced computing
applications integrated with voice and data communications over a unified
network to small and medium-sized businesses.

NETWORK PROVIDERS

- MCI WorldCom, a provider of facilities-based and fully integrated local,
long distance, international and Internet services.

- NeuMedia Inc., a provider of fiber optic network services.

In the three months ended March 31, 2000, our three largest customers were
Mpower, IXNet, Inc. and Megawatts, from whom we received approximately 61%, 18%
and 5% of our revenue, respectively. In 1999, our three largest customers were
IXNet, Megawats and KIVEX, from whom we received approximately 56%, 23% and 11%
of our revenue, respectively. In 1998, our three largest customers were MediaOne
Group, Inc., Megawats and IXNet from whom we received approximately 34%, 31% and
11% of our revenue, respectively.

SALES AND MARKETING

DIRECT SALES FORCE. We have a direct sales force to market our Neutral
Optical Hub solution to our target customers. We are organizing our sales force
along both account-specific and geographic lines. We have five sales regions in
the U.S. and intend to establish two additional international sales regions.
Each region will have a sales director, sales representatives and

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sales engineers who handle the technical issues that may arise in our sales
process. At May 31, 2000, we employed 62 people in our sales and sales
engineering divisions, and we intend to continue to grow our sales force
rapidly.

INDIRECT SALES CHANNELS. We are also building and exploring additional
distribution channels, including indirect sales channels for our product
offerings by strategically targeting partners that have relationships with
prospective customers requiring a colocation solution. For example, we currently
have an agreement with Nortel for an option on space in our Neutral Optical Hubs
for use by Nortel's customers to place equipment purchased from Nortel. This
provides us with an indirect sales channel and allows Nortel to deploy its
switches more quickly. Other channel relationships include InterNAP, Band-X,
Avcom, Cat Technologies and Extreme Networks.

MARKETING. Our marketing efforts are focused on building a world-wide brand
through actively communicating a value proposition that establishes COLO.COM as
the premier provider of a widely distributed infrastructure where customers can
locate their equipment close to end users and partners and quickly and easily
deploy applications and services for their customers. We believe that brand
recognition is critical in developing market leadership. We intend to build our
services into a world class brand through a recognizable standard look and feel
of our Neutral Optical Hubs and an aggressive communications strategy including
public relation campaigns, trade show participation, channel marketing programs
and targeted advertising.

STRATEGIC AND COMMERCIAL RELATIONSHIPS

We have entered into strategic relationships with NEXTLINK, Nortel, and
MasTec and Skanska, each of whom also made equity investments in COLO.COM, and a
commercial relationship with InterNAP.

NEXTLINK. NEXTLINK has an option to locate its equipment in 20 of our
Neutral Optical Hubs and to provide connectivity in the form of both fiber and
wireless connections to our customers in these facilities. NEXTLINK also
received a warrant to purchase our Series C preferred stock, which became
exercisable in the first quarter of 2000 as a result of NEXTLINK initiating the
process of connecting its network to ten of our Neutral Optical Hubs. NEXTLINK
purchased approximately $5 million of our Series C preferred stock.

NORTEL. Nortel has an option on space in our Neutral Optical Hubs for use
by its customers who want to buy Nortel equipment and need a place to locate it.
This provides us with an indirect sales channel and allows Nortel to deploy its
switches more quickly. Nortel purchased approximately $5 million of our Series C
preferred stock and we have agreed to acquire $5 million of equipment from
Nortel before December 31, 2001.

MASTEC AND SKANSKA. MasTec and Skanska have agreed to build 22 of our
Neutral Optical Hubs in North America. In addition, MasTec and Skanska each
purchased approximately $2.5 million of our Series C preferred stock in December
1999.

INTERNAP. We have also entered into a commercial relationship with InterNAP
that gives it reseller rights with respect to its space in our San Francisco
(Townsend Street) facility for the purpose of selling value-added services to
its customers. InterNAP has also designated COLO.COM as a preferred colocation
provider.

FACILITY BUILDOUT

SITE SELECTION AND LEASING. We have engaged two large commercial real
estate brokers, Cushman & Wakefield in the U.S. and Canada, and Jones Lang
LaSalle in Europe, to identify and evaluate potential targeted sites for our
facilities. To ensure consistent quality and uniform
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facilities, we have developed an exacting set of standards for the features of
the spaces that we lease and a 60-point site selection checklist. One of our
most important criteria is proximity to network facilities. Using these
standards, our real estate staff evaluates each potential site, ranks them and
then makes its selection. Detailed proposal requirements and our own lease form
with sample lease amendments allow us to expedite the leasing process.

FACILITY DESIGN. We have designed a comprehensive facility model based on a
rigorous set of standardized engineering specifications that will be applied to
each facility we build. We design our facilities to provide exacting
environmental controls and physical security as well as fully redundant,
technologically advanced electrical power, air conditioning and fire suppression
systems. We believe that our design specifications will lead to high quality
facilities that we can construct rapidly.

FACILITY CONSTRUCTION. We have teamed with leading project management and
construction firms to build our facilities in accordance with our construction
criteria. These firms include MasTec North America, Inc. of Miami, Florida and
Sordoni Skanska Construction Company of Parsippany, New Jersey; DPR Construction
of Redwood City, California; and Total Site Solutions of Beltsville, Maryland
for facilities in the United States and Jones Lang LaSalle for facilities in
Europe. Each of these firms has expertise in architecture, engineering, and the
permitting process as well as the skills to manage local contractors.

CUSTOMER INSTALLATION AND CONNECTIVITY. Once we have completed construction
of a Neutral Optical Hub, some time is required for customers and carriers to
stage, configure and install their equipment, and for customers to connect to
the carriers. Systems testing and further staff training also occurs during this
time. At the end of this period, we expect that the facility will begin
generating revenue.

On average, we expect a new domestic facility of 25,000 square feet to take
approximately ten months from entering into a lease to generating revenue and
cost approximately $10 million to construct and equip. On average, we expect a
new international facility of 50,000 square feet to take approximately twelve
months from entering into a lease to generating revenue and cost approximately
$25 million to construct and equip. We may elect to defer construction of a
facility until we have the capital available to complete construction.

COMPETITION

In addition to competing with other neutral colocation providers, we will
compete with traditional colocation providers, including local phone companies,
long distance phone companies, Internet service providers and web-hosting
facilities. Most of these competitors have greater resources, more customers,
longer operating histories, greater brand recognition and more established
relationships than we have. We believe our neutrality provides us with an
advantage over these competitors. However, these competitors could offer
colocation on neutral terms, and may start doing so in the metropolitan areas
where we establish operations. If this occurs, we could face increased price
competition.

42
<PAGE> 45

There are a number of companies offering colocation facilities. Many of
these competitors could also be our customers. These companies can be
categorized as follows:

CARRIER OPERATED FACILITIES. Carrier operated facilities are generally
operated by the traditional local exchange carriers, long distance providers and
some new local phone companies. For example, carriers such as AT&T, Global
Center, Level 3 Communications, MCI WorldCom, Qwest Communications
International, and Sprint, as a byproduct of offering access to their networks,
offer colocation space. By becoming an occupant of a carrier-operated facility,
customers are typically limited to purchasing services from that carrier. As a
result, customers may be required to pay high prices and might receive poor
service, as colocation is ancillary to the carriers' primary business.

WEB-HOSTING FACILITIES. Web-hosting facilities such as Digital Island,
Exodus Communications and Globix may require their Internet-based customers to
use their services exclusively which may result in higher pricing and limited
network deployment flexibility.

NETWORK ACCESS POINTS. Other network access facilities, such as Neutral
Nap, PAIX, and Equinix, tend to be Internet exchange centric and can face
difficulties in bringing the right mix of customers and carrier-diversity into
their sites, affecting connectivity and time-to-market.

OTHER CENTRAL OFFICE-LIKE FACILITIES. Several other companies are offering
central office-like facilities. There are a number of domestic and international
companies, including Switch and Data Facilities, CO Space, InFlow, Telehouse and
TelePlace in the U.S., City Reach, DigiPlex, Global Reach, IX Europe, iaxis,
InterXion and Redbus Interhouse in Europe, and iAsiaWorks in Asia.

CARRIER HOTELS. Carrier hotels such as the Westin Building in Seattle, One
Wilshire in Los Angeles and 60 Hudson in New York City, are buildings that tend
to be operated by real estate companies or individuals that expect to lease
physical space to telecommunications companies for colocation purposes.

Once a customer is located in a facility, it will be difficult to convince
that customer to relocate to another colocation facility, because moving out of
an existing facility could result in service interruptions and significant costs
to reconfigure network connections. One of the key components of our business
strategy is to be first-to-market with broad geographic presence, which we
believe will provide us with a competitive advantage over later market entrants.

GOVERNMENT REGULATION

We believe that, because we do not provide transmission, switching, or
multiplexing services or facilities, we are not currently subject to regulation
by the Federal Communications Commission or state authorities that regulate
telecommunications. Telecommunications regulation frequently changes, however,
and, particularly at the state level, the line between regulated and
non-regulated activities is not always clear. Accordingly, it is possible that a
regulatory authority would seek to regulate some of our existing activities. In
addition, some

43
<PAGE> 46

new services or products offered by us may be subject to regulation by state
public utility commissions, the FCC, or both.

FACILITIES

Our executive offices are located in approximately 36,000 square feet of
office space in Brisbane, California under leases expiring in 2004 and 2005. As
of May 31, 2000, we had entered into leases for 46 Neutral Optical Hubs in the
following metropolitan areas and specific locations, which cover the approximate
gross square footage noted below and expire in the indicated years:

<TABLE>
<CAPTION>
SQUARE FEET LEASE
METROPOLITAN AREA LOCATION LEASED EXPIRATION
----------------- -------- ----------- ----------
<S> <C> <C> <C>
Austin...................... Austin, TX 15,986 2010
Boston...................... Medford, MA 38,416 2010
Chicago..................... Chicago, IL -- Wells St.* 6,800 2009
Oak Brook, IL* 16,780 2009
Chicago, IL -- Cermak Rd. 33,300 2015
Charlotte................... Charlotte, NC 30,324 2010
Cincinnati.................. Cincinnati, OH 22,840 2010
Cleveland................... Cleveland, OH 27,776 2012
Dallas...................... Dallas, TX* 27,370 2010
Ft. Worth, TX* 19,031 2011
Denver...................... Englewood, CO 27,485 2010
Detroit..................... Detroit, MI 28,342 2010
Jacksonville................ Jacksonville, FL 25,910 2010
Kansas City................. Lee's Summit, MO 25,000 2010
Las Vegas................... Las Vegas, NV* 28,560 2010
Los Angeles................. Los Angeles, CA* 34,710 2009
Irvine, CA 23,709 2010
Louisville.................. Louisville, KY 28,000 2010
Madrid...................... Madrid, Spain 37,700 2015
Memphis..................... Cordova, TN 27,298 2010
Miami....................... Miami, FL 26,216 2010
Milwaukee................... Milwaukee, WI* 5,200 2010
Minneapolis................. Minneapolis, MN 38,367 2012
Munich...................... Munich, Germany 111,000 2010
Norfolk..................... Chesapeake, VA 23,424 2010
New York City............... New York, NY -- Hudson St. 33,286 2015
New York, NY -- Broad St. 32,614 2010
Orlando..................... Orlando, FL 27,992 2010
Phoenix..................... Phoenix, AZ 32,000 2010
Pittsburgh.................. Pittsburgh, PA 26,220 2010
Portland.................... Beaverton, OR 23,101 2010
Portland, OR 23,441 2011
Richmond.................... Richmond, VA 33,471 2010
Salt Lake City.............. West Valley, UT 33,947 2010
San Antonio................. San Antonio, TX 34,898 2010
San Diego................... San Diego, CA 22,068 2010
San Francisco............... Emeryville, CA* 14,657 2009
San Francisco, CA -- Townsend St.* 20,576 2010
Santa Clara, CA 25,000 2015
San Ramon, CA 18,677 2010
Seattle..................... Seattle, WA* 19,138 2010
Bothell, WA 66,568 2015
</TABLE>

44
<PAGE> 47

<TABLE>
<CAPTION>
SQUARE FEET LEASE
METROPOLITAN AREA LOCATION LEASED EXPIRATION
----------------- -------- ----------- ----------
<S> <C> <C> <C>
St. Louis................... St. Louis, MO -- Walnut St. 9,358 2010
St. Louis, MO -- Tucker Blvd. 28,024 2010
Washington, DC.............. Vienna, VA* 23,715 2009
Sterling, VA 26,534 2010
</TABLE>

-------------------------
* Generating revenue or ready for carriers and customers to install their
equipment as of May 31, 2000.

We anticipate that our target center in the United States will be
approximately 25,000 square feet, subject to space and power availability, and
that approximately 50% of the square footage in each of our facilities will be
available for our customers' use. Most of our facilities have ten year lease
terms, with options for additional lease periods. We are actively negotiating
and seeking leases in many additional locations as part of our planned
deployment in the U.S., Canada and Europe.

EMPLOYEES

As of May 31, 2000, we had 234 full-time employees. None of our employees
is represented by a labor union, and we consider employee relations to be good.
We believe that our future success will depend in part on our continued ability
to attract, hire and retain qualified personnel. The competition for such
personnel is intense, and we cannot assure you that we will be able to identify,
attract and retain such personnel in the future. See "Risk Factors -- We have a
new management team, and we depend on our ability to attract and retain key
personnel."

LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings.

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<PAGE> 48

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and their ages as of May 31, 2000 are
as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Charles M. Skibo.................. 61 Chief Executive Officer and Chairman of the Board
Wayne A. Olson.................... 55 Senior Vice President, Operations and Administration
H.S. Kullar....................... 47 Senior Vice President, Sales and Marketing
Stephen I. Robertson.............. 39 Chief Financial Officer
Gary J. Sanders................... 53 Chief Information Officer
James M. Smith.................... 31 Chief Technology Officer
David H. Stanley.................. 53 General Counsel and Secretary
Robert E. Lamb, Jr. .............. 32 Vice President, Business Development
John F. Mevi III.................. 42 Vice President, Sales
James H. Strachan................. 27 Vice President, Product Development and Planning
Christopher E. Clouser(2)......... 48 Director
Young Soo Ha(1)................... 37 Director
John W. Jarve(2).................. 44 Director
Richard P. Nespola(1)............. 55 Director
Arthur Patterson(2)............... 56 Director
Kirby G. Pickle, Jr.(1)........... 43 Director
</TABLE>

-------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.

CHARLES M. SKIBO has served as our Chairman of the Board and Chief
Executive Officer since January 1999. Since February 1996, Mr. Skibo has also
served as Chairman and Chief Executive Officer of Allied Telecommunications, a
communications company. Since February 1990, Mr. Skibo has served as Chairman
and Chief Executive Officer of Strategic Enterprises and Communications, Inc., a
venture capital firm. From 1985 to 1987, Mr. Skibo was President and CEO of U.S.
Sprint and its predecessor company, U.S. Telecom. Mr. Skibo is also a director
of iBasis, Inc., a public international Internet telephony services provider,
and a director of New ICO, a privately held satellite based Internet company.

WAYNE A. OLSON has served as our Senior Vice President, Operations and
Administration since March 1999. From July 1993 to March 1999, Mr. Olson was
President and Chief Executive Officer of the St. Andrews Group, Ltd., a
consulting firm specializing in human systems and organizational services.

H.S. KULLAR has served as our Senior Vice President, Sales and Marketing
since June 2000. From September 1999 to June 2000, Mr. Kullar was our Senior
Vice President, Marketing. From February 1999 to September 1999, Mr. Kullar was
an independent consultant. From April 1998 to February 1999, Mr. Kullar served
as Vice President of Product Marketing with Fabrik Communications, a provider of
service-based enterprise email solutions. From May 1997 to April 1998, Mr.
Kullar was Senior Director of Business Development for ICG/Netcom, an Internet
services corporation; Senior Director of Strategic and Product Marketing from
October 1996 to May 1997; and Director of Market Programs and Development for
Business Services from April 1996 to October 1996. From March 1994 to April
1996, Mr. Kullar served as General Manager of AFAX, a messaging services
company.

STEPHEN I. ROBERTSON has served as our Chief Financial Officer since March
2000. From July 1998 to March 2000, Mr. Robertson served as Chief Financial
Officer of InsWeb

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<PAGE> 49

Corporation, an online insurance marketplace. From November 1997 to July 1998,
Mr. Robertson was a Senior Vice President of Lehman Brothers, an investment
banking firm. From September 1986 to October 1997, Mr. Robertson held various
investment banking positions with Salomon Brothers, Smith Barney, and Alex.
Brown.

GARY J. SANDERS has served as our Chief Information Officer since September
1999 and served as our Interim Chief Financial Officer from September 1999 to
March 2000. From November 1998 to September 1999, Mr. Sanders served in a
part-time capacity as Vice President, Finance and Chief Financial Officer at
TimeDance, Inc., an Internet-based group scheduling company. From November 1998
to August 1999, Mr. Sanders also served in a part-time capacity as Vice
President of Finance and Chief Financial Officer at Optimal Networks, Inc. a
software company. Mr. Sanders served as Vice President of Finance and Chief
Financial Officer of Tyecin Systems, Inc., a software company, from April 1996
to June 1998, and of Luxcom, Inc., a telecommunications equipment company, from
July 1985 to April 1996. Mr. Sanders has also served in executive finance
positions with Cynthia Peripherals/Bull Peripherals Corp. and the Federal
Reserve Bank of San Francisco.

JAMES M. SMITH has served as our Chief Technology Officer since July 1999.
From April 1999 to June 1999, he was our Director of Operations. From November
1997 to April 1999, Mr. Smith served as Sales Manager with Verio, an Internet
service provider. Prior to joining Verio, Mr. Smith founded ATMnet, an Internet
service provider, where he served as Sales Manager from February 1996 to
November 1997. From August 1994 to January 1996, Mr. Smith attended Oregon State
University.

DAVID H. STANLEY has served as our General Counsel and Secretary since
October 1999. From October 1997 to September 1999, Mr. Stanley served as General
Counsel and Member of Executive Staff for Avant! Corporation, a software
company. From July 1988 to October 1997, Mr. Stanley served as Vice President,
Legal and Corporate Services, General Counsel and Secretary with Informix
Corporation, a software company.

ROBERT E. LAMB, JR. co-founded COLO.COM in 1997 and has served as our Vice
President, Business Development since February 1999. From November 1998 to
February 1999, Mr. Lamb served as our President, and from October 1997 to
November 1998, as our Vice President, Marketing. From March 1997 to October
1997, Mr. Lamb served as Senior Account Manager at Neural Applications
Corporation, a software company. From July 1995 to March 1997, Mr. Lamb served
as Regional Sales Director for Ethos Corporation, a web portal development
company. From January 1995 to June 1995, Mr. Lamb was an institutional equities
salesperson with Genesis Merchant Group Securities, a brokerage firm.

JOHN F. MEVI III has served as our Vice President, Sales since May 1999.
From March 1998 to May 1999, Mr. Mevi served as Director of Sales with Sentient
Networks, a multi-protocol switch manufacturer. Prior to joining Sentient, Mr.
Mevi founded ATMnet, an Internet service provider, where he served as Vice
President of Sales and Marketing from November 1995 to November 1997. From
September 1994 to December 1995, Mr. Mevi was a Senior Account Executive at
Teleport Communications Group, a communications company.

JAMES H. STRACHAN has served as our Vice President, Product Development and
Planning since March 1999. Mr. Strachan served as our Director of Product
Development from December 1998 to March 1999, our Vice President, Sales from
June 1998 to November 1998 and our Business Development Manager from February
1998 to June 1998. From September 1996 to February 1998, Mr. Strachan served in
various sales positions at MCI Communications, a telecommunications company.
From 1992 to 1996, Mr. Strachan attended California State University at San Luis
Obispo, California, and received his B.S. in Finance, Real Estate and Marketing.

47
<PAGE> 50

CHRISTOPHER E. CLOUSER has served as one of our directors since January
2000. Since May 2000, Mr. Clouser has served as President of CRP Sports and
Chief Executive Officer of the Minnesota Twins Baseball Club. From July 1999 to
May 2000, Mr. Clouser served as President and Chief Executive Officer and a
director of Preview Travel, Inc. From March 1991 to June 1999, Mr. Clouser
served as Senior Vice President of Northwest Airlines. Mr. Clouser is also a
director of Pepsi Americas, Inc.

YOUNG SOO ("PERRY") HA has served as one of our directors since September
1998. From December 1998 to January 1999, Mr. Ha served as our Interim Chief
Executive Officer. Since September 1997, Mr. Ha has been a general partner of
Athena Technology Ventures, a venture capital firm. From June 1994 to September
1997, he was head of the North American Center of Excellence for the Product
Development and Technology Management Practice at Gemini Consulting, a
consulting company.

JOHN W. JARVE has served as one of our directors since April 1999. Since
1985, Mr. Jarve has been employed by Menlo Ventures, a venture capital firm
focused on the software, communications, healthcare and Internet sectors, where
he currently serves as a general partner and managing director. Mr. Jarve is
also a director of Digital Insight Corporation and iBasis, Inc.

RICHARD P. NESPOLA has served as one of our directors since January 2000.
Since January 1990, Mr. Nespola has served as President, Chief Executive Officer
and a director of The Management Network Group, Inc., a consulting firm.

ARTHUR PATTERSON has served as one of our directors since April 1999. Since
1983, Mr. Patterson has been a partner of Accel Partners, a venture capital
firm. Mr. Patterson is also a director of Actuate Corporation, Weblink Wireless,
Inc., Portal Software, Inc. and Viasoft, Inc.

KIRBY G. ("BUDDY") PICKLE, JR. has served as one of our directors since
January 2000. Since February 1997, Mr. Pickle has served as President and Chief
Operating Officer of Teligent, Inc., a telecommunications company. From 1991 to
January 1997, Mr. Pickle served as Executive Vice President of MFS
Communications Co., a telecommunications company.

BOARD OF DIRECTORS

Our bylaws authorize a range of from four to seven directors, currently set
at seven. Either our board or our stockholders have the power to amend this
provision of our bylaws to set the exact number of directors within this range.
We currently have seven directors and no vacancies.

Upon completion of this offering, our board of directors will be divided
into three classes, each with staggered three-year terms. As a result, only one
class of directors will be elected at each annual meeting of our stockholders,
with the other classes continuing for the remainder of their respective
three-year terms.

Our class I directors, whose terms will expire at the 2001 annual meeting
of stockholders, are and . Our class II directors,
whose terms will expire at the 2002 annual meeting of stockholders, are
and . Our class III directors, whose terms will
expire at the 2003 annual meeting of stockholders, are ,
and .

BOARD COMMITTEES

Our board of directors currently has an audit committee and a compensation
committee. The audit committee consists of Mr. Nespola, Mr. Ha and Mr. Pickle.
The audit committee has a written charter and selects our independent auditors,
reviews the scope of audit and other

48
<PAGE> 51

services by our independent auditors, reviews the accounting principles and
auditing practices and procedures to be used for our financial statements and
reviews the results of our accounting audits.

The compensation committee consists of Mr. Clouser, Mr. Patterson and Mr.
Jarve. The compensation committee makes recommendations to the board of
directors regarding our stock plans and the compensation of officers.

DIRECTOR COMPENSATION

Our non-employee directors are reimbursed for expenses incurred in
connection with attending board and committee meetings but are not compensated
for their services as board or committee members. Pursuant to the terms of our
stock plan, our board has the discretion to grant options to current and new
non-employee directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the compensation committee is currently, or has been
at any time since our formation, one of our officers or employees. No
interlocking relationships exist between our board of directors, compensation
committee or officers and the board of directors, compensation committee or
officers of any other company, nor has an interlocking relationship existed in
the past.

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<PAGE> 52

EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation earned during
1999 by the two individuals who served as our Chief Executive Officers during
1999 and our four other most highly compensated executive officers, whom we
collectively refer to as our named executive officers, for services rendered in
all capacities to COLO.COM.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------- -------------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION OPTIONS COMPENSATION
---------------------------- -------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Charles Skibo(1)...................... $206,250 $75,000 -- 4,210,000 --
Chairman of the Board and Chief
Executive Officer
Young Soo Ha(2)....................... -- -- -- -- --
Wayne Olson(3)........................ 118,750 50,000 -- 551,143 $18,350(5)
Senior Vice President, Operations
and Administration
Robert Lamb, Jr. ..................... 117,500 40,000 -- 40,000 6,346(6)
Vice President, Business Development
James Strachan........................ 107,500 45,000 -- 100,000 6,827(6)
Vice President, Product Development
and Planning
Richard Palomba(4).................... 144,250 -- -- 50,000 --
Vice President, Real Estate
Acquisition and Development
</TABLE>

-------------------------
(1) Mr. Skibo began his employment with us on January 25, 1999.
(2) Mr. Ha served as our Interim Chief Executive Officer from December 1998 to
January 1999, for which he received no compensation.
(3) Mr. Olson began his employment with us on March 15, 1999.
(4) Mr. Palomba was compensated pursuant to a consulting agreement with
Corporate Planning & Property Consulting, Inc., of which Mr. Palomba is a
principal. In March 2000, Mr. Palomba became a part-time consultant and no
longer serves as a vice president.
(5) Consists of relocation expenses.
(6) Consists of payments for accrued but unused vacation time.

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<PAGE> 53

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information relating to stock options
granted during 1999 to our named executive officers:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(3)
OPTIONS GRANTED EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME (#)(1) FISCAL YEAR SHARE DATE(2) 5% 10%
---- --------------- ------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles 1,270,000 13.05% $0.05 1/28/2009 $39,935 $101,203
Skibo(4)........
2,940,000 30.20 0.05 4/12/2009 92,448 234,280
Young Soo Ha...... -- -- -- -- -- --
Wayne Olson....... 551,143 5.67 0.05 6/08/2009 17,331 43,919
Robert Lamb, 40,000 0.41 0.05 6/08/2009 1,258 3,187
Jr. ............
James Strachan.... 40,000 0.41 0.05 6/08/2009 1,258 3,187
60,000 0.62 0.50 11/24/2009 18,867 47,812
Richard Palomba... 50,000 0.51 0.05 6/08/2009 1,572 3,984
</TABLE>

-------------------------
(1) These options are incentive stock options that were granted at fair market
value and vest over a 4-year period so long as the optionee is employed by
us, except for the options granted to Mr. Skibo which vest over a 3-year
period.
(2) Each of the options has a ten-year term, subject to earlier termination in
the event of the optionee's earlier cessation of service with us.
(3) The assumed 5% and 10% rates of stock price appreciation are provided in
accordance with rules of the Securities and Exchange Commission and do not
represent our estimate or projection of the future price of our common
stock. Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock, overall market conditions and the
option holder's continued employment through the vesting period. Unless the
market price of the common stock appreciates over the option term, no value
will be realized from the option grants made to the Named Executive
Officers.
(4) Under the terms of Mr. Skibo's employment agreement, all of the shares
subject to this option will accelerate and become fully vested in the event
that either Mr. Skibo's employment with the Company is terminated without
cause or there is a material breach by the Company of his employment
agreement. See "-- Employment Arrangements."

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<PAGE> 54

AGGREGATE OPTION EXERCISES IN 1999 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information for our named executive officers
in 1999 relating to option exercises in 1999 and the number and value of
securities underlying exercisable and unexercisable options held at December 31,
1999. All options were granted under our 1998 Incentive Stock Option Plan. These
options are immediately exercisable in full at the date of grant, but shares
purchased on exercise of unvested options are subject to a repurchase right in
our favor that entitles us to repurchase unvested shares at their original
exercise price upon termination of the employee's services with us. Except as
indicated in the footnotes below, the repurchase rights generally lapse on these
shares as to 25% of the shares on the first anniversary of the grant date, and
the balance ratably per month over the next three years.

<TABLE>
<CAPTION>
NUMBER SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1999 DECEMBER 31, 1999(2)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles Skibo(3)... 4,210,000 $8,209,500 -- -- -- --
Young Soo Ha....... -- -- -- -- -- --
Wayne Olson........ 551,143 1,074,729 -- -- -- --
Robert Lamb,
Jr. ............. 40,000 78,000 -- -- -- --
James Strachan..... 190,000 370,500 60,000 -- $90,000 --
Richard Palomba.... 50,000 97,500 -- -- -- --
</TABLE>

-------------------------
(1) Based on the fair market value of our common stock at an assumed price of
$2.00 per share, less the exercise price payable for such shares.
(2) Based on the fair market value of our common stock at December 31, 1999
estimated by our board of directors to be $2.00 per share less the exercise
price payable for such shares.
(3) Our right of repurchase lapses over a three-year period with respect to 60%
of the underlying shares at the first anniversary of the grant date, 20% on
the second anniversary and 20% on the third anniversary of the grant date
except in the event of termination without cause, our right of repurchase
lapses immediately.

COMPENSATION PLANS

1998 INCENTIVE STOCK OPTION PLAN

Our 1998 Incentive Stock Option Plan was adopted by our board of directors
in January 1998 and approved by our stockholders in February 1998. The maximum
number of shares that may be issued under the 1998 Incentive Stock Option Plan
is 14,047,839 shares of our common stock. As of May 31, 2000, options to
purchase 3,199,400 shares of our common stock were outstanding under this plan.
Our board of directors has decided that no further options will be granted under
the 1998 Incentive Stock Option Plan. However, the provisions of this plan will
still govern outstanding options. The 1998 Incentive Stock Option Plan provides
for the grant of incentive stock options, within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, referred to as the Code, to our
employees, and for the grant of nonstatutory stock options and stock purchase
rights to our employees, directors and consultants. In the event of our merger
with or into another corporation or a sale of substantially all of our assets,
the successor corporation will assume or substitute each option or stock
purchase right. If the outstanding options or stock purchase rights are not
assumed or substituted, the administrator will provide notice to the optionee
that he or she has the right to exercise the option or stock purchase right as
to all of the shares subject to the option or stock purchase right, including
shares which would not otherwise be exercisable, for a period of 15

52
<PAGE> 55

days from the date of the notice. The option or stock purchase right will
terminate upon the expiration of the 15-day period.

2000 STOCK PLAN

Our board of directors adopted the 2000 Stock Plan in 2000 and
the stockholders initially approved this plan in 2000. Our 2000 Stock
Plan provides for the grant of incentive stock options, within the meaning of
Section 422 Code, to our employees, and for the grant of nonstatutory stock
options and stock purchase rights to our employees, directors and consultants.

Number of Shares of Common Stock Available under the 2000 Stock Plan. As of
, 2000, a total of shares of our common stock were reserved for
issuance pursuant to the 2000 Stock Plan, of which options to acquire
shares were issued and outstanding as of that date. Our 2000 Stock Plan provides
for annual increases in the number of shares available for issuance under our
2000 Stock Plan on the first day of each fiscal year, beginning with our fiscal
year 2001, equal to the lesser of % of the outstanding shares of common stock
on the first day of our fiscal year, shares or a lesser amount as our
board may determine.

Administration of the 2000 Stock Plan. Our board of directors or a
committee of our board administers the 2000 Stock Plan. In the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the committee will consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The administrator
has the power to determine the terms of the options or stock purchase rights
granted, including the exercise price, the number of shares subject to each
option or stock purchase right, the exercisability of the options and the form
of consideration payable upon exercise.

Options. The administrator determines the exercise price of options granted
under the 2000 Stock Plan, but with respect to nonstatutory stock options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code and all incentive stock options, the exercise price
must at least be equal to the fair market value of our common stock on the date
of grant. The term of an incentive stock option generally may not exceed ten
years, and the administrator determines the term of all other options.

No optionee may be granted an option to purchase more than
shares in any fiscal year. In connection with his or her initial service, an
optionee may be granted an additional option to purchase up to
shares.

After termination of one of our employees, directors or consultants, he or
she may exercise his or her option for the period of time stated in the option
agreement. Generally, if termination is due to death or disability, the option
will remain exercisable for 12 months. In all other cases, the option will
generally remain exercisable for 3 months. However, an option may never be
exercised later than the expiration of its term.

Stock Purchase Rights. The administrator determines the exercise price of
stock purchase rights granted under our 2000 Stock Plan. Unless the
administrator determines otherwise, the restricted stock purchase agreement will
grant us a repurchase option that we may exercise upon the voluntary or
involuntary termination of the purchaser's service with us for any reason
(including death or disability). The purchase price for shares we repurchase
will generally be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to us. The administrator
determines the rate at which our repurchase option will lapse.

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<PAGE> 56

Transferability of Options and Stock Purchase Rights. Our 2000 Stock Plan
generally does not allow for the transfer of options or stock purchase rights,
and only the optionee may exercise an option and stock purchase right during his
or her lifetime.

Automatic Option Grants to Non-Employee Directors. Our 2000 Stock Plan also
provides for the automatic grant of shares of common stock to a
director who first becomes a non-employee director (except those directors who
become non-employee directors by ceasing to be employee directors) on or after
the date of this offering. This option will vest as to % of the shares
subject to the option on each anniversary of the date of grant. Each non-
employee director will automatically be granted an option to purchase
shares each year following the date of our annual stockholder's
meeting (except after the first such annual meeting if it is held within 6
months of the date of this offering) if on such date, he or she will have served
on our board of directors for at least the previous 6 months. This option will
vest as to % of the shares subject to the option on each anniversary of
the date of grant. All options automatically granted to non-employee directors
will have a term of 10 years, and the exercise price will be 100% of the fair
market value per share of common stock on the date of grant.

Adjustments upon Merger or Asset Sale. Our 2000 Stock Plan provides that in
the event of our merger with or into another corporation or a sale of
substantial all of our assets, the successor corporation will assume or
substitute an equivalent option or right for each outstanding option or stock
purchase right. If following the assumption or substitution of an option
automatically granted to one of our outside directors any such outside director
is terminated other than by his or her voluntary resignation, then he or she
will have the right to exercise the option as to all of the shares subject to
the option, including shares which would not otherwise be exercisable.

If there is no assumption or substitution of outstanding options or stock
purchase rights, the administrator will provide notice to the optionee that he
or she has the right to exercise the option or stock purchase right as to all of
the shares subject to the option or stock purchase right, including shares which
would not otherwise be exercisable, for a period of 15 days from the date of the
notice. The option or stock purchase right will terminate upon the expiration of
the 15-day period.

Amendment and Termination of our 2000 Stock Plan. Our 2000 Stock Plan will
automatically terminate in 2010, unless we terminate it sooner. In addition, our
board of directors has the authority to amend, suspend or terminate the 2000
Stock Plan provided it does not adversely affect any option previously granted
under it.

2000 EMPLOYEE STOCK PURCHASE PLAN.

Concurrently with this offering, we intend to establish an Employee Stock
Purchase Plan.

Number of Shares of Common Stock Available under the Purchase Plan. A total
of shares of our common stock will be made available for sale. In
addition, our Employee Stock Purchase Plan provides for annual increases in the
number of shares available for issuance under the Employee Stock Purchase Plan
on the first day of each fiscal year, beginning with our fiscal year 2001, equal
to the lesser of % of the outstanding shares of our common stock on the
first day of the fiscal year, shares or such other amount as may be
determined by our board of directors.

Administration of the Purchase Plan. Our board of directors or a committee
of our board administers the Purchase Plan. Our board of directors or its
committee has full and exclusive authority to interpret the terms of the
Employee Stock Purchase Plan and determine eligibility.

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<PAGE> 57

Eligibility to Participate. All of our employees are eligible to
participate if they are customarily employed by us or any participating
subsidiary for at least 20 hours per week and more than five months in any
calendar year. However, an employee may not be granted an option to purchase
stock if such employee:

- immediately after grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock, or

- whose rights to purchase stock under all of our employee stock purchase
plans accrues at a rate that exceeds $25,000 worth of stock for each
calendar year.

Offering Periods and Contributions. Our Employee Stock Purchase Plan is
intended to qualify under Section 423 of the Code and contains consecutive,
overlapping 24-month offering periods. Each offering period includes four
6-month purchase periods. The offering periods generally start on the first
trading day on or after and of each year, except for the
first such offering period which will commence on the first trading day on or
after the effective date of this offering and will end on the last trading day
on or before .

Our Employee Stock Purchase Plan permits participants to purchase common
stock through payroll deductions of up to % of their eligible compensation
which includes a participant's base salary, wages, overtime pay, commissions,
bonuses and other compensation remuneration paid directly to the employee. A
participant may purchase a maximum of shares during a 6-month period.

Purchase of Shares. Amounts deducted and accumulated by the participant are
used to purchase shares of our common stock at the end of each six-month
purchase period. The price is 85% of the lower of the fair market value of our
common stock at the beginning of an offering period or after a purchase period's
end. If the fair market value at the end of a purchase period is less than the
fair market value at the beginning of the offering period, participants will be
withdrawn from the current offering period following their purchase of shares on
the purchase date and will be automatically re-enrolled in a new offering
period. Participants may end their participation at any time during an offering
period and will be paid their payroll deductions to date. Participation ends
automatically upon termination of employment with us.

Transferability of Rights. A participant may not transfer rights granted
under the Employee Stock Purchase Plan other than by will, the laws of descent
and distribution or as otherwise provided under the Purchase Plan.

Adjustments upon Merger or Asset Sale. In the event of our merger with or
into another corporation or a sale of all or substantially all of our assets, a
successor corporation may assume or substitute each outstanding option. If the
successor corporation refuses to assume or substitute for the outstanding
options, the offering period then in progress will be shortened, and a new
exercise date will be set.

Amendment and Termination of the Purchase Plan. Our Employee Stock Purchase
Plan will terminate in 2010. However, our board of directors has the authority
to amend or terminate our Purchase Plan, except that, subject to certain
exceptions described in the Purchase Plan, no such action may adversely affect
any outstanding rights to purchase stock under our Purchase Plan.

401(k) PLAN

In 1999, our board of directors adopted a Retirement Savings and Investment
Plan covering our full-time employees located in the U.S. This plan is intended
to qualify under Section 401(k) of the Internal Revenue Code of 1986, as
amended, so that contributions to

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<PAGE> 58

this plan by employees, and the investment earnings thereon, are not taxable to
employees until withdrawn. Pursuant to this plan, employees may elect to reduce
their current compensation by up to the lesser of 15% of their annual
compensation or the statutorily prescribed annual limit, and to have the amount
of such reduction contributed to this plan. We do not currently make additional
matching contributions on behalf of plan participants.

EMPLOYMENT ARRANGEMENTS

Charles M. Skibo. Mr. Skibo entered into an employment agreement with us on
January 25, 1999. This agreement is for an initial term of three years,
terminating on January 24, 2002, and renewable for one-year periods. Under the
agreement, we agreed to pay Mr. Skibo an annual salary of $225,000 for his first
year of employment, $250,000 for his second year of employment, and $300,000 for
his third year of employment.

Upon completion of an initial public offering during the term of agreement,
Mr. Skibo's annual salary will immediately increase to $360,000. Mr. Skibo is
also eligible to receive target bonuses of up to $75,000 in the first year of
employment, 60% of his base salary in the second year of employment and 85% of
his base salary in the third year of employment.

In connection with his employment, Mr. Skibo was granted options to
purchase 4,210,000 shares of our common stock. These options were exercised for
shares of restricted stock which vest over a three year period, with 60% of the
shares vesting at the end of one year of employment, 20% vesting at the end of
two years of employment, and 20% vesting at the end of three years of
employment. If Mr. Skibo is terminated without cause, he will be entitled to
receive continued payment of his base salary for the remainder of the term of
the agreement and the vesting of his restricted stock shall accelerate and
become fully vested.

Wayne A. Olson. Mr. Olson began working as our Senior Vice President,
Operations and Administration in March 1999. Under the terms of Mr. Olson's
offer letter, if we terminate Mr. Olson's employment without cause, Mr. Olson
will continue to receive his salary for twelve months following the termination
date.

Stephen I. Robertson. Mr. Robertson began working as our Chief Financial
Officer in March 2000. Under the terms of Mr. Robertson's offer letter, Mr.
Robertson was granted an option to purchase 560,000 shares of our common stock
to vest over four years. If we complete a secondary funding event after our
initial public offering prior to the end of Mr. Robertson's first year of
employment, 70,000 of the shares will vest at the close of that transaction.

If we terminate Mr. Robertson's employment without cause, Mr. Robertson
will continue to receive his salary and his options will continue to vest for
twelve months following the termination date. In the event that we experience a
change in control and Mr. Robertson is terminated without cause or is
constructively terminated, his option will continue to vest for two years after
the termination date.

INDEMNIFICATION AND LIMITATION OF LIABILITY

Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for the following:

- any breach of their duty of loyalty to the corporation or its
stockholders;

- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

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<PAGE> 59

- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

- any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.

We have entered into agreements to indemnify our directors, executive
officers and controller, in addition to indemnification provided for in our
bylaws. These agreements, among other things, provide for indemnification of our
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in our rights, arising out
of such person's services as a director or executive officer to us, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.

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<PAGE> 60

RELATED PARTY TRANSACTIONS

PREFERRED STOCK FINANCINGS

From June 1998 through April 1999, we issued to various investors a total
of 4,261,730 shares of Series A preferred stock at a purchase price of $0.50 per
share. In April 1999, we issued to various investors a total of 24,500,000
shares of Series B preferred stock at a purchase price of $0.50 per share. In
December 1999, we issued to various investors a total of 20,408,164 shares of
Series C Preferred stock at a purchase price of $9.80 per share.

Investors in, and beneficial owners of, our preferred stock include, among
others, the following directors and holders of more than 5% of our outstanding
stock:

<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------
PREFERRED STOCKHOLDER SERIES A SERIES B SERIES C
--------------------- --------- ---------- ---------
<S> <C> <C> <C>
HOLDERS OF MORE THAN 5%:
Accel Partners Entities...................... -- 10,000,000 816,327
Athena Venture Fund, L.P. ................... 2,500,000 2,500,000 510,204
InvestCorp International Inc. ............... -- -- 3,571,428
Menlo Ventures Entities...................... -- 10,000,000 1,836,735
Meritech Capital Partners Entities........... -- -- 4,081,633
DIRECTORS:
Young Soo Ha(1).............................. 2,500,000 2,500,000 510,204
John Jarve(2)................................ -- 10,000,000 1,836,735
Arthur Patterson(3).......................... -- 10,000,000 816,327
</TABLE>

-------------------------
(1) Consists of shares held by Athena Venture Fund, L.P. Mr. Ha is a general
partner of Athena Venture Fund, L.P. and disclaims beneficial ownership of
these shares except to the extent of his proportionate partnership interest
therein.

(2) Consists of shares held by Menlo Ventures entities. Mr. Jarve is a general
partner of the Menlo Ventures entities and disclaims beneficial ownership of
these shares except to the extent of his proportionate partnership interest
therein.

(3) Consists of shares held by Accel Partners entities. Mr. Patterson is a
general partner of the Accel Partners entities and disclaims beneficial
ownership of these shares except to the extent of his proportionate
partnership interest therein.

Holders of our preferred stock are entitled to registration rights with
respect to the shares of common stock issuable upon conversion of the preferred
stock. See "Description of Capital Stock -- Registration Rights."

LOANS TO OFFICERS

We have implemented a program under which our directors, executive officers
and a number of other key employees are permitted to exercise their outstanding
options as to both vested and unvested shares, with unvested shares being
subject to a right of repurchase at cost in favor of COLO.COM in the event of
termination of employment prior to vesting of the shares. Under this program,
the participants paid the exercise price for their outstanding options pursuant
to full recourse promissory notes. The notes bear interest at a rate of
approximately 6.2% per annum and are due and payable on the earlier of
termination of the participant's

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<PAGE> 61

employment with us, or on various dates beginning in November 2003. The
principal balance as of March 31, 2000 of each note payable by a director or
executive officer is set forth below:

<TABLE>
<CAPTION>
NOTE
DIRECTOR OR EXECUTIVE OFFICER AMOUNT
----------------------------- ----------
<S> <C>
H.S. Kullar................................................. $ 200,000
David H. Stanley............................................ 200,000
Charles M. Skibo............................................ 84,200
James M. Smith.............................................. 82,000
Wayne A. Olson.............................................. 27,557
John F. Mevi III............................................ 20,000
Robert E. Lamb, Jr. ........................................ 10,000
James H. Strachan........................................... 8,500
</TABLE>

The aggregate principal balance as of March 31, 2000 of notes payable by
all directors, officers and employees was approximately $1.4 million.

CONSULTING AGREEMENT

In March 1999, we entered into a consulting agreement with Corporate
Planning & Property Consulting, Inc. Mr. Palomba is a Principal of Corporate
Planning & Property Consulting, Inc. Under this agreement, Mr. Palomba served as
our Vice President, Real Estate Acquisition and Development. In March 2000, Mr.
Palomba became a part-time consultant and no longer serves as a vice president.

OTHER TRANSACTIONS

In December 1998, we repurchased 600,000 shares of common stock for a total
of $60,000 from our former Chief Executive Officer, Peter Berns, in connection
with his resignation from employment with us.

Mario M. Rosati, one of our directors from June 1998 to April 1999, is also
a member of Wilson Sonsini Goodrich & Rosati, Professional Corporation, which
has served as our outside corporate counsel since January 1998. Mr. Rosati holds
12,000 shares of common stock and WS Investment Company 98B holds 108,000
shares. WS Investment Company 98B is a holding company of Wilson Sonsini
Goodrich & Rosati.

The spouse of Robert E. Lamb, Jr., our Vice President, Business
Development, is the owner of Visual Resources, Inc. Through May 31, 2000, we had
purchased approximately $72,000 of business materials and printing supplies from
Visual Resources.

We believe that all transactions between us and our officers, directors,
principal stockholders and other affiliates have been, and it is our intention
that they will be, on terms no less favorable to us than could be obtained from
unaffiliated third parties.

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<PAGE> 62

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock (on an as-converted basis), as of May 31, 2000, by
the following individuals or groups:

- each person, or group of affiliated persons, whom we know beneficially
owns more than 5% of our outstanding stock;

- each of our named executive officers;

- each of our directors; and

- all of our directors and executive officers as a group.

Unless otherwise indicated, the address for each stockholder on this table
is c/o COLO.COM, 2000 Sierra Point Parkway, Suite 601, Brisbane, California
94005-1819. Except as otherwise noted, and subject to applicable community
property laws, to the best of our knowledge, the persons named in this table
have sole voting and investing power for all of the shares of common stock held
by them.

This table lists percentage ownership based on 62,885,699 shares of common
stock outstanding (assuming the conversion of all preferred stock) as of May 31,
2000. Options to purchase shares of our common stock that are exercisable within
60 days of May 31, 2000 are deemed to be beneficially owned by the persons
holding these options for the purpose of computing percentage ownership of that
person, but are not treated as outstanding for the purpose of computing any
other person's ownership percentage. Shares underlying options that are deemed
beneficially owned are included in the number of shares listed in the column
labeled "Number." In addition, a portion of the shares held by all of our
executive officers listed below are subject to repurchase by us at the original
purchase prices under the terms of restricted stock purchase agreements. Under
these agreements, these officers exercised unvested options and gave us a right
to repurchase these shares, which lapses over time.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER OFFERING OFFERING
---------------- ---------- -------------- -------------
<S> <C> <C> <C>
5% STOCKHOLDERS:
Accel Partners Entities(1)................... 10,816,327 17.2% %
428 University Ave
Palo Alto, CA 94301
Athena Venture Fund, L.P..................... 5,510,204 8.8
310 University Ave., Suite 202
Palo Alto, CA 94301
InvestCorp International Inc.(2)............. 3,571,428 5.7
280 Park Avenue, 37th Floor
New York, NY 10017
Menlo Ventures Entities(3)................... 11,836,735 18.8
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Meritech Capital Partners Entities(4)........ 4,081,633 6.5
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
</TABLE>

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<PAGE> 63

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER OFFERING OFFERING
---------------- ---------- -------------- -------------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Charles M. Skibo(5).......................... 4,210,000 6.7%
Wayne A. Olson............................... 551,143 *
Robert E. Lamb, Jr. ......................... 1,366,550 2.2
Richard J. Palomba(6)........................ 210,000 *
James H. Strachan(7)......................... 270,000 *
Christopher E. Clouser(8).................... 150,000 *
Young S. Ha(9)............................... 5,643,141 9.0
John W. Jarve(10)............................ 11,836,735 18.8
Richard P. Nespola(11)....................... 150,000 *
Arthur Patterson(12)......................... 10,816,327 17.2
Kirby G. Pickle, Jr.(13)..................... 150,000 *
All directors and executive officers as a
group
(16 persons)(14).......................... 37,307,896 58.3%
</TABLE>

-------------------------
* Less than 1% of the outstanding shares of common stock.

(1) Includes 8,804,490 shares held by Accel VI L.P., 1,124,898 shares held by
Accel Internet Fund II L.P., 140,612 shares held by Accel Keiretsu VI L.P.
and 746,327 shares held by Accel Investors '98 L.P.

(2) All of these shares are held by Colo.com Equity Limited, a holding company
of InvestCorp International Inc.

(3) Includes 10,380,352 shares held by Menlo Ventures VII, L.P., 435,975 shares
held by Menlo Entrepreneurs Fund VII, L.P., 971,817 shares held by Menlo
Ventures VIII, L.P., 38,484 shares held by Menlo Entrepreneurs Fund VIII,
L.P., and 10,107 shares held by MMEF VIII, L.P.

(4) Includes 4,016,327 shares held by Meritech Capital Partners, L.P. and
65,306 shares held by Meritech Capital Affiliates, L.P.

(5) All of these shares are held by the Skibo Family Limited Partnership, of
which Mr. Skibo is a general partner.

(6) Includes 40,000 shares held by Mr. Palomba's daughter, Gina K. Palomba
UGMA, and 120,000 shares held jointly by Mr. Palomba and Beverly Palomba.

(7) Includes 60,000 shares that are subject to unvested options which are
immediately exercisable into restricted stock.

(8) Includes 150,000 shares that are subject to unvested options which are
immediately exercisable into restricted stock.

(9) Includes 5,510,204 shares held by Athena Venture Fund, L.P. Mr. Ha, one of
our directors, is a general partner of this entity and disclaims beneficial
ownership of these shares, except to the extent of his proportionate
partnership interest therein. Also includes 132,937 shares held by the Ha
Family Trust of 1997.

(10) Includes 10,380,352 shares held by Menlo Ventures VII, L.P., 435,975 shares
held by Menlo Entrepreneurs Fund VII, L.P., 971,817 shares held by Menlo
Ventures VIII, L.P., 38,484 shares held by Menlo Entrepreneurs Fund VIII,
L.P., and 10,107 shares held by MMEF VIII, L.P. Mr. Jarve, one of our
directors, is a managing director of MV Management VII, LLC, the general
partner of Menlo Ventures VII, L.P. and Menlo Entrepreneurs Fund VII, L.P.,
and MV Management VIII, LLC, the general partner of Menlo Ventures VIII,
L.P., Menlo Entrepreneurs Fund VIII, L.P. and MMEF VIII, L.P. and disclaims

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<PAGE> 64

beneficial ownership of these shares, except to the extent of his
proportionate partnership interest therein.

(11) Includes 150,000 shares that are subject to unvested options which are
immediately exercisable into restricted stock.

(12) Includes 8,804,490 shares held by Accel VI L.P., 1,124,898 shares held by
Accel Internet Fund II L.P., 746,327 shares held by Accel Investors '98
L.P. and 140,612 shares held by Accel Keiretsu VI L.P. Mr. Patterson, one
of our directors, is a general partner of each of these entities and
disclaims beneficial ownership of these shares, except to the extent of his
proportionate partnership interest therein.

(13) Includes 150,000 shares that are subject to unvested options which are
immediately exercisable into restricted stock.

(14) Includes 1,070,000 shares that are subject to unvested options which are
immediately exercisable into restricted stock.

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<PAGE> 65

DESCRIPTION OF CAPITAL STOCK

GENERAL

Our certificate of incorporation that becomes effective upon the closing of
this offering authorizes the issuance of 200,000,000 shares of common stock,
$0.001 par value, and authorizes the issuance of 10,000,000 shares of
undesignated preferred stock, no par value. From time to time, our board of
directors may establish the rights and preferences of the preferred stock. As of
May 31, 2000, 62,885,699 shares of common stock were issued and outstanding and
held by approximately 165 stockholders, and options to purchase 3,199,400 shares
of common stock were issued and outstanding and held by 250 optionholders.

COMMON STOCK

Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably the
dividends, if any, that are declared from time to time by the board of directors
out of funds legally available for that purpose. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of COLO.COM, the holders of
common stock are entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate in the future.

PREFERRED STOCK

The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of this preferred stock. However, the effects
might include, among other things:

- restricting dividends on the common stock;

- diluting the voting power of the common stock;

- impairing the liquidation rights of the common stock; or

- delaying or preventing a change in control of COLO.COM without further
action by the stockholders.

Upon the closing of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.

WARRANTS

As of May 31, 2000, we had outstanding warrants to purchase an aggregate of
520,750 shares of common stock at an exercise price of $0.05 per share. These
warrants are currently exercisable in full and will expire upon the earlier of
the closing of our initial public
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<PAGE> 66

offering or 2002. We also had outstanding warrants to purchase 217,679 shares of
common stock at an exercise price of $6.44 per share, 73,976 shares of common
stock at an exercise price of $7.57 per share and 300,000 shares of common stock
at an exercise price of $10.00 per share. These warrants to purchase 217,679
shares of common stock and 73,976 shares of common stock are currently
exercisable and will expire in 2009. The warrants to purchase 300,000 shares of
common stock are currently exercisable and will expire in 2004.

In connection with the issuance of the senior notes in March 2000, we
issued warrants to purchase an aggregate of 5,991,540 shares of our common stock
with an exercise price of $0.01 per share. These warrants become exercisable 180
days after our initial public offering and automatically expire on March 15,
2010.

REGISTRATION RIGHTS

After this offering, holders of 49,169,894 shares of common stock
(collectively, "registrable shares") may, under limited circumstances and
subject to specified conditions and limitations, require us to use our best
efforts to register the registrable shares.

We must use our best efforts to register registrable shares:

- if we receive written notice from holders of 50% or more of the
registrable shares requesting that we effect a registration with respect
to not less than 40% of the registrable shares then held by the holders
requesting registration (or a lesser percentage where the reasonably
anticipated price to the public of the sale of the registrable shares
will exceed $10,000,000); provided, however, that we are not obligated to
effect such registration prior to December 31, 2000 or during the 180 day
period following the effective date of this offering.

- if we decide to register our own securities (except in connection with an
initial public offering and, in any offer involving an underwriting, the
underwriters may limit the amount of registrable shares to 20% of the
total amount of shares included in such offering;) or

- if (1) we receive written notice from any holder or holders of
registrable shares requesting that we effect a registration on Form S-3
(a shortened form of registration statement) with respect to shares of
the registrable shares and (2) we are then eligible to use Form S-3
(which at the earliest will occur twelve calendar months after the
closing of this offering).

These registration rights terminate with respect to each registrable share
upon the first to occur of when the holder can transfer his or her registrable
shares pursuant to Rule 144 or five years after the closing of this offering.

The holders of the warrants issued in connection with the senior notes are
entitled to piggyback registration rights for the common stock issuable upon
exercise of the warrants. We are obligated to register, within 180 days
following the consummation of this offering, the shares issuable upon exercise
of the warrants issued in connection with the senior notes. We are further
obligated to keep such registration effective until the earlier of such time as
all warrants have been exercised or two years after the effective date of the
registration statement.

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<PAGE> 67

ANTITAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BYLAWS

Provisions of Delaware law and our certificate of incorporation and bylaws
could make the following more difficult:

- the acquisition of COLO.COM by means of a tender offer;

- the acquisition of COLO.COM by means of a proxy contest or otherwise; or

- the removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
COLO.COM to negotiate first with our board. We believe that the benefits of
increased protection of its potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure COLO.COM
outweigh the disadvantages of discouraging these proposals because negotiation
of any proposals of this type could result in an improvement of their terms.

Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class will serve for a three-year term,
with our stockholders electing one class each year. See "Management -- Board of
Directors." This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of COLO.COM, because it generally makes it more difficult for
stockholders to replace a majority of the directors.

Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board or the president may call special meetings of
stockholders.

Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures for stockholder
proposals and for the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board.

Delaware Antitakeover Law. COLO.COM is subject to Section 203 of the
Delaware General Corporation Law, an antitakeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years following
the date the person became an interested stockholder, unless the business
combination or the transaction in which the person became an interested
stockholder is approved in the manner specified in Section 203. Generally, a
business combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an interested stockholder is a person who, together with affiliates
and associates, owns or within three years prior to the determination of
interested stockholder status did own 15% or more of a corporation's voting
stock. The existence of this provision may have an antitakeover effect by
discouraging takeover attempts not approved in advance by the board of
directors, that might result in a premium over the market price for the shares
of common stock held by stockholders.

Elimination of Stockholder Action by Written Consent. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.

No Cumulative Voting. Our certificate of incorporation and bylaws do not
provide for cumulative voting in the election of directors.

Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of COLO.COM.
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<PAGE> 68

These and other provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of COLO.COM.

Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is .

LISTING

We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "COLC."

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<PAGE> 69

DESCRIPTION OF INDEBTEDNESS

THE 13 7/8% SENIOR NOTES

In March 2000, we issued an aggregate of $300.0 million of 13 7/8% senior
notes pursuant to an indenture between us, as issuer, and State Street Bank and
Trust Company of California, N.A., as trustee. The senior notes are unsecured
obligations and mature on March 15, 2010. Interest on the senior notes accrues
at the rate of 13 7/8% per annum, payable semi-annually on March 15 and
September 15 of each year, commencing on September 15, 2000.

The senior notes will be redeemable at our option, in whole or in part, on
or after March 15, 2005 at the redemption prices set forth in the senior notes
indenture. In addition, at anytime prior to March 15, 2003, we may redeem up to
35% of the principal amount of the senior notes with the net proceeds of one or
more sales of certain types of our stock at a redemption price of 113.875%, plus
accrued and unpaid interest, if any, to the redemption date; provided that at
least 65% of the aggregate principal amount of the senior notes originally
issued remain outstanding and notice of such redemption is mailed within 60 days
of each such sale of stock. Upon a change of control (as defined in the senior
notes indenture), we would be required to purchase the senior notes at a
purchase option equal to 101% of the principal amount, plus accrued and unpaid
interest, if any.

The debt evidenced by the senior notes ranks equally in right of payment
with all our existing and future unsubordinated unsecured debt, and senior in
right of payment to all existing and future subordinated debt.

The senior notes indenture restricts, among other things, our ability to
incur additional debt and the use of proceeds of such additional debt, pay
dividends or make certain other restricted payments, incur certain liens to
secure debt or engage in merger transactions. There are significant "carve-outs"
and exceptions to these covenants.

COMDISCO LOAN FACILITY

In October 1999, we entered into a $7.0 million loan facility with
Comdisco, Inc. Under this facility, which we can draw down through August 31,
2000, Comdisco provides financing for construction costs and equipment for our
facilities in Chicago, Illinois and Emeryville, California. This agreement is
secured by all tangible and intangible assets relating to the specific
facilities funded by the lender. Individual loans bear interest at a rate of
8.25% per annum and will be repaid in 42 equal monthly installments plus a final
payment equal to 15% of the original advance. As of March 31, 2000, we had
outstanding borrowings of $2.2 million under this facility.

In connection with this facility, we issued to Comdisco a warrant to
purchase 73,976 shares of our Series C preferred stock at an exercise price of
$7.57 per share.

The facility restricts our ability to merge or consolidate with another
entity. It also restricts our ability to pay dividends or purchase stock.

MMC/GATX LOAN FACILITY

In November 1999, we entered into a $17.0 million loan facility with
MMC/GATX Partnership and other lenders. Under this facility, which we can draw
down through December 31, 2001, MMC provides financing for construction costs
and equipment for our facilities in Los Angeles, California and Vienna,
Virginia. This agreement is secured by all tangible and intangible assets
relating to the specific facilities funded by the lender. Individual

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<PAGE> 70

loans bear interest at a rate equal to the sum of the applicable U.S. Treasury
note yield to maturity plus 3.93% per annum and will be repaid in 42 equal
monthly installments plus a final payment equal to 10% of the original advance.
As of March 31, 2000, we had outstanding borrowings of $1.2 million under this
facility.

In connection with this facility, we issued to MMC and others warrants to
purchase 217,679 shares of our Series C preferred stock at an exercise price of
$6.44 per share.

The facility restricts our ability to merge or consolidate with another
entity. It also restricts our ability to pay dividends or purchase stock.

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<PAGE> 71

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through sale of our equity securities. As described below, no
shares currently outstanding will be available for sale immediately after this
offering because of contractual resale restrictions contained in agreements
between us and our stockholders.

Upon completion of this offering, we will have outstanding
shares of common stock based upon shares outstanding as of May
31, 2000, assuming no exercise of the underwriters' over-allotment option and no
exercise of outstanding options prior to completion of this offering. Of these
shares, the shares sold in this offering will be freely tradable
without restriction under the Securities Act, except for any shares purchased by
our "affiliates" as defined in Rule 144 under the Securities Act. Of the
remaining shares of common stock, shares held by
existing stockholders are subject to lock-up agreements with the underwriters
and/or us providing that the stockholder will not offer to sell, contract to
sell or otherwise sell, dispose of, loan, pledge or grant any rights to, any
shares of common stock or any securities that are convertible into common stock,
owned as of the date of this prospectus or subsequently acquired, for a period
of 180 days after the date of this prospectus without prior written consent. As
a result of these lock-up agreements, notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701 under the
Securities Act, none of these shares will be resellable until 181 days after the
date of this prospectus. Deutsche Bank Securities Inc. may, in its sole
discretion and at any time without notice, release all or any portion of the
shares subject to lock-up agreements.

Beginning 181 days after the date of this prospectus, approximately
shares will be eligible for sale in the public market. All of
these shares will be subject to volume limitations under Rule 144, except
shares eligible for sale under Rule 144(k) and
shares eligible for sale under Rule 701. In some cases, these shares are subject
to repurchase rights of COLO.COM.

In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
except an affiliate, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this
offering; or

- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144.

Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about COLO.COM. Under Rule 144(k), a person who is not deemed to have been an
affiliate of COLO.COM at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner except an affiliate, is entitled
to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of

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<PAGE> 72

Rule 144. Any employee, officer or director of or consultant to COLO.COM who
purchased shares pursuant to a written compensatory plan or contact may be
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell their Rule 701 shares in reliance on Rule 144 without
having to comply with the holding period, public information, volume limitation
or notice provisions of Rule 144. All holders of Rule 701 shares are required to
wait until 90 days after the date of this prospectus before selling their Rule
701 shares. However, all Rule 701 shares are subject to lock-up agreements and
will only become eligible for sale at the earlier of the expiration of the
180-day lock-up agreements or the receipt of the written consent of Deutsche
Bank Securities Inc. more than 90 days after the date of this prospectus.

After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our employee benefit plans. As of May 31, 2000,
options to purchase a total of 3,199,400 shares were outstanding and 1,749,483
shares were reserved for future issuance under our stock plans. Common stock
issued upon exercise of outstanding vested options or issued pursuant to our
employee stock purchase plan, other than common stock issued to our affiliates,
will be available for immediate resale in the open market following expiration
of the 180-day lock-up agreements.

Also beginning six months after the date of this offering, holders of
49,169,894 restricted shares will be entitled to registration rights on these
shares for sale in the public market. See "Description of Capital
Stock -- Registration Rights." Registration of these shares under the Securities
Act would result in their becoming freely tradable without restriction under the
Securities Act immediately upon the effectiveness of the registration.

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<PAGE> 73

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., FleetBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc. and UBS
Warburg LLC, have severally agreed to purchase from us the following respective
number of shares of common stock at a public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Deutsche Bank Securities Inc. ..............................
FleetBoston Robertson Stephens Inc. ........................
Bear, Stearns & Co. Inc. ...................................
UBS Warburg LLC.............................................
--------
Total Underwriters ( )................................
========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.

The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and other selling terms.

We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to
additional shares of common stock at the public offering price
less the underwriting discounts and commissions set forth on the cover page of
this prospectus. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of common stock offered hereby. To
the extent that the underwriters exercise this option, each of the underwriters
will become obligated, subject to conditions, to purchase approximately the same
percentage of additional shares of common stock as the number of shares of
common stock to be purchased by it in the above table bears to the total number
of shares of common stock offered hereby. We will be obligated, pursuant to the
option, to sell these additional shares of common stock to the underwriters to
the extent the option is exercised. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is % of the initial public offering price. We
have agreed to pay the underwriters the following fees, assuming either no
exercise or full exercise by the underwriters of the underwriters' over-
allotment option:

<TABLE>
<CAPTION>
TOTAL FEE
------------------------------------------------
WITHOUT EXERCISE OF WITH FULL EXERCISE
FEE PER SHARE OVER-ALLOTMENT OPTION OF OVER-ALLOTMENT OPTION
------------- --------------------- ------------------------
<S> <C> <C> <C>
Fee paid by COLO.COM........ $ $ $
</TABLE>

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<PAGE> 74

In addition, we estimate that our share of the total expenses of this
offering, excluding the above described underwriting discounts and commissions,
will be approximately $ .

We have agreed to indemnify the underwriters against some specified types
of liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in respect of
any of these liabilities.

Each of our officers and directors, and substantially all of our
stockholders and holders of options and warrants to purchase our stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering or
common stock issuable upon exercise of options or warrants held by these persons
for a period of 180 days after the effective date of the registration statement
of which this prospectus is a part without the prior written consent of Deutsche
Bank Securities Inc. This consent may be given at any time without public
notice. We have entered into a similar agreement with the representatives of the
underwriters, except that we may grant options and sell shares pursuant to our
1998 Incentive Stock Option Plan and our 2000 Employee Stock Purchase Plan
without such consent.

The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from the issuer in the offering. The
underwriters may close out any covered short position by either exercising their
option to purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which they may
purchase shares through the over-allotment option. "Naked" short sales are any
sales in excess of such option. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of common
stock made by the underwriters in the open market prior to the completion of the
offering.

The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of our
common stock, and together with the imposition of the penalty bid may stabilize,
maintain or otherwise affect the market price of the common stock. As a result,
the price of the common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

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<PAGE> 75

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for our vendors, employees,
family members of employees, customers and other third parties. The number of
shares of our commons stock available for sale to the general public will be
reduced to the extent these reserved shares are purchased. Any reserved shares
that are not purchased by these persons will be offered by the underwriters to
the general public on the same basis as the other shares in this offering.

The underwriters have provided, and are expected to continue to provide,
investment banking and other services to us and our affiliates. In connection
with our senior notes offering, which occurred in March 2000, three of the
underwriters received discounts and commissions in their role as initial
purchasers. Deutsche Bank Securities Inc. received approximately $675,000, Bear,
Stearns & Co. Inc. received approximately $1.8 million and UBS Warburg LLC
received approximately $700,000. In connection with our Series C preferred stock
financing, which occurred in December 1999, two of the underwriters received
commissions and fees for their services as placement agents. Deutsche Bank
Securities, Inc. received approximately $4.4 million and UBS Warburg LLC
received approximately $1.3 million. In addition, BT Investment Partners, Inc.,
an affiliate of Deutsche Bank Securities Inc., purchased 102,041 shares of
Series C preferred stock for an aggregate purchase price of $1.0 million and UBS
Capital II LLC, an affiliate of UBS Warburg LLC, purchased 2,021,816 shares of
Series C preferred stock for an aggregate price of $19.8 million.

PRICING OF THIS OFFERING

Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:

- prevailing market conditions;

- our results of operations in recent periods;

- the present stage of our development;

- the market capitalization and stage of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and

- estimates of our business potential.

LEGAL MATTERS

Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California will pass upon the validity of the common stock sold in this offering
for COLO.COM. Shearman & Sterling, New York, New York and Menlo Park, California
is acting as counsel for the underwriters in connection with selected legal
matters relating to the shares of common stock offered by this prospectus. As of
the date of this prospectus, an investment partnership composed of current and
former members of and persons associated with Wilson Sonsini Goodrich & Rosati
and certain members of and persons associated with Wilson Sonsini Goodrich &
Rosati, beneficially owned an aggregate of 123,132 shares of our common stock.

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<PAGE> 76

EXPERTS

The consolidated financial statements of COLO.COM and subsidiaries as of
December 31, 1998 and 1999 and for the period from inception (April 2, 1997) to
December 31, 1997 and for the years ended December 31, 1998 and 1999 included in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1. This prospectus, which forms a part of the Registration
Statement, does not contain all the information included in the Registration
Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in this
prospectus to any contract or other document of COLO.COM, such references are
not necessarily complete and you should refer to the exhibits attached to the
Registration Statement for copies of the actual contract or document. You may
review a copy of the Registration Statement, including exhibits and schedule
filed therewith, at the Securities and Exchange Commission's public reference
facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Securities and Exchange
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may also obtain copies of such materials from the Public
References Section of the Securities and Exchange Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as COLO.COM, that file
electronically with the Securities and Exchange Commission.

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<PAGE> 77

COLO.COM AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit)................................................. F-5
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE> 78

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
COLO.COM:

We have audited the accompanying consolidated balance sheets of COLO.COM (a
California corporation) and Subsidiary as of December 31, 1998 and 1999, and the
related statements of operations, changes in stockholders' equity (deficit), and
cash flows for the period from inception (April 2, 1997) to December 31, 1997,
and for the years ended December 31, 1998 and 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of COLO.COM and
Subsidiary as of December 31, 1998 and 1999, and the results of their operations
and their cash flows for the period from inception (April 2, 1997) to December
31, 1997, and for the years ended December 31, 1998 and 1999, in conformity with
generally accepted accounting principles.

/s/ Arthur Andersen LLP

San Francisco, California,
January 24, 2000

F-2
<PAGE> 79

COLO.COM AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999, AND MARCH 31, 2000 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 2000
------------------- --------------------------
1998 1999 ACTUAL PRO FORMA
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 138 $198,412 $381,010
Accounts receivable, net of allowance for doubtful
accounts of $5, $25, and $135 (unaudited) at December
31, 1998 and 1999, and March 31, 2000, respectively..... 42 28 521
Prepaids and other current assets......................... 177 704 2,182
------- -------- --------
Total current assets.................................... 357 199,144 383,713
PROPERTY AND EQUIPMENT, net................................. 495 13,195 49,033
RESTRICTED CASH AND CASH EQUIVALENTS........................ -- 2,162 3,765
RESTRICTED INVESTMENTS...................................... -- -- 77,729
DEPOSITS AND OTHER NONCURRENT ASSETS........................ 36 1,241 10,868
------- -------- --------
Total assets............................................ $ 888 $215,742 $525,108
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 263 $ 8,911 $ 21,434
Accrued liabilities....................................... 149 761 4,823
Current portion of notes payable, net of discount......... -- 1,464 478
------- -------- --------
Total current liabilities............................... 412 11,136 26,735
------- -------- --------
NONCURRENT LIABILITIES:
Long-term notes payable, net of discount.................. -- 1,876 217,755
Other noncurrent liabilities.............................. -- 42 1,286
------- -------- --------
Total noncurrent liabilities............................ -- 1,918 219,041
------- -------- --------
Total liabilities....................................... 412 13,054 245,776
------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 7) STOCKHOLDERS' EQUITY:
Series A preferred stock, no par value:
Authorized shares -- 5,250,000
Issued and outstanding shares -- 4,255,730 at December 31,
1998, and 4,261,730 at both December 31, 1999, and March
31, 2000 and 0 at March 31, 2000 (pro forma)............ 2,078 2,079 2,079 --
Series B preferred stock, no par value:
Authorized shares -- 24,500,000
Issued and outstanding shares -- 0 at December 31, 1998,
and 24,500,000 at both December 31, 1999, and March 31,
2000 and 0 at March 31, 2000 (pro forma)................ -- 12,219 12,219 --
Series C preferred stock, no par value:
Authorized shares -- 21,000,000
Issued and outstanding shares -- 0 at December 31, 1998
and 20,408,164 at both December 31, 1999, and March 31,
2000 and 0 at March 31, 2000 (pro forma)................ -- 194,056 194,056 --
Common stock, no par value:
Authorized shares -- 81,000,000
Issued and outstanding shares -- 4,233,888, 13,321,793,
13,557,555 (unaudited) and 62,727,449 (unaudited) at
December 31, 1998 and 1999, March 31, 2000, and March
31, 2000 (pro forma) respectively....................... 37 12,826 26,003 234,357
Warrants.................................................. -- 2,434 88,460 88,460
Deferred compensation..................................... -- (9,306) (19,698) (19,698)
Notes receivable from stockholders........................ (8) (1,102) (1,377) (1,377)
Accumulated deficit....................................... (1,631) (10,518) (22,410) (22,410)
------- -------- -------- --------
Total stockholders' equity.............................. 476 202,688 279,332 $279,332
------- -------- -------- ========
Total liabilities and stockholders' equity.............. $ 888 $215,742 $525,108
======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 80

COLO.COM AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (APRIL 2, 1997) TO DECEMBER 31, 1997,
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999, AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
PERIOD FROM INCEPTION DECEMBER 31, MARCH 31,
(APRIL 2, 1997) TO ----------------- ------------------
DECEMBER 31, 1997 1998 1999 1999 2000
--------------------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE......................................... $ 31 $ 190 $ 218 $ 55 $ 192
------ ------- ------- ------- --------
OPERATING COSTS AND EXPENSES:
Cost of revenue............................... 92 342 762 164 3,521
Selling, general, and administrative.......... 14 1,388 6,526 409 5,464
Deferred compensation......................... -- -- 1,248 -- 2,258
Depreciation and amortization................. 2 10 139 50 561
Loss on lease and leasehold improvements...... -- -- 921 610 --
------ ------- ------- ------- --------
Total operating costs and expenses.......... 108 1,740 9,596 1,233 11,804
------ ------- ------- ------- --------
Loss from operations........................ (77) (1,550) (9,378) (1,178) (11,612)
INTEREST INCOME................................. -- 7 491 2 2,659
INTEREST EXPENSE................................ (1) (10) -- -- (2,939)
------ ------- ------- ------- --------
Net loss........................................ $ (78) $(1,553) $(8,887) $(1,176) $(11,892)
====== ======= ======= ======= ========
PER SHARE INFORMATION:
Net loss per common share: basic and
diluted..................................... $(0.03) $ (0.28) $ (1.86) $ (0.26) $ (1.49)
====== ======= ======= ======= ========
Common shares used in computing per share
amounts: basic and diluted.................... 2,612 5,554 4,771 4,461 7,985
====== ======= ======= ======= ========
Proforma:
Net loss per common share basic and diluted
(unaudited)................................. $ (0.34) $ (0.13) $ (0.21)
======= ======= ========
Common shares used in computing per share
amounts basic and diluted (unaudited)....... 26,460 8,717 57,155
======= ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 81

COLO.COM AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (APRIL 2, 1997) TO DECEMBER 31, 1997,
FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1999, AND
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES C COMMON STOCK
------------------ -------------------- --------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS
--------- ------ ---------- ------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 2, 1997..... -- $ -- -- $ -- -- $ -- -- $ -- $ --
Issuance of common stock
for cash and services... -- -- -- -- -- -- 5,050,000 53 --
Net loss for period....... -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- ---------- -------- ---------- ------- -------
BALANCE, DECEMBER 31,
1997...................... -- -- -- -- -- -- 5,050,000 53 --
Issuance of Series A
preferred stock for cash
and services, net of
issuance costs.......... 4,255,730 2,078 -- -- -- -- -- -- --
Issuance of common stock
in exchange for
stockholder notes and
cash.................... -- -- -- -- -- -- 3,755,000 188 --
Repurchase of common
stock................... -- -- -- -- -- -- (4,571,112) (204) --
Net loss for year......... -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- ---------- -------- ---------- ------- -------
BALANCE, DECEMBER 31,
1998...................... 4,255,730 2,078 -- -- -- -- 4,233,888 37 --
Issuance of Series A
preferred stock for
cash, net of issuance
costs................... 6,000 1 -- -- -- -- -- -- --
Issuance of Series B
preferred stock for
cash, net of issuance
costs................... -- -- 24,500,000 12,219 -- -- -- -- --
Issuance of Series C
preferred stock for cash
and debt repayment, net
of issuance costs....... -- -- -- -- 20,408,164 194,056 -- -- --
Issuance of common stock
for cash and services... -- -- -- -- -- -- 284,366 999 --
Value assigned to issued
warrants................ -- -- -- -- -- -- -- -- 2,434
Exercise of employee stock
options for stockholder
notes and cash.......... -- -- -- -- -- -- 9,785,368 1,285 --

<CAPTION>
NOTES
RECEIVABLE ACCUMU-
DEFERRED FROM LATED EQUITY
COMPENSATION STOCKHOLDERS DEFICIT (DEFICIT)
------------ ------------ -------- ---------
<S> <C> <C> <C> <C>
BALANCE, APRIL 2, 1997..... $ -- $ -- $ -- $ --
Issuance of common stock
for cash and services... -- -- -- 53
Net loss for period....... -- -- (78) (78)
-------- ------ -------- --------
BALANCE, DECEMBER 31,
1997...................... -- -- (78) (25)
Issuance of Series A
preferred stock for cash
and services, net of
issuance costs.......... -- -- -- 2,078
Issuance of common stock
in exchange for
stockholder notes and
cash.................... -- (182) -- 6
Repurchase of common
stock................... -- 174 -- (30)
Net loss for year......... -- -- (1,553) (1,553)
-------- ------ -------- --------
BALANCE, DECEMBER 31,
1998...................... -- (8) (1,631) 476
Issuance of Series A
preferred stock for
cash, net of issuance
costs................... -- -- -- 1
Issuance of Series B
preferred stock for
cash, net of issuance
costs................... -- -- -- 12,219
Issuance of Series C
preferred stock for cash
and debt repayment, net
of issuance costs....... -- -- -- 194,056
Issuance of common stock
for cash and services... -- -- -- 999
Value assigned to issued
warrants................ -- -- -- 2,434
Exercise of employee stock
options for stockholder
notes and cash.......... -- (1,143) -- 142
</TABLE>

F-5
<PAGE> 82

COLO.COM AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
FOR THE PERIOD FROM INCEPTION (APRIL 2, 1997) TO DECEMBER 31, 1997,
FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1999, AND
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES C COMMON STOCK
------------------ -------------------- --------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS
--------- ------ ---------- ------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Recognition of deferred
compensation............ -- -- -- -- -- -- -- 10,554 --
Deferred compensation..... -- -- -- -- -- -- -- -- --
Repurchase of common
stock................... -- -- -- -- -- -- (981,829) (49) --
Net loss for year......... -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- ---------- -------- ---------- ------- -------
BALANCE, DECEMBER 31,
1999...................... 4,261,730 2,079 24,500,000 12,219 20,408,164 194,056 13,321,793 12,826 2,434
Value assigned to issued
warrants (unaudited).... -- -- -- -- -- -- -- -- 86,176
Warrants exercised
(unaudited)............. -- -- -- -- -- -- 90,345 200 (150)
Exercise of employee stock
options for stockholder
notes and cash
(unaudited)............. -- -- -- -- -- -- 210,000 330 --
Payment of stockholder
note.................... -- -- -- -- -- -- -- -- --
Recognition of deferred
compensation
(unaudited)............. -- -- -- -- -- -- -- 12,650 --
Deferred compensation
(unaudited)............. -- -- -- -- -- -- -- -- --
Repurchase of common stock
(unaudited)............. -- -- -- -- -- -- (64,583) (3) --
Net loss for period
(unaudited)............. -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- ---------- -------- ---------- ------- -------
BALANCE, MARCH 31, 2000
(unaudited)............... 4,261,730 $2,079 24,500,000 $12,219 20,408,164 $194,056 13,557,555 $26,003 $88,460
========= ====== ========== ======= ========== ======== ========== ======= =======

<CAPTION>
NOTES
RECEIVABLE ACCUMU-
DEFERRED FROM LATED EQUITY
COMPENSATION STOCKHOLDERS DEFICIT (DEFICIT)
------------ ------------ -------- ---------
<S> <C> <C> <C> <C>
Recognition of deferred
compensation............ (10,554) -- -- --
Deferred compensation..... 1,248 -- -- 1,248
Repurchase of common
stock................... -- 49 -- --
Net loss for year......... -- (8,887) (8,887)
-------- ------- -------- --------
BALANCE, DECEMBER 31,
1999...................... (9,306) (1,102) (10,518) 202,688
Value assigned to issued
warrants (unaudited).... -- -- -- 86,176
Warrants exercised
(unaudited)............. -- -- -- 50
Exercise of employee stock
options for stockholder
notes and cash
(unaudited)............. -- (328) -- 2
Payment of stockholder
note.................... -- 53 -- 53
Recognition of deferred
compensation
(unaudited)............. (12,650) -- -- --
Deferred compensation
(unaudited)............. 2,258 -- -- 2,258
Repurchase of common stock
(unaudited)............. -- -- -- (3)
Net loss for period
(unaudited)............. -- -- (11,892) (11,892)
-------- ------- -------- --------
BALANCE, MARCH 31, 2000
(unaudited)............... $(19,698) $(1,377) $(22,410) $279,332
======== ======= ======== ========
</TABLE>

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

F-6
<PAGE> 83

COLO.COM AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (APRIL 2, 1997) TO DECEMBER 31, 1997,
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999, AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 2000 (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS
INCEPTION YEAR ENDED ENDED
(APRIL 2, 1997) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------ ------------------
1997 1998 1999 1999 2000
------------------ ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $(78) $(1,553) $ (8,887) $(1,176) $(11,892)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 2 10 139 50 561
Amortization of warrants.............................. -- -- -- -- 338
Loss on disposal of fixed assets...................... -- -- 465 465 --
Deferred compensation................................. -- 1,248 -- 2,258
Cost of revenues relating to warrants................. -- -- -- -- 2,294
Series A preferred stock exchanged for services....... -- 116 -- -- --
Changes in operating assets and liabilities:
Accounts receivable, net............................ (9) (33) 14 3 (494)
Prepaids and other current assets................... -- (177) (527) 178 (1,478)
Deposits and other noncurrent assets................ -- (36) (955) 32 (209)
Accounts payable.................................... 7 256 110 (155) 886
Other noncurrent liabilities........................ -- -- 42 -- 1,170
Accrued liabilities................................. 12 137 612 118 1,634
---- ------- -------- ------- --------
Net cash used in operating activities............. (66) (1,280) (7,739) (485) (4,932)
---- ------- -------- ------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property and equipment, net................ (71) (436) (12,430) (73) (35,734)
Increase in accounts payable related to construction
activities............................................ -- -- 2,598 -- 17,577
Restricted investments.................................. -- -- -- -- (77,729)
Increase in restricted cash and cash equivalents........ -- -- (2,162) -- (1,603)
---- ------- -------- ------- --------
Net cash used in investing activities............. (71) (436) (11,994) (73) (97,489)
---- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable................. 119 41 9,729 497 290,508
Interest payable........................................ -- -- -- -- 2,502
Repayments of notes payable............................. -- (160) (3,643) -- (2,153)
Proceeds from sale of common stock...................... 53 6 205 17 --
Payment of stockholder note............................. -- -- -- -- 53
Warrants and options exercised.......................... -- -- -- -- 52
Proceeds from issuance of Series A preferred stock,
net................................................... -- 1,962 1 1 --
Proceeds from issuance of Series B preferred stock,
net................................................... -- -- 12,219 -- --
Proceeds from issuance of Series C preferred stock,
net................................................... -- -- 199,496 -- --
Preferred stock issuance costs paid..................... -- -- -- -- (5,940)
Repurchase of common stock.............................. -- (30) -- -- (3)
---- ------- -------- ------- --------
Net cash provided by financing activities......... 172 1,819 218,007 515 285,019
---- ------- -------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 35 103 198,274 (43) 182,598
CASH AND CASH EQUIVALENTS:
Beginning of period..................................... -- 35 138 138 198,412
---- ------- -------- ------- --------
End of period........................................... $ 35 $ 138 $198,412 $ 95 $381,010
==== ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest................ $ 1 $ 10 $ 63 $ -- $ 106
Notes issued for purchase of common stock............... -- 182 1,143 -- 328
Repurchase of common stock in exchange for stockholder
notes................................................. -- 174 49 -- --
Stock issued for assets and services.................... -- -- 936 -- --
Value assigned to warrants.............................. -- -- 2,434 -- 86,176
Warrants exercised...................................... -- -- -- -- 150
Deferred compensation................................... -- -- 10,554 -- 12,650
Issuance of Series C preferred stock in lieu of debt
repayment............................................. -- -- 500 -- --
Amortization of debt discount included in capitalized
interest.............................................. -- -- 874 -- 591
Accrued preferred stock issuance costs.................. -- -- 5,940 -- --
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 84

COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

1. NATURE OF BUSINESS:

COLO.COM, formerly Colomotion, Inc., was incorporated on April 2, 1997, in
the state of California. As of March 31, 2000, COLO.COM had two wholly owned
subsidiaries. COLO.COM Limited, was incorporated in the United Kingdom on
November 12, 1999. COLO.COM GmbH was incorporated in Germany on February 9,
2000. The Company, which includes COLO.COM, COLO.COM Limited and COLO.COM GmbH,
is a rapidly growing provider of colocation facilities in which communications
services companies can house their equipment and connect to network providers.
The Company's target customers are Internet-based businesses, application
service providers, Internet service providers, competitive local phone companies
and other voice and data communications companies. The facilities, known as
Neutral Optical Hubs, will offer target customers a capital-efficient means to
rapidly deploy their networks and applications. As of December 31, 1999, the
Company operated one such Neutral Optical Hub in which revenue was generated. As
of March 31, 2000, the Company had four Neutral Optical Hubs in which revenue
was generated. The Company intends to make its facilities available in many
domestic and international locations. The facilities are planned to provide
flexible access to multiple communications carriers, allowing customers the
opportunity to select a network provider. The facilities will also have
technologically advanced systems designed to provide uninterrupted electric
power availability, temperature and humidity control, physical security and
environmental safety, and on-site services provided by a staff of
telecommunication and Internet-trained technicians.

The Company is a start-up company in a new and rapidly evolving market. Its
success, in part, depends on its ability to generate additional financing, grow
its customer base, and manage its relations with the companies that provide
connectivity to its Neutral Optical Hubs. The Company's success also depends on
its ability to effectively manage growth, develop Neutral Optical Hubs
worldwide, penetrate additional international markets, and profitably charge for
its services. Additional risks include actual and potential competition from
larger, existing service providers and carriers as well as new market entrants,
changes in technology, evolving industry standards, development of an effective
strategy to secure market acceptance for the Company's services, and retention
of qualified personnel.

The Company incurred a loss of $8,887,000 and $11,892,000 (unaudited) for
the year ended December 31, 1999, and for the three months ended March 31, 2000,
respectively, and had an accumulated deficit at March 31, 2000, of $22,410,000
(unaudited). The Company expects to make significant capital expenditures and to
continue to incur significant losses in the foreseeable future. Management
believes that the Company will be successful in obtaining adequate sources of
cash to fund its anticipated operating losses, capital expenditures, and
interest expense through the end of 2000 and to follow through with plans for
growth and expansion. There can be no assurance that management will be
successful in carrying out its plans. If the risks listed above cannot be
managed in a timely manner, the Company's operations may be adversely affected.

2. SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL STATEMENTS

The interim consolidated financial statements as of March 31, 2000, and for
the three months ended March 31, 1999 and 2000, are unaudited, and certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. In the opinion of management, all adjustments (consisting only of

F-8
<PAGE> 85
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

normal recurring adjustments) necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not indicative of the results for the entire fiscal year.

UNAUDITED PROFORMA PRESENTATION

The unaudited pro forma balance sheet and statement of stockholders' equity
(deficit) as of March 31, 2000 reflects the automatic conversion of all
outstanding shares of convertible preferred stock into 49,169,894 shares of
common stock which will occur upon the closing of the Company's proposed initial
public offering.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of COLO.COM and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in the consolidated financial statements.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year financial
statements to conform to the current reporting.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

REVENUE RECOGNITION

Through December 31, 1999, all revenue has been generated from the
Company's first facility in San Francisco (Mission Street). In the first three
months of 2000, revenue has been generated from four of the Company's Neutral
Optical Hubs. The Company enters into contracts with its customers for services
and use of cabinet and cage space at the Company's Neutral Optical Hubs. These
contracts typically have terms between one and ten years, with varying renewal
periods. The Company's revenue consists primarily of monthly payments for use of
cabinet and cage space in the Company's Neutral Optical Hubs, payments for
customer connections to communications carriers, and payments for installation
and technical support services. Generally, the Company bills the customer at the
beginning of the month for the subsequent month's rent. Any advance collections
are deferred and recognized on a straight-line basis over the period in which
service is provided. Revenue for services other than installation is recognized
as the services are provided. In December 1999, the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue
Recognition in Financial Statements." SAB 101 summarizes the SEC's view in
applying generally accepted accounting principles to selected revenue
recognition issues. As of January 1, 2000, the Company began to recognize
installation revenue over the life of a customer

F-9
<PAGE> 86
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

contract. The cost associated with customer installation and other services is
expensed as incurred. There is no material impact on prior years' statements.

SIGNIFICANT CUSTOMERS

The Company earned approximately 34 percent, 31 percent and 11 percent of
its revenue from sales made to its three largest customers during the year ended
December 31, 1998. The Company earned approximately 56 percent, 23 percent and
11 percent of its revenue from sales made to its three largest customers during
the year ended December 31, 1999. The Company earned approximately 28 percent,
19 percent and 18 percent of its revenues compared to 61 percent, 18 percent and
5 percent of its revenues for sales made to its three largest customers during
the three months ended March 31, 1999 and 2000, respectively (unaudited).

DEFERRED RENT

The Company has certain leases that contain fixed escalations of the
minimum annual lease payments during the original term of the lease. The Company
recognizes occupancy expense on a straight-line basis, recording the difference
between the rental amount charged to expense and the amount payable under the
lease as a deferred rent liability. Amounts are included in other noncurrent
liabilities.

CONCENTRATION OF CREDIT RISK

Financial instruments that may potentially subject the Company to
concentration of credit risk consist principally of cash, short term securities
and accounts receivable. All cash is with financial institutions with strong
credit ratings, which minimizes the risk of loss due to nonpayment. The Company
has not experienced any losses due to credit impairment related to its financial
instruments. The collection of accounts receivable is subject to the credit
worthiness of the Company's customers. The Company has experienced minimal
losses due to the write-off of uncollectible accounts.

INCOME TAXES

Upon incorporation, the Company's common stockholders elected to be taxed
under the subchapter S corporation provisions of the Internal Revenue Code,
whereby stockholders are personally liable for federal income taxes on their
proportionate share of the Company's net income or loss. Effective June 26,
1998, with the issuance of Series A preferred stock, the Company became
ineligible for S corporation status. As of June 26, 1998, the Company had an
accumulated deficit of $567,000 incurred while an S corporation. The Company
accounts for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
the asset and liability method of accounting for income taxes. Under this
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying the applicable statutory tax rate to the
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities.

F-10
<PAGE> 87
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

SEGMENT REPORTING

The Company has adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
annual and interim reporting standards for operating segments of a company. The
statement requires disclosures of selected segment-related financial information
about products, major customers, and geographic areas. The Company has one
reportable segment because it is not organized by multiple segments for purposes
of making operating decisions or assessing performance. The Company evaluates
performance, makes operating decisions, and allocates resources based on
financial data consistent with the presentation in the accompanying consolidated
financial statements. As of December 31, 1998 and 1999 and March 31, 2000
(unaudited), substantially all operations and assets were based in the United
States.

CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents.

RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and cash equivalents represent funds set aside as
collateral for letters of credit issued under building lease agreements. The
balance consists of certificates of deposits with terms of 90 days or less.

RESTRICTED INVESTMENTS

Under the covenants of the offering of the senior notes, the Company is
required to pledge securities equal to the amount of the first four interest
payments. These securities, which consist of United States Treasury bills with
maturities near the date of each interest payment, are held by a Trustee. It is
the Company's intent to hold these investments until maturity.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are depreciated using the
straight-line method over estimated useful lives, or related lease terms, if
shorter, as follows:

<TABLE>
<CAPTION>
CLASSIFICATIONS ESTIMATED USEFUL LIVES
--------------- ----------------------
<S> <C>
Computer and office furniture and
equipment............................ 3 - 5 years
Site equipment, furniture and
fixtures............................. 5 years
Leasehold improvements................. The lesser of estimated useful lives or
term of lease
</TABLE>

LONG-LIVED ASSETS

The Company's policy is to record long-lived assets at cost, amortizing
their costs over the expected useful life of the related assets. In accordance
with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," assets are

F-11
<PAGE> 88
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amounts of the assets may not be recoverable.

CONSTRUCTION IN PROGRESS

Construction in progress includes direct expenditures for the construction
of Neutral Optical Hubs and is stated at cost. Capitalized construction costs
include costs incurred under the construction contract, cabling, on-site
construction management and rent, utilities, direct costs and interest during
the construction phase. Once a Neutral Optical Hub has been constructed and is
available for its intended use, capitalized costs are depreciated at an
appropriate rate based on Company policy. Interest incurred during construction
is capitalized in accordance with SFAS No. 34, "Capitalization of Interest
Costs." Total interest capitalized to construction in progress during the year
ended December 31, 1999, and the three months ended March 31, 1999 and 2000, was
$930,000, $0 and $591,000 (unaudited), respectively.

DEFERRED FINANCING COSTS

During March 2000, the Company completed an offering of senior notes that
raised approximately $290 million (unaudited), net of issuance costs. As of
December 31, 1999, and March 31, 2000, costs of $144,000 and $9,680,000
(unaudited), respectively, have been incurred in connection with this offering.
These costs are included in other noncurrent assets in the accompanying
consolidated balance sheets. These costs are being amortized on a straight-line
basis over the life of the notes beginning in March 2000.

NET INCOME (LOSS) PER COMMON SHARE

The Company computes net income (loss) per common share in accordance with
SFAS No. 128, "Earnings Per Share," and SEC Staff Accounting Bulletin No. 98
(SAB No. 98). Under the provisions of SFAS No. 128 and SAB No. 98, basic net
income (loss) per common share (Basic EPS) is computed by dividing net income
(loss) by the weighted average number of common shares outstanding excluding
shares subject to repurchase. Diluted net income (loss) per common share
(Diluted EPS) is computed by dividing net income (loss) by the weighted average
number of common shares and dilutive common share equivalents then outstanding.

Diluted EPS for all periods presented does not include the impact of stock
options, shares subject to repurchase, preferred stock, and warrants, as the
effect of their inclusion would be antidilutive.

PRO FORMA NET LOSS PER SHARE (UNAUDITED)

The calculation of pro forma net loss per share assumes that all series of
convertible shares have been converted into common stock as of the original
issuance date.

COST OF REVENUE

Cost of revenue consists primarily of site-related employee salaries and
benefits, rental payments on the Company's Neutral Optical Hubs, payments for
equipment, connectivity charges, utilities, and other direct operating expenses.

F-12
<PAGE> 89
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

DEFERRED COMPENSATION AND STOCK EXCHANGED FOR SERVICES

The Company has elected to follow Accounting Principles Board Opinion No.
25 (APB 25), "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its employee stock options. Under APB 25, when
the exercise price of employee stock options is less than the fair market value
of the underlying stock on the date of grant, compensation expense is recorded
for the difference between fair market value and the exercise price. Expense
associated with stock-based compensation is being amortized over the vesting
period of the individual award consistent with the method described in Financial
Accounting Standards Board (FASB) Interpretation No. 28. No stock compensation
expense was recorded in 1998. The Company has recorded compensation expense of
$1,248,000 and $2,258,000 (unaudited) for the year ended December 31, 1999, and
for the three months ended March 31, 2000, respectively. All deferred
compensation relate to selling, general and administrative expense. The Company
has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation."

The value of warrants, options or stock exchanged for services is expensed
over the period benefited. To calculate the expense, the Company uses either the
market value of the equity instrument or the value of the services, whichever is
more objectively determinable.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1), which provides
guidance on the capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company adopted the new standard in
1999, although the impact on the 1999 financial statements was not significant.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP 98-5 is adopted.
Adoption of this statement in fiscal 1999 did not have an impact on the
consolidated financial statements; all start-up costs have historically been
expensed as incurred.

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards of derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Subsequently, in June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivatives and Hedging Activities -- Deferral of the Effective Date of SFAS No.
133," which amended SFAS No. 133. The Company does not currently have any
derivatives or hedges and does not expect the adoption of this standard to have
a material effect on the Company's results of operations, financial position or
cash flows.

F-13
<PAGE> 90
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following at December 31, 1998 and
1999, and March 31, 2000 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1998 1999 2000
---- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and office furniture and equipment............ $ 15 $ 1,487 $ 3,159
Site equipment, furniture, and fixtures................ 24 24 4,275
Leasehold improvements................................. 163 146 6,476
Construction in progress............................... 305 11,635 35,676
---- ------- -------
507 13,292 49,586
Less: Accumulated depreciation......................... (12) (97) (553)
---- ------- -------
$495 $13,195 $49,033
==== ======= =======
</TABLE>

Depreciation and amortization expense for the period from inception (April
2, 1997) to December 31, 1997, for the years ended December 31, 1998 and 1999,
and for the three months ended March 31, 1999 and 2000, was $2,000, $10,000,
$139,000, $50,000 (unaudited) and $561,000 (unaudited), respectively.

During 1997, the Company implemented SFAS No. 121, which requires an entity
to assess the recoverability of the carrying amount of an asset if certain
events or changes in circumstances occur. During 1999, management determined
that the Company would relocate its San Francisco facility to a new site.
Consequently, the Company determined that the leasehold improvements related to
the current site were impaired and recognized a charge for impairment loss of
$449,000, which is included in loss on lease and leasehold improvements in the
accompanying consolidated statements of operations.

ACQUISITION OF LEASE AND LEASEHOLD IMPROVEMENTS

In September 1999, the Company entered into an agreement to acquire a
colocation facility lease in Chicago and the related equipment and leasehold
improvements, which were under construction. The facility was under construction
and not yet producing revenue. A two-year noncompete agreement with the seller
was also obtained. Further, the Company agreed to utilize an affiliate of the
seller to construct five additional Neutral Optical Hubs and to pay the seller a
fee for future customer referrals. The purchase price was $500,000 plus 100,000
shares of the Company's common stock, with 50,000 issued in September 1999 and
50,000 to be issued in increments in 2000 based upon the seller achieving
certain milestones. If the milestones are not achieved by the seller, any
unissued shares will be issued by the Company on September 1, 2000, for no
additional consideration. A value of $250,000 was assigned to the common stock
issued in September 1999 and the 50,000 shares that will ultimately be issued in
2000. The Company has assigned a value of $500,000 to the leasehold improvements
in process and a $250,000 value to the noncompete covenant and other rights
obtained under the agreement. The $500,000 and $250,000 are included in property
and equipment, net, and deposits and other noncurrent assets, respectively, in
the accompanying consolidated balance sheet.

F-14
<PAGE> 91
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

4. ACCRUED LIABILITIES:

Accrued liabilities consist of the following at December 31, 1998 and 1999,
and March 31, 2000 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31
------------ MARCH 31,
1998 1999 2000
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and payroll related expenses...................... $ 20 $622 $ 820
Operating expenses and other.............................. 129 139 1,575
Interest payable.......................................... -- -- 2,428
---- ---- ------
$149 $761 $4,823
==== ==== ======
</TABLE>

5. INCOME TAXES:

The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred taxes are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse.

The Company's primary temporary differences relate to items expensed for
financial reporting purposes but not currently deductible for income tax
purposes consisting primarily of accrued vacation, capitalized interest,
stock-based compensation expense, deferred rent, and other reserves.

As of December 31, 1999, the Company had a tax net operating loss (NOL)
carryforward of approximately $8,157,000 for both federal and California state
income tax purposes. The federal NOL begins to expire in 2018, and the
California NOL begins to expire in 2005. A significant change in ownership of
the Company may limit the Company's ability to use these NOL carryforwards. SFAS
No. 109 requires that the tax benefit of such net operating loss be recorded as
an asset. At December 31, 1999, the Company had gross deferred tax assets of
approximately $3,432,000 related to the NOL, tax credits, and miscellaneous
temporary differences. The Company has recorded a full valuation allowance of
$3,432,000 at December 31, 1999, due to uncertainties surrounding the
realizability of the deferred tax asset.

6. NOTES PAYABLE:

In March 2000, the Company issued $300,000,000 of Senior Notes and 300,000
warrants to purchase 5,991,540 shares of the Company's Common Stock (the Senior
Notes) at $.01 per share. The Senior Notes mature on March 15, 2010 and bear
interest at 13 7/8% per annum. Interest on the Senior Notes will be payable
semiannually on March 15 and September 15 of each year. Approximately $9,680,000
of costs were incurred in connection with this offering. These deferred
financing costs are included in other non current assets in the accompanying
consolidated balance sheets and are being amortized on a straight-line basis
over the life of the notes beginning in March 2000. The Senior Notes indenture
restricts, among other things, the Company's ability to incur additional debt
and the use of proceeds of such additional debt, pay dividends or make certain
other restricted payments, incur certain liens to secure debt or engage in
certain merger transactions. In the event of a change of control as defined in
the indenture agreement, each note-holder will have the right to require that
the Company repurchase the notes at a price equal to 101% of the principal
amount, plus accrued and unpaid interest. The covenants of the Senior Notes
require the Company

F-15
<PAGE> 92
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

to pledge investments equal to the first four interest payments due by the
Company. These securities are included in restricted investments in the
accompanying consolidated balance sheets. The warrants are exercisable any time
on or after the earliest to occur of (a) 180 days after the closing date of the
Company's initial public offering or (b) the first anniversary of the warrant
issuance date. A value of $83,881,560 was assigned to these warrants.

In October 1999, the Company entered into a loan agreement (the Comdisco
Loan Agreement) with Comdisco, Inc. (Comdisco). The Comdisco Loan Agreement
provides financing for up to $7 million for construction costs and equipment at
the Company's Chicago, Illinois, and Emeryville, California, sites. The
commitment for this financing terminates on August 31, 2000. Individual notes
bear interest at a rate of 8.25 percent per annum and are repayable in 42
monthly installments plus a final payment of 15 percent of the original advance.
The Comdisco Loan Agreement includes a prepayment option available after 12
months with a premium equal to 1 percent of the unpaid principal plus the
present value of the final payment. Comdisco's security interest includes all
tangible and intangible assets relating to the specific facilities funded by the
lender. The agreement contains restrictive covenants including limitations on
future acquisitions or the payment of dividends or stock purchases. As part of
the Comdisco Loan Agreement, the Company granted Comdisco warrants to purchase
73,976 shares of the Company's Series C preferred stock at an exercise price of
$7.57 per share. The warrants are exercisable from the date of grant and expire
10 years after this date. A value of $548,000 was assigned to these warrants. In
November 1999, the Company borrowed $2.4 million under the Comdisco Loan
Agreement. As of December 31, 1999, and March 31, 2000, $2.3 million and $2.2
million (unaudited), respectively, was outstanding. Comdisco is also a holder of
Series C preferred stock.

In November 1999, the Company entered into a loan agreement (the MMC Loan
Agreement) with MMC/GATX Partnership (MMC) and other lenders (Others). The MMC
Loan Agreement provides financing of up to $17 million for eligible construction
costs and equipment at the Company's Los Angeles, California, and Vienna,
Virginia, sites. The commitment for this financing terminates on December 31,
2001. Individual notes bear interest at a per annum rate equal to the sum of the
applicable U.S. Treasury note yield to maturity plus 3.93 percent. These notes
are repayable in 42 equal monthly installments plus a final payment of 10
percent of the original advance. MMC's security interest includes substantially
all tangible and intangible assets relating to the specific facilities funded by
the lenders. The MMC Loan Agreement includes a prepayment option declining from
10 percent to 2 percent of the unpaid principal over the loan period plus the
present value of the final payment. The agreement contains restrictive covenants
including limitations on future acquisitions or the payment of dividends or
stock purchases. As part of the MMC Loan Agreement, the Company granted MMC and
Others warrants to purchase 227,679 shares of the Company's Series C preferred
stock at an exercise price of $6.44 per share. The warrants are exercisable from
the date of grant and expire 10 years after this date. A value of $1.7 million
was assigned to these warrants. In December 1999, the Company borrowed $1.3
million under the MMC Loan Agreement. As of December 31, 1999, and March 31,
2000, $1.3 million and $1.2 million (unaudited), respectively, was outstanding.

In November 1999, the Company entered into a one-year Revolving Line of
Credit Agreement (Revolver) with a bank. The Revolver provides credit of up to
$2 million, including amounts outstanding under letters of credit. Advances bear
interest at a rate equal to the prime rate plus 1.25 percent per annum. The
borrowings are secured by substantially all personal property of the Company,
including accounts receivable, deposit accounts, inventory, and intellectual
property other than assets pledged to the Company's other lenders. The agreement
contains restrictive covenants

F-16
<PAGE> 93
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

including limitations on future acquisitions or the payment of dividends or
stock purchases. Additionally, the agreement contains covenants requiring
certain minimum quarterly consolidated revenue amounts. As part of the Revolver,
the Company entered into a stock purchase agreement giving the bank the right to
purchase 24,845 shares of the Company's common stock at a price of $2.00 per
share. A value of $150,000 was assigned to these stock purchase rights. In
December 1999, the Company borrowed $2 million under the Revolver. In March
2000, the Revolver was paid in full and cancelled (unaudited).

The value assigned to the above warrants or options was calculated using
the Black-Scholes pricing model with the following assumptions: a risk-free
weighted average interest rate of 6.0 percent, expected dividend yield of 0
percent, the expected lives of four to seven years from the date of the grant,
and an expected volatility of 70 percent. This amount is accounted for as a
discount on the related note and is being amortized as interest expense ratably
over either the life of the commitment period of the credit facility or the life
of the Senior Notes (10 to 120 months).

In December 1999, the Company entered into a loan agreement (the Lighthouse
Loan Agreement) with Lighthouse Capital Partners (Lighthouse). The Lighthouse
Loan Agreement provides bridge financing of up to $6 million. Notes issued bear
interest at a rate of 10 percent per annum and mature on January 31, 2000. The
agreement contains covenants including limitations on future investments or loan
agreements. As part of the Lighthouse Loan Agreement, the Company entered into a
stock purchase agreement whereby Lighthouse purchased 91,429 shares of the
Company's common stock at a price of $0.50 per share. In December 1999, the
Company borrowed $4 million under the Lighthouse Loan Agreement. This note was
repaid on December 30, 1999, with cash of $3.5 million and the issuance of
51,020 shares of Series C preferred stock at a value $9.80 per share. The
differences between the fair value of the common stock used for accounting
purposes and the purchase price of $0.50 was $686,000 and was accounted for as a
discount on the related note and was fully amortized in 1999 upon the repayment
of the note. Lighthouse is also a holder of Series C preferred stock.

The unamortized portion of the value assigned to warrants issued in
connection with the above notes payable agreements is recorded as a discount to
the related note payable.

F-17
<PAGE> 94
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

As of December 31, 1999 and March 31, 2000 (unaudited), the payments due on
long-term debt for the next five years and thereafter were as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
YEAR ENDING 1999 2000
----------- ------------ ----------
<S> <C> <C>
2000................................................ $ 2,829 $ 676
2001................................................ 996 996
2002................................................ 1,103 1,103
2003................................................ 658 658
Thereafter.......................................... -- 300,000
------- --------
Total notes payable............................... 5,586 303,433
Less: Discount related to warrants, net of
amortization...................................... (2,246) (85,200)
------- --------
Total notes payable, net of discount.............. 3,340 218,233
Less: Current portion of notes payable, net of
discount.......................................... (1,464) (478)
------- --------
Long term notes payable, net of discount.......... $ 1,876 $217,755
======= ========
</TABLE>

7. COMMITMENTS AND CONTINGENCIES:

FACILITY OPERATING LEASES

The Company is committed under long-term operating leases for various
facilities expiring at various dates through 2014 with varying renewal options
and escalating rent clauses. The Company generally pays for real estate taxes,
insurance, and specified maintenance costs under real property leases. The
minimum rental commitments under these lease agreements as of December 31, 1999,
are as follows:

<TABLE>
<CAPTION>
LEASED
YEAR ENDING DECEMBER 31, FACILITIES
------------------------ --------------
(IN THOUSANDS)
<S> <C>
2000........................................................ $ 6,686
2001........................................................ 7,420
2002........................................................ 7,570
2003........................................................ 7,703
2004........................................................ 7,476
Thereafter.................................................. 47,990
-------
$84,845
=======
</TABLE>

Rent expense, net of amounts capitalized to construction in progress, for
the period from inception (April 2, 1997) to December 31, 1997, and for the
years ended December 31, 1998 and 1999 (excluding the expansion site abandoned
in 1999), and for the three months ended March 31, 1999 and 2000, was
approximately $26,000, $121,000, $338,000, $14,000 (unaudited) and $388,000
(unaudited), respectively. These amounts are included in operating expenses in
the accompanying statements of operations.

F-18
<PAGE> 95
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

PURCHASE COMMITMENTS

The Company has entered into certain capital expenditure commitments
associated with construction of future facilities and equipment purchases. As of
December 31, 1999, and March 31, 2000, purchase commitments were $42 million and
$53 million (unaudited), respectively, excluding the commitments described in
Note 8.

CARRIER COMMITMENTS

To attract carriers to connect to our facilities, the Company plans to
place circuit orders with up to three carriers prior to completing construction
of a facility. These orders generally require the Company to pay an installation
fee and a minimum monthly charge for periods anticipated to be approximately one
to three years. As of March 31, 2000, the Company had placed orders with
multiple carriers to connect to six facilities.

As of March 31, 2000, the Company had the following commitments associated
with these contracts:

<TABLE>
<CAPTION>
MARCH 31, 2000
--------------
(UNAUDITED)
<S> <C>
2000........................................................ $ 910
2001........................................................ 1,468
2002........................................................ 1,407
2003........................................................ 610
------
$4,395
======
</TABLE>

The table above excludes amounts payable under month to month carrier
commitments. As customers connect to carriers, it is anticipated that the
related monthly charges will be assigned to the customers, thereby reducing the
Company's obligation.

ABANDONED LEASES

In 1998, the Company leased its original San Francisco facility and an
adjacent expansion site under operating leases with original expiration dates in
1999 and 2007, respectively.

In the first quarter of 1999, management determined that the original
facility and the expansion site adjacent to the San Francisco facility would not
be used, and thus it was anticipated that the lease would be terminated. On
October 5, 1999, the Company entered into an agreement to terminate its
expansion site lease whereby the Company paid the owner approximately $286,000
and forfeited its security deposit. Additionally, the Company wrote off rent
that was prepaid through August and paid certain legal costs associated with
terminating the lease. For the year ended December 31, 1999, the Company has
recorded a $472,000 provision for loss associated with terminating the lease.
This provision is included in loss on lease and leasehold improvements in the
accompanying consolidated statements of operations.

F-19
<PAGE> 96
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

8. TRANSACTIONS WITH PREFERRED STOCK INVESTORS:

AGREEMENT WITH NEXTLINK

In December 1999, the Company entered into a Definitive Agreement and
Warrant (the NEXTLINK Agreement) with NEXTLINK Communications, Inc. (NEXTLINK).
Among other items, the NEXTLINK Agreement specifies a minimum number of
facilities the Company must open by December 31, 2001, and provides for the
connection of NEXTLINK's network at up to 20 of the Company's Neutral Optical
Hubs within two years. As part of the NEXTLINK Agreement, the Company granted
NEXTLINK a warrant to purchase up to 300,000 shares of the Company's Series C
preferred stock at an exercise price of $10.00 per share. The warrants are
issued in increments of 30,000 for up to 10 facilities. The warrants become
exercisable when specific performance measures in the first quarter of 2000 are
achieved and expire five years from the warrant issuance. As of December 31,
1999, measurement dates had not yet occurred, and no warrants had been earned.
In the first quarter of 2000, NEXTLINK met the performance measures of
initiating connections into 10 facilities and earned the warrants to purchase
300,000 shares of the Company's Series C Preferred stock. The value associated
with these warrants of $2,294,000 was included in cost of revenues in the three
months ended March 31, 2000 (unaudited).

This agreement also provides NEXTLINK with available space provisions at
the Company's Neutral Optical Hubs and grants NEXTLINK certain rental rights.
The terms of the agreement are for five years and provide NEXTLINK with two
five-year renewal options.

The value assigned to the above warrants was calculated using the
Black-Scholes pricing model with the following assumptions: risk free interest
rate of 6.6 percent, no expected dividend yield, expected life of four years
from the grant date, and expected volatility of 70 percent.

AGREEMENT WITH MASTEC AND SKANSKA

In December 1999, the Company entered into a Project Management and
Construction Services Agreement (the Construction Agreement) with Mastec North
America, Inc. (Mastec) and Sordoni Skanska Construction Company (Skanska). The
Construction Agreement provides for the construction of 22 Neutral Optical Hubs
and the related project management at specified prices.

Skanska will perform the construction work, and Mastec will provide project
management services. Management estimates the Company's obligation under this
agreement to be approximately $120 million, depending on the building
specifications. Mastec and Skanska are holders of Series C preferred stock.

AGREEMENT WITH NORTEL

In December 1999, the Company entered into a Strategic Alliance Agreement
with Nortel Networks, Inc. (Nortel). The agreement requires the Company to
purchase Nortel equipment in an amount of no less than $5 million before
December 31, 2001, and gives Nortel the right of first refusal on a percentage
of space in future Neutral Optical Hubs. Contemporaneous with the execution of
the Strategic Alliance Agreement, Nortel purchased Series C preferred stock.

F-20
<PAGE> 97
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

9. STOCKHOLDERS' EQUITY:

The Company's amended and restated articles of incorporation allow for the
issuance of 81,000,000 shares of common stock, 5,250,000 shares of Series A
preferred stock (Series A Stock), 24,500,000 shares of Series B preferred stock
(Series B Stock), and 21,000,000 shares of Series C preferred stock (Series C
Stock).

COMMON STOCK

The holders of common stock are entitled to one vote per share. Subject to
preferences on outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors. In the event of a liquidation, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of preferred stock.

Certain holders of common stock have entered into repurchase agreements
allowing the Company the exclusive option to repurchase the unreleased shares as
defined in the stock purchase agreement in the event of termination of the
stockholder's employment with the Company. The repurchase option extends for 90
days after termination and grants the right to the Company to repurchase the
shares at the original purchase price per share. The number of shares subject to
repurchase is reduced over a four-year vesting period. The Company has the right
to repurchase 88,889, 35,556 and 22,224 (unaudited) unreleased shares as of
December 31, 1998 and 1999, and March 31, 2000, respectively, at the stock
issuance price if the holders' service with the Company terminates.

For the year ended December 31, 1999, the Company issued 9,785,368 shares
of common stock as a result of the exercise of stock options and repurchased
981,829 shares (see Note 11). The Company has the right to repurchase 7,551,976
unvested shares as of December 31, 1999, at the stock issuance price if the
holders' service with the Company terminates

PREFERRED STOCK

Significant rights and preferences attaching to the Series A Stock are as
follows:

DIVIDENDS -- The holders of Series A Stock are entitled, when and if
declared by the Board of Directors, to receive noncumulative dividends out
of the remaining assets of the Company after payment of liabilities,
payable in preference and priority to any dividend to common stockholders,
at the rate of $0.04 per share per annum. To date, no dividends have been
declared by the Board of Directors.

PREFERENCE IN LIQUIDATION -- In the event of any liquidation, dissolution,
or winding up of the Company, the holders of Series A Stock are entitled to
receive, prior and in preference to any distribution of any assets or
surplus funds to the holders of common stock, an amount equal to $0.50 per
share plus a further amount equal to any dividends declared but unpaid on
such shares.

VOTING RIGHTS -- The holders of Series A Stock are entitled to the number
of votes equal to the number of shares of common stock into which each
share of preferred stock is convertible on the record date for the vote.

F-21
<PAGE> 98
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

CONVERSION -- Each share of Series A Stock is convertible, at the option of
the holder, into the number of fully paid and nonassessable shares of
common stock on a one-for-one basis, subject to certain adjustments. All
preferred stock will convert upon the closing of a public offering of the
Company's common stock in which the public offering price equals or exceeds
$15.00 per share and the aggregate proceeds raised equal or exceed $40
million.

During 1998, the Company issued 231,000 shares of Series A Stock to individuals
at no cost in exchange for services. The value of $116,000 was assigned to the
stock and has been expensed as selling, general, and administrative expenses in
the accompanying statements of operations.

SERIES B PREFERRED STOCK

In April 1999, the Company issued 24,500,000 shares of Series B Stock at
$0.50 per share. The sale of Series B Stock raised $12,219,000, net of issuance
costs. The Series B Stock has essentially the same rights and preferences as the
Series A Stock.

SERIES C PREFERRED STOCK

In December 1999, the Company issued 20,408,164 shares of Series C Stock at
$9.80 per share. The sale of Series C Stock raised $194,056,000, net of issuance
costs.

The Series C Stock has essentially the same rights and preferences as the
Series A Stock, except that (1) dividends are payable at a rate of $0.784 per
share per annum and (2) in the event of any liquidation, dissolution, or winding
up of the Company, the holders of Series C Stock are entitled to receive, prior
and in preference to any distribution of assets or surplus funds to the holders
of Series A Stock, Series B Stock or common stock an amount equal to $9.80 per
share plus a further amount equal to any dividends declared but unpaid on such
shares.

NOTES RECEIVABLE FROM STOCKHOLDERS

The Company has implemented a program under which directors, officers, and
a number of key employees are permitted to exercise their outstanding options as
to both the vested and unvested shares. The Company has the right to repurchase
any unvested shares at the original option price in the event of termination of
employment prior to vesting of all shares. Under this program, the participants
paid the exercise price for their outstanding options through a full-recourse
promissory note. These notes bear interest at a rate of 6.2 percent per annum
and are due and payable on the earlier of termination of employment or on
various dates beginning in November 2003.

As of December 31, 1998 and 1999, and March 31, 2000 (unaudited), there
were one stockholder, fifteen stockholders and seventeen stockholders,
respectively, with loans outstanding. Stockholder loans are classified as a
contra account within stockholders' equity.

10. WARRANTS TO PURCHASE STOCK:

In conjunction with the issuance of Series A Stock in March 1998, the
Company issued warrants to purchase 545,500 shares of the Company's common stock
at an exercise price of $0.05 per share to certain individuals involved in
identifying Series A Stock investors. The purchase rights under the warrants
expire in March 2002 unless terminated earlier in accordance with the stock
warrant purchase agreement.

F-22
<PAGE> 99
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

See Notes 6 and 8 for a description of Series C Stock and common stock
warrants issued to various lenders and a related party, respectively.

Warrants outstanding have the following contractual lives (in years):

<TABLE>
<CAPTION>
MARCH 31, 2000
DECEMBER 31, 1999 (UNAUDITED)
----------------------------------------- ------------------------------
NUMBER OF WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE WARRANTS REMAINING WARRANTS REMAINING
PRICE OUTSTANDING CONTRACTUAL LIFE OUTSTANDING CONTRACTUAL LIFE
-------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Common stock................. $ 0.01 -- -- 5,991,540 10.0
Common stock................. 0.05 545,500 3.2 530,000 3.0
Common stock................. 2.00 24,845 * -- --
Series C Stock............... 7.57 73,976 9.8 73,976 9.5
Series C Stock............... 6.44 227,679 9.8 227,679 9.6
Series C Stock............... 10.00 300,000 5.0 300,000 4.7
--------- ---------
Total...................... 1,172,000 7,123,195
========= =========
</TABLE>

-------------------------
* This warrant had no stated expiration date and was exercised during the three
months ended March 31, 2000.

All of the warrants outstanding at December 31, 1999, are exercisable
except the 300,000 Series C Stock warrants related to NEXTLINK (see Note 8). A
holder of any of the warrants described above will not be entitled to any rights
as a stockholder of the Company, including, without limitation, the right to
vote the underlying shares of preferred stock until the holder has exercised the
warrants. All of the warrants outstanding at March 31, 2000 are exercisable
except the 5,991,541 common stock warrants related to the Senior Notes
(unaudited).

11. STOCK OPTION PLAN:

The Company's 1998 Stock Option Plan (the Plan) provides for the grant of
incentive stock options and nonstatutory stock options to employees, directors,
and consultants of the Company. The Plan also allows for the issuance of stock
purchase rights and an option exchange program. As of December 31, 1999 and
March 31, 2000 (unaudited), there were no stock purchase rights outstanding and
no activity in the option exchange program. Stock options granted under the Plan
generally vest over a four-year period, with 25 percent vesting after one year
of the grant date and an additional one forty-eighth of the total number of
shares becoming exercisable on each monthly anniversary thereafter. Options
expire ten years after the grant date. The terms of the Plan allow certain
individuals to exercise their options prior to full vesting. In the event that
an individual's service to the Company terminates before his/her options become
fully vested, the Company has the right to repurchase the unvested shares at the
original option price. The maximum aggregate number of shares authorized for
options under the Plan was 3,490,000 at December 31, 1998 and 14,047,839 at both
December 31, 1999 and March 31, 2000 (unaudited).

The Company accounts for stock options granted to employees and directors
under APB Opinion No. 25. For the year ended December 31, 1998, no compensation
expense was recognized. Stock-based compensation expense of $1,248,000, $0
(unaudited) and $2,258,000 (unaudited) was recognized for the year ended
December 31, 1999, and for the three months ended March 31, 1999 and 2000,
respectively.

F-23
<PAGE> 100
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

Options issued to consultants were valued using the Black-Scholes option
pricing model consistent with SFAS No. 123. Expense is being recognized over the
vesting period of the options.

Had compensation cost for the stock options issued to employees and
directors been determined consistently with SFAS No. 123, the Company's net loss
and basic and diluted loss per share would have been changed to the following
pro forma amounts:

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
PERIOD FROM INCEPTION DECEMBER 31, MARCH 31,
(APRIL 2, 1997) TO ------------------ ---------------------
DECEMBER 31, 1997 1998 1999 1999 2000
--------------------- ------- ------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (IN THOUSANDS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported............. $ (78) $(1,553) $(8,887) $(1,176) $(11,892)
Pro forma............... (78) (1,554) (9,040) (1,182) (12,343)
Basic and diluted net loss
per common share:
As reported............. $(0.03) $ (0.28) $ (1.86) (0.26) $ (1.49)
Pro forma............... (0.03) (0.28) (1.89) (0.26) (1.55)
</TABLE>

A summary of the status of the Company's stock option plan is as follows:

<TABLE>
<CAPTION>
WEIGHTED
RANGE OF AVERAGE
EXERCISE EXERCISE
OPTIONS PRICES PRICE
---------- ------------- --------
<S> <C> <C> <C>
Outstanding at December 31, 1997............. -- $ -- $ --
Granted.................................... 2,472,500 0.03 - 0.055 0.05
Exercised.................................. -- -- --
Canceled................................... -- -- --
---------- ------------- -----
Outstanding at December 31, 1998............. 2,472,500 0.03 - 0.055 0.05
Granted.................................... 9,735,072 0.05 - 2.00 0.21
Exercised.................................. (9,785,368) 0.03 - 1.00 0.13
Canceled................................... (963,854) 0.05 - 0.50 0.06
---------- ------------- -----
Outstanding at December 31, 1999............. 1,458,350 0.05 - 2.00 0.54
Granted (unaudited)........................ 1,629,500 2.00 - 5.00 3.63
Exercised (unaudited)...................... (210,000) 0.05 - 2.00 1.57
Canceled (unaudited)....................... (17,300) 0.05 - 2.00 1.00
---------- ------------- -----
Outstanding at March 31, 2000 (unaudited).... 2,860,550 $0.05 - 2.00 $2.22
========== ============= =====
</TABLE>

The weighted average fair value of options granted as of December 31, 1998
and 1999, and March 31, 2000, is $0.007, $1.190 and $8.42 (unaudited),
respectively.

Of the options outstanding at December 31, 1998 and 1999, and March 31,
2000, 850,000, 250,000 and 250,000 (unaudited), respectively, are vested.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998,

F-24
<PAGE> 101
COLO.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, AND MARCH 31, 2000 (UNAUDITED)

1999 and 2000: risk-free weighted-average interest rates of between 4.5 and 6.5
percent, expected dividend yield of 0 percent, expected life of between three
and four years from the grant date, and expected volatility of 0 percent in 1998
and 70 percent in 1999 and 2000. Included in the options exercised above for the
year ended December 31, 1999, was 981,829 of unvested options where the Company
repurchased the stock upon the individuals' leaving the Company.

The options outstanding have the following contractual lives:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999 MARCH 31, 2000
------------------------------------ ------------------------------------ ---------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF REMAINING NUMBER OF REMAINING NUMBER OF REMAINING
OPTIONS EXERCISE CONTRACTUAL OPTIONS EXERCISE CONTRACTUAL OPTIONS EXERCISE CONTRACTUAL
OUTSTANDING PRICE LIFE OUTSTANDING PRICE LIFE OUTSTANDING PRICE LIFE
----------- -------- ----------- ----------- -------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
150,000... 0.030 9.07 -- 0.030 N/A -- 0.030 --
1,472,500.. 0.050 9.76 479,000 0.050 9.58 440,000 0.050 9.33
850,000... 0.055 9.79 250,000 0.055 8.71 250,000 0.055 8.48
--........ 0.500 N/A 478,050 0.500 9.81 456,750 0.500 9.58
--........ 2.000 N/A 251,300 2.000 9.96 827,600 2.000 9.80
--........ 5.000 N/A -- 5.000 886,200 5.000 9.85
--------- --------- ---------
2,472,500.. 1,458,350 2,860,550
========= ========= =========
</TABLE>

12. 401(K) RETIREMENT PLAN:

The Company established a 401(k) retirement plan in May 1999 for which all
full-time employees are eligible after one month of employment. Pursuant to this
plan, employees may elect to reduce their current compensation by up to the
lesser of 15% of their annual compensation or the statutorily prescribed annual
limit, and to have the amount of such reduction contributed to the plan. Company
contributions to the plan are at the discretion of the Board of Directors, begin
to vest upon completion of one year of employment, and become fully vested after
five years of employment. As of both December 31, 1999 and March 31, 2000
(unaudited) the Company has not declared or paid any contributions to the plan.

13. SUBSEQUENT EVENTS:

Subsequent to March 31, 2000, the Company has formed three new
subsidiaries, COLOCOM Iberia, S.A. in Spain, COLO.COM Limited in Canada,
COLO.COM B.V. in the Netherlands and COLO.COM, Inc. in Delaware. Each of these
subsidiaries are wholly owned by the Company.

In April 2000, the Company authorized 1,724,439 shares of Series D
preferred stock. No shares have been issued.

F-25
<PAGE> 102

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Forward-Looking Statements............ 18
Use of Proceeds....................... 19
Dividend Policy....................... 19
Trademarks............................ 19
Capitalization........................ 20
Dilution.............................. 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 34
Management............................ 46
Related Party Transactions............ 58
Principal Stockholders................ 60
Description of Capital Stock.......... 63
Description of Indebtedness........... 67
Shares Eligible for Future Sale....... 69
Underwriting.......................... 71
Legal Matters......................... 73
Experts............................... 74
Available Information................. 74
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. DEALERS
ARE ALSO OBLIGATED TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

[COLO.COM LOGO]

COMMON STOCK
DEUTSCHE BANC ALEX. BROWN

ROBERTSON STEPHENS

BEAR, STEARNS & CO., INC.

UBS WARBURG LLC
PROSPECTUS

, 2000
<PAGE> 103

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all fees and expenses payable by COLO.COM in
connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the SEC registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC Registration Fee........................................ $ 60,720
NASD Filing Fee............................................. 23,500
Nasdaq National Market Listing Fee.......................... 95,000
Printing and Engraving Expenses............................. 200,000
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 250,000
Transfer Agent and Registrar Fees and Expenses.............. 25,000
Blue Sky fees and expenses.................................. 10,000
Miscellaneous Expenses...................................... 185,780
----------
Total..................................................... $1,250,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Prior to the closing of this offering, COLO.COM intends to reincorporate
from California into Delaware. Section 145 of the Delaware General Corporation
Law allows for the indemnification of officers, directors and any corporate
agents in terms sufficiently broad to indemnify such persons under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. Our certificate of incorporation and our
bylaws provide for indemnification of our directors, officers, employees and
other agents to the extent and under the circumstances permitted by the Delaware
General Corporation Law. We have also entered into agreements with our directors
and executive officers that require COLO.COM, among other things, to indemnify
them against certain liabilities that may arise by reason of their status or
service as directors and executive officers to the fullest extent permitted by
Delaware law. We have also purchased directors and officers liability insurance,
which provides coverage against certain liabilities including liabilities under
the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Within the last three years we have issued and sold the following
unregistered securities:

(1) Since our inception through May 31, 2000, we have issued and sold
an aggregate of 24,768,434 shares of common stock at purchase prices
ranging from $0.001 to $2.00 per share.

(2) Since our inception through May 31, 2000, we have granted options
to purchase 14,353,322 shares of common stock to employees, directors and
consultants under our 1998 incentive stock option plan at exercise prices
ranging from $0.03 to $5.00 per share. Of the 14,353,322 shares granted,
3,199,400 remain outstanding, 10,145,368 shares of common stock have been
purchased pursuant to exercises of stock options and
II-1
<PAGE> 104

2,054,966 shares have been canceled and returned to the 1998 incentive
stock option plan.

(3) From June 1998 to April 1999, we sold 4,261,730 shares of Series A
preferred stock at a price of $0.50 per share to approximately 47
investors.

(4) In March 1999, we issued warrants to purchase an aggregate of
545,500 shares of common stock at an exercise price of $0.05 per share.

(5) In October 1999, we issued a warrant to purchase 73,976 shares of
Series C preferred stock at an exercise price of $7.57 per share.

(6) In November 1999, we issued a warrant to purchase 24,845 shares of
common stock at $2.00 per share and warrants to purchase 227,679 shares of
Series C preferred stock at an exercise price of $6.44 per share. In June
2000, we cancelled warrants to purchase 10,000 shares of Series C preferred
stock as partial consideration for the issuance of 10,000 shares of common
stock.

(7) In April 1999, we sold an aggregate of 24,500,000 shares of Series
B preferred stock at a price of $0.50 per share to approximately 9
investors.

(8) In December 1999, we sold an aggregate of 20,408,164 shares of
Series C preferred stock at a price of $9.80 per share to approximately 70
investors and a warrant to purchase 300,000 shares of Series C preferred
stock at an exercise price of $10.00 per share.

(9) In March 2000, we issued 300,000 units consisting of $300,000,000
of 13 7/8% Senior Notes due 2010 and 300,000 warrants to purchase an
aggregate of 5,991,540 shares of common stock at an exercise price of $0.01
per share.

The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with COLO.COM, to
information about us.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

II-2
<PAGE> 105

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.1(1) Amended and Restated Investors Rights Agreement dated
December 17, 1999
10.2 1998 Incentive Stock Option Plan and forms of agreements
thereunder
10.3* 2000 Stock Plan
10.4* 2000 Employee Stock Purchase Plan
10.5* Form of Director and Executive Officer Indemnification
Agreement
10.6(1) Senior Notes Indenture by COLO.COM as Issuer and State
Street Bank and Trust Company, N.A. as Trustee, dated March
10, 2000
10.7 Warrants Registration Rights Agreement between COLO.COM and
State Street Bank and Trust Company, N.A. (as warrant
agent), dated March 10, 2000
10.8(1) Registration Rights Agreement dated March 10, 2000 between
COLO.COM and Goldman Sachs & Co., Bear Stearns & Co. Inc.,
Chase Securities Inc., Deutsche Bank Securities Inc.,
Warburg Dillon Read LLC and Jeffries & Company Inc.
10.9(1) Office Lease by and between COLO.COM and Hitachi America,
LTD, dated December 1999
10.10(1) Office Building Net Lease by and between COLO.COM and BEP-
Emeryville, LP, dated July 16, 1999
10.11 Office Lease by and between COLO.COM and Hitachi America,
Ltd. dated May 18, 1999.
10.12(1) Strategic Alliance Agreement by and between COLO.COM and
Nortel Networks Inc., dated December 23, 1999
10.13(1) Definitive Agreement by and between COLO.COM and NextLINK
Communications, Inc., dated December 23, 1999
10.14(1) Employment Agreement by and between COLO.COM and Charles
Skibo, with Addendum, dated January 25, 1999
10.15(1) Loan and Security Agreement by and between COLO.COM and
Comdisco, Inc., dated October 22, 1999
10.16(1) Loan and Security Agreement by and among COLO.COM and
Silicon Valley Bank, Venture Lending and Leasing II, Inc.,
Transamerica Business Credit Corporation and Lighthouse
Capital Partners, dated November 9, 1999
10.17(1) Retail Lease between Telehub, Inc. and Mauswerks, Inc.,
dated November 7, 1996 and related assignment by Mauswerks,
Inc. to COLO.COM dated July 8, 1997
10.18* Warrant Agreement to Purchase Shares of Series C Preferred
Stock of COLO.COM issued to NEXTLINK Communications, Inc.
dated December 27, 1999.
10.19 Employment Offer Letter to Wayne A. Olson dated March 11,
1999.
10.20* Employment Offer Letter to Stephen I. Robertson dated
February 18th, 2000.
10.21 Form of Warrant to Purchase Shares of Common Stock
10.22 Form of Warrant to Purchase Series C Preferred Stock
10.23 Warrant Agreement to Purchase Shares of the Series C
Preferred Stock of COLO.COM issued to Comdisco, Inc. dated
October 22, 1999
10.24* Warrant Agreement between COLO.COM and State Street Bank and
Trust Company, N.A. dated March 10, 2000
21.1 List of Subsidiaries
23.1 Consent of Arthur Andersen LLP, Independent Auditors
</TABLE>

II-3
<PAGE> 106

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
23.2* Consent of Counsel (included in exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
</TABLE>

-------------------------
* To be filed by amendment

(1) Incorporated by reference from exhibits to COLO.COM's registration statement
on Form S-4 (No. 333-38906).

(b) FINANCIAL STATEMENT SCHEDULES

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS

Insofar as indemnification by COLO.COM for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of COLO.COM, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
COLO.COM of expenses incurred or paid by a director, officer or controlling
person of COLO.COM in the successful defense of any action, suit or proceeding)
is asserted by a director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by COLO.COM
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

We hereby undertake that:

(a) We will provide to the underwriters at the closing as specified in
the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

(b) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by COLO.COM pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.

(c) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 107

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
COLO.COM has duly caused this Registration Statement on Form S-1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Brisbane, State of California, on the 21st day of July, 2000.

COLO.COM

By: /s/ CHARLES M. SKIBO
---------------------------------------
Charles M. Skibo
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles M. Skibo and Stephen I. Robertson
and each of them, his attorneys-in-fact, each with the power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same Offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every Act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ CHARLES M. SKIBO Chief Executive Officer and July 21, 2000
--------------------------------------------- Chairman of the Board
Charles M. Skibo (Principal Executive Officer)

/s/ STEPHEN I. ROBERTSON Chief Financial Officer (Principal July 21, 2000
--------------------------------------------- Financial and Accounting Officer)
Stephen I. Robertson

/s/ CHRISTOPHER E. CLOUSER Director July 21, 2000
---------------------------------------------
Christopher E. Clouser

/s/ YOUNG SOO HA Director July 21, 2000
---------------------------------------------
Young Soo Ha
</TABLE>

II-5
<PAGE> 108

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ JOHN W. JARVE Director July 21, 2000
---------------------------------------------
John W. Jarve

/s/ RICHARD P. NESPOLA Director July 21, 2000
---------------------------------------------
Richard P. Nespola

/s/ ARTHUR PATTERSON Director July 21, 2000
---------------------------------------------
Arthur Patterson

/s/ KIRBY G. PICKLE, JR. Director July 21, 2000
---------------------------------------------
Kirby G. Pickle, Jr.
</TABLE>

II-6
<PAGE> 109

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1(a)(1) Amended and Restated Articles of Incorporation, as currently
in effect
3.1(b)* Certificate of Incorporation to be filed upon completion of
the offering
3.2(a)(1) Bylaws of COLO.COM as currently in effect
3.2(b)* Bylaws of COLO.COM as in effect upon completion of the
offering
4.1* Specimen Common Stock Certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1(1) Amended and Restated Investors Rights Agreement dated
December 17, 1999
10.2 1998 Incentive Stock Option Plan and forms of agreements
thereunder
10.3* 2000 Stock Plan
10.4* 2000 Employee Stock Purchase Plan
10.5* Form of Director and Executive Officer Indemnification
Agreement
10.6(1) Senior Notes Indenture by COLO.COM as Issuer and State
Street Bank and Trust Company, N.A. as Trustee, dated March
10, 2000
10.7 Warrants Registration Rights Agreement between COLO.COM and
State Street Bank and Trust Company, N.A. (as warrant
agent), dated March 10, 2000
10.8(1) Registration Rights Agreement dated March 10, 2000 between
COLO.COM and Goldman Sachs & Co., Bear Stearns & Co. Inc.,
Chase Securities Inc., Deutsche Bank Securities Inc.,
Warburg Dillon Read LLC and Jeffries & Company Inc.
10.9(1) Office Lease by and between COLO.COM and Hitachi America,
LTD, dated December 1999
10.10(1) Office Building Net Lease by and between COLO.COM and BEP-
Emeryville, LP, dated July 16, 1999
10.11 Office Lease by and between COLO.COM and Hitachi America,
Ltd. dated May 18, 1999.
10.12(1) Strategic Alliance Agreement by and between COLO.COM and
Nortel Networks Inc., dated December 23, 1999
10.13(1) Definitive Agreement by and between COLO.COM and NextLINK
Communications, Inc., dated December 23, 1999
10.14(1) Employment Agreement by and between COLO.COM and Charles
Skibo, with Addendum, dated January 25, 1999
10.15(1) Loan and Security Agreement by and between COLO.COM and
Comdisco, Inc., dated October 22, 1999
10.16(1) Loan and Security Agreement by and among COLO.COM and
Silicon Valley Bank, Venture Lending and Leasing II, Inc.,
Transamerica Business Credit Corporation and Lighthouse
Capital Partners, dated November 9, 1999
</TABLE>
<PAGE> 110

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.17(1) Retail Lease between Telehub, Inc. and Mauswerks, Inc.,
dated November 7, 1996 and related assignment by Mauswerks,
Inc. to COLO.COM dated July 8, 1997
10.18* Warrant Agreement to Purchase Shares of Series C Preferred
Stock of COLO.COM issued to NEXTLINK Communications, Inc.
dated December 27, 1999.
10.19 Employment Offer Letter to Wayne A. Olson dated March 11,
1999.
10.20* Employment Offer Letter to Stephen I. Robertson dated
February 18, 2000.
10.21 Form of Warrant to Purchase Shares of Common Stock
10.22 Form of Warrant to Purchase Series C Preferred Stock
10.23 Warrant Agreement to Purchase Shares of the Series C
Preferred Stock of COLO.COM issued to Comdisco, Inc. dated
October 22, 1999
10.24* Warrant Agreement between COLO.COM and State Street Bank and
Trust Company of California, N.A. dated March 10, 2000
21.1 List of Subsidiaries
23.1 Consent of Arthur Andersen LLP, Independent Auditors
23.2* Consent of Counsel (included in exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
</TABLE>

-------------------------
* To be filed by amendment

(1) Incorporated by reference from exhibits to COLO.COM's registration statement
on Form S-4 (No. 333-38906).