10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-31227

COGENT COMMUNICATIONS GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	52-2337274
(State of Incorporation)	(I.R.S. Employer Identification Number)

1015 31st Street N.W.
Washington, D.C. 20007

(Address of Principal Executive Offices and Zip Code)

(202) 295-4200

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.001 par value 17,574,380 Shares Outstanding as of November 1, 2004

INDEX

	PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets of Cogent Communications Group, Inc., and Subsidiaries as of December 31, 2003 and September 30, 2004
	Condensed Consolidated Statements of Operations of Cogent Communications Group, Inc., and Subsidiaries for the Three Months Ended September 30, 2003 and September 30, 2004
	Condensed Consolidated Statements of Operations of Cogent Communications Group, Inc., and Subsidiaries for the Nine Months Ended September 30, 2003 and September 30, 2004
	Condensed Consolidated Statements of Cash Flows of Cogent Communications Group, Inc., and Subsidiaries for the Nine Months Ended September 30, 2003 and September 30, 2004
	Notes to Interim Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
	PART II OTHER INFORMATION
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS

2

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2003 AND SEPTEMBER 30, 2004

(IN THOUSANDS, EXCEPT SHARE DATA)

	December 31, 2003			September 30, 2004
				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,875		$	8,796
Short term investments ($753 and $601 restricted, respectively)	4,115			601
Accounts receivable, net of allowance for doubtful accounts of $2,868 and $3,408, respectively	5,066			10,582
Accounts receivable — related party	—			1,709
Prepaid expenses and other current assets	905			3,952
Total current assets	17,961			25,640
Property and equipment:
Property and equipment	400,097			463,317
Accumulated depreciation and amortization	(85,691		)	(123,690		)
Total property and equipment, net	314,406			339,627
Intangible assets:
Intangible assets	26,780			28,549
Accumulated amortization	(18,671		)	(25,502		)
Total intangible assets, net	8,109			3,047
Other assets ($1,608 and $1,564 restricted, respectively)	3,964			4,949
Total assets	$	344,440		$	373,263
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,296		$	13,014
Accounts payable—related party	—			1,409
Accrued liabilities	7,885			15,066
Current maturities, capital lease obligations	3,646			5,799
Total current liabilities	18,827			35,288
Amended and Restated Cisco Note	17,842			17,842
Convertible subordinated notes, net of discount of $6,084 and $5,326	4,107			4,865
Capital lease obligations, net of current	58,107			102,955
Other long-term liabilities	803			2,533
Total liabilities	99,686			163,483
Commitments and contingencies:
Stockholders’ equity:
Convertible preferred stock, Series F, $0.001 par value; 11,000 shares authorized, issued, and outstanding; liquidation preference of $29,100	10,904			10,904
Convertible preferred stock, Series G, $0.001 par value; 41,030 shares authorized, issued and outstanding; liquidation preference of $123,090	40,787			40,787
Convertible preferred stock, Series H, $0.001 par value; 84,001 shares authorized; 53,372 and 46,499 shares issued and outstanding, respectively; liquidation preference of $7,845	45,990			45,039
Convertible preferred stock, Series I, $0.001 par value; 3,000 shares authorized, 2,575 shares issued and outstanding at September 30, 2004; liquidation preference of $7,725	—			2,545
Convertible preferred stock, Series J, $0.001 par value; 3,891 shares authorized, issued and outstanding at September 30, 2004; liquidation preference of $58,365	—			19,421
Convertible preferred stock, Series K, $0.001 par value; 2,600 shares authorized, issued and outstanding at September 30, 2004; liquidation preference of $7,800	—			2,588
Convertible preferred stock, Series L, $0.001 par value; 185 shares authorized, issued and outstanding at September 30, 2004; liquidation preference of $2,781	—			927
Common stock, $0.001 par value; 600,000,000 shares authorized; 13,071,340 and 16,338,992 shares outstanding, respectively	14			16
Additional paid-in capital	232,461			236,179
Deferred compensation	(32,680		)	(26,412		)
Stock purchase warrants	764			764
Treasury stock, 1,229,235 shares	(90		)	(90		)
Accumulated other comprehensive income	628			572
Accumulated deficit	(54,024		)	(123,460		)
Total stockholders’ equity	244,754			209,780
Total liabilities and stockholders’ equity	$	344,440		$	373,263

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

3

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2004

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

	Three Months Ended September 30, 2003			Three Months Ended September 30, 2004
	(Unaudited)			(Unaudited)
Net service revenue (none and $496 from related party, respectively)	$	15,148		$	21,736
Operating expenses:
Network operations (including $53 and $207 of amortization of deferred compensation, respectively, and none and $230 to related party, respectively, exclusive of amounts shown separately)	12,067			14,510
Selling, general, and administrative (including $702 and $2,753 of amortization of deferred compensation, respectively, and $1,025 and $432 of allowance for doubtful accounts expense, respectively)	7,014			11,842
Restructuring charge	—			1,396
Terminated public offering costs	—			779
Depreciation and amortization	11,968			13,369
Total operating expenses	31,049			41,896
Operating loss	(15,901		)	(20,160		)
Gain—Cisco credit facility troubled debt restructuring	215,432			—
Interest income and other	199			181
Interest expense	(3,268		)	(3,062		)
Net income (loss)	$	196,462		$	(23,041	)
Beneficial conversion charges	(52,000		)	(3,455		)
Net income (loss) applicable to common stock	$	144,462		$	(26,496	)
Net income (loss) per common share:
Basic net income (loss) per common share	$	0.86		$	(1.43	)
Beneficial conversion charges	(0.23		)	(0.21		)
Basic net income (loss) per common share applicable to common stock	0.63			(1.64		)
Diluted net income (loss) per common share	$	0.86		$	(1.43	)
Beneficial conversion charges	(0.23		)	(0.21		)
Diluted net income (loss) per common share applicable to common stock	0.63			(1.64		)
Weighted-average common shares—basic	228,520,340			16,123,018
Weighted-average common shares—diluted	228,595,536			16,123,018

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

4

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2004

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

	Nine Months Ended September 30, 2003			Nine Months Ended September 30, 2004
	(Unaudited)			(Unaudited)
Net service revenue (none and $1,611 from related party, respectively)	$	44,899		$	63,068
Operating expenses:
Network operations (including $161 and $633 of amortization of deferred compensation, respectively, and none and $1,630 to related party, respectively, exclusive of amounts shown separately)	35,088			43,944
Selling, general, and administrative (including $2,141 and $8,404 of amortization of deferred compensation, respectively, and $3,257 and $2,453 of allowance for doubtful accounts expense, respectively)	22,155			36,612
Restructuring charge	—			1,396
Terminated public offering costs	—			779
Depreciation and amortization	35,006			41,654
Total operating expenses	92,249			124,385
Operating loss	(47,350		)	(61,317		)
Gain—Cisco credit facility troubled debt restructuring	215,432			—
Gain—Allied Riser note exchange	24,802			—
Interest income and other	908			1,313
Interest expense	(18,212		)	(9,432		)
Net income (loss)	$	175,580		$	(69,436	)
Beneficial conversion charges	(52,000		)	(25,483		)
Net income (loss) applicable to common stock	$	123,580		$	(94,919	)
Net income (loss) per common share:
Basic net income (loss) per common share	$	2.03		$	(4.67	)
Beneficial conversion charges	(0.60		)	(1.71		)
Basic net income (loss) per common share applicable to common stock	$	1.43		$	(6.38	)
Diluted net income (loss) per common share	$	2.03		$	(4.67	)
Beneficial conversion charges	(0.60		)	(1.71		)
Diluted net income (loss) per common share applicable to common stock	$	1.43		$	(6.38	)
Weighted-average common shares—basic	86,301,503			14,882,754
Weighted-average common shares—diluted	86,363,131			14,882,754

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

5

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER  30, 2003 AND SEPTEMBER 30, 2004

(IN THOUSANDS)

	Nine Months Ended September 30, 2003			Nine Months Ended September 30, 2004
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	175,580		$	(69,436	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain—Cisco credit facility troubled debt restructuring	(215,432		)	—
Gain—Allied Riser note exchange	(24,802		)	—
Gain—sale of warrant	—			(842		)
Depreciation and amortization	35,006			41,654
Amortization of debt costs	1,359			—
Amortization of debt discount—convertible notes	1,622			758
Amortization of deferred compensation	2,302			9,037
Loss on equipment sale	—			106
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	84			2,231
Accounts receivable—related party	—			(1,696		)
Prepaid expenses and other current assets	(876		)	3,176
Other assets	1,001			740
Accounts payable—related party	—			1,401
Accounts payable, accrued and other liabilities	677			(8,994		)
Net cash used in operating activities	(23,479		)	(21,865		)
Cash flows from investing activities:
Purchases of property and equipment	(21,068		)	(6,335		)
(Purchases) maturities of short term investments	(5,016		)	3,514
Purchases of intangible assets	(700		)	(357		)
Proceeds from other assets acquired – Firstmark acquisition	—			602
Cash acquired—Global Access acquisition	—			170
Cash acquired—UFO acquisition	—			1,889
Cash acquired—Firstmark acquisition	—			2,159
Cash acquired—Gamma acquisition	—			2,545
Cash acquired—Omega acquisition	—			19,421
Proceeds from sale of equipment	—			276
Proceeds from sale of warrant	—			3,402
Net cash (used in) provided by investing activities	(26,784		)	27,286
Cash flows from financing activities:
Borrowings under Cisco credit facility	8,005			—
Repayment of advances from LNG Holdings—related party	—			(1,225		)
Exchange agreement payment—Allied Riser notes	(4,997		)	—
Exchange agreement payment—Cisco credit facility restructuring	(20,000		)	—
Proceeds from issuance of Series G preferred stock, net	40,630			—
Repayments of capital lease obligations	(2,183		)	(3,199		)
Net cash provided by (used in) financing activities	21,455			(4,424		)
Effect of exchange rate changes on cash	525			(76		)
Net (decrease) increase in cash and cash equivalents	(28,283		)	921
Cash and cash equivalents, beginning of period	39,314			7,875
Cash and cash equivalents, end of period	$	11,031		$	8,796
Supplemental disclosures of cash flow information:
Non-cash financing activities—Capital lease obligations incurred	$	4,654		$	411
Borrowing under credit facility for payment of loan costs and interest	$	4,502
Issuance of Series I preferred stock for Gamma common stock				$	2,575
Issuance of Series J preferred stock for Omega common stock				$	19,454
Issuance of Series K preferred stock for UFO Group common stock				$	2,600
Issuance of Series L preferred stock for Global Access assets				$	927
Exchange agreement with Cisco Capital (See Note 1)
Global Access acquisition
Fair value of assets acquired				$	1,931
Less: valuation of Series L preferred stock issued				(927		)
Fair value of liabilities assumed				$	1,004
UFO Group Inc. Merger—UFO acquisition
Fair value of assets acquired				$	3,326
Less: valuation of Series K preferred stock issued				(2,600		)
Fair value of liabilities assumed				$	726
Symposium Gamma Merger—Firstmark acquisition
Fair value of assets acquired				$	155,468
Negative goodwill				(77,232		)
Less: valuation of Series I preferred stock issued				(2,575		)
Fair value of liabilities assumed				$	75,661

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

6

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003 and 2004

(unaudited)

1.Description of business:

Cogent Communications, Inc. (“Cogent”) was formed on August 9, 1999, as a Delaware corporation and is located in Washington, DC. Cogent is a facilities-based Internet Services Provider (“ISP”), providing primarily Internet access to businesses located in North America and in Western Europe. In 2001, Cogent formed Cogent Communications Group, Inc., (the “Company”), a Delaware corporation. Effective on March 14, 2001, Cogent’s stockholders exchanged all of their outstanding common and preferred shares for an equal number of shares of the Company, and Cogent became a wholly owned subsidiary of the Company.

The Company’s high-speed Internet access service is delivered to its customers over a fiber-optic network. The Company’s network is dedicated primarily to Internet Protocol data traffic. Since the Company’s April 2002 acquisition of certain assets of PSINet, Inc. (“PSINet”), in addition to its high-speed Internet access service offering, the Company added a more traditional Internet service offering, with lower speed connections provided by leased circuits obtained from telecommunications carriers (primarily local telephone companies). The Company utilizes leased circuits (primarily T-1 lines) to reach customers that purchase this service. The Company provides high-speed Internet access to businesses, universities, operators of Internet web sites, and other Internet service providers in North America and Europe.

Acquisition of Global Access

On September 15, 2004, the Company issued 185 shares of its newly authorized Series L convertible preferred stock to the shareholders of Global Access Telecommunications, Inc. (“Global Access”) in exchange for the majority of the assets of Global Access.  The Series L preferred stock converts into approximately 5.7 million sharesof the Company’s common stock and, with the exception of voting rights, has rights and privileges similar to the Company’s Series J preferred stock. The estimated fair market value for the Series L preferred stock was determined by using the price per share of our Series J preferred stock. Global Access was headquartered in Frankfurt, Germany and provided Internet access and other data services in Germany. The acquired assets included customer contracts, accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships and accounts payable and accrued liabilities.  The Company is in the process of  integrating these acquired assets into its operations and onto its broadband network.

Merger with UFO Group, Inc.

On August 12, 2004, a subsidiary of the Company merged with UFO Group, Inc. (“UFO Group”).  The Company issued 2,600 shares of its newly authorized Series K convertible preferred stock in exchange for the outstanding shares of UFO Group.  The Series K preferred stock converts into approximately 16.1 million sharesof the Company’s common stock and has rights and privileges similar to the Company’s Series J preferred stock.  The estimated fair market value for the Series K preferred stock was determined by using the price per share of our Series J preferred stock. Prior to the merger, UFO Group had acquired the majority of the assets of Unlimited Fiber Optics, Inc. (UFO).   UFO’s customer base is comprised of data service customers and its network is comprised of fiber optic facilities located in San Francisco, Los Angeles and Chicago. The acquired assets included net cash of approximately $1.9 million, all of UFO’s customer contracts, customer accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships and accounts payable.  Under the purchase agreement the Company and UFO Group agreed to provide certain services to UFO for a transition period and UFO agreed to provide the Company network services and facilities for a transition period of approximately ninety days.  The Company is in the process of  integrating these acquired assets into its operations and onto its broadband network.

Merger with Symposium Omega

On March 30, 2004, Symposium Omega, Inc., (“Omega”) a Delaware corporation and related party, merged with a subsidiary of the Company (Note 11). Prior to the merger, Omega had raised approximately $19.5 million in cash in a private equity transaction with certain existing investors in the Company and acquired the rights to a German fiber optic network. The German fiber optic network had no customers, employees or associated revenues. The Company issued 3,891 shares of Series J preferred stock to the shareholders of Omega in exchange for all of the outstanding common stock of Omega. The accounting for the merger resulted in the Company recording cash of approximately $19.5 million and issuing Series J convertible preferred stock. The acquisition of the German fiber optic network will be accounted for in the fourth quarter of 2004 when the final acquisition payments are expected to be made. The network includes a pair of single mode fibers under a fifteen-year IRU, network equipment, and the co-location rights to facilities in approximately thirty-five points of presence in Germany. The agreement requires a payment of approximately 2.3 million euros and includes monthly service fees of approximately 85,000 euros for co-location and maintenance for the pair of single mode fibers. Approximately 0.2 million euro of the 2.3 million euro was paid through September 30, 2004, 1.3 million euros was paid in October 2004 and the remaining 0.8 million euro payment is expected to be made in the fourth quarter of 2004. The Company is in the process of integrating this German network into its existing European networks and is offering point-to-point transport, transit services and its North American product set in Germany.

7

Merger with Symposium Gamma, Inc. and Acquisition of Firstmark Communications Participations S.à r.l. and Subsidiaries (“Firstmark”)

In January 2004, a subsidiary of the Company merged with Symposium Gamma, Inc. (“Gamma”), a related party (Note 11). Immediately prior to the merger, Gamma had raised $2.5 million through the sale of its common stock in a private equity transaction with certain existing investors in the Company and new investors and in January 2004, acquired Firstmark for 1 euro. The merger expanded the Company’s network into Western Europe. Under the merger agreement all of the issued and outstanding shares of Gamma common stock were converted into 2,575 shares of the Company’s Series I convertible participating preferred stock. This Series I convertible preferred stock is convertible into approximately 16.0 million shares of the Company’s common stock. The Company is supporting Firstmark’s products including point-to-point transport and transit services in over 40 markets and approximately 20 data centers across Western Europe. The Company has also introduced in Western Europe a new set of products and services based on the Company’s current North American product set.  In 2004, Firstmark changed its name to Cogent Europe S.à r.l (“Cogent Europe”).

Withdrawal of Public Offering

In 2004, the Company filed a registration statement to sell shares of common stock in a public offering.  In October 2004, the Company withdrew the public offering and expensed the associated costs incurred through September 30, 2004 of approximately $0.8 million.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. While the Company believes that the disclosures  are adequate to not make the information misleading, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included elsewhere in this prospectus.

The accompanying unaudited consolidated financial statements include all wholly owned subsidiaries. All inter-company accounts and activity have been eliminated.

Business risks

The Company operates in the rapidly evolving Internet services industry, which is subject to intense competition and rapid technological change, among other factors. The successful execution of the Company’s business plan is dependent upon the Company’s ability to increase the number of customers purchasing services in the buildings connected to and being served by its network (“lit buildings”), its ability to increase its market share, the Company’s ability to integrate acquired businesses and purchased assets, including its recent expansion into Western Europe, into its operations and realize planned synergies, access to capital, the availability of and access to intra-city dark fiber and multi-tenant office buildings, the availability and performance of the Company’s network equipment, the extent to which acquired businesses and assets are able to meet the Company’s expectations and projections, the Company’s ability to retain and attract key employees, and the Company’s ability to manage its growth, among other factors. Although management believes that the Company will successfully mitigate these risks, management cannot give assurances that it will be able to do so or that the Company will ever operate profitably.

International operations

The Company began recognizing revenue from operations in Canada through its wholly owned subsidiary, ARC Canada effective with the closing of the Allied Riser merger on February 4, 2002. All revenue is reported in United States dollars. Revenue for ARC Canada for the three months ended September 30, 2003 and September 30, 2004 was approximately $1.4 million and $1.6 million, respectively. Revenue for ARC Canada for the nine months ended September 30, 2003 and September 30, 2004 was approximately $4.0 million and $4.5 million, respectively. ARC Canada’s total consolidated assets were approximately $11.8 million at December 31, 2003 and $11.6 million at September 30, 2004.

The Company began recognizing revenue from operations in Europe effective with the January 5, 2004 acquisition of Cogent Europe. All revenue is reported in United States dollars. Revenue for the Company’s European operations for the three and nine months ended September 30, 2004 was approximately $5.7 million and $16.3 million, respectively. Cogent Europe’s total consolidated assets were approximately $63.7 million at September 30, 2004.

Financial instruments

The Company is party to letters of credit totaling $2.2 million as of September 30, 2004. Securing these letters of credit are restricted investments totaling $2.2 million that are included in short-term investments and other assets. No claims have been made

8

against these financial instruments.

At December 31, 2003 and September 30, 2004, the carrying amount of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued expenses approximated fair value because of the short maturity of these instruments. The Allied Riser convertible subordinated notes remaining after the note exchange discussed in Note 7, have a face value of $10.2 million. These notes were recorded at their fair value of approximately $2.9 million at the merger date when they were trading at $280 per $1,000. The discount is being accreted to interest expense through the maturity date.

Revenue recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition.” The Company’s service offerings consist of telecommunications services typically provided under month-to-month or annual contracts that are billed monthly in advance. Net revenues from telecommunication services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable and collection is probable. The probability of collection is determined by an analysis of credit history for certain new customers and historical payment patterns for existing customers. Service discounts and incentives related to telecommunication services are recorded as a reduction of revenue when granted. Fees billed in connection with customer installations and other non-refundable upfront charges are deferred and recognized ratably over the longer of the estimated customer life or contract term determined by a historical analysis of customer retention, generally one year.

The Company establishes a valuation allowance for collection of doubtful accounts and other sales credit adjustments. Valuation allowances for sales credits are established through a charge to revenue, while valuation allowances for doubtful accounts are established through a charge to selling, general and administrative expenses. The Company assesses the adequacy of these reserves monthly by evaluating general factors, such as the length of time individual receivables are past due, historical collection experience, the economic and competitive environment, changes in the credit worthiness of its customers and any unprocessed customer cancellations. The Company believes that its established valuation allowances are adequate as of December 31, 2003 and September 30, 2004. If circumstances relating to specific customers change or economic conditions worsen such that the Company’s past collection experience and assessment of the economic environment are no longer relevant, the Company’s estimate of the recoverability of its accounts receivable could be further reduced.

The Company invoices certain customers for amounts contractually due for unfulfilled minimum contractual obligations and recognizes a corresponding sales allowance equal to this revenue resulting in the recognition of zero net revenue at the time the customer is billed. The Company recognizes net revenue as these billings are collected in cash. The Company vigorously seeks payment of these amounts.

Foreign Currency

The functional currency of ARC Canada is the Canadian dollar. The functional currency of Cogent Europe is the euro. The consolidated financial statements of ARC Canada, and Cogent Europe, are translated into U.S. dollars using the period-end rates of exchange for assets and liabilities and average rates of exchange for revenues and expenses. Gains and losses on translation of the accounts of the Company’s non-U.S. operations are accumulated and reported as a component of other comprehensive income in stockholders’ equity.

Statement of Financial Accounting Standard (“SFAS”) No. 130, “Reporting of Comprehensive Income” requires “comprehensive income” and the components of “other comprehensive income” to be reported in the financial statements and/or notes thereto (amounts in thousands).

	Three months ended September 30, 2003			Three months ended September 30, 2004			Nine months ended September 30, 2003		Nine months ended September 30, 2004
Net income (loss) applicable to common stock	$	144,462		$	(26,496	)	$	123,580	$	(94,919	)
Currency translation	(39		)	268			525		(56		)
Comprehensive income (loss)	$	144,423		$	(26,228	)	$	124,105	$	(94,975	)

Long-lived assets

The Company’s long-lived assets include property and equipment and identifiable intangible assets to be held and used. These long-lived assets are currently reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount should be addressed pursuant to Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Pursuant to SFAS No. 144, impairment is determined by comparing the carrying value of these long-lived assets to management’s probability weighted estimate of the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The cash flow projections used to make this assessment are consistent with the cash flow projections that management uses internally to assist in making key decisions. In the event an impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset, which is generally determined by using quoted market prices or valuation techniques such as the discounted present value of expected future cash flows, appraisals, or other pricing models. Management believes that no such impairment existed in accordance with SFAS No. 144 as of December 31, 2003 or September 30, 2004. In the event there are changes in the planned use of the Company’s long-term assets or the Company’s expected future undiscounted cash flows are reduced significantly, the Company’s assessment of its ability to recover the carrying value of these

9

assets under SFAS No. 144 could change.

Because management’s best estimate of undiscounted cash flows generated from these assets exceeds their carrying value for each of the periods presented, no impairment pursuant to SFAS No. 144 exists. However, because of the significant difficulties confronting the telecommunications industry, management believes that the current fair value of its long-lived assets including its network assets and IRU’s are significantly below the amounts the Company originally paid for them and may be less than their current depreciated cost basis.

Use of estimates

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

Stock-based compensation

The Company accounts for its stock option plan and shares of restricted preferred stock granted under its 2003 and 2004 Incentive Award Plan in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense related to fixed employee stock options and restricted shares is recorded only if on the date of grant, the fair value of the underlying stock exceeds the exercise or purchase price. The Company has adopted the disclosure only requirements of SFAS No. 123, “Accounting for Stock-Based Compensation,” which allows entities to continue to apply the provisions of APB Opinion No. 25 for transactions with employees and to provide pro forma net income disclosures as if the fair value based method of accounting described in SFAS No. 123 had been applied to employee stock option grants and restricted shares. The following table illustrates the effect on net income and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 (in thousands except share and per share amounts):

	Three Months Ended September 30, 2003			Three Months Ended September 30, 2004			Nine Months Ended September 30, 2003			Nine Months Ended September 30, 2004
Net income (loss) applicable to common stock, as reported	$	144,462		$	(26,496	)	$	123,580		$	(94,919	)
Add: stock-based employee compensation expense included in reported net income (loss), net of related tax effects	755			2,960			2,302			9,037
Deduct: stock-based employee compensation expense determined under fair value based method, net of related tax effects	(984		)	(3,086		)	(2,955		)	(9,163		)
Pro forma-net income (loss)	$	144,233		$	(26,622	)	$	122,927		$	(95,045	)
Net income (loss) per share applicable to common stock, as reported-basic	$	0.63		$	(1.64	)	$	1.43		$	(6.38	)
Net income (loss) per share applicable to common stock, as reported-diluted	$	0.63		$	(1.64	)	$	1.43		$	(6.38	)
Pro forma net income loss per share applicable to common stock, -basic	$	0.63		$	(1.65	)	$	1.42		$	(6.39	)
Pro forma net income loss per share applicable to common stock, - diluted	$	0.63		$	(1.65	)	$	1.42		$	(6.39	)

The weighted-average per share grant date fair value of options for common stock granted was $2.16 for the three months ended September 30, 2003 and $13.68 for the nine months ended September 30, 2003. The fair value of these options was estimated at the date of grant with the following assumptions for the three months ended September 30, 2003—an average risk-free rate of 3.5 percent, a dividend yield of 0 percent, an expected life of 5.0 years and an expected volatility of 197 percent and for the nine months ended September 30, 2003—an average risk-free rate of 3.5 percent, a dividend yield of 0 percent, an expected life of 5.0 years and an expected volatility of 197 percent. The weighted-average per share grant date fair value of options for Series H preferred stock granted was $236.50 for the three and nine months ended September 30, 2004.The fair value of these options was estimated at the date of grant with the following assumptions - an average risk-free rate of 3.5 percent, a dividend yield of 0 percent, an expected life of 5.0 years and an expected volatility of 160 percent. The weighted- average per share grant date fair value of Series H preferred shares granted to employees in the nine months ended September 30, 2004 was $1,244.96 There were no shares of Series H preferred stock granted in the three months ended September 30, 2004.  The fair value was determined using the as converted number of common shares times the trading price of the Company’s common stock on the date of grant. Each share of Series H preferred stock converts into approximately 769 shares of common stock. During the nine months ended September 30, 2004 employees converted 4,248 shares of Series H preferred stock into approximately 3.3 million share of common stock.

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Basic and diluted net loss per common share

Net loss per share is presented in accordance with the provisions of SFAS No. 128 “Earnings per Share”. SFAS No. 128 requires a presentation of basic EPS and diluted EPS. Basic EPS excludes dilution for common stock equivalents and is computed by dividing income or loss available to common stockholders by the weighted-average number of common shares outstanding for the period, adjusted, using the if-converted method, for the effect of common stock equivalents arising from the assumed conversion of participating convertible securities, if dilutive. Diluted net loss per common share is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of common stock equivalents arising from the assumed exercise of stock options, warrants, the conversion of preferred stock and conversion of participating convertible securities, if dilutive. Common stock equivalents have been excluded from the net loss per share calculation when their effect would be anti-dilutive.

For the three and nine months ended September 30, 2004 the following securities were not included in the computation of earnings per share as they are anti-dilutive: preferred stock convertible into approximately 505 million shares of common stock, options to purchase 27,183 shares of Series H preferred stock at a weighted-average exercise price of $82.38 per share, options to purchase 121,600 shares of common stock at a weighted-average exercise price of $0.45 per share, warrants for 104,000 shares of common stock at a weighted average exercise price of $11.30 per share and 21,329 shares of common stock issuable on the conversion of the Allied Riser convertible subordinated notes.

In March 2004, the FASB ratified the consensuses reached by Emerging Issues Task Force in Issue No. 03-06, “Participating Securities and the Two-Class Method under FASB Statement No. 128” (“EITF 03-06”). EITF 03-06 clarifies the definitional issues surrounding participating securities and requires companies to restate prior earnings per share amounts for comparative purposes upon adoption. The Company has adopted the provisions of EITF 03-06 in the second quarter of 2004, and the Company has restated its previously disclosed basic earnings per share amounts to include its participating securities in basic earnings per share when dilutive. As a result, basic income per share available to common shareholders decreased from $13.59 to $0.63 for the quarter ended September 30, 2003, and from $20.98 to $1.43 for the nine months ended September 30, 2003.

The following details the determination of the diluted weighted average shares for the three and nine months ended September 30, 2003.

	Three Months Ended September 30, 2003	Nine Months Ended September 30, 2003
Weighted average common shares outstanding	10,628,612	5,891,601
Dilutive effect of preferred stock	217,891,728	80,409,902
Total – weighted average shares - basic	228,520,340	86,301,503
Dilutive effect of stock options	21,681	8,113
Dilutive effect of warrants	53,515	53,515
Weighted average shares - diluted	228,595,536	86,363,131

Asset retirement obligations

In accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations,” the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company measures changes in the liability for an asset retirement obligation due to passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period. The interest rate used to measure that change is the credit-adjusted risk-free rate that existed when the liability was initially measured.

2.Acquisitions – pro forma amounts:

The merger with Cogent Europe was recorded in the accompanying financial statements under the purchase method of accounting. The Cogent Europe purchase price allocation is preliminary and further refinements may be made if certain assumed accounts payable and accrued liabilities do not result in cash payments. During the second quarter of 2004 the assumed liabilities were reduced by approximately $0.6 million resulting in an increase in negative goodwill resulting in a reduction of the long-lived asset balances. The operating results related to the merger with Cogent Europe have been included in the consolidated statements of operations from the date of acquisition. The Cogent Europe acquisition closed on January 5, 2004.

The purchase price of Cogent Europe was approximately $78.2 million, which includes the fair value of the Company’s Series I preferred stock of $2.6 million and assumed liabilities of $75.7 million. The fair value of assets acquired was approximately $155.5 million, which then gave rise to negative goodwill of approximately $77.3 million. Negative goodwill was allocated to long-lived assets, resulting in recorded assets acquired of $78.2 million.

If the Cogent Europe acquisition had taken place at the beginning of 2003, the unaudited pro forma combined results of the Company for the nine months ended September 30, 2003 would have been as follows (amounts in thousands, except per share amounts).

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	Nine Months Ended September 30, 2003
Revenue	$	65,537
Net income	280,795
Net income per share—basic	$	2.75
Net income per share—diluted	$	2.74

In management’s opinion, these unaudited pro forma amounts are not necessarily indicative of what the actual results of the combined operations might have been if the Firstmark acquisition had been effective at the beginning of 2003. Cogent Europe’s results for the nine months ended September 30, 2003 include non-recurring gains of approximately $135 million.  Pro forma amounts for the UFO Group and Global Access acquisitions are not presented as these acquisitions did not exceed the materiality reporting thresholds.

3.Property and equipment:

Property and equipment consisted of the following (in thousands):

	December 31, 2003			September 30, 2004
Owned assets:
Network equipment	$	186,204		$	213,682
Software	7,482			7,575
Office and other equipment	4,120			14,964
Leasehold improvements	50,387			52,994
System infrastructure	32,643			33,808
Construction in progress	988			160
	281,824			323,183
Less—Accumulated depreciation and amortization	(72,762		)	(104,726		)
	209,062			218,457
Assets under capital leases:
IRUs	118,273			140,134
Less—Accumulated depreciation and amortization	(12,929		)	(18,964		)
	105,344			121,170
Property and equipment, net	$	314,406		$	339,627

Depreciation and amortization expense related to property and equipment was $9.4 million and $11.4 million for the three months ended September 30, 2003 and September 30, 2004, respectively, and was $27.7 million and $34.8 million for the nine months ended September 30, 2003 and September 30, 2004, respectively.

Capitalized labor and related costs

The Company capitalizes the salaries and related benefits of employees directly involved with its construction activities. The Company began capitalizing these costs in July 2000 and will continue to capitalize these costs while it is involved in construction activities.  For the three months ended September 30, 2003 and September 30, 2004, the Company capitalized salaries and related benefits of $0.4 million and $0.4 million, respectively. For the nine months ended September 30, 2003 and September 30, 2004, the Company capitalized salaries and related benefits of $2.1 million and $1.2 million, respectively.  These amounts are included in system infrastructure.

4.Accrued liabilities and restructuring charge:

In July 2004, the French subsidiary of Cogent Europe  re-located its Paris headquarters.  The estimated net present value of the remaining lease obligation, net of estimated sub lease income, was approximately $1.4 million and was recorded as a restructuring charge in July 2004.  Of this obligation, approximately $0.5 million is recorded as a current obligation in accrued liabilities and $0.9 million is recorded in other long-term liabilities.

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Accrued liabilities consist of the following (in thousands):

	December 31, 2003		September 30, 2004
General operating expenditures	$	4,541	$	6,372
Payroll and benefits	419		577
Restructuring accrual – current portion	—		512
Litigation settlement accruals	400		—
Taxes	1,584		2,651
Interest	455		3,476
Deferred revenue	486		1,478
Total	$	7,885	$	15,066

5.Intangible assets:

Intangible assets consist of the following (in thousands):

	December 31, 2003			September 30, 2004
Customer contracts	$	8,145		$	9,175
Peering arrangements	16,440			16,440
Trade name	1,764			1,764
Other	—			167
Licenses	—			572
Non compete agreements	431			431
Total	26,780			28,549
Less—accumulated amortization	(18,671		)	(25,502		)
Intangible assets, net	$	8,109		$	3,047

Amortization expense for the three months ended September 30, 2003 and September 30, 2004 was approximately $2.6 million and $2.0 million, respectively. Amortization expense for the nine months ended September 30, 2003 and September 30, 2004 was approximately $7.4 million and $6.9 million, respectively. Future amortization expense related to intangible assets is $2.6 million, $0.3 million and $0.1 million for the twelve-month periods ending September 30, 2005, 2006, and 2007, respectively.

6.Other assets:

Other assets consist of the following (in thousands):

	December 31, 2003		September 30, 2004
Prepaid expenses	$	378	$	286
Deposits	3,419		4,663
Other	167		—
Total	$	3,964	$	4,949

7.Long-term debt:

Restructuring and Amended and Restated Credit Agreement

In March 2000, Cogent entered into a $280 million credit facility with Cisco Capital. In March 2001, the credit facility was increased to $310 million and in October 2001 the agreement was increased to $409 million. Immediately prior to the restructuring of the credit facility on July 31, 2003, the Company was indebted under the Cisco credit facility for a total of $269.1 million ($262.8 million of principal and $6.3 million of accrued but unpaid interest). On June 12, 2003, the Company’s Board of Directors approved a transaction with Cisco Systems, Inc. (“Cisco”) and Cisco Capital that restructured the Company’s indebtedness to Cisco Capital.

In order to restructure the Company’s credit facility, the Company, Cisco and Cisco Capital entered into an agreement (the “Exchange Agreement”) which, among other things, cancelled the principal amount and accrued interest and returned warrants exercisable for the purchase approximately 0.8 million shares of Common Stock (the “Cisco Warrants”) in exchange for a cash payment by the Company of $20.0 million, the issuance of 11,000 shares of the Company’s Series F preferred stock, and the issuance of a $17.0 million amended and restated promissory note (the “Amended and Restated Cisco Note”) under an Amended and Restated Credit Agreement. The Exchange Agreement provides that the entire debt to Cisco Capital is reinstated if Cisco Capital is forced to disgorge the cash payment received under the Exchange Agreement. The debt restructuring transaction has been accounted for as a troubled debt restructuring pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 15, “Accounting by Debtors and Creditors of Troubled Debt Restructurings”. Under SFAS No. 15, the Amended and Restated Cisco Note was recorded at its principal amount plus the total estimated future interest payments.

In order to restructure the Company’s credit facility, the Company also entered into an agreement (the “Purchase

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Agreement”) with certain of the Company’s existing preferred stockholders (the “Investors”), pursuant to which the Company sold to the Investors in several sub-series, 41,030 shares of the Company’s Series G preferred stock for $41.0 million in cash. Under the Purchase Agreement the Company’s outstanding Series A, B, C, D and E preferred stock (“Existing Preferred Stock”) were converted into approximately 10.8 million shares of common stock.

On July 31, 2003, the Company, Cisco Capital, Cisco and the Investors closed on the Exchange Agreement and the Purchase Agreement. The gain resulting from the retirement of the amounts outstanding under the credit facility under the Exchange Agreement was determined as follows (in thousands):

Cash paid	$		20,000
Issuance of Series F Preferred Stock	11,000
Amended and Restated Cisco Note, principal plus future interest	17,842
Transaction costs	1,167
Total consideration	50,009
Amount outstanding under the credit facility	(262,812			)
Interest accrued under the credit facility	(6,303			)
Book value of cancelled warrants	(8,248			)
Book value of unamortized credit facility loan costs	11,922
Gain from Exchange Agreement	$	(215,432		)

Under the Amended and Restated Credit Agreement, Cisco Capital’s obligation to make additional loans to the Company was terminated. Additionally the Amended and Restated Credit Agreement eliminated the Company’s financial performance covenants. Cisco Capital retained its senior security interest in substantially all of the Company’s assets; however, the Company may subordinate Cisco Capital’s security interest in the Company’s accounts receivable to another lender. The Amended and Restated Cisco Note is to be repaid in three installments. Interest is not payable, and does not accrue for the first 30 months, unless the Company defaults. When the Amended and Restated Cisco Note accrues interest, interest accrues at the 90-day LIBOR rate plus 4.5%. The Amended and Restated Cisco Note is subject to mandatory prepayment in full, without prepayment penalty, upon the occurrence of the closing of any change in control of the Company, the completion of any equity financing or receipt of loan proceeds in excess of $30.0 million, the achievement by the Company of four consecutive quarters of positive operating cash flow of at least $5.0 million, or the merger of the Company resulting in a combined entity with an equity value greater than $100.0 million; each of these events is defined in the agreement. The debt is subject to partial mandatory prepayment in an amount equal to the lesser of $2.0 million or the amount raised if the Company raises less than $30.0 million in a future equity financing.

Future maturities of principal and estimated future interest under the Amended and Restated Cisco Note are as follows (in thousands):

For the year ending September 30,
2005	$	—
2006	7,374
2007	5,374
2008	5,094
Thereafter	—
	$	17,842

Allied Riser convertible subordinated notes

On September 28, 2000, Allied Riser completed the issuance and sale in a private placement of an aggregate of $150.0 million in principal amount of its 7.50% convertible subordinated notes due September 15, 2007 (the “Notes”). At the closing of the merger between Allied Riser and the Company in February 2002, approximately $117.0 million of the Notes were outstanding.

In January 2003, the Company, Allied Riser and the holders of approximately $106.7 million in face value of Notes entered into an exchange agreement and a settlement agreement. Pursuant to the exchange agreement, these note holders surrendered their Notes, including accrued and unpaid interest, in exchange for a cash payment of approximately $5.0 million, 3.4 million shares of the Company’s Series D preferred stock and 3.4 million shares of the Company’s Series E preferred stock. This preferred stock, at issuance, was convertible into approximately 4.2% of the Company’s then outstanding fully diluted common stock. Pursuant to the settlement agreement, these note holders dismissed their litigation against the Company with prejudice in exchange for the cash payment. These transactions closed in March 2003 when the agreed amounts were paid and the Company issued the Series D and Series E preferred shares. The settlement and exchange transactions together eliminated $106.7 million in face amount of the notes due in September 2007, interest accrued on the Notes since the December 15, 2002 interest payment, all future interest payment

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obligations on the Notes and settled the note holder litigation.

As of December 31, 2002, the Company had accrued the amount payable under the settlement agreement, net of a recovery of $1.5 million under its insurance policy. This resulted in a net expense of $3.5 million recorded in 2002. The $4.9 million payment required under the settlement agreement was paid in March 2003. The Company received the $1.5 million insurance recovery in April 2003. The exchange agreement resulted in a gain of approximately $24.8 million recorded in March 2003. The gain resulted from the difference between the $36.5 million net book value of the notes ($106.7 face value less the related discount of $70.2 million) and $2.0 million of accrued interest and the exchange consideration which included $5.0 million in cash and the $8.5 million estimated fair market value for the Series D and Series E preferred stock less approximately $0.2 million of transaction costs. The estimated fair market value for the Series D and Series E preferred stock was determined by using the price per share of our Series C preferred stock, which represented the Company’s most recent equity transaction for cash.

The terms of the remaining $10.2 million of Notes were not impacted by these transactions and they continue to be due on June 15, 2007. These $10.2 million notes were recorded at their fair value of approximately $2.9 million at the merger date. The discount is accreted to interest expense through the maturity date. The Notes are convertible at the option of the holders into approximately 21,000 shares of the Company’s common stock. Interest is payable semiannually on June 15 and December 15, and is payable, at the election of the Company, in either cash or registered shares of the Company’s common stock. The Notes are redeemable at the Company’s option at any time on or after the third business day after June 15, 2004, at specified redemption prices plus accrued interest.

8.Commitments and contingencies:

Capital leases-Fiber lease agreements

The Company has entered into various lease agreements with fiber providers for dark fiber primarily under 15-25 year IRUs. Once the Company has accepted the related fiber route, if the lease meets the criteria for treatment as a capital lease it is recorded as a capital lease obligation and IRU asset.

The future minimum commitments under these agreements are as follows (in thousands):

For the year ending September 30,
2005	$	15,640
2006	14,981
2007	13,435
2008	13,169
2009	11,355
Thereafter	108,390
Total minimum lease obligations	176,970
Less-amounts representing interest	(68,216		)
Present value of minimum lease obligations	108,754
Current maturities	(5,799		)
Capital lease obligations, net of current maturities	$	102,955

Fiber Leases and Construction Commitments

Certain of the Company’s agreements for the construction of building laterals and for the leasing of metro fiber rings and lateral fiber include minimum specified commitments. The future commitment under these arrangements was approximately $3.4 million at September 30, 2004.

Current and Potential Litigation

In October 2004 the Company settled a dispute with a vendor over the amount invoiced by the vendor for telecommunications services.  The settlement payment of $0.3 million was made in October 2004 and was less than the $1.0 million that had previously been recorded in accounts payable. As a result approximately $0.7 million was recorded as a reduction to the cost of network operations in the third quarter of 2004.

The Company is also involved in a dispute over intercompany services provided by and to Lambdanet Germany during the time LambdaNet Germany was a sister company of Firstmark’s French subsidiary—LNF and Firstmark’s Spanish subsidiary—LNE (See Note 11).  LNF and LNE are no longer sister companies of LambdaNet Germany.  The Company intends to vigorously defend its position related to these charges and management believes  that it has adequately reserved for the potential liability.

In 2003, a counterclaim was filed against the Company by a former employee in state court in California. The former

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employee asserted primarily that additional commissions were due to the employee. The Company had filed a claim against this employee for breach of contract among other claims. A judgment was awarded and the Company has appealed this decision. The Company has recorded a liability for the estimated liability  under this judgment.

The Company has been made aware of several other companies in its own and in other industries that use the word “Cogent” in their corporate names. One company has informed the Company that it believes the Company’s use of the name “Cogent” infringes on its intellectual property rights in that name. If such a challenge is successful, the Company could be required to change its name and lose the goodwill associated with the Cogent name in its markets. Management does not believe such a challenge, if successful, would have a material impact on the Company’s business, financial condition or results of operations.

In December 2003 five former employees of the Company’s Spanish subsidiary filed claims related to their termination of employment.  The initial rulings of the Spanish court have supported the Company’s position.  The Company intends to continue to vigorously defend its position related to these charges and feels that it has adequately reserved for the potential liability.

The Company is involved in other legal proceedings in the normal course of business which management does not believe will have a material impact on the Company’s financial condition.

Operating leases and license agreements

The Company leases office space, network equipment sites, and facilities under operating leases. The Company also enters into building access agreements with the landlords of its targeted multi- tenant office buildings. Future minimum annual commitments under these arrangements are as follows (in thousands):

For the year ending September 30,
2005	$	20,301
2006	17,002
2007	13,262
2008	10,343
2009	7,833
Thereafter	30,534
	$	99,275

Rent expense, net of sublease income, for the three months ended September 30, 2003 and September 30, 2004 was approximately $0.6 million and $3.2 million, respectively. Rent expense, net of sublease income, for the nine months ended September 30, 2003 and September 30, 2004 was approximately $1.7 million and $7.1 million, respectively. The Company has subleased certain office space and facilities. Future minimum payments under these sublease agreements are approximately $1.1 million, $0.7 million, $0.4 million and $0.3 million for the years ending September 30, 2005 through September 30, 2008, respectively.

Maintenance and fiber lease agreements

The Company pays monthly fees for maintenance of its fiber optic network. In certain cases, the Company connects its customers and the buildings it serves to its national fiber-optic backbone using intra-city and inter-city fiber under operating lease commitments from various providers under contracts that range from month-to-month to five-year terms.

Future minimum obligations related to these arrangements are as follows (in thousands):

Year ending September 30,
2005	$		5,076
2006	4,304
2007	3,955
2008	4,027
2009	3,913
Thereafter	46,981
	$	68,256

Shareholder Indemnification

In November 2003, the Company’s Chief Executive Officer acquired LNG Holdings S.A. (“LNG”). LNG, through its LambdaNet group of subsidiaries, operated a carriers’ carrier fiber optic transport business in Europe. In connection with this transaction, the Company provided an indemnification to certain former LNG shareholders due to the possibility of acquiring certain LNG assets. The guarantee is without expiration and covers claims related to LNG’s LambdaNet subsidiaries and actions taken in

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respect thereof including actions related to the transfer of ownership interests in LNG. Should the Company be required to perform, the Company will defend the action and may attempt to recover from LNG and other involved entities.  The Company has recorded a long-term liability of approximately $0.2 million for the estimated fair value of this obligation and believes that the maximum loss exposure is limited to the as converted value of its Series I preferred stock.

LambdaNet Communications Deutschland, AG (“Lambdanet Germany”)

The Company attempted to acquire Lambdanet Germany, but was unable to reach agreement with Lambdanet Germany’s bank creditors. Cogent Europe has made use of Lambdanet Germany’s facilities to complete communications circuits into Germany and has also depended on Lambdanet Germany for network operations support, billing and other services. The Company has begun the process of fully separating the operations of Cogent Europe from Lambdanet Germany but this process is not complete and there may be disruptions as this process proceeds.

9.Stockholders’ equity:

In June 2003, the Company’s board of directors and shareholders approved an amended and restated charter that increased the number of authorized shares of the Company’s common stock from 21.1 million shares to 395.0 million shares, eliminated the reference to the Company’s Series A, B, C, D, and E preferred stock (“Existing Preferred Stock”) and authorized 120,000 shares of authorized but unissued and undesignated preferred stock. In April 2004, the Company’s board of directors and shareholders approved an amended and restated charter that increased the number of authorized shares of the Company’s common stock from 395.0 million shares to 600.0 million shares and increased the shares of undesignated preferred stock from 120,000 shares to 170,000 shares.  In October 2004, the Company's board of directors approved an amended and restated charter that increased the number of authorized shares of the Company's common stock to 750.0 million shares.

On July 31, 2003 and in connection with the Company’ restructuring of its debt with Cisco Capital, all of the Company’s Existing Preferred Stock was converted into approximately 10.8 million shares of common stock. At the same time the Company issued 11,000 shares of Series F preferred stock to Cisco Capital under the Exchange Agreement and issued 41,030 shares of Series G preferred stock for gross proceeds of $41.0 million to the Investors under the Purchase Agreement.

In January 2004, Symposium Gamma Inc. (“Gamma”) merged with a subsidiary of the Company. Under the merger agreement, all of the issued and outstanding shares of Gamma common stock were converted into 2,575 shares of the Company’s Series I preferred stock and the Company became Gamma and Cogent Europe’s sole shareholder.

On March 30, 2004, Symposium Omega, Inc., (“Omega”) a Delaware corporation merged with a subsidiary of the Company. Prior to the merger Omega had raised approximately $19.5 million in cash and acquired the rights to acquire a German fiber optic network. The Company issued 3,891 shares of Series J preferred stock to the shareholders of Omega in exchange for all of the outstanding common stock of Omega.

On August 12, 2004, UFO Group, Inc., (“UFO Group”) a Delaware corporation merged with a subsidiary of the Company. Prior to the merger UFO Group had raised net cash of approximately $2.1 million  and acquired the rights to acquire the majority of the assets of Unlimited Fiber Optics, Inc. The Company issued 2,600 shares of Series K preferred stock to the shareholders of UFO Group in exchange for all of the outstanding common stock of UFO Group.

On September 15, 2004, the Company issued 185 shares of Series L preferred stock to the shareholders of Global Access Telecommunications Inc. (“Global Access”) in exchange for the majority of the assets of Global Access.

Each share of the Series F preferred stock, Series G preferred stock, Series H preferred stock, Series I preferred stock,  Series J preferred stock, Series K preferred stock and Series L preferred stock (collectively, the “New Preferred”) may be converted into shares of common stock at the election of its holder at any time. The Series F, Series G, Series I, Series J, Series K and Series L preferred stock are convertible into 68.2 million, 254.9 million, 16.0 million, 120.6 million, 16.1 million and 5.7 million shares of the Company’s common stock, respectively. The 84,001 authorized shares of Series H preferred stock are convertible into 64.6 million shares of the Company’s common stock. The New Preferred will be automatically converted into common stock, at the then applicable conversion rate in the event of an underwritten public offering of shares of the Company at a total offering of not less than $50 million at a post-money valuation of the Company of $500 million (a “Qualifying IPO”). The conversion prices are subject to adjustment, as defined.

The New Preferred stock votes together with the common stock and not as a separate class. Each share of the New Preferred has a number of votes equal to the number of shares of common stock then issuable upon conversion of such shares, with the expetion of the Series L preferred stock which is non-voting. The consent of holders of a majority of the outstanding Series F preferred stock is required to declare or pay any dividend on the common or the preferred stock of the Company.

In the event of any dissolution, liquidation, or winding up of the Company, at least $29.1 million, $123.1 million, $8.0 million, $7.7 million, $58.4 million, $7.8 million and $2.8 million will be paid in cash to the holders of the Series F, G, H, I, J, K and L preferred stock, respectively, before any payment is made to the holders of the Company’s common stock.

Offer to exchange—Series H Preferred Stock and 2003 and 2004 Incentive Award Plans

In September 2003, the Compensation Committee (the “Committee”) of the board of directors adopted and the stockholders approved, the Company’s 2003 Incentive Award Plan (the “Award Plan”). The Award Plan reserved 54,001 shares of Series H preferred stock for issuance under the Award Plan. In September 2003, the Company offered its employees the opportunity to

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exchange eligible outstanding stock options and certain common stock for restricted shares of Series H preferred stock under the Award Plan. Under the offer, the Company recorded a deferred compensation charge of approximately $46.1 million in the fourth quarter of 2003. The Company also granted additional shares of Series H preferred to certain new employees resulting in an additional deferred compensation. In 2004, the Company’s board of directors and shareholders approved the Company’s 2004 Incentive Award Plan that increased the shares of Series H preferred stock available for grant as either restricted shares or options for restricted shares under the Award Plan from 54,001 to 84,001 shares.   In July 2004, the Company began granting options for Series H preferred stock, 17,500 of which were granted with an exercise price below the trading price of the Company’s common stock on grant date.  Each share of Series H preferred stock converts into approximately 769 shares of common stock. The Series H preferred shares were valued using the trading price of the Company’s common stock on the grant date. These option grants resulted in additional deferred compensation of $4.7 million recorded during the third quarter of 2004. Deferred compensation for these option grants was determined by the multiplying the difference between the exercise price and the market value of the Series H preferred stock on grant date times the number of options granted and is being amortized over the service period.

For shares granted under the offer to exchange, the vesting period was 27% upon grant with the remaining shares vesting ratably over a three year period and for share and options grants to newly hired employees; the shares generally vest 25% after one year with the remaining shares vesting ratably over three years. Compensation expense related to Series H preferred stock was approximately $2.3 million for the nine months ended September 30, 2003, and $9.0 million for the nine months ended September 30, 2004. For grants of restricted stock, when an employee terminates prior to full vesting, the total remaining deferred compensation charge is reduced, the employee retains their vested shares and the employees’ unvested shares are returned to the plan. For grants of options for restricted stock, when an employee terminates prior to full vesting, the total remaining deferred compensation charge is reduced, previously recorded deferred compensation  is reversed and the employee may elect to exercise their vested options for a period of ninety days and the any of the employees’ unvested options are returned to the plan.

Dividends

The Cisco credit facility prohibits the Company from paying cash dividends and restricts the Company’s ability to make other distributions to its stockholders.

Beneficial Conversion Charges

Beneficial conversion charges of $2.5 million, $19.5 million, $2.6 million and $0.9 million were recorded on January 5, 2004, March 30, 2004, August 12, 2004 and September 15, 2004, respectively, since the price per common share at which the Series I, Series J, Series K and Series L preferred stock converts into were less than the quoted trading price of the Company’s common stock on that date.

10.Segment information:

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates as one operating segment. Below are the Company’s net revenues and long lived assets by geographic theater (in thousands):

	Three Months Ended September 30, 2003		Three Months Ended September 30, 2004		Nine Months Ended September 30, 2003		Nine Months Ended September 30, 2004
Net Revenues
North America	$	15,148	$	16,002	$	44,899	$	46,733
Europe	—		5,734		—		16,335
Total	$	15,148	$	21,736	$	44,899	$	63,068

	December 31, 2003		September 30, 2004
Long lived assets, net
North America	$	322,515	$	292,410
Europe	—		50,264
Total	$	322,515	$	342,674

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11.Related parties:

Office lease

The Company’s headquarters is located in an office building owned by an entity controlled by the Company’s Chief Executive Officer. The Company paid monthly rent to this entity of approximately $30,000 during 2003 and 2004.

LNG Holdings S.A (“LNG”)

In November 2003, approximately 90% of the stock of LNG, the then parent company to Firstmark, now named Cogent Europe, was acquired by Symposium Inc. (“Symposium”) a Delaware corporation, for no consideration in return for a commitment to cause at least $2 million to be invested in LNG’s subsidiary LambdaNet France and an indemnification of LNG’s selling stockholders by the Company and Symposium. Symposium is wholly owned by the Company’s Chief Executive Officer. In January 2004, LNG transferred its interest in Firstmark to Symposium Gamma, Inc. (“Gamma”), a Delaware corporation, in return for $1 and a commitment by Gamma to invest at least $2 million in the operations of Firstmark’s French subsidiary—LNF. Prior to the transfer, Gamma had raised approximately $2.5 million in a private equity transaction with certain existing investors in the Company and new investors. In January 2004, Gamma transferred $2.5 million to LNF and, by so doing, fulfilled the $2.0 million commitment. Symposium continues to own approximately 90% of the stock of LNG.  LNG operates as a holding company.  Its subsidiaries hold assets related to their former telecommunications operations.

In January 2004, euro 215.1 million of Firstmark’s total debt of euro 216.1 million owed to its previous parent LNG, and other amounts payable of euro 4.9 million owed to LNG were assigned to Symposium Gamma, Inc. (“Gamma”) at their fair market value of euro 1 in connection with Gamma’s acquisition of Firstmark. Prior to the Company’s merger with Gamma, and advanced as part of the Gamma merger, LNG transferred euro 1 million to LNF. LNF repaid the euro 1 million to LNG in March 2004. Accordingly, euro 215.1 million of the total euro 216.1 million of the debt obligation and euro 4.9 million of the other amounts payable eliminate in the consolidation of these financial statements.

Symposium Gamma, Inc., and Symposium Omega, Inc. (“Omega”)

Gamma and Omega are considered related parties to the Company since both entities had raised cash in private equity transactions with certain existing investors in the Company.  Gamma was formed in order to acquire Firstmark.  Omega was formed in order to acquire the rights to a German fiber optic network. In December 2003, Gamma was capitalized with approximately $2.5 million in exchange for 100% of Gamma’s common stock.  In March 2004, Omega was capitalized with approximately $19.5 million in exchange for 100% of Omega’s common stock.

Cogent Europe’s subsidiaries provide network services and in turn utilize the network of LambdaNet Communications AG (“Lambdanet Germany”) in order for each entity to provide services to certain of their customers under a network sharing agreement. Lambdanet Germany was a majority owned subsidiary of LNG from November 2003 until April 2004 when Lambdanet Germany was sold to an unrelated party. During the three and nine months ended September 30, 2004 Cogent Europe recorded revenue of euro 0.4 million ($0.5 million) and 1.3 million euro ($1.6 million), respectively from Lambdanet Germany and network costs of euro 0.2 million ($0.2 million) and 1.3 euro million ($1.6 million), respectively under the network sharing agreement. As of September 30, 2004 Cogent Europe had recorded net amounts due from Lambdanet Germany of euro 1.4 million ($1.7 million) and net amounts due to Lambdanet Germany of euro 1.1 million ($1.4 million). These amounts are reflected as amounts due from related party and amounts due to related party in the accompanying condensed consolidated September 30, 2004 balance sheet. The Company is currently in negotiations with the new owner of Lambdanet Germany over the terms of settling these amounts and the network sharing agreement.

Cisco Systems, Inc. (“Cisco”)

In connection with the UFO acquisition the Company acquired Cisco as a customer.  Cisco is a Company shareholder and lender.  The Company recorded revenue of approximately $65,000 from Cisco for the three months ended September 30, 2004.

12.Subsequent Events:

Merger with Cogent Potomac, Inc.

In October 2004, the Company merged with Cogent Potomac, Inc. (“Potomac”).  The Company issued 3,700 shares of its newly authorized Series M preferred stock in exchange for all of the outstanding common shares of Potomac.  The Series M preferred stock converts into approximately 114.7 million sharesof the Company’s common stock and has rights and privileges similar to the Company’s Series J preferred stock, except that the Series M preferred stock does not vote for directors.  Prior to the merger, Potomac had acquired the majority of the assets of Aleron Broadband Services LLC (“Aleron”).  Aleron was headquartered in Chantilly, Virginia and provided Internet access and dial-up services on a wholesale basis. The acquired assets included net cash of approximately $18.5 million, all of Aleron’s customer contracts, customer accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships, accounts payable, and accrued liabilities.  The Company intends to integrate these acquired assets into its operations and onto its broadband network. A beneficial conversion charge of $18.5 million will be recorded in October 2004, since the price per common share at which the Series M preferred stock converts into was less than the quoted trading price of the Company’s common stock on that date.

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

Special Note Regarding Forward Looking Statements

Our Form 10-Q disclosure and analysis concerning our operations, cash flows and financial position includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. Although these statements are based upon assumptions we consider reasonable, they are subject to risks and uncertainties that are described more fully below and in the notes accompanying our financial statements.  Accordingly, we can give no assurance that we will achieve the results anticipated or implied by our forward-looking statements.

General Overview

We are a leading facilities-based provider of low-cost, high-speed Internet access and IP connectivity. Our network has been designed and optimized to transmit data using Internet Protocol, which provides us with significant cost and performance advantages over legacy networks. We deliver our services to more than 5,000 small and medium-sized businesses, communications service providers, and other bandwidth-intensive organizations located in North America and Europe. Our primary service is providing Internet access at a speed of 100 Megabits per second, much faster than typical Internet access currently offered to businesses. Our service is delivered through our own facilities running all the way to our customers’ premises.

Our network is comprised of in-building riser facilities, metropolitan optical fiber networks, metropolitan traffic aggregation points and intercity transport facilities. The network is physically connected entirely through our facilities to over 925 buildings in which we provide our on-net services, including over 780 multi-tenant office buildings. We also provide on-net services in carrier-neutral colocation facilities, data centers and single-tenant office buildings. Because of our network architecture, we are not dependent on local telephone companies to serve our on-net customers. In addition to providing our on-net services, we also provide Internet connectivity to customers that are not located in buildings directly connected to our network. We serve these off-net customers using other carriers’ facilities to provide the last mile portion of the link from our customers’ premises to our network. We emphasize the sale of on-net services because sales of these services generate higher gross profit margins. For the three months ended September 30, 2003, 55.0% of our net service revenue was generated from on-net customers as compared to 65.7% in the same period in 2004.

We have grown our net service revenue from $3.0 million for the year ended December 31, 2001 to $59.4 million for the year ended December 31, 2003 and from $15.1 million for the three months ended September 30, 2003 to $21.7 million for the three months ended September 30, 2004. Net service revenue is determined by subtracting our allowances for sales credit adjustments and unfulfilled purchase obligations from our gross service revenue.

We have generated our revenue growth through the strategic acquisitions of communications network assets and customers, primarily from financially distressed companies, and the continued expansion of our network of on-net buildings. Our results for 2003 do not include the impact of our most recent acquisitions that extended our business into Europe and expanded our operations in North America. The January 5, 2004 acquisition of Firstmark Communications Participation S.à r.l., or Firstmark — now named Cogent Europe S.à r.l., or Cogent Europe, extended our network into France, Spain, the United Kingdom, Belgium, Switzerland and the Netherlands. On March 30, 2004, we obtained rights to approximately 1,500 fiber route miles and other assets that were once part of the Carrier 1 International S.A. network in Germany. On August 12, 2004 we merged with UFO Group, Inc.  Prior to this merger, UFO Group, Inc. had acquired the majority of the assets of Unlimited Fiber Optics, Inc. This acquisition expanded our services offerings and customer base in San Francisco and Los Angeles, California.  On September 15, 2004 we acquired the majority of the assets of Global Access Telecommunications, Inc., which further expanded our operations in Germany.  On October 20, 2004, we merged with Cogent Potomac, Inc.  Prior to this merger, Cogent Potomac had acquired the rights to the majority of the assets of Aleron Broadband Services LLC.  This acquisition expanded our services offerings and customer base in North America.  We are in the process of integrating these customers and operations onto our network and into our operations. As with prior acquisitions, we plan to continue to support a number of legacy service offerings, but will focus our efforts on selling our on-net IP data service offerings.

Our net service revenue is derived from our on-net, off-net and non-core services, which comprised 55.0%, 28.4% and 16.6% of our net revenue, respectively, for the three months ended September 30, 2003 and 65.7%, 23.5% and 10.8% for the three months ended September 30, 2004. Our on-net service consists of high-speed Internet access and Internet Protocol connectivity ranging from 0.5 Mbps per second to 1,000 Mbps per second of bandwidth. We offer our on-net services to customers located in buildings that are physically connected to our network. Off-net services are sold to businesses that are connected to our network primarily by means of T1 and T3 lines obtained from other carriers. Our non-core services, which consist of legacy services of companies whose assets or businesses we have acquired, include email, retail dial-up Internet access, shared web hosting, managed web hosting, managed security, voice services provided in Toronto, Canada only, point to point private line services provided by UFO, and services provided to LambdaNet Germany under a network sharing arrangement as discussed below. We do not actively market these non-core services and expect the revenue associated with them to decline.

In connection with each of our acquisitions in which we have acquired customer contracts, some portion of these customers have elected not to continue purchasing services from us. Accordingly, historical operating results from the acquired businesses or assets have not been indicative of our combined results. Our evaluation of potential acquisitions contemplates such patterns of revenue

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erosion. Our results attributable to Cogent Europe for the first nine months of 2004 reflect some of the expected erosion of revenue acquired in Europe and we expect to experience additional material erosion of this revenue. For example, certain customer’s of our subsidiaries in France and Spain have indicated to us that they will not continue to purchase or will reduce the amount of services purchased after the expiration of their current contractual obligations. In 2003, revenue under contracts with these customers represented approximately 3.8 million euro of the total 23.5 million euro revenue of Cogent Europe.

We have grown our gross profit from a negative $17.0 million for the year ended December 31, 2001 to $12.4 million for the year ended December 31, 2003 and from $10.0 million for the nine months ended September 30, 2003 to $19.8 million for the nine months ended September 30, 2004. Our gross profit margin has expanded from 21% in 2003 to 31% for the nine months ended September 30, 2004. We determine gross profit by subtracting network operation expenses (exclusive of amounts shown separately), other than amortized deferred compensation, from our net service revenue. The amortization of deferred compensation classified as cost of network services was $0.3 million, $0.2 million and $1.3 million for the years ended December 31, 2001, 2002 and 2003, respectively, and $0.2 million and $0.6 million for the nine months ended September 30, 2003 and 2004, respectively. We believe that our gross profit will benefit from the limited incremental expenses associated with providing service to new on-net customers. We have not allocated depreciation and amortization expense to our network operations expense.

Due to our strategic acquisitions of network assets and equipment, we believe we are positioned to grow our revenue base and profitability without significant additional capital investments. We continue to deploy network equipment to other parts of our network to maximize the utilization of our assets without incurring significant additional capital expense. As a result, our future capital expenditures will be based primarily on our planned expansion of on-net buildings and the growth of our customer base. We anticipate that our future capital expenditure rate will be significantly less than our historical capital expenditure rate. However, we may still need to raise additional capital to fund our expansion and this capital may not be available.

Historically, our operating expenses have exceeded our net service revenue resulting in operating losses of $61.1 million, $62.3 million and $81.2 million in 2001, 2002 and 2003, respectively, and $47.4 million and $61.3 million for the nine months ended September 30, 2003 and September 30, 2004, respectively. In each of these periods, our operating expenses consisted primarily of the following:

•Network operations expenses consist primarily of the cost of leased circuits, sites and facilities; telecommunications license agreements, network maintenance expenses, salaries of, and expenses related to, employees who are directly involved with maintenance and operation of our network, who we refer to as network employees; and software license fees.

•Selling general and administrative expenses consist primarily of salaries, bonuses and related benefits paid to our non-network employees and related selling and administrative costs.

•Depreciation and amortization expenses result from the depreciation of our property and equipment, including the assets and capitalized expenses associated with our network and the amortization of our intangible assets.

•Amortization of deferred compensation that results from the expense of amortizing over the vesting period the fair value of our stock options and restricted stock granted to our employees.

•For the nine months ended September 30, 2004 $0.8 million of terminated public offering costs and $1.4 million of restructuring costs associated with the termination of an office lease in Paris France.

Acquisitions

Since our inception, we have consummated nine major and three minor acquisitions through which we have expanded our network and customer base and added strategic assets to our business. We have accomplished this primarily by acquiring financially distressed companies or their assets at a significant discount to their original cost. The overall impact of these acquisitions on the operation of our business has been to extend the physical reach of our network in both North America and Europe, expand the breadth of our service offerings, and increase the number of customers to whom we provide our services. The overall impact of these acquisitions on our balance sheet and cash flows has been to significantly increase the assets on our balance sheet, including cash, increase our indebtedness and increase our cash flows from operations due to our increased customer base and reduce our cash flows from operations due to assumed liabilities and assumed obligations.

Acquisition of Aleron

In October 2004, our subsidiary merged with Cogent Potomac, Inc. (Potomac).  We issued 3,700 shares of our newly authorized Series M preferred stock in exchange for all of the outstanding common shares of Potomac.  The Series M preferred stock will, upon the filing of an amendment to our certificate of incorporation, convert into approximately 114.7 million sharesof our common stock and has rights and privileges similar to our Series J preferred stock.  Prior to the merger, Potomac had acquired the majority of the assets of Aleron Broadband Services LLC (Aleron).  Aleron was headquartered in Chantilly, Virginia and provided Internet access and dial-up services on a wholesale basis. The acquired assets included net cash of approximately $18.5 million, all of Aleron’s customer contracts, customer accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships, accounts payable, and accrued liabilities.  We intend to integrate these acquired assets into our operations

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and onto our broadband network.

Acquisition of Global Access

On September 15, 2004, we issued 185 shares of our newly authorized Series L preferred stock to the shareholders of Global Access Telecommunications Inc. (Global Access) in exchange for the majority of the assets of Global Access.  The Series L preferred stock converts into approximately 5.7 million sharesof our common stock and has rights and privileges similar to our Series J preferred stock, except that it is non-voting. Global Access was headquartered in Frankfurt, Germany and provided Internet access and other data services in Germany. The acquired assets included customer contracts, accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships and accounts payable and accrued liabilities.  We are in the process of integrating these acquired assets into our operations and onto our broadband network.

Acquisition of UFO Group, Inc.

On August 12, 2004, our subsidiary merged with UFO Group, Inc. (UFO Group).  We issued 2,600 shares of our Series K preferred stock in exchange for the outstanding shares of UFO Group.  The Series K preferred stock converts into approximately 16.1 million shares of our common stock and has rights and privileges similar to our Series J preferred stock.  Prior to the merger, UFO Group had acquired the majority of the assets of Unlimited Fiber Optics, Inc. (UFO).   UFO’s customer base is comprised of data service customers and its network is comprised of fiber optic facilities located in San Francisco, Los Angeles and Chicago. The acquired assets included net cash of approximately $1.9 million, all of UFO’s customer contracts, customer accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships and accounts payable.  We are in the process of integrating these acquired assets into our operations and onto our broadband network.

Acquisition of European Network

We expanded our network into Europe through a number of related transactions. In September 2003, we began exploring the possibility of acquiring LNG Holdings SA, (LNG) an operator of a European telecommunications network that was on the verge of insolvency. We determined that an acquisition of LNG in whole was not advisable at that time; however, the private equity funds that owned LNG refused to consider a transaction in which we would acquire only parts of the network. In order to prevent LNG from liquidating and to preserve our ability to structure an acceptable acquisition, in November 2003, our Chief Executive Officer formed a corporation that acquired a 90% interest in LNG in return for a commitment to cause at least $2 million to be invested in LNG’s subsidiary LambdaNet France and an indemnification of LNG’s selling stockholders by us and the acquiring corporation. In November 2003, we reached an agreement with investment funds associated with BNP Paribas and certain of our existing investors regarding the acquisition of the LNG network in France, Spain and Germany.

We completed the first step of the European network acquisition in January 2004. The investors funded a corporation that they controlled with $2.5 million and acquired Firstmark, now named Cogent Europe, the parent holding company of LambdaNet France and LambdaNet Spain, from LNG for one euro. As consideration, the investors, through the corporation they controlled, entered into a commitment to use reasonable efforts to cause LNG to be released from a guarantee of certain obligations of LambdaNet France and a commitment to fund LambdaNet France with $2.0 million. That corporation was then merged into one of our subsidiaries in a transaction in which the investors received preferred stock that converts into approximately 16.0 million shares of our common stock.

The planned second step of the transaction was the acquisition of the German network of LNG. We attempted to structure an acceptable acquisition which would have included using $19.5 million allocated by the investors to restructure the existing bank debt of LambdaNet Germany; however, we subsequently concluded that it was unlikely that we could structure an acceptable acquisition of LambdaNet Germany, and we began to seek an alternative German network acquisition in order to complete the European portion of our network and meet the conditions required to cause the investors to fund $19.5 million.

In March 2004, we identified network assets in Germany formerly operated as part of the Carrier 1 network as an attractive acquisition opportunity. Pursuant to the November commitment, the investors funded a newly-formed Delaware corporation with $19.5 million and that corporation, through a German subsidiary, acquired the rights to the Carrier 1 assets in exchange for 2.3 million euros. That corporation was then merged into one of our subsidiaries in a transaction in which the investors received preferred stock, which converts into approximately 120.6 million shares of our common stock. Through September 30, 2004 we paid 0.2 million euros and paid 1.3 million euros in October 2004 of the 2.3 million euro purchase price. We anticipate paying the remaining 0.8 million euros in November 2004.

Acquisition of Assets of Fiber Network Services

In February 2003, we acquired the principal assets of Fiber Network Services, Inc., or FNSI, an Internet service provider in the midwestern United States, in exchange for options to purchase 120,000 shares of our common stock and the assumption of certain of FNSI’s liabilities. The acquired assets included FNSI’s customer contracts and accounts receivable. The liabilities that we assumed included accounts payable, facilities leases, customer contractual commitments and note obligations.

Acquisition of PSINet Assets

In April 2002, we purchased the principal assets of PSINet, Inc. out of bankruptcy in exchange for $9.5 million and the assumption of certain liabilities. The assets included certain of PSINet’s accounts receivable, rights to dark fiber pursuant to IRUs, and intangible assets including settlement-free peering agreements, customer contracts and the PSINet trade name. The liabilities that we assumed included leased circuit commitments, facilities leases, customer contractual commitments and colocation arrangements. With

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the acquisition of PSINet assets we began to offer our off-net service and acquired significant non-core services.

Allied Riser Merger

In February 2002, we acquired Allied Riser Communications Corporation, a facilities-based provider of broadband data, video and voice communications services to small and medium-sized businesses in the United States and Canada in exchange for the issuance of approximately 2.0 million shares of our common stock. As a result of the merger, Allied Riser became a wholly-owned subsidiary of ours. In connection with the merger, we became co-obligor under Allied Riser’s 7 ¹/₂% Convertible Subordinated Notes.

Acquisition of NetRail Assets

In September 2001, we purchased for $11.7 million the principal assets of NetRail, Inc. out of bankruptcy. The assets included certain customer contracts and the related accounts receivable, circuits, network equipment, and settlement-free peering agreements.

Results of Operations

Our management reviews and analyzes several key performance indicators in order to manage our business and assess the quality of and potential variability of our net service revenues and cash flows. These key performance indicators include:

•net service revenues, which are an indicator of our overall business growth;

•gross profit, which is an indicator of both our service offering mix, competitive pressures and the cost of our network operations;

•growth in our on-net customer base, which is an indicator of the success of our on-net focused sales efforts;

•growth in our on-net buildings; and

•distribution of revenue across our service offerings.

Three Months Ended September 30, 2003 Compared to the Three Months Ended September 30, 2004

The following summary table presents a comparison of our results of operations for the three months ended September 30, 2003 and 2004 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

	Three Months Ended September 30,					Percent
	2003		2004			Change
	(unaudited)
	(in thousands)
Net service revenue	$	15,148	$	21,736		43.5	%
Network operations expenses (1)	12,014		14,303			19.1	%
Selling, general, and administrative expenses (2)	6,312		9,089			44.0	%
Restructuring charge	—		1,396			—
Terminated public offering costs	—		779			—
Depreciation and amortization expenses	11,968		13,369			11.7	%
Gain – Cisco troubled debt restructuring	215,432		—			—
Net income (loss)	196,462		(23,041		)	(111.7	)%

(1)Excludes amortization of deferred compensation of $53 and $207 in the three months ended September 30, 2003 and 2004, respectively, which, if included would have resulted in a period-to-period change of 20.2%.

(2)Excludes amortization of deferred compensation of $702 and $2,753 in the three months ended September 30, 2003 and 2004, respectively, which, if included would have resulted in a period-to-period change of 68.8%.

Net Service Revenue.  Our net service revenue increased 43.5% from $15.1 million for the three months ended September 30, 2003 to $21.7 million for the three months ending September 30, 2004. The $6.2 million increase in net service revenue is primarily attributable to $6.4 million of net service revenue from the customers acquired in the Firstmark, UFO and Global Access acquisitions and a $2.9 million increase in organic revenue.  We define organic revenue as revenue derived from contracts obtained under our sales efforts.  These increases were partially offset by a $2.4 million decrease in revenue from the customers acquired in the PSINet and FNSI acquisitions. For the three months ended September 30, 2003 and 2004, on-net, off-net and non-core services represented 55.0%, 28.4% and 16.6% and 65.7%, 23.5% 10.8% of our net service revenues, respectively.

Our net service revenue related to our acquisitions is included in our statements of operations from the acquisition dates.  Net service revenue from our January 5, 2004 Cogent Europe acquisition totaled approximately $5.5 million for the three months ended September 30, 2004.  Approximately $0.5 million of the Cogent Europe net service revenue during the period was derived from services

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rendered to LambdaNet Communications Deutschland AG (LambdaNet Germany). LambdaNet Germany was majority-owned by LNG Holdings until April 2004 when it was sold to an unrelated third party. We are in the process of renegotiating LambdaNet Germany’s service contracts and may lose some or all of this revenue. Net service revenue from our August 12, 2004 UFO acquisition totaled approximately $0.6 million for the three months ended September 30, 2004.  Net service revenue from our September 15, 2004, Global Access acquisition totaled approximately $0.2 million for the three months ended September 30, 2004.  Net service revenue from the acquired PSINet and FNSI legacy customer contracts totaled approximately $4.4 million for the three months ended September 30, 2003 and $2.0 million for the three months ended September 30, 2004.

Network Operations Expenses.  Our network operations expenses, excluding the amortization of deferred compensation, increased 19.1% from $12.0 million for the three months ended September 30, 2003 to $14.3 million for the three months ended September 30, 2004. The increase is primarily attributable to $3.5 million of costs incurred in connection with the operation of our European network after our Cogent Europe and Global Access acquisitions. The increase was partly offset by a $0.7 million reduction in the cost of network operations due to the settlement of a vendor dispute for a payment less than the amount recorded as accounts payable and the reduction of circuit costs associated with the reduction in the number of off-net PSINet and FNSI customers. For the three-month period ended September 30, 2004, Cogent Europe recorded $0.2 million of network usage costs from LambdaNet Germany. We are in the process of renegotiating the LambdaNet Germany service contracts. Our total cost of network operations for the three months ended September 30, 2003 and September 30, 2004 includes approximately $0.1 million and $0.2 million, respectively, of amortization of deferred compensation expense classified as cost of network operations.

Selling, General, and Administrative Expenses.  Our SG&A expenses, excluding the amortization of deferred compensation, increased 44.0% from $6.3 million for the three months ended September 30, 2003 to $9.1 million for the three months ended September 30, 2004. SG&A expenses increased primarily from the $2.8 million of SG&A expenses associated with our operations in Europe after our Cogent Europe and Global Access acquisitions and an increase in professional fees, partially offset by a $0.6 million reduction of expense for the allowance for doubtful accounts. Our total SG&A expenses for the three months ended September 30, 2003 and September 30, 2004 includes $0.7 million and $2.8 million, respectively, of amortization of deferred compensation expense.

Amortization of Deferred Compensation.  The total amortization of deferred compensation increased from $0.8 million for the three months ended September 30, 2003 to $3.0 million for the three months ending September 30, 2004. The increase is attributed to the amortization of deferred compensation related to restricted shares of Series H preferred stock granted to our employees primarily in October 2003 under our 2003 Incentive Award Plan and the amortization of $4.7 million of deferred compensation related to options for shares of Series H preferred stock granted in the third quarter of 2004 with an exercise price below the trading price of our common stock on grant date.  We amortize deferred compensation costs on a straight-line basis over the service period.

Restructuring charge.  In July 2004, we abandoned the Paris office obtained in the Cogent Europe acquisition and located these operations in another Cogent Europe facility.  We recorded a restructuring charge of approximately $1.4 million related to the discounted remaining $3.4 million commitment on the lease less our estimated sub-lease income.

Withdrawal of Public Offering.  In 2004, we filed a registration statement to sell shares of common stock in a public offering.  In October 2004, we withdrew the public offering and expensed the associated deferred costs of approximately $0.8 million in the three months ended September 30, 2004.

Depreciation and Amortization Expenses.  Our depreciation and amortization expense increased 11.7% from $12.0 million for the three months ended September 30, 2003 to $13.4 million for the three months ended September 30, 2004. Of this increase, $1.4 million resulted from depreciation and amortization of assets acquired in our Cogent Europe acquisition.  We begin to depreciate our capital assets once the related assets are placed in service.

Gain – Cisco credit facility restructuring.  The restructuring of our Cisco credit facility on July 31, 2003 resulted in a gain of approximately $215.4 million.  The gain resulting from the retirement of the amounts outstanding under the credit facility was determined as follows (in thousands):

Cash paid	$	20,000
Issuance of Series F Preferred Stock	11,000
Amended and Restated Cisco Note, principal plus future interest	17,842
Transaction costs	1,167
Total Consideration	$	50,009
Amount outstanding under Facility	(262,812		)
Interest accrued under the Facility	(6,303		)
Book value of cancelled warrants	(8,248		)
Book value of unamortized Facility loan costs	11,922
Gain from Exchange Agreement	(215,432		)

Net Income (Loss).  As a result of the foregoing, net income was $196.5 million for the three months ended September 30, 2003 as compared to a net loss of $23.0 million for the three months ended September 30, 2004.

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Nine Months Ended September 30, 2003 Compared to the Nine Months Ended September 30, 2004

The following summary table presents a comparison of our results of operations for the nine months ended September 30, 2003 and 2004 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

	Nine Months Ended September 30,					Percent
	2003		2004			Change
	(unaudited)
	(in thousands)
Net service revenue	$	44,899	$	63,068		40.5	%
Network operations expenses (1)	34,927		43,311			24.0	%
Selling, general, and administrative expenses (2)	20,014		28,208			40.9	%
Restructuring charge	—		1,396			—
Terminated public offering costs	—		779			—
Depreciation and amortization expenses	35,006		41,654			19.0	%
Gain – Cisco troubled debt restructuring	215,432		—			—
Gain – Allied Riser note exchange	24,802		—			—
Net income (loss)	175,580		(69,436		)	(139.5	)%

(1)Excludes amortization of deferred compensation of $161 and $633 in the nine months ended September 30, 2003 and 2004, respectively, which, if included would have resulted in a period-to-period change of 25.2%.

(2)Excludes amortization of deferred compensation of $2,141 and $8,404 in the nine months ended September 30, 2003 and 2004, respectively, which, if included would have resulted in a period-to-period change of 65.3%.

Net Service Revenue.  Our net service revenue increased 40.5% from $44.9 million for the nine months ended September 30, 2003 to $63.1 million for the nine months ending September 30, 2004. The $18.2 million increase in net service revenue is primarily attributable to $16.9 million of net service revenue from the customers acquired in the Cogent Europe, UFO and Global Access acquisitions and a $10.5 million increase in organic revenue.  We define organic revenue as revenue derived from contracts obtained under our sales efforts.  These increases were partially offset by a $8.6 million decrease in revenue from the customers acquired in the PSINet and FNSI acquisitions.  For the nine months ended September 30, 2003 and 2004, on-net, off-net and non-core services represented 53.8%, 26.9% and 19.3% and 65.7%, 22.7% and 11.6% of our net service revenues, respectively.

Our net service revenue related to our acquisitions is included in our statements of operations from the acquisition dates.  Net service revenue from our January 5, 2004 Cogent Europe acquisition totaled approximately $16.1 million for the nine months ended September 30, 2004.  Approximately $1.6 million of the Cogent Europe net service revenue during the period was derived from services rendered to LambdaNet Communications Deutschland AG (LambdaNet Germany). LambdaNet Germany was majority-owned by LNG Holdings until April 2004 when it was sold to an unrelated third party. We are in the process of renegotiating LambdaNet Germany’s service contracts and may lose some or all of this revenue. Net service revenue from our August 12, 2004 UFO acquisition totaled approximately $0.6 million for the nine months ended September 30, 2004.  Net service revenue from our September 15, 2004, Global Access acquisition totaled approximately $0.2 million for the nine months ended September 30, 2004.  Net service revenue from the acquired PSINet and FNSI legacy customer contracts totaled approximately $15.9 million for the nine months ended September 30, 2003 and $7.3 million for the nine months ended September 30, 2004.

Network Operations Expenses.  Our network operations expenses, excluding the amortization of deferred compensation, increased 24.0% from $35.0 million for the nine months ended September 30, 2003 to $43.3 million for the nine months ended September 30, 2004. The increase is primarily attributable to $11.0 million of costs incurred in connection with the operation of our European network after our Cogent Europe acquisition. The increase was partly offset by a $0.7 million reduction in the cost of network operations due to the settlement of a vendor dispute for a payment less than the amount recorded as accounts payable and a reduction in circuit costs associated with the reduction in the number of off-net PSINet and FNSI customers. For the nine month period ended September 30, 2004, Cogent Europe recorded $1.6 million of network usage costs from LambdaNet Germany. We are in the process of renegotiating the LambdaNet Germany service contracts. Our total cost of network operations for the nine months ended September 30, 2003 and September 30, 2004 includes approximately $0.2 million and $0.6 million, respectively, of amortization of deferred compensation expense classified as cost of network operations.

Selling, General, and Administrative Expenses.  Our SG&A expenses, excluding the amortization of deferred compensation, increased 40.9% from $20.0 million for the nine months ended September 30, 2003 to $28.2 million for the nine months ended September 30, 2004. SG&A expenses increased primarily from the $8.0 million of SG&A expenses associated with our operations in Europe after our Cogent Europe and Global Access acquisitions. Our SG&A expenses for the nine month period ended September 30, 2004 includes a $0.6 million expense related to the settlement of a dispute with a landlord over a lease acquired in the Allied Riser merger.  Our total SG&A expenses for the nine months ended September 30, 2003 and September 30, 2004 include $2.1 million and $8.4 million, respectively, of amortization of deferred compensation.

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Amortization of Deferred Compensation.  The total amortization of deferred compensation increased from $2.3 million for the nine months ended September 30, 2003 to $9.0 million for the nine months ending September 30, 2004. The increase is attributed to the amortization of deferred compensation related to restricted shares of Series H preferred stock granted to our employees primarily in October 2003 under our 2003 Incentive Award Plan and the amortization of $4.7 million of deferred compensation related to options for shares of Series H preferred stock granted in the third quarter of 2004 with an exercise price below the trading price of our common stock on grant date.  We amortize deferred compensation costs on a straight-line basis over the service period.

Restructuring charge.  In July 2004, we abandoned the Paris office obtained in the Cogent Europe acquisition and located these operations in another Cogent Europe facility.  We recorded a restructuring charge of approximately $1.4 million related to the discounted remaining $3.4 million commitment on the lease less our estimated sub-lease income.

Withdrawal of Public Offering.  In 2004, we filed a registration statement to sell shares of common stock in a public offering.  In October 2004, we withdrew the public offering and expensed the associated deferred costs of approximately $0.8 million in the three months ended September 30, 2004.

Depreciation and Amortization Expenses.  Our depreciation and amortization expense increased 19.0% from $35.0 million for the nine months ended September 30, 2003 to $41.7 million for the nine months ended September 30, 2004. Of this increase, $4.8 million resulted from depreciation and amortization of assets acquired in our Cogent Europe acquisition.  Additionally, we had more capital equipment and IRUs in service in 2004 than in the same period in 2003. We begin to depreciate our capital assets once the related assets are placed in service.

Gain – Cisco credit facility restructuring.  The restructuring of our Cisco credit facility on July 31, 2003 resulted in a gain of approximately $215.4 million.  The gain resulting from the retirement of the amounts outstanding under the credit facility was determined as follows (in thousands):

Cash paid	$	20,000
Issuance of Series F Preferred Stock	11,000
Amended and Restated Cisco Note, principal plus future interest	17,842
Transaction costs	1,167
Total Consideration	$	50,009
Amount outstanding under Facility	(262,812		)
Interest accrued under the Facility	(6,303		)
Book value of cancelled warrants	(8,248		)
Book value of unamortized Facility loan costs	11,922
Gain from Exchange Agreement	(215,432		)

Gain on Allied Riser Note Exchange.  In connection with the exchange and settlement related to our 7 ¹/₂% Convertible Subordinated Notes Due 2007 we recorded a gain of approximately $24.8 million during the nine months ended September 30, 2003. This gain results from the difference between the $36.5 million net book value of the notes ($106.7 million face value less the related unamortized discount of $70.2 million) and $2.0 million of accrued interest, the cash consideration of $5.0 million and the $8.5 million estimated fair market value for the Series D and Series E preferred stock issued to the noteholders less approximately $0.2 million of transaction costs. The estimated fair market value for the Series D and Series E preferred stock was determined by using the price per share of our Series C preferred stock, which represented our most recent equity transaction for cash.

Net Income (Loss).  As a result of the foregoing, net income was $175.6 million for the nine months ended September 30, 2003 as compared to a net loss of $69.4 million for the nine months ended September 30, 2004.

Liquidity and Capital Resources

In assessing our liquidity, our management reviews and analyzes our current cash on-hand, our accounts receivable, foreign exchange rates, capital expenditure commitments, and our required debt payments and other obligations.

Cash Flows

The following table sets forth our consolidated cash flows for the nine months ended September 30, 2003 and 2004.

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	Nine Months Ended September 30,
	2003				2004
	(unaudited)
Net cash used in operating activities	$		(23,479	)	$	(21,865	)
Net cash (used in) provided by investing activities	(26,784			)	27,286
Net cash provided by (used in) financing activities	21,455				(4,424		)
Effect of exchange rates on cash	525				(76		)
Net (decrease) increase in cash and cash equivalents during period	$	(28,283		)	$	921

Net Cash Used in Operating Activities.  Net cash used in operating activities was $23.5 million for the nine months ended September 30, 2003 compared to $21.9 million for the same period during 2004. Our primary sources of cash are receipts from our customers who are billed on a monthly basis for our services.  Our primary uses of cash are payments made to our vendors and employees.  Our net income was $175.6 million for the nine months ended September 30, 2003 compared to a net loss of $69.4 million for the nine months ended September 30, 2004. Net income for the nine months ended September 30, 2003 included a gain of $24.8 million related our settlement with certain Allied Riser note holders and a gain of $215.4 million related to the restructuring of our Cisco credit facility. Depreciation and amortization, including the amortization of deferred compensation and the debt discount on the Allied Riser notes was $40.3 million for the nine months ended September 30, 2003, and $51.4 million for the nine months ended September 30, 2004. Changes in assets and liabilities resulted in an increase to operating cash of $0.9 million for the nine months ended September 30, 2003 and a decrease in operating cash of $3.1 million for the nine months ended September 30, 2004.

Net Cash (Used in) Provided By Investing Activities.  Net cash used in investing activities was $26.8 million for the nine months ended September 30, 2003 compared to net cash provided by investing activities of $27.3 million for the same period during 2004. Our primary sources of cash provided by investing activities during the first nine months of 2004 was cash acquired of $4.7 million, $19.4 million and $1.9 million from our acquisition of Cogent Europe in January 2004, our merger with Symposium Omega in March 2004, and our merger with UFO Group in September 2004, respectively. Our purchases of property and equipment were $21.1 million for the nine months ended September 30, 2003 and $6.3 million for the nine months ended September 30, 2004. Our purchases of short-term investments were $5.0 million for the nine months ended September 30, 2003 and maturities of short-term investments were $3.5 million for the nine months ended September 30, 2004. Net cash provided by investing activities for the nine months ended September 30, 2004 also included proceeds from the sale of warrants for $3.4 million.

Net Cash Provided by (Used in) Financing Activities.  Financing activities provided net cash of $21.5 million for the nine months ended September 30, 2003 and used net cash of $4.4 million for the nine months ended September 30, 2004. Net cash provided by financing activities during the first nine months of 2003 resulted principally from proceeds from the issuance of Series G preferred stock of $40.6 million and proceeds from borrowings under the previous Cisco credit facility of $8.0 million offset by a $20.0 million payment for the restructuring of our Cisco credit facility, a $5.0 million payment related to the Allied Riser note exchange and principal payments under our capital leases of $2.2 million. Net cash used in financing activities during the first nine months of 2004 were from a $1.2 million payment to LNG Holdings and $3.2 million for principal payments under our capital leases.

Cash Position and Indebtedness

During the year ended December 31, 2003, the Allied Riser note exchange and related agreement and the Cisco recapitalization in particular had a significant impact on our liquidity and our level of indebtedness. At September 30, 2004, our total cash and cash equivalents were $9.4 million and our total indebtedness was $131.4 million. Total indebtedness includes $108.8 million of capital lease obligations for dark fiber primarily under 15-25 year indefeasable rights of use (IRU’s). Of this $108.8 million, approximately $5.8 million is considered a current liability.

In October 2004, we merged with Cogent Potomac, Inc. (Potomac).  We issued 3,700 shares of our newly authorized Series M preferred stock in exchange for all of the outstanding common shares of Potomac.  Prior to the merger, Potomac had acquired the majority of the assets of Aleron Broadband Services LLC (Aleron).  The acquired assets included net cash of approximately $18.5 million, all of Aleron’s customer contracts, customer accounts receivable and certain network equipment.  Assumed liabilities include certain vendor relationships, accounts payable, and accrued liabilities.

Amended and Restated Cisco Note

In connection with the Cisco recapitalization, we amended our credit agreement with Cisco Capital. The Amended and Restated Credit Agreement became effective at the closing of the recapitalization on July 31, 2003. Our remaining $17.0 million of indebtedness to Cisco is evidenced by a promissory note, which we refer to as the Amended and Restated Cisco Note. The Amended and Restated Cisco Note eliminated the covenants related to our financial performance. Cisco Capital retained its senior security interest in substantially all of our assets, except that we will be permitted to subordinate Cisco Capital’s security interest in our accounts receivable. The Amended and Restated Cisco Note is to be repaid in three installments. No interest is accrued or payable on the Amended and Restated Cisco Note for the first 30 months unless we default under the terms of the Amended and Restated Cisco Note. Principal and interest is paid as follows: a $7.0 million principal payment is due on February 1, 2006, a $5.0 million principal payment plus interest accrued is due on February 1, 2007, and a final principal payment of $5.0 million plus interest is due on February 1, 2008. When the indebtedness under the Amended and Restated Cisco Note begins to accrue interest, interest accrues at the 90-day LIBOR rate plus 4.5%.

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The Amended and Restated Cisco Note is subject to mandatory prepayment in full upon the occurrence of the closing of any change in control of us, our completion of any equity financing or receipt of loan proceeds above $30.0 million, our achievement of four consecutive quarters of operating cash flow of at least $5.0 million, or our merger resulting in a combined entity with an equity value greater than $100.0 million, as each of these events is defined in the agreement. Our indebtedness under the Amended and Restated Cisco Note is subject to partial mandatory prepayment in an amount equal to the lesser of $2.0 million or the amount raised if we raise less than $30.0 million in a future equity financing.

The Cisco recapitalization was considered a troubled debt restructuring under SFAS No. 15, Accounting by Debtors and Creditors of Troubled Debt Restructurings. Under SFAS No. 15, the Amended and Restated Cisco Note was recorded at its principal amount plus the estimated future interest payments.

Future Capital Requirements

Our future capital requirements will depend on a number of factors, including our success in increasing the number of customers using our services, customer retention, regulatory changes, competition, technological developments, potential merger and acquisition activity and the economy. We believe that if we are able to increase the number of customers using our services as planned, our current cash position is sufficient to fund our operations until we generate more cash than we consume. If we are unable to achieve revenue growth or if we have significant unplanned costs or cash requirements, we may need to raise additional funds through the issuance of debt or equity. We cannot assure you that such financing will be available on terms acceptable to us or our stockholders, or at all. Insufficient funds may require us to delay or scale back the number of buildings that we serve or require us to restructure our business. If additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result.

In March 2004, we identified network assets in Germany formerly operated as part of the Carrier 1 network as an attractive acquisition opportunity. Pursuant to the November commitment, the investors funded a newly-formed Delaware corporation with $19.5 million and that corporation, through a German subsidiary, acquired the rights to the Carrier 1 assets in exchange for 2.3 million euros. Through September 30, 2004 we paid 0.2 million euros and paid 1.3 million euros in October 2004 of the 2.3 million euro purchase price. We anticipate paying the remaining 0.8 million euros in November 2004.

We may elect to purchase or otherwise retire the remaining $10.2 million face value of Allied Riser notes with cash, stock or assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries where we believe that market conditions are favorable to do so. Such purchases may have a material effect on our liquidity, financial condition and results of operations.

Recent Accounting Pronouncements

In March 2004, the FASB ratified the consensuses reached by Emerging Issues Task Force in Issue No. 03-06, “Participating Securities and the Two-Class Method under FASB Statement No. 128” (“EITF 03-06”). EITF 03-06 clarifies the definitional issues surrounding participating securities and requires companies to restate prior earnings per share amounts for comparative purposes upon adoption. The Company has adopted the provisions of EITF 03-06 in the second quarter of 2004, and the Company has restated its previously disclosed basic earnings per share amounts to include its participating securities in basic earnings per share when dilutive. As a result, basic income per share available to common shareholders decreased from $13.59 to $0.63 for the quarter ended September 30, 2003, and from $20.98 to $1.43 for the nine months ended September 30, 2003.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

All of our financial instruments that are sensitive to market risk are entered into for purposes other than trading. Our primary market risk exposure is related to our marketable securities. We place our marketable securities investments in instruments that meet high credit quality standards as specified in our investment policy guidelines. Marketable securities were approximately $9.4 million at September 30, 2004, $8.8 million of which are considered cash equivalents and mature in 90 days or less and $0.6 million are short-term investments that are restricted for collateral against letters of credit. We also own commercial paper investments and certificates

of deposit totaling $1.6 million that are classified as other long-term assets. These investments are also restricted for collateral against letters of credit.

If market rates were to increase immediately and uniformly by 10% from the level at September 30, 2004, the change to our interest sensitive assets and liabilities would have an immaterial effect on our financial position, results of operations and cash flows over the next fiscal year. A 10% increase in the weighted-average interest rate for the nine months ended September 30, 2004 would have increased our interest expense for the period by approximately $0.9 million.

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ITEM 4. CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), an evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and our principal financial officer, concluded that the design and operation of these disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are involved in legal proceedings in the normal course of our business that we do not expect to have a material impact on our operations or results of operations.  The larger of these proceedings are discussed in Note 8 of our interim condensed consolidated financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The issuance of our Series K, and Series L preferred stock and the amendment of our Articles of Incorporation to increase the number of authorized shares of stock was approved by the holders of our securities by written action on August 2, 2004 and September 8, 2004, respectively.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)Exhibits

Exhibit Number	Description
3.1	Corrected Certificate of Designations relating to the Company’s Series K Participating Convertible Preferred Stock, par value $.001 per share, filed as Exhibit 3.1 to the company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2004.
3.2	Corrected Certificate of Designations relating to the Company’s Series L Participating Convertible Preferred Stock, par value $.001 per share, filed as Appendix C to the company’s information statement on form DEF 14C filed with the Securities and Exchange Commission on October 6, 2004.
10.1	Fourth Amended and Restated Stockholders Agreement of Cogent Communications Group, Inc., dated as of August 12, 2004, filed as Exhibit 10.1 to the company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2004.
10.2	Sixth Amended and Restated Registration Rights Agreement of Cogent Communications Group, Inc., dated September 15, 2004, filed as Exhibit 10.2 to the company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2004.
10.3	Sixth Amended and Restated Registration Rights Agreement of Cogent Communications Group, Inc., dated September 15, 2004, filed herewith.
31.1	Certification of Chief Executive Officer (filed herewith)
31.2	Certification of Chief Financial Officer (filed herewith)
32.1	Certification of Chief Executive Officer (filed herewith)
32.2	Certification of Chief Financial Officer (filed herewith)

(b)Reports on Form 8-K

During the three months ended September 30, 2004, the Company filed one report on Form 8-K containing the following information and filed on the following date:

Date	Description
September 17, 2004	Current report on Form 8-K filed September 17, 2004 announcing the private placement of 185.4 shares of its Series L Participating Convertible Preferred Stock to Global Access Telecommunications, Inc. (GA) in connection with the acquisition of substantially all of the assets of GA by one of our subsidiaries.

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SIGNATURES

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

Date: November 15, 2004	COGENT COMMUNICATIONS GROUP, INC.
	By:	/s/ David Schaeffer
		Name: David Schaeffer
		Title: Chairman of the Board and Chief Executive Officer
Date: November 15, 2004	By:	/s/ Thaddeus G. Weed
		Name: Thaddeus G. Weed
		Title: Chief Financial Officer (Principal Accounting Officer)

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Exhibit Index

Exhibit Number	Description
3.1	Corrected Certificate of Designations relating to the Company’s Series K Participating Convertible Preferred Stock, par value $.001 per share, filed as Exhibit 3.1 to the company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2004.
3.2	Corrected Certificate of Designations relating to the Company’s Series L Participating Convertible Preferred Stock, par value $.001 per share, filed as Appendix C to the company’s information statement on form DEF 14C filed with the Securities and Exchange Commission on October 6, 2004.
10.1	Fourth Amended and Restated Stockholders Agreement of Cogent Communications Group, Inc., dated as of August 12, 2004, filed as Exhibit 10.1 to the company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2004.
10.2	Sixth Amended and Restated Registration Rights Agreement of Cogent Communications Group, Inc., dated September 15, 2004, filed as Exhibit 10.2 to the company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2004.
10.3	Sixth Amended and Restated Registration Rights Agreement of Cogent Communications Group, Inc., dated September 15, 2004, filed herewith.
31.1	Certification of Chief Executive Officer (filed herewith)
31.2	Certification of Chief Financial Officer (filed herewith)
32.1	Certification of Chief Executive Officer (filed herewith)
32.2	Certification of Chief Financial Officer (filed herewith)

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EX-10.3

Exhibit 10.3

COGENT COMMUNICATIONS GROUP, INC.

SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT

September 15, 2004

To each of the several holders of Series F Preferred Stock (the “Series F Purchasers”), each sub-series of Series G Preferred Stock (collectively, the “Series G Purchasers”), Series I Preferred Stock (the “Series I Purchasers”), Series J Preferred Stock (the “Series J Purchasers”), Series K Preferred Stock (the “Series K Purchasers”), and Series L Preferred Stock (the “Series L Purchasers”) collectively, the Series F, G, I, J, K, and L Purchasers shall be known as the “Purchasers”):

Dear Sirs:

This will confirm that the Company covenants and agrees with each of you as follows:

1.Certain Definitions.  As used in this Agreement, the following terms shall have the following respective meanings:

“Commission” shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.

“Common Stock” shall mean the Common Stock, par value $.001 per share, of the Company, as constituted as of the date of this Agreement.

“Company” shall mean Cogent Communications Group, Inc.

“Conversion Shares” shall mean shares of Common Stock issued or issuable upon conversion of the Preferred Stock, and any shares of capital stock received in respect thereof.

“Exchange Act” shall mean the Securities Exchange Act of 1934 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Preferred Stock” shall mean the Series F Preferred Stock, the Series G Preferred Stock, the Series I Preferred Stock, the Series J Preferred Stock and the Series K Preferred Stock.

“Registration Expenses” shall mean the expenses so described in Section 8.

“Restricted Stock” shall mean (i) the Conversion Shares, excluding Conversion Shares which have been (a) registered under the Securities Act pursuant to an

effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them or (b) publicly sold pursuant to Rule 144 under the Securities Act, and (ii) any shares of Common Stock issued or distributed in respect of the securities described in clause (i).

“Securities Act” shall mean the Securities Act of 1933 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Selling Expenses” shall mean the expenses so described in Section 8.

“Series F Preferred Stock” shall mean the Series F Participating Convertible Preferred Stock, par value $.001 per share, of the Company, constituted as of July 31, 2003.

“Series G Preferred Stock” shall mean the Series G Participating Convertible Preferred Stock of the Company, constituted as of July 31, 2003.

“Series I Preferred Stock” shall mean the Series I Participating Convertible Preferred Stock of the Company, constituted as of January 5, 2004.

“Series J Preferred Stock” shall mean the Series J Participating Convertible Preferred Stock of the Company, constituted as of March 30, 2004.

“Series K Preferred Stock” shall mean the Series K Participating Convertible Preferred Stock of the Company constituted as of August 12, 2004.

“Series L Preferred Stock” shall mean the Series L Participating Convertible Preferred Stock of the Company, issued as of the date of this Agreement.

2.Restrictive Legend.  Each certificate representing Preferred Stock, Conversion Shares or Restricted Stock shall, except as otherwise provided in this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend substantially in the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws.  These securities have been acquired for investment and not with a view to distribution or resale, and may not be sold mortgaged, pledged, hypothecated or otherwise transferred without an effective registration statement for such securities under the Securities Act of 1933 and applicable state securities laws, or the availability of an exemption from the registration provisions of the Securities Act of 1933 and applicable state securities laws.”

A certificate shall not bear such legend if in the opinion of counsel reasonably satisfactory to the Company the securities being sold thereby may be publicly sold without registration

under the Securities Act.

3.Notice of Proposed Transfer.  Prior to any proposed transfer of any Preferred Stock, Conversion Shares or Restricted Stock (other than under the circumstances described in Sections 4, 5 or 6), the holder thereof shall give written notice to the Company of its intention to effect such transfer.  Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the holder of such stock shall be entitled to transfer such stock in accordance with the terms of its notice; provided, however, that no such opinion of counsel shall be required for a transfer to one or more partners of the transferor (in the case of a transferor that is a partnership), to one or more members of the transferor (in the case of a transferor that is a limited liability company) or to an affiliated corporation (in the case of a transferor that is a corporation);  provided, further, however, that any transferee other than a partner, member or affiliate of the transferor shall execute and deliver to the Company a representation letter in form reasonably satisfactory to the Company’s counsel to the effect that the transferee is acquiring Restricted Stock for its own account, for investment purposes and without any view to distribution thereof.  Each certificate for Preferred Stock or Conversion Shares transferred as above provided shall bear the legend set forth in Section 2, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act.  The restrictions provided for in this Section 3 shall not apply to securities which are not required to bear the legend prescribed by Section 2 in accordance with the provisions of that Section.

4.Required Registration.

(a)Subject to Section 13(f) of this Agreement, at any time after the earlier of (i) July 31, 2006 and (ii) the date that is six (6) months after the first public offering after the date hereof of securities by the Company, holders of Restricted Stock constituting more than 50% of the total number of shares of Restricted Stock then outstanding may request the Company to register under the Securities Act all or any portion of the shares of Restricted Stock held by such requesting holder or holders for sale in the manner specified in such notice.  For purposes of this Section 4 and Sections 5, 6, 13(a) and 13(d), the term “Restricted Stock” shall be deemed to include the number of shares of Restricted Stock which would be issuable to a holder of Preferred Stock upon conversion of all shares of Preferred Stock held by such holder at such time; provided, however, that the only securities which the Company shall be required to register pursuant hereto shall be shares of Common Stock; provided, further, however, that, in any underwritten public offering contemplated by this Section 4 or Sections 5 and 6, the holders of Preferred Stock shall be entitled to sell such Preferred Stock to the underwriters for conversion and sale of the shares of Common Stock issued upon conversion thereof and holders of a majority of the Preferred Stock being so registered shall have the right to approve the managing underwriter(s) selected by the

Company in connection with such underwritten public offering.  Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to effect a registration (i) during the 180 day period commencing with the effective date of a registration statement filed by the Company covering the first firm commitment underwritten public offering after the date hereof or (ii) if the Company delivers notice to the holders of the Restricted Stock within thirty (30) days of any registration request of the Company’s intent to file a registration statement for an underwritten public offering within ninety (90) days.

(b)Following receipt of any notice under this Section 4, the Company shall immediately notify all holders of Restricted Stock and Preferred Stock from whom notice has not been received and such holders shall then be entitled within 30 days thereafter to request the Company to include in the requested registration all or any portion of their shares of Restricted Stock.  The Company shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition described in paragraph (a) above, the number of shares of Restricted Stock specified in such notice (and in all notices received by the Company from other holders within 30 days after the giving of such notice by the Company).  The Company shall be obligated to register Restricted Stock pursuant to this Section 4 on three occasions only; provided, however, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Restricted Stock specified in notices received as aforesaid for sale in accordance with the method of disposition specified by the requesting holders shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto.

(c)The Company (or at the option of the Company, the holders of Common Stock) shall be entitled to include in any registration statement referred to in this Section 4, for sale in accordance with the method of disposition specified by the requesting holders, shares of Common Stock to be sold by the Company or such other holders for its own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold.  Subject to Section 4(a) and except for registration statements on Form S-4, S-8 or any successor thereto, the Company will not file with the Commission any other registration statement with respect to its Common Stock, whether for its own account or that of other stockholders, from the date of receipt of a notice from requesting holders pursuant to this Section 4 until the completion of the period of distribution of the registration contemplated thereby.

(d)If, in the opinion of the managing underwriter, the inclusion of all of the Restricted Stock requested to be registered under this Section would adversely affect the marketing of such shares, the Company shall only include the number of shares that, in the reasonable opinion of such underwriter, can be sold without having an adverse effect on the marketing of such shares, to be allocated to each stockholder of the Company on a pro rata basis based on the total number of shares held by such holder and requested to be included in the registration; provided, however, that the number of shares of Restricted Stock to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first excluded from the underwriting and registration.

5.Incidental Registration.  Subject to Section 13(f) of this Agreement, if the Company at any time (other than pursuant to Section 4 or Section 6) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Restricted Stock for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Stock of its intention so to do.  Upon the written request of any such holder, received by the Company within 30 days after the giving of any such notice by the Company, to register any of its Restricted Stock, the Company will use its best efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Restricted Stock so registered.  In the event that any registration pursuant to this Section 5 shall be, in whole or in part, an underwritten public offering of Common Stock, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the holders of Restricted Stock invoking the rights under this Section 5 on a pro rata basis based on the total number of shares of Restricted Stock held by such holders; and third, to any stockholder of the Company (other than such holders) on a pro rata basis.  No such reduction shall reduce the amount of securities of the selling holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration.  In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by holders of Restricted Stock without the written consent of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the Restricted Stock proposed to be sold in the offering.  If any such holder disapproves of the terms of any such underwriting, such holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement.  Any shares of Restricted Stock excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.  For any holder which is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing person shall be deemed to be a single holder, and any pro rata reduction with respect to such holder shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such holder, as defined in this sentence.  Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 5 without thereby incurring any liability to the holders of Restricted Stock.

6.Registration on Form S-3.  Subject to Section 13(f) of this Agreement, if at any time (i) a holder or holders of Restricted Stock then outstanding request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the shares of Restricted Stock held by such requesting holder or holders, and (ii) the Company is a registrant entitled to use Form S-3 or any successor

thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto for public sale in accordance with the method of disposition specified in such notice, the number of shares of Restricted Stock specified in such notice.  Whenever the Company is required by this Section 6 to use its best efforts to effect the registration of Restricted Stock, each of the procedures and requirements of Section 4 (including but not limited to the requirement that the Company notify all holders of Restricted Stock from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration; provided, however, that there shall be no limitation on the number of registrations on Form S-3 which may be requested and obtained under this Section 6 and registrations effected pursuant to this Section 6 shall not be counted as demands for registration or registrations effected pursuant to Sections 4 or 5, respectively.

(b)Notwithstanding anything to the contrary set forth in this Agreement, the Company’s obligation under this Agreement to register Restricted Stock under the Securities Act on registration statements (“Registration Statements”) may, upon the reasonable determination of the Board of Directors made not more than twice in the aggregate (and not more than once with respect to a Registration Statement on Form S-1 and not more than once with respect to a Registration Statement on Form S-3 and including any delay pursuant to the last sentence of Section 4(a)) during any 12-month period, be suspended in the event and during such period as unforeseen circumstances (including without limitation (i) an underwritten primary offering by the Company (which includes no secondary offering) if the Company is advised in writing by its underwriters that the registration of the Restricted Stock would have a material adverse effect on the Company’s offering, or (ii) pending negotiations relating to, or consummation of, a transaction or the occurrence of an event which would require additional disclosure of material information by the Company in Registration Statements or such other filings, as to which the Company has a bona fide business purpose for preserving confidentiality or which renders the Company unable to comply with the Commission’s requirements) exist (such unforeseen circumstances being hereinafter referred to as a “Suspension Event”) which would make it impractical or unadvisable for the Company to file the Registration Statements or such other filings or to cause such to become effective.  Such suspension shall continue only for so long as such event is continuing but in no event for a period longer than (i) one hundred and twenty (120) days, in the case of a Registration Statement on Form S-1 (or any successor thereto) or (ii) ninety (90) days, in the case of a Registration Statement on Form S-3 (or any successor thereto).  The Company shall notify the Purchasers of the existence and nature of any Suspension Event.

7.Registration Procedures.  If and whenever the Company is required by the provisions of Sections 4, 5 or 6 to use its best efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, as expeditiously as possible:

(a)prepare and file with the Commission a registration statement (which, in the case of an underwritten public offering pursuant to Section 4, shall be on Form S-1 or other form of general applicability satisfactory to the managing underwriter selected as therein provided) with respect to such securities and use its best efforts to cause such

registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided);

(b)prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers’ intended method of disposition set forth in such registration statement for such period;

(c)furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and each such amendment and supplement thereto (in each case including all exhibits) and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement;

(d)use its best efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering, the managing underwriter reasonably shall request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

(e)use its best efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;

(f)immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare and furnish to such seller a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Restricted Stock, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(g)if the offering is underwritten and at the request of any seller of Restricted Stock, use its best efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration:  (i) an opinion dated such date of

counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, to such effect as reasonably may be requested by counsel for the underwriters, and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request;

(h)make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, reasonable access to all financial and other records, pertinent corporate documents and properties of the Company, as such parties may reasonably request, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(i)cooperate with the selling holders of Restricted Stock and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Restricted Stock to be sold, such certificates to be in such denominations and registered in such names as such holders or the managing underwriters may request at least two business days prior to any sale of Restricted Stock; and

(j)permit any holder of Restricted Stock which holder, in the sole and exclusive judgment, exercised in good faith, of such holder, might be deemed to be a controlling person of the Company, to participate in good faith in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included and to permit any other holder of Restricted Stock participating in the registration to review such registration or comparable statement during its preparation.

For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of distribution of Restricted Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Restricted Stock in any other registration shall be deemed to extend until the earlier of the sale of all Restricted Stock covered thereby and 180 days after the effective date thereof.

In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information requested by the Company with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws and to make the registration statement correct, accurate and complete in all respects with respect to such

sellers; provided, however, that this requirement shall not be deemed to limit any disclosure obligation arising out of any seller’s relationship to the Company if one of such seller’s agents or affiliates is an officer, director or control person of the Company.  In addition, the sellers shall, if requested by the Company, execute such other agreements, which are reasonably satisfactory to them and which shall contain such provisions as may be customary and reasonable in order to accomplish the registration of the Restricted Stock.

In connection with each registration pursuant to Sections 4, 5 or 6 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company’s size and investment stature.

8.Expenses.  All expenses incurred by the Company in complying with Sections 4, 5 and 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees and expenses of one counsel for the selling holders of Restricted Stock in connection with the registration of Restricted Stock, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of any insurance which might be obtained, but excluding any Selling Expenses, are called “Registration Expenses.”  All underwriting discounts and selling commissions applicable to the sale of Restricted Stock and the fees and expenses of more than one counsel for the selling holders of Restricted Stock in connection with the registration of Restricted Stock are called “Selling Expenses.”

The Company will pay all Registration Expenses incurred in connection with each of the first five Registration Statements filed pursuant to Sections 4, 5 or 6.  All Selling Expenses incurred in connection with each of the first five Registration Statements filed pursuant to Sections 4, 5 or 6, and all Selling Expenses and Registration Expenses incurred in connection with each Registration Statement filed pursuant to Sections 4, 5 or 6 thereafter, shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.

9.Indemnification.

(a)To the extent permitted by law, in the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, the Company will indemnify and hold harmless each holder of Restricted Stock, its partners, members, officers and directors, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder, officer, director, underwriter or controlling person may become subject under the Securities Act, Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or

actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus (but only to the extent not corrected in the final prospectus) or final prospectus contained therein, or any amendment or supplement thereof, (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Restricted Stock under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”), (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) any violation by the Company or its agents of any rule or regulation promulgated under the Securities Act or Exchange Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, or (v) any failure to register or qualify the Restricted Stock in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter chosen by the Company being attributed to the Company) will undertake such registration or qualification on the seller’s behalf (provided that in such instance the Company shall not be so liable if it has undertaken its best efforts to so register or qualify the Restricted Stock) and will reimburse each such holder, and such partner, member, officer and director, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement, prospectus or Blue Sky Application.

(b)To the extent permitted by law, in the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each other holder of Restricted Stock, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, other seller, underwriter or controlling person may become subject under the Securities Act, Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus (but only to the extent not corrected in the final prospectus) or final prospectus contained therein, or any amendment or supplement thereof, or any Blue Sky Application or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements

therein not misleading, and will reimburse the Company and each such officer, director, other seller, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement, prospectus or Blue Sky Application; and provided, further, however, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the net proceeds received by such seller from the sale of Restricted Stock covered by such registration statement.

(c)Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 9 and shall only relieve it from any liability which it may have to such indemnified party under this Section 9 if and to the extent the indemnifying party is prejudiced by such omission.  In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 9 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party, in the defense of any such claim or litigation shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, and no indemnified party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld.

(d)If the indemnification provided for in this Section 9 is held by a court

of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the violation that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in no event shall any contribution by a holder of Restricted Stock hereunder, when combined with amounts paid or payable pursuant to Section 9(b), exceed the net proceeds from the offering received by such holder.

(e)The obligations of the Company and holders of Restricted Stock under this Section 9 shall survive completion of any offering of Restricted Stock by a registration statement and the termination of this Agreement.

10.Changes in Common Stock, Series F Preferred Stock, Series G Preferred Stock, Series I Preferred Stock, Series J Preferred Stock, Series K Preferred Stock, or Series L Preferred Stock.  If, and as often as, there is any change in the Common Stock, Series F Preferred Stock, Series G Preferred Stock, Series I Preferred Stock, Series J Preferred Stock, Series K Preferred Stock, or Series L Preferred Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock, Series F Preferred Stock, Series G Preferred Stock, Series I Preferred Stock, Series J Preferred Stock, Series K Preferred Stock, or Series L Preferred Stock as so changed.

11.Rule 144 Reporting.  With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to:

(a)make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

(b)use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration.

12.Representations and Warranties of the Company.  The Company represents and warrants to you as follows:

(a)The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the articles of organization or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.

(b)This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

13.Miscellaneous.

(a)All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Preferred Stock or Restricted Stock), whether so expressed or not; provided, however, that registration rights conferred herein on the holders of Preferred Stock or Restricted Stock shall only inure to the benefit of a transferee of Preferred Stock or Restricted Stock if (i) there is transferred to such transferee at least twenty five percent (25%) of the shares of Restricted Stock (appropriately adjusted for any subdivision or combination) originally issued to a Purchaser, (ii) such transferee is a member, former member, partner, retired partner, family member or trust for the benefit of any individual holder, stockholder or affiliate of a party hereto or (iii) such transferee acquires at least 2,500,000 shares (appropriately adjusted for any subdivision or combination) of Preferred Stock on an as converted to shares of Common Stock basis; provided, further, however, that the Company is given written notice thereof.

(b)All notices, requests, consents and other communications hereunder shall be in writing and shall be mailed by certified or registered mail, return receipt requested, postage prepaid, or by recognized overnight delivery service of international reputation or, in the case of non-U.S. residents, telexed or sent by recognized overnight delivery service of international reputation or, addressed as follows:

If to the Company, to:

Cogent Communications Group, Inc.

1015 31st Street, N.W.

Washington, DC 20007,

Attention:  Robert Beury

with copies to:

Latham & Watkins, LLP

555 Eleventh St., N.W., Suite 1000

Washington, D.C. 20004

Attention: David McPherson

If to any other party hereto, to their respective addresses set forth on Schedule I hereto;

If to any subsequent holder of Preferred Stock or Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder;

or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Preferred Stock or Restricted Stock) or to the holders of Preferred Stock or Restricted Stock (in the case of the Company) in accordance with the provisions of this paragraph.

(c)This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of New York, without reference to its conflict of laws provisions.

(d)This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the holders of at least two-thirds of the outstanding shares of Restricted Stock.  Notwithstanding the foregoing, no such amendment or modification shall be effective if and to the extent that such amendment or modification either (a) creates any additional affirmative obligations to be complied with by any or all of the Purchasers or (b) grants to any one or more Purchasers any rights more favorable than any rights granted to all other Purchasers or otherwise treats any one or more Purchasers differently than all other Purchasers.

(e)This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(f) If requested in writing by the underwriters for the first underwritten public offering of securities of the Company after the date hereof, each holder of Restricted Stock who is a party to this Agreement shall agree not to sell publicly any shares of

Restricted Stock or any other shares of Common Stock (other than shares of Restricted Stock or other shares of Common Stock being registered in such offering or any shares purchased in the open market after the Company’s public offering), without the consent of such underwriters, for a period of not more than 180 days following the consummation of such public offering; provided, however, that all holders of at least one percent (1%) of the then outstanding Common Stock and all officers and directors of the Company shall also have agreed not to sell publicly their Common Stock under the circumstances and pursuant to the terms set forth in this Section 13(f).

(g)If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

(h)This Agreement shall amend and restate in its entirety the Fifth Amended and Restated Registration Rights Agreement, dated August 12, 2004, by and among the Company and the other parties thereto (the “Prior Registration Rights Agreement”), the parties hereto constitute the Company and the holders of at least two-thirds of the outstanding shares of Restricted Stock (as defined in the Prior Registration Rights Agreement) immediately prior to the execution of this Agreement.

(i)After the date of this Agreement, the Company shall not, without the prior written consent of the holders of at least two-thirds of the Restricted Stock then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights pari passu or senior to those granted to the holders hereunder, other than a registration related to stock issued upon conversion of debt securities assumed by the Company in connection with its acquisition of Allied Riser Communications Corporation.

(j)All registration rights granted under Sections 4, 5, and 6 shall terminate and be of no further force and effect upon the earlier of (i) three (3) years after the date the Company first effects a registration pursuant to Section 4 or (ii) five (5) years from the date hereof.  In addition, the registration rights of a holder of Restricted Stock shall expire if all Restricted Stock held by and issuable to such holder (and its affiliates) may be sold under Rule 144 during any ninety (90) day period.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Please indicate your acceptance of the foregoing by signing and returning the enclosed counterpart of this letter, whereupon this Agreement shall be a binding agreement between the Company and you.

Please indicate your acceptance of the foregoing by signing and returning the enclosed counterpart of this letter, whereupon this Agreement shall be a binding agreement between the Company and you.

Very truly yours,
COGENT COMMUNICATIONS GROUP, INC.
By:	/s/David Schaeffer
By: David Schaeffer
Its: Chief Executive Officer

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

OAK INVESTMENT PARTNERS IX,
LIMITED PARTNERSHIP
By:		Oak Associates IX, LLC,its General Partner
By:	/s/Edward Glassmeyer
Name: Edward Glassmeyer
Title: Managing Member
OAK IX AFFILIATES FUND, LIMITED PARTNERSHIP
By:		Oak IX Affiliates, LLC, its General Partner
By:	/s/Edward Glassmeyer
Name: Edward Glassmeyer
Title: Managing Member
OAK IX AFFILIATES FUND-A, LIMITED PARTNERSHIP
By:		Oak Associates IX, LLC, its General Partner
By:	/s/Edward Glassmeyer
Name: Edward Glassmeyer
Title: Managing Member

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

JERUSALEM VENTURE PARTNERS III, L.P.
By:		Jerusalem Partners III, L.P., its General Partner
By:		Jerusalem Venture Partners Corporation, its
		General Partner
By:	/s/Erel Margalit
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS III
(ISRAEL), L.P.
By:		Jerusalem Venture Partners III (Israel) Management Company Ltd., its General Partner
By:	/s/Erel Margalit
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS
ENTREPRENEURS FUND III, L.P.
By:		Jerusalem Partners III, L.P., its General Partner
By:		Jerusalem Venture Partners Corporation, its General Partner
By:	/s/Erel Margalit
Name: Erel Margalit

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

JERUSALEM VENTURE PARTNERS IV, L.P.
By:		Jerusalem Partners IV, L.P., its General Partner
By:		JVP Corp IV, its General Partner
By:	/s/Erel Margalit
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS IV (Israel), L.P.
By:		Jerusalem Partners IV – Venture Capital, L.P.,
		its General Partner
By:		JVP Corp IV, its General Partner
By:	/s/Erel Margalit
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS IV-A, L.P.
By:		Jerusalem Venture Partners IV, L.P., its General
		Partner
By:		JVP Corp IV, its General Partner
By:	/s/Erel Margalit
Name: Erel Margalit

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

WORLDVIEW TECHNOLOGY
PARTNERS III, L.P.
WORLDVIEW TECHNOLOGY
INTERNATIONAL III, L.P.
WORLDVIEW STRATEGIC PARTNERS III, L.P.
WORLDVIEW III CARRIER FUND, L.P.
By:		Worldview Capital III, L.P., its General Partner
By:	/s/James Wei
Name: James Wei
WORLDVIEW TECHNOLOGY
PARTNERS IV, L.P.
WORLDVIEW TECHNOLOGY
INTERNATIONAL IV, L.P.
WORLDVIEW STRATEGIC PARTNERS IV, L.P.
By:		Worldview Capital IV, L.P., its General Partner
By:	/s/James Wei
Name: James Wei

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

BCP CAPITAL, L.P.
By:		BCP General LLC, its General Partner
By:	/s/Steven D. Brooks
Name:		Steven D. Brooks
Title:		Managing Director
BCP CAPITAL QPF, L.P.
By:		BCP General LLC, its General Partner
By:	/s/Steven D. Brooks
Name:		Steven D. Brooks
Title:		Managing Director
BCP AFFILIATES FUND LLC
By:		BCP Capital Management LLC, its Manager
By:	/s/Steven D. Brooks
Name:		Steven D. Brooks
Title:		Managing Director

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

BOULDER VENTURES IV, L.P.
By:	/s/Andrew E. Jones
Name: Andrew E. Jones
Title: General Partner
BOULDER VENTURES IV (ANNEX), L.P.
By:	/s/Andrew E. Jones
Name: Andrew E. Jones
Title: General Partner

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

NAS PARTNERS I L.L.C.
By:		Nassau Capital LLC, its General Partner
By:	/s/Randall A. Hack
Name:		Randall A. Hack
Title:		Managing Member
NASSAU CAPITAL PARTNERS IV L.P.
By:		Nassau Capital LLC, its General Partner
By:	/s/Randall A. Hack
Name:		Randall A. Hack
Title:		Managing Member

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

BNP EUROPE TELECOM & MEDIA FUND II, LP
By:	/s/Shawna Morehouse  /s/Martin Wm. Laidlaw
Name: Shawna Morehouse & Martin Laidlaw
Title: Authorized Signatories
By: General Business, Finance and Investment Ltd.,
its General Partner and By: Commerce Advisory Services Ltd, as Director and Partnership Secretary
NATIO VIE DEVELOPPEMENT 3, FCPR
By:	/s/Bernard d’Hotelans
Name: Bernard d’Hotelans
Title: Directeur Associe

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

By:	/s/David Schaeffer
David Schaeffer
THE SCHAEFFER DESCENDENTS TRUST
By:	/s/Ruth Schaeffer
Ruth Schaeffer

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

UFO COMMUNICATIONS, INC.
By:	/s/Jay Ferguson
Name: Jay Ferguson
Title: Chairman

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

PALADIN CAPITAL PARTNERS FUND, L.P.
By:			Paladin General Holdings, LLC
			Its General Partner
By:	/s/Michael R. Steed
Name: Michael R. Steed
Title: President
WORLDWIDE INVESTMENTS, LLC
By: Worldwide Assets, Inc., its Sole Member
By:	/s/Frank J. Hanna, Jr.
Name:		Frank J. Hannah, Jr.
Title:
2001 PENN. AVE. INVESTMENTS, LLC
By:	/s/Michael R. Steed
Name: Michael R. Steed
Title: President

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

KLINE HAWKES PACIFIC, L.P.
By:  Kline Hawkes Pacific Advisors, LLC,
its General Partner
By:	/s/Jay Ferguson
Name:					Jay Ferguson
Title:			Member
KLINE HAWKES PACIFIC FRIENDS FUND, LLC
By:  Kline Hawkes Pacific Advisors, LLC,
its Managing Member
By:	/s/Jay Ferguson
Name:				Jay Ferguson
Title:			Member
BROADMARK CAPITAL, L.L.C.
By:	/s/Joseph L. Schocken
Name:				Joseph L. Schocken
Title:		President

[Signature Page to Sixth Amended and Restated Registration Rights Agreement]

GLOBAL ACCESS TELECOMMUNICATIONS, INC.
By:	/s/John E. Jones
Name:			John E. Jones
Title:		Vice President

EX-31.1

Exhibit 31.1

CERTIFICATIONS

Certification of Chief Executive Officer

I, David Schaeffer, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Cogent Communications Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2004

/s/ David Schaeffer

Name: David Schaeffer

Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Thaddeus Weed, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Cogent Communications Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2004

/s/ Thaddeus G. Weed

Name: Thaddeus G. Weed

Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cogent Communications Group, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)            the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 15, 2004

/s/ David Schaeffer

David Schaeffer
Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cogent Communications Group, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 15, 2004

/s/ Thaddeus G. Weed

Thaddeus G. Weed
Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.