Edgar Filing: COGENT COMMUNICATIONS GROUP INC

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PART I FINANCIAL INFORMATION

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, 2007
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
(State of Incorporation)

52-2337274
(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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Securities Exchange Act. (Check one)

Large accelerated filer o Accelerated filer ý Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (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 48,182,576 Shares Outstanding as of November 6, 2007

INDEX

PART I
FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets of Cogent Communications Group, Inc., and Subsidiaries as of December 31, 2006 and September 30, 2007 (Unaudited)
	Condensed Consolidated Statements of Operations of Cogent Communications Group, Inc., and Subsidiaries for the Three Months Ended September 30, 2006 and September 30, 2007 (Unaudited)
	Condensed Consolidated Statements of Operations of Cogent Communications Group, Inc., and Subsidiaries for the Nine months Ended September 30, 2006 and September 30, 2007 (Unaudited)
	Condensed Consolidated Statements of Cash Flows of Cogent Communications Group, Inc., and Subsidiaries for the Nine months Ended September 30, 2006 and September 30, 2007 (Unaudited)
	Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
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 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits
SIGNATURES
CERTIFICATIONS

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2006 AND SEPTEMBER 30, 2007
(IN THOUSANDS, EXCEPT SHARE DATA)

	December 31, 2006			September 30, 2007
				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	42,642		$	180,241
Short term investments, $0 and $650 restricted, respectively		80			650
Accounts receivable, net of allowance for doubtful accounts of $1,233 and $1,145, respectively		20,053			22,528
Prepaid expenses and other current assets		5,339			5,875

Total current assets		68,114			209,294
Property and equipment, net		263,268			250,885
Intangible assets, net		1,150			305
Deposits and other assets ($1,118 and $468 restricted, respectively)		4,344			3,808

Total assets	$	336,876		$	464,292

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	9,096		$	13,515
Accrued liabilities		12,614			15,431
Convertible subordinated notes, net of discount of $1,213		8,978			—
Current maturities, capital lease obligations		6,027			7,271

Total current liabilities		36,715			36,217
Convertible senior notes, net of discount of $4,291		—			195,709
Capital lease obligations, net of current maturities		82,019			83,591
Other long term liabilities		2,510			1,636

Total liabilities		121,244			317,153

Commitments and contingencies:
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 48,928,108 and 48,177,863 shares issued and outstanding, respectively		49			48
Additional paid-in capital		478,140			432,322
Stock purchase warrants		764			764
Accumulated other comprehensive income — foreign currency translation adjustment		1,638			2,983
Accumulated deficit		(264,959	)		(288,978	)

Total stockholders' equity		215,632			147,139

Total liabilities and stockholders' equity	$	336,876		$	464,292

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

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2007
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Three Months Ended September 30, 2006			Three Months Ended September 30, 2007
	(Unaudited)			(Unaudited)
Net service revenue	$	37,954		$	46,969
Operating expenses:
Network operations (including $79 and $61 of equity-based compensation expense, respectively, exclusive of amounts shown separately)		19,432			22,771
Selling, general, and administrative (including $2,540 and $3,000 of equity-based compensation expense, respectively, and $855 and $515 of bad debt expense, net of recoveries, respectively)		14,289			15,512
Depreciation and amortization		14,878			16,627

Total operating expenses		48,599			54,910

Operating loss		(10,645	)		(7,941	)
Gains—lease restructurings and settlement		255			2,110
Interest income and other, net		1,288			2,906
Interest expense		(2,752	)		(2,498	)

Net loss	$	(11,854	)	$	(5,423	)

Net loss per common share:
Basic and diluted net loss per common share	$	(0.24	)	$	(0.12	)

Weighted-average common shares—basic and diluted		48,463,130			47,073,070

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

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2007
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Nine months Ended September 30, 2006			Nine months Ended September 30, 2007
	(Unaudited)			(Unaudited)
Net service revenue	$	108,556		$	135,698
Operating expenses:
Network operations (including $285 and $143 of equity-based compensation expense, respectively, exclusive of amounts shown separately)		60,051			65,296
Selling, general, and administrative (including $9,205 and $7,003 of equity-based compensation expense, respectively, and $2,001 and $1,421 of bad debt expense, net of recoveries, respectively)		43,333			44,702
Depreciation and amortization		43,679			48,865

Total operating expenses		147,063			158,863

Operating loss		(38,507	)		(23,165	)
Gains—lease restructurings and settlement		255			2,110
Interest income and other, net		2,471			4,788
Interest expense		(8,005	)		(7,752	)

Net loss	$	(43,786	)	$	(24,019	)

Net loss per common share:
Basic and diluted net loss per common share	$	(0.96	)	$	(0.50	)

Weighted-average common shares—basic and diluted		45,705,013			48,069,477

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

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2007
(IN THOUSANDS)

	Nine months Ended September 30, 2006			Nine months Ended September 30, 2007
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net cash provided by operating activities	$	4,825		$	35,169

Cash flows from investing activities:
Purchases of property and equipment		(17,941	)		(26,105	)
Maturities (purchases) of short term investments		1,203			(570	)
Proceeds from dispositions of assets		93			14

Net cash used in investing activities		(16,645	)		(26,661	)

Cash flows from financing activities:
Proceeds from issuance of common stock, net		36,481			—
Purchases of common stock		—			(51,894	)
Proceeds from issuance of senior convertible notes, net		—			195,500
Senior convertible notes issuance costs		—			(353	)
Repayment of convertible notes		—			(10,187	)
Proceeds from exercises of stock options		147			1,054
Repayments of capital lease obligations		(6,105	)		(5,454	)

Net cash provided by financing activities		30,523			128,666

Effect of exchange rate changes on cash		428			425

Net increase in cash and cash equivalents		19,131			137,599
Cash and cash equivalents, beginning of period		29,883			42,642

Cash and cash equivalents, end of period	$	49,014		$	180,241

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

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 and 2007
(unaudited)

1. Description of the business and recent developments:

Description of business

Cogent Communications Group, Inc. (the "Company") is a Delaware corporation and is headquartered in Washington, DC. The Company is a facilities-based provider of low-cost, high-speed Internet access and Internet Protocol ("IP") communications services. The Company's network is specifically designed and optimized to transmit data using IP. The Company delivers its services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations through over 14,380 customer connections in North America and Europe.

The Company offers on-net Internet access services exclusively through its own facilities, which run all the way to its customers' premises. Because of its integrated network architecture, the Company is not dependent on local telephone companies to serve its on-net customers. The Company provides on-net Internet access to certain bandwidth-intensive users such as universities, other Internet service providers, telephone companies, cable television companies and commercial content providers at speeds up to 10 Gigabits per second. These customers generally receive service in colocation facilities and the Company's data centers. The Company also offers Internet access services in multi-tenant office buildings typically serving law firms, financial services firms, advertising and marketing firms and other professional services businesses. The Company operates data centers throughout North America and Europe that allow customers to collocate their equipment and access the Company's network.

In addition to providing on-net services, the Company also provides Internet connectivity to customers that are not located in buildings directly connected to its network. The Company serves these off-net customers using other carriers' facilities to provide the "last mile" portion of the link from its customers' premises to the Company's network. The Company also provides certain non-core services that resulted from acquisitions. The Company continues to support but does not actively sell these non-core services.

The Company has created its network by acquiring optical fiber from underlying carriers and directly connecting Internet routers to this optical fiber. Through 2004, the Company expanded its network through several acquisitions of financially distressed companies or their assets. Since then, it has primarily focused on the growth of its on-net Internet access services.

Recent Developments

$50.0 Million Share Buyback Program

In August 2007, the Company's board of directors approved a common stock buyback program (the "Buyback Program"). Under the Buyback Program the Company is authorized to purchase up to $50.0 million of the Company's common stock prior to December 31, 2008. In September 2007, the Company purchased approximately 194,000 shares of its common stock for approximately $4.4 million under the Buyback Program. These common shares were subsequently retired. Of the total $4.4 million commitment, $1.8 million was paid in September 2007 and $2.6 million was paid in October 2007.

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 U.S. generally accepted accounting principles 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 in its 2006 annual report on Form 10-K.

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

Use of estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles 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 may differ from these estimates.

Foreign currency translation adjustment and comprehensive loss

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. The Company's only components of "other comprehensive income" are currency translation adjustments for all periods presented (in thousands).

	Three months ended September 30, 2006			Three months ended September 30, 2007			Nine months ended September 30, 2006			Nine months ended September 30, 2007
Net loss	$	(11,854	)	$	(5,423	)	$	(43,786	)	$	(24,019	)
Currency translation		144			702			880			1,345

Comprehensive loss	$	(11,710	)	$	(4,721	)	$	(42,906	)	$	(22,674	)

Financial instruments

The Company was party to letters of credit totaling approximately $1.0 million at December 31, 2006 and September 30, 2007. These letters of credit are secured by certificates of deposit of approximately $1.1 million that are restricted and included in short term investments and deposits and other assets.

Basic and diluted net loss per common share

Basic loss per share is based upon the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted-average number of common shares outstanding during the period plus the dilutive effect of potentially future issuances of common stock. In calculating diluted loss per share, the dilutive effect of stock options and warrants is computed using the average market price for the period in accordance with the treasury stock method. For the three and nine months ended September 30, 2006 and September 30, 2007, options to purchase 1.2 million and 1.1 million shares of common stock, respectively, at weighted-average exercise prices of $2.67 and $5.53 per share, respectively, are not included in the computation of diluted loss per share as

the effect would be anti-dilutive. For the three and nine months ended September 30, 2006, the Company's employees exercised options for approximately 17,000 and 47,000 common shares, respectively. For the three and nine months ended September 30, 2007, the Company's employees exercised options for approximately 110,000 and 205,000 common shares, respectively. As of September 30, 2006 and September 30, 2007, 0.3 million and 1.2 million unvested shares of restricted common stock, respectively, are not included in the computation of loss per share. These shares will be included in the computation as they vest.

The effect of convertible securities on the calculation of diluted loss per share is calculated using the "if-converted" method. Using the "if-converted" method, the shares issuable upon conversion of the 1.00% Convertible Senior Notes (the "Notes") were anti-dilutive for the three and nine months ending September 30, 2007. Accordingly, their impact has been excluded from the computation of diluted loss per share. The Notes are convertible into shares of the Company's Common stock at an initial conversion price of $49.18 per share, yielding 4.1 million common shares, subject to certain adjustments set forth in the indenture.

Recent accounting pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"). The objective of the statement is to define fair value, establish a framework for measuring fair value and expand disclosures about fair value measurements. SFAS 157 will be effective for interim and annual reporting periods beginning after November 15, 2007. The Company has not yet assessed the impact of this statement on the Company's financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 will be effective for the first fiscal year that begins after November 15, 2007. The Company has not yet determined whether it will adopt the alternatives provided in this statement.

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. ("FIN") 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109." FIN No. 48 requires that management determine whether a tax position is more likely than not to be sustained upon examination based on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statements. The Company adopted the provisions of FIN No. 48 on January 1, 2007. The adoption of FIN No. 48 did not have a material effect on the Company's results of operations or financial position.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is subject to U.S. federal tax and state tax examinations for years from 2003 to 2006. Management does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FIN No. 48, the Company did not have any accrued interest or penalties associated with any unrecognized tax positions, and there was no interest expense or expense associated with penalties recognized during the three or nine months ended September 30, 2007.

2. Property and equipment:

Depreciation and amortization expense related to property and equipment and capital leases was $14.5 million and $16.3 million for the three months ended September 30, 2006 and 2007, respectively, and was $42.4 million and $48.0 million for the nine months ended September 30, 2006 and 2007, respectively.

Capitalized network construction labor and related costs

The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $0.4 million and $1.2 million for the three months ended September 30, 2006 and 2007, respectively, and $1.6 million and $2.5 million for the nine months ended September 30, 2006 and 2007, respectively. Included in capitalized labor and related costs for the nine months ended September 30, 2007 is $0.5 million of equity-based compensation costs.

3. Accrued liabilities:

Acquired lease obligations

In December 2004, the Company accrued for the net present value of estimated cash flows for amounts related to leases of abandoned facilities acquired in an acquisition. In September 2007, the Company entered into a settlement agreement under which the Company was released from its obligation under one of the facilities. This settlement agreement resulted in a gain of approximately $2.1 million recorded as a gain on lease restructurings and settlement in the accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2007. Of the $2.1 million gain, $1.3 million was included in the unused lease obligation and $0.8 million was included in accrued liabilities. A reconciliation of the amounts related to these contract termination costs is as follows (in thousands):

Lease accrual
Assumed obligation—balance December 31, 2006	$	1,754
Amortization of discount		81
Settlement amount (recorded as a gain)		(1,325	)
Amounts paid		(415	)

Balance—September 30, 2007 (included in accrued liabilities)	$	95

4. Long-term debt:

Convertible Senior Notes

In June 2007, the Company issued 1.00% Convertible Senior Notes (the "Notes") due June 15, 2027, for an aggregate principal amount of $200.0 million in a private offering for resale to qualified institutional buyers pursuant to SEC Rule 144A. The Notes are unsecured and bear interest at 1.00% per annum. The Notes will rank equally with any future senior debt and senior to any future subordinated debt and will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries and to any secured debt the Company may issue, to the extent of the value of the collateral. Interest is payable in cash semiannually in arrears on June 15 and December 15, of each year, beginning on December 15, 2007. The Company received proceeds of approximately $195.5 million, after deducting the original issue discount of 2.25%. The Company used $10.6 million of the proceeds to repay principal and accrued interest on its existing convertible subordinated notes on June 15, 2007 and used approximately $50.1 million of the net proceeds to repurchase approximately 1.8 million shares of its common stock concurrently with the Notes offering. These 1.8 million common shares were subsequently retired. The Company intends to use the remaining proceeds for general

corporate purposes. The discount and other issuance costs are being amortized to interest expense using the effective interest method through June 15, 2014, which is the earliest put date.

Conversion Process and Other Terms of the Notes

The Notes are convertible into shares of the Company's common stock at an initial conversion price of $49.18 per share, or 20.3355 shares for each $1,000 principal amount of Notes, subject to adjustment for certain events as set forth in the indenture. Depending upon the price of the Company's common stock at the time of conversion, holders of the Notes will receive additional shares of the Company's common stock. Upon conversion of the Notes, the Company will have the right to deliver shares of its common stock, cash or a combination of cash and shares of its common stock. The Notes are convertible (i) during any fiscal quarter after the fiscal quarter ending September 30, 2007, if the closing sale price of the Company's common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 130% of the conversion price in effect on the last trading day of the immediately preceding fiscal quarter, or (ii) specified corporate transactions occur, or (iii) the trading price of the Notes falls below a certain threshold, or (iv) if the Company calls the Notes for redemption, or (v) on or after April 15, 2027 until maturity. In addition, following specified corporate transactions, the Company will increase the conversion rate for holders who elect to convert notes in connection with such corporate transactions, provided that in no event may the shares issued upon conversion, as a result of adjustment or otherwise, result in the issuance of more than 35.5872 common shares per $1,000 principal amount or approximately 7.1 million shares. The Notes include an "Irrevocable Election of Settlement" whereby the Company may choose, in its sole discretion, and without the consent of the holders of the Notes, to waive its right to settle the conversion feature in either cash or stock or in any combination at its option.

The Notes may be redeemed by the Company at any time after June 20, 2014 at a redemption price of 100% of the principal amount plus accrued interest. Holders of the Notes have the right to require the Company to repurchase for cash all or some of their notes on June 15, 2014, 2017 and 2022 and upon the occurrence of certain designated events at a redemption price of 100% of the principal amount plus accrued interest.

Registration Rights

Under the terms of the Notes, the Company is required to use reasonable efforts to file and maintain a shelf registration statement with the SEC covering the resale of the Notes and the common stock issuable on conversion of the Notes. If the Company fails to meet these terms, the Company will be required to pay special interest on the Notes in the amount of 0.25% for the first 90 days after the occurrence of the failure to meet and 0.50% thereafter. In addition to the special interest, additional interest of 0.25% per annum will accrue in the event of default, as defined in the indenture. The Company filed a shelf registration statement registering the Notes and common stock issuable upon conversion of the Notes in July 2007.

Convertible Subordinated Notes—Allied Riser

The Company's $10.2 million 7.50% convertible subordinated notes were recorded at their fair value of approximately $2.9 million at the merger date in 2002. The discount was amortized to interest expense through the maturity date. The notes and accrued interest were fully paid in June 2007.

5. Contingencies:

Current and potential litigation

The Company is involved in disputes with certain telephone companies that provide it local circuits or leased optical fibers. The total amount claimed by these vendors is $3.0 million. The Company does not believe any of these amounts are owed to these providers and intends to vigorously defend its position and believes that it has adequately reserved for any potential liability.

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 value 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 the normal course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company's financial condition or results of operations.

6. Related party transactions:

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 $132,000 and $343,000 in the three and nine months ended September 30, 2006 and $149,000 and $423,000 in the three and nine months ended September 30, 2007, respectively, in rent and related costs to this entity. The lease expires in August 2010.

LNG Holdings SA ("LNG")

In November 2003, approximately 90% of the stock of LNG, the then parent company of Cogent Europe was acquired by Symposium Inc. ("Symposium") a Delaware corporation. The Company's Chief Executive Officer owns 100% of Symposium. In the nine months ended September 30, 2007 the Company paid approximately $24,000 for professional services performed for LNG and the Company received reimbursement for approximately $85,000 of professional fees paid for LNG in 2006.

7. Segment information:

The Company operates as one operating segment. Below are the Company's net service revenues and long lived assets by geographic region (in thousands):

	Three Months Ended September 30, 2006		Three Months Ended September 30, 2007		Nine months Ended September 30, 2006		Nine months Ended September 30, 2007
*Net Revenues*
North America	$	29,930	$	36,708	$	85,519	$	106,025
Europe		8,024		10,261		23,037		29,673

Total	$	37,954	$	46,969	$	108,556	$	135,698

	December 31, 2006		September 30, 2007
*Long lived assets, net*
North America	$	221,942	$	207,474
Europe		42,476		43,716

Total	$	264,418	$	251,190

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

You should read the following discussion and analysis together with our consolidated condensed financial statements and related notes included in this report. The discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include those discussed in Item 1A "Risk Factors" in our annual report on Form 10-K for the fiscal year ended December 31, 2006.

General Overview

We are a leading facilities-based provider of low-cost, high-speed Internet access and IP communications services. Our network is specifically designed and optimized to transmit data using IP. IP networks are significantly less expensive to operate and are able to achieve higher performance levels than the traditional circuit-switched networks used by our competitors, thus giving us cost and performance advantages in our industry. We deliver our services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations through over 14,380 customer connections in North America and Europe. Our primary on-net service is Internet access at a speed of 100 Megabits per second and greater. We offer this on-net service exclusively through our own facilities, which run 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 inter-city transport facilities. The network is physically connected entirely through our facilities to 1,189 buildings in which we provide our on-net services, including 905 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 integrated network architecture, we are not dependent on local telephone companies to serve our on-net customers. We emphasize the sale of on-net services because we believe we have a competitive advantage in providing these services and our sales of these services generate higher gross profit margins than our off-net and non-core 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 also provide certain non-core services which are legacy services which we acquired and continue to support but do not actively sell.

We believe our key opportunity is provided by our high-capacity network, which provides us with the ability to add a significant number of customers to our network with minimal incremental costs. Our focus is to add customers to our network in a way that maximizes its use and at the same time provides us with a customer mix that produces strong profit margins. We are responding to this opportunity by increasing our sales and marketing efforts including increasing our number of sales representatives. In addition, we may add customers to our network through strategic acquisitions.

We are expanding our network to locations that we believe can be economically integrated and represent significant concentrations of Internet traffic. One of our keys to developing a profitable business will be to carefully match the expense of extending our network to reach new customers with the revenue generated by those customers.

We believe the two most important trends in our industry are the continued growth in Internet traffic and a decline in Internet access prices. As Internet traffic continues to grow and prices per unit of traffic continue to decline, we believe our ability to load our network and gain market share from less efficient network operators will expand. However, continued erosion in Internet access prices will likely have a negative impact on the rate at which we can increase our revenues and our profit margins.

Our on-net service consists of high-speed Internet access and IP connectivity ranging from 0.5 Megabits per second to 10 Gigabits 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, T3, E1 and E3 and Ethernet link lines obtained from other carriers. Our non-core services, which consist of legacy services of companies whose assets or businesses we have acquired, include managed modem services, email, retail dial-up Internet access, shared web hosting, managed web hosting, managed security, voice services (only provided in Toronto, Canada) and point to point private line services. We do not actively market these non-core services and expect the net service revenue associated with them to continue to decline.

Due to our strategic acquisitions of network assets and equipment, we believe we are positioned to grow our revenue base. We continue to deploy network equipment to parts of our network to maximize the utilization of our assets. Our future capital expenditures will be based primarily on our planned expansion of our network and the addition of on-net buildings and the concentration and growth of our customer base. We expect our 2007 capital expenditures to be approximately $30.0 million. We plan to increase our number of on-net buildings by approximately 100 buildings by December 31, 2007 from 1,107 buildings at December 31, 2006. We expect our 2008 capital expenditures to be approximately $30.0 million. We plan to increase our number of on-net buildings by approximately another 100 buildings in 2008.

Historically, our operating expenses have exceeded our net service revenue resulting in operating losses. Our operating expenses consist primarily of the following:

•: Network operations expenses, which consist primarily of the cost of leased circuits, sites and facilities; telecommunications license agreements, maintenance expenses, and salaries of, and expenses related to, employees who are directly involved with maintenance and operation of our network.
•: Selling, general and administrative expenses, which consist primarily of salaries, commissions and related benefits paid to our employees and related selling and administrative costs including professional fees and bad debt expenses.
•: Depreciation and amortization expenses, which result from the depreciation of our property and equipment, including the assets associated with our network and the amortization of our intangible assets.
•: Equity-based compensation expenses that result from the grants of stock options and restricted stock.

Results of Operations

Our management reviews and analyzes several key performance indicators in order to manage our business. These key performance indicators include:

•: net service revenues, which are an indicator of our overall business growth and the success of our sales and marketing efforts and sales representative productivity;
•: gross profit, which is an indicator of our service offering mix, competitive pricing pressures and the cost of our network operations;

•: growth in our on-net customer base and revenues, which is an indicator of the success of our on-net focused sales efforts and sales representative productivity;
•: growth in the number of on-net buildings; and
•: the distribution of revenue across our service offerings.

Three Months Ended September 30, 2006 Compared to the Three Months Ended September 30, 2007

The following summary table presents a comparison of our results of operations for the three months ended September 30, 2006 and 2007 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

	Three months ended September 30,
	Three months ended September 30,						Percent Change
	2006			2007			Percent Change
	(in thousands)
Net service revenue	$	37,954		$	46,969		23.8%
Network operations expenses (1)		19,353			22,710		17.3%
Gross profit (2)		18,601			24,259		30.4%
Selling, general, and administrative expenses (3)		11,749			12,512		6.5%
Equity-based compensation expense		2,619			3,061		16.9%
Depreciation and amortization expenses		14,878			16,627		11.8%
Gains on lease restructurings		255			2,110		727.5%
Net loss		(11,854	)		(5,423	)	54.3%

(1): Excludes equity-based compensation expenses of $79 and $61 in the three months ended September 30, 2006 and 2007, respectively, which, if included would have resulted in a period-to-period change of 17.2%.
(2): Excludes equity-based compensation expenses of $79 and $61 in the three months ended September 30, 2006 and 2007, respectively, which if included would have resulted in a period-to-period change of 30.6%.
(3): Excludes equity-based compensation expenses of $2,540 and $3,000 in the three months ended September 30, 2006 and 2007, respectively, which, if included would have resulted in a period-to-period change of 8.6%.

Net Service Revenue. Our net service revenue increased 23.8% from $38.0 million for the three months ended September 30, 2006 to $47.0 million for the three months ended September 30, 2007. The impact of exchange rates resulted in approximately $1.0 million of this increase in revenues. For the three months ended September 30, 2006 and 2007, on-net, off-net and non-core revenues represented 72.4%, 21.8% and 5.8% and 80.2%, 16.5% and 3.3% of our net service revenues, respectively.

Our on-net revenues increased 37.1% from $27.5 million for the three months ended September 30, 2006 to $37.6 million for the three months ended September 30, 2007. Our on-net revenues increased as we increased the number of our on-net customer connections by 51.8% from approximately 6,900 at September 30, 2006 to approximately 10,500 at September 30, 2007. On-net customer connections increased at a greater rate than on-net revenues due to a decline in the revenue per on-net customer connection. This decline is partly attributed to a shift in the customer connection mix. Due to the increase in the size of our sales force, we are now able to focus not only on customers who purchase high-bandwidth connections, as we have done historically, but also on customers who purchase lower-bandwidth connections. We expect to continue to focus our sales efforts on a broad mix

of customers. Additionally, on-net customers who cancel their service, in general, have greater revenue per connection than new customers. These trends and an increase in customers receiving a discount for purchasing longer term contracts, resulted in lower revenue per on-net connection. We believe that our on-net revenues as a percentage of total revenues will continue to increase as we are allocating the majority of our sales and marketing resources toward obtaining additional on-net customers.

Our off-net revenues decreased 6.5% from $8.3 million for the three months ended September 30, 2006 to $7.8 million for the three months ended September 30, 2007. Our off-net customer connections declined from approximately 3,400 at September 30, 2006 to approximately 3,000 at September 30, 2007. Our non-core revenues decreased 28.6% from $2.2 million for the three months ended September 30, 2006 to $1.6 million for the three months ended September 30, 2007. The number of our non-core customer connections declined from approximately 1,100 at September 30, 2006 to approximately 860 at September 30, 2007. We do not actively market these acquired non-core services and expect that the net service revenue associated with them will continue to decline.

Network Operations Expenses. Our network operations expenses, excluding equity-based compensation expense, increased 17.3% from $19.4 million for the three months ended September 30, 2006 to $22.7 million for the three months ended September 30, 2007. The increase is primarily attributable to an increase in costs related to our network and facilities expansion activities. The impact of exchange rates resulted in approximately $0.4 million of this increase in network operations expenses.

Gross Profit. Our gross profit, excluding equity-based compensation expense, increased 30.4% from $18.6 million for the three months ended September 30, 2006 to $24.3 million for the three months ended September 30, 2007. We determine gross profit by subtracting network operation expenses from our net service revenue (excluding equity-based compensation expense) and do not allocate depreciation and amortization expense to our network operations expense. The increase is primarily attributed to the increase in higher gross margin on-net revenues as a percentage of net service revenue. Our gross profit margin expanded from 49.0% for the three months ended September 30, 2006 to 51.6% for the three months ended September 30, 2007. Our gross profit has benefited from the limited incremental expenses associated with providing service to an increasing number of on-net customers and the decline in off-net revenues which carry a lower gross margin due to the associated leased circuit required to provide this service. Our gross profit margin may be impacted by the timing and amounts of disputed circuit costs and the additional costs of expanding our network and operating our existing network. We generally record disputed circuit costs amounts when billed by the vendor and reverse these amounts when the vendor credit has been received or the dispute has been otherwise resolved. We believe that our gross profit margin will continue to increase as we are allocating the majority of our sales and marketing resources toward obtaining additional on-net customers and as sales of these services generate higher gross profit margins than our off-net and non-core services.

Selling, General, and Administrative Expenses. Our SG&A expenses, excluding equity-based compensation expense, increased 6.5% from $11.7 million for the three months ended September 30, 2006 to $12.5 million for the three months ended September 30, 2007. SG&A expenses increased primarily from the increase in salaries and related costs required to support our expanding sales and marketing efforts. The impact of exchange rates resulted in approximately $0.3 million of this increase in SG&A expenses.

Equity-based Compensation Expense. Equity-based compensation expense is related to restricted stock and stock options. The total equity-based compensation expense increased 16.9% from $2.6 million for the three months ended September 30, 2006 to $3.1 million for the three months ending September 30, 2007. The increase is primarily attributed to the issuances of restricted stock to our employees in 2007. During 2007, we issued approximately 1.0 million shares of restricted stock to

our employees. These grants were valued at our closing stock price on the date of grant and will vest over periods ranging from two to four years. These grants resulted in approximately $2.7 million in equity-based compensation expense for the three months ended September 30, 2007. The increase is partly offset by a $1.7 million decrease in equity-based compensation expense associated with the amortization of compensation expense for certain 2003 restricted stock grants which ended in August 2006 when these shares became fully vested.

Depreciation and Amortization Expenses. Our depreciation and amortization expense increased 11.8% from $14.9 million for the three months ended September 30, 2006 to $16.6 million for the three months ended September 30, 2007 primarily due to an increase in fixed assets.

Gains on lease restructurings. In September 2007, we entered into a settlement agreement under which we were released from our obligations under a lease agreement for an acquired unused facility. This settlement agreement resulted in a gain of approximately $2.1 million recorded as a gain under lease restructurings and settlements during the three months ended September 30, 2007. In September 2006, Cogent Spain negotiated modifications to an IRU capital lease that reduced its quarterly IRU lease payments and extended the lease term. The modification to this IRU capital lease resulted in a gain of approximately $0.3 million recorded in the three months ended September 30, 2006.

Net Loss. Our net loss was $11.9 million for the three months ended September 30, 2006 as compared to a net loss of $5.4 million for the three months ended September 30, 2007. Our net loss decreased by $6.4 million as a result of a $5.6 million increase in our gross margin, a $1.9 million reduction in net interest expense and other expenses and a $1.9 million increase in gains on lease restructurings, partly offset by a $0.8 million increase in SG&A expenses and a $1.7 million increase in depreciation and amortization expenses.

Buildings On-net. As of September 30, 2006 and 2007 we had a total of 1,094 and 1,189 on-net buildings connected to our network, respectively.

Nine months Ended September 30, 2006 Compared to the Nine months Ended September 30, 2007

The following summary table presents a comparison of our results of operations for the nine months ended September 30, 2006 and 2007 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

	Nine months ended September 30,
	Nine months ended September 30,						Percent Change
	2006			2007			Percent Change
	(in thousands)
Net service revenue	$	108,556		$	135,698		25.0	%
Network operations expenses (1)		59,766			65,153		9.0	%
Gross profit (2)		48,790			70,545		44.6	%
Selling, general, and administrative expenses (3)		34,128			37,699		10.5	%
Equity-based compensation expense		9,490			7,146		(24.7	)%
Depreciation and amortization expenses		43,679			48,865		11.9	%
Gains on lease restructurings		255			2,110		727.5	%
Net loss		(43,786	)		(24,019	)	45.1	%

(1): Excludes equity-based compensation expenses of $285 and $143 in the nine months ended September 30, 2006 and 2007, respectively, which, if included would have resulted in a period-to-period change of 8.7%.

(2): Excludes equity-based compensation expenses of $285 and $143 in the nine months ended September 30, 2006 and 2007, respectively, which, if included would have resulted in a period-to-period change of 45.1%.
(3): Excludes equity-based compensation expenses of $9,205 and $7,003 in the nine months ended September 30, 2006 and 2007, respectively, which, if included would have resulted in a period-to-period change of 3.2%.

Net Service Revenue. Our net service revenue increased 25.0% from $108.6 million for the nine months ended September 30, 2006 to $135.7 million for the nine months ended September 30, 2007. The impact of exchange rates resulted in approximately $2.5 million of this increase in revenues. For the nine months ended September 30, 2006 and 2007, on-net, off-net and non-core revenues represented 69.4%, 23.9% and 6.7% and 78.2%, 17.8% and 4.0% of our net service revenues, respectively.

Our on-net revenues increased 40.9% from $75.3 million for the nine months ended September 30, 2006 to $106.1 million for the nine months ended September 30, 2007. Our on-net revenues increased as we increased the number of our on-net customer connections by 51.8% from approximately 6,900 at September 30, 2006 to approximately 10,500 at September 30, 2007. On-net customer connections increased at a greater rate than on-net revenues due to a decline in the revenue per on-net customer connection. This decline is partly attributed to a shift in the customer connection mix. Due to the increase in the size of our sales force, we are now able to focus not only on customers who purchase high-bandwidth connections, as we have done historically, but also on customers who purchase lower-bandwidth connections. We expect to continue to focus our sales efforts on a broad mix of customers. Additionally, on-net customers who cancel their service, in general, have greater revenue per connection than new customers. These trends and an increase in customers receiving a discount for purchasing longer term contracts, resulted in lower revenue per on-net connection. We believe that our on-net revenues as a percentage of total revenues will continue to increase as we are allocating the majority of our sales and marketing resources toward obtaining additional on-net customers.

Our off-net revenues decreased 7.1% from $26.0 million for the nine months ended September 30, 2006 to $24.2 million for the nine months ended September 30, 2007. Our off-net customer connections declined from approximately 3,400 at September 30, 2006 to approximately 3,000 at September 30, 2007. Our non-core revenues decreased 25.0% from $7.3 million for the nine months ended September 30, 2006 to $5.5 million for the nine months ended September 30, 2007. The number of our non-core customer connections declined from approximately 1,100 at September 30, 2006 to approximately 860 at September 30, 2007. We do not actively market these acquired non-core services and expect that the net service revenue associated with them will continue to decline.

Network Operations Expenses. Our network operations expenses, excluding equity-based compensation expense, increased 9.0% from $59.8 million for the nine months ended September 30, 2006 to $65.2 million for the nine months ended September 30, 2007. The increase is primarily attributable to an increase in costs related to our network and facilities expansion activities. The impact of exchange rates resulted in approximately $1.1 million of this increase in network operations expenses.

Gross Profit. Our gross profit, excluding equity-based compensation expense, increased 44.6% from $48.8 million for the nine months ended September 30, 2006 to $70.5 million for the nine months ended September 30, 2007. We determine gross profit by subtracting network operation expenses from our net service revenue (excluding equity-based compensation expense) and do not allocate depreciation and amortization expense to our network operations expense. The increase is primarily attributed to the increase in higher gross margin on-net revenues as a percentage of net service revenue. Our gross profit margin expanded from 44.9% for the nine months ended September 30, 2006

to 52.0% for the nine months ended September 30, 2007. Our gross profit has benefited from the limited incremental expenses associated with providing service to an increasing number of on-net customers and the decline in off-net revenues which carry a lower gross margin due to the associated leased circuit required to provide this service. Our gross profit margin may be impacted by the timing and amounts of disputed circuit costs and the additional costs of expanding our network and operating our existing network. We generally record disputed circuit costs amounts when billed by the vendor and reverse these amounts when the vendor credit has been received or the dispute has been otherwise resolved. We believe that our gross profit margin will continue to increase as we are allocating the majority of our sales and marketing resources toward obtaining additional on-net customers and as sales of these services generate higher gross profit margins than our off-net and non-core services.

Selling, General, and Administrative Expenses. Our SG&A expenses, excluding equity-based compensation expense, increased 10.5% from $34.1 million for the nine months ended September 30, 2006 to $37.7 million for the nine months ended September 30, 2007. SG&A expenses increased primarily from the increase in salaries and related costs required to support our expanding sales and marketing efforts. The impact of exchange rates resulted in approximately $0.9 million of this increase in SG&A expenses.

Equity-based Compensation Expense. Equity-based compensation expense is related to restricted stock and stock options. The total equity-based compensation expense decreased 24.7% from $9.5 million for the nine months ended September 30, 2006 to $7.1 million for the nine months ending September 30, 2007. The decrease is primarily attributed to a $6.8 million decrease in equity-based compensation expense associated with the amortization of compensation expense for certain 2003 restricted stock grants which ended in August 2006 when these shares became fully vested. The decrease was partly offset by compensation expense from grants of restricted stock made in the in the nine months ended September 30, 2007. In January 2007, we granted 51,250 shares of restricted stock to our non-management directors. These grants were valued at our closing price on the date of grant, were fully vested upon grant, and resulted in approximately $0.9 million of compensation expense during the nine months ended September 30, 2007. During the nine months ended September 30, 2007, we issued approximately 1.0 million shares of restricted stock to our employees. These grants were valued at our closing stock price on the date of grant and will vest over periods ranging from two to four years. These grants resulted in approximately $4.5 million in equity based compensation expense for the nine months ended September 30, 2007.

Depreciation and Amortization Expenses. Our depreciation and amortization expense increased 11.9% from $43.7 million for the nine months ended September 30, 2006 to $48.9 million for the nine months ended September 30, 2007 primarily due to an increase in fixed assets.

Gains on Lease Restructurings. In September 2007, we entered into a settlement agreement under which we were released from our obligations under a lease agreement for an acquired unused facility. This settlement agreement resulted in a gain of approximately $2.1 million recorded as a gain under lease restructurings and settlements during the nine months ended September 30, 2007. In September 2006, Cogent Spain negotiated modifications to an IRU capital lease that reduced its quarterly IRU lease payments and extended the lease term. The modification to this IRU capital lease resulted in a gain of approximately $0.3 million recorded in the nine months ended September 30, 2006.

Net Loss. Our net loss was $43.8 million for the nine months ended September 30, 2006 as compared to a net loss of $24.0 million for the nine months ended September 30, 2007. Our net loss decreased by $19.8 million as a result of a $21.8 million increase in our gross margin, a $2.6 million reduction in net interest expense and other, a $2.3 million reduction in equity based compensation expense and a $1.9 million increase in gains on lease restructurings partly offset by a $3.6 million increase in SG&A expenses and a $5.2 million increase in depreciation and amortization expenses.

Buildings On-net. As of September 30, 2006 and 2007 we had a total of 1,094 and 1,189 on-net buildings connected to our network, respectively.

Liquidity and Capital Resources

In assessing our liquidity, management reviews and analyzes our current cash balances on-hand, short-term investments, accounts receivable, accounts payable, capital expenditure commitments, and required capital lease and debt payments and other obligations.

Cash Flows

The following table sets forth our consolidated cash flows for the nine months ended September 30, 2006 and nine months ended September 30, 2007.

	Nine months ended September 30,
	2006			2007
	(in thousands)
Net cash provided by operating activities	$	4,825		$	35,169
Net cash used in investing activities		(16,645	)		(26,661	)
Net cash provided by financing activities		30,523			128,666
Effect of exchange rates on cash		428			425

Net increase in cash and cash equivalents during period	$	19,131		$	137,599

Net Cash Provided by Operating Activities. Our primary sources of operating cash are receipts from our customers who are billed on a monthly basis for our services. Our primary uses of operating cash are payments made to our vendors and employees. Net cash provided by operating activities was $4.8 million for the nine months ended September 30, 2006 compared to net cash provided by operating activities of $35.2 million for the nine months ended September 30, 2007. The increase in cash provided by operating activities is due to an increase in our operating profit and an improvement in the changes in operating assets and liabilities from a use of cash of $5.9 million for the nine months ended September 30, 2006 to an increase of cash of $4.0 million for the nine months ended September 30, 2007.

Net Cash Used In Investing Activities. Net cash used in investing activities was $16.6 million for the nine months ended September 30, 2006 and $26.7 million for the nine months ended September 30, 2007. Our primary use of investing cash for the nine months ended September 30, 2006 was $17.9 million for the purchases of property and equipment. Our primary source of investing cash for the nine months ended September 30, 2006 was $1.2 million from the maturities of short-term investments. Our primary use of investing cash for the nine months ended September 30, 2007 was $26.1 million for the purchases of property and equipment and $0.6 million for the purchase of short-term investments. The increase in purchases of property and equipment from the nine months ended September 30, 2006 to the nine months ended September 30, 2007 is primarily due to our network expansion activities.

Net Cash Used In Financing Activities. Net cash provided by financing activities was $30.5 million for the nine months September 30, 2006. Net cash provided by financing activities was $128.7 million for the nine months September 30, 2007. Our primary use of financing cash for the nine months ended September 30, 2006 was $6.1 million of principal payments under our capital lease obligations. Our primary use of financing cash for the nine months ended September 30, 2007 was $51.9 million for the purchase of shares of our common stock, $10.2 million for the repayment of our convertible subordinated notes on their June 15, 2007 maturity date and $5.5 million of principal payments under our capital lease obligations. Our primary source of financing cash for the nine months ended

September 30, 2006 was $36.5 million of net proceeds from a public offering of common stock. Our primary source of financing cash for the nine months ended September 30, 2007 was $195.5 million of proceeds from the issuance of our 1.00% Convertible Senior Notes and $1.1 million of proceeds from the exercises of stock options.

Cash Position and Indebtedness

Our total cash and cash equivalents and short-term investments were $180.9 million at September 30, 2007. Our total indebtedness, net of discount, at September 30, 2007 was $286.6 million. Our total indebtedness includes $90.9 million of capital lease obligations for dark fiber primarily under 15-25 year IRUs, of which approximately $7.3 million is considered a current liability. These capital lease obligations will be paid over a weighted average remaining term of approximately twelve years.

$50.0 Million Share Buyback Program

In August 2007, our board of directors approved a common stock buyback program (the "Buyback Program"). Under the Buyback Program we are authorized to purchase up to $50.0 million of our common stock prior to December 31, 2008. In September 2007, we purchased approximately 194,000 shares of our common stock for approximately $4.4 million under the Buyback Program. These common shares were subsequently retired. Of the total $4.4 million commitment $1.8 million was paid in September 2007 and $2.6 million was paid in October 2007.

Convertible Senior Notes

In June 2007, we issued 1.00% Convertible Senior Notes (the "Notes") due June 15, 2027, for an aggregate principal amount of $200.0 million in a private offering for resale to qualified institutional buyers pursuant to SEC Rule 144A. The Notes are unsecured and bear interest at 1.00% per annum. The Notes will rank equally with any future senior debt and senior to any future subordinated debt and will be effectively subordinated to all of our subsidiary's existing and future liabilities and to any secured debt that we may issue to the extent of the value of the collateral. Interest is payable in cash semiannually in arrears on June 15 and December 15, of each year, beginning on December 15, 2007. We received proceeds of approximately $195.5 million after deducting the original issue discount of 2.25%. We used $10.6 million of the proceeds to repay principal and accrued interest on our existing convertible subordinated notes on June 15, 2007 and approximately $50.1 million to repurchase approximately 1.8 million shares of our common stock. These 1.8 million common shares were subsequently retired. We intend to use the remaining proceeds for general corporate purposes and to fund the Buy-back Program.

The Notes are convertible into shares of our common stock at an initial conversion price of $49.18 per share, or 20.3355 shares for each $1,000 principal amount of Notes, subject to adjustment for certain events as set forth in the indenture. Upon conversion of the Notes, we will have the right to deliver shares of our common stock, cash or a combination of cash and shares of our common stock. The Notes are convertible (i) during any fiscal quarter after the fiscal quarter ending September 30, 2007, if the closing sale price of our common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 130% of the conversion price in effect on the last trading day of the immediately preceding fiscal quarter, or (ii) specified corporate transactions occur, or (iii) the trading price of the Notes falls below a certain threshold, or (iv) if we call the Notes for redemption, or (v) on or after April 15, 2027 until maturity. In addition, following specified corporate transactions, we will increase the conversion rate for holders who elect to convert Notes in connection with such corporate transactions, provided that in no event may the shares issued upon conversion, as a result of adjustment or otherwise, result in the issuance of more than 35.5872 common shares per $1,000 principal amount, or approximately 7.1 million shares. The Notes include an "Irrevocable Election of Settlement" whereby we may choose,

in our sole discretion, and without the consent of the holders of the Notes, to waive our right to settle the conversion feature in either cash or stock or in any combination at our option.

The Notes may be redeemed by us at any time after June 20, 2014 at a redemption price of 100% of the principal amount plus accrued interest. Holders of the Notes have the right to require us to repurchase for cash all or some of their Notes on June 15, 2014, 2017 and 2022 and upon the occurrence of certain designated events at a redemption price of 100% of the principal amount plus accrued interest.

Under the terms of the Notes, we are required to use reasonable efforts to file and maintain a shelf registration statement with the SEC covering the resale of the Notes and the common stock issuable on the conversion of the Notes. If we fail to meet these terms, we will be required to pay special interest on the Notes in the amount of 0.25% for the first 90 days after the occurrence of the failure to meet and 0.50% thereafter. In addition to the special interest, additional interest of 0.25% per annum will accrue in the event of default as defined in the indenture. We filed a shelf registration statement registering the Notes and common stock issuable on conversion of the Notes in July 2007.

Convertible Subordinated Notes

Our $10.2 million 7.50% convertible subordinated notes were due on June 15, 2007. These notes and accrued interest were paid on June 15, 2007 with part of the proceeds from the Notes.

Contractual Obligations and Commitments

For our contractual obligations and commitments see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the year ended December 31, 2006. The long-term debt component of our contractual obligations and commitments has changed materially since December 31, 2006 due to the issuance of our Convertible Senior Notes. The terms of our Convertible Senior Notes are described above.

Future Capital Requirements

We believe that our cash on hand and cash generated from our operating activities will be adequate to meet our working capital, capital expenditure, debt service and other cash requirements if we execute our business plan.

Any future acquisitions or other significant unplanned costs or cash requirements may require that we 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, reduce our planned increase in our sales and marketing efforts, or require us to otherwise alter our business plan or take other actions that could have a material adverse effect on our business, results of operations and financial condition. If issuing equity securities raises additional funds, substantial dilution to existing stockholders may result.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies and Significant Estimates

Management believes that as of September 30, 2007, there have been no material changes to our critical accounting policies and significant estimates from those listed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations of our annual report on Form 10-K for the year ended December 31, 2006, except as noted below:

•: We evaluated the embedded conversion option of our 1.00% Convertible Senior Notes (the "Notes") in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", EITF Issue No. 00-19 "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company's Own Stock" and EITF Issue No. 01-6 "The Meaning of Indexed to a Company's Own Stock", and concluded that the embedded conversion option contained within the Notes should not be accounted for separately because the conversion option is indexed to our common stock and would be classified within stockholders' equity, if issued on a standalone basis.
•: We evaluated the terms of the Notes for a beneficial conversion feature in accordance with EITF No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and EITF No. 00-27, "Application of Issue 98-5 to Certain Convertible Instruments" and concluded that there was no beneficial conversion feature at the commitment date based on the conversion rate of the Notes relative to the commitment date stock price. We will continue to evaluate potential future beneficial conversion charges based upon potential future triggering conversion events.

Recent accounting pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"). The objective of the statement is to define fair value, establish a framework for measuring fair value and expand disclosures about fair value measurements. SFAS 157 will be effective for interim and annual reporting periods beginning after November 15, 2007. We have not yet assessed the impact of this statement on our financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 will be effective for the first fiscal year that begins after November 15, 2007. We have not yet determined whether we will adopt the alternatives provided in this statement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For quantitative and qualitative disclosures about market risk see Item 7A "Quantitative and Qualitative Disclosures About Market Risk," of our annual report on Form 10-K for the year ended December 31, 2006. Our exposures to market risk have not changed materially since December 31, 2006.

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 disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes 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 control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control 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 more significant of these proceedings are discussed in Note 5 of our interim condensed consolidated financial statements.

ITEM 1A. RISK FACTORS

We need to retain existing customers and continue to add new customers in order to become profitable and remain cash flow positive.

In order to become profitable and remain consistently cash flow positive, we need to both retain existing customers and continue to add a large number of new customers. The precise number of additional customers required for us to become profitable and remain consistently cash flow positive is dependent on a number of factors, including the turnover of existing customers and the revenue mix among customers. We may not succeed in adding customers if our sales and marketing plan is unsuccessful. In addition, many of our target customers are existing businesses that are already purchasing Internet access services from one or more providers, often under a contractual commitment, and it has been our experience that such target customers are often reluctant to switch providers due to costs associated with switching providers. Further, as some of our customers grow larger they may decide to build or otherwise acquire their own Internet networks. While no single customer accounted for more than approximately 2.7% of our revenues for the nine months ended September 30, 2007, a migration of a few very large Internet users to their own networks could impair our growth.

We are experiencing rapid growth of our business and operations and we may not be able to efficiently manage our growth.

We have rapidly grown our company through acquisitions of companies, assets and customers as well as implementation of our own network expansion and the acquisition of new customers through our own sales efforts. Our expansion places significant strains on our management, operational and financial infrastructure. Our ability to manage our growth will be particularly dependent upon our ability to:

•: expand, develop and retain an effective sales force and qualified personnel;
•: maintain the quality of our operations and our service offerings;
•: maintain and enhance our system of internal controls to ensure timely and accurate compliance with our regulatory reporting requirements; and

•: expand our accounting and operational information systems in order to support our growth.

If we fail to implement these measures successfully, our ability to manage our growth will be impaired.

We may experience delays and additional costs in expanding our on-net buildings.

Our plan for growth requires that we add carrier neutral data centers and other building to our network. We may be unsuccessful at identifying appropriate carrier neutral data centers and buildings or negotiating favorable terms for acquiring access to such locations, and consequently, may experience difficulty in adding customers to our network and fully using the network's capacity.

We depend upon our key employees and may be unable to attract or retain sufficient qualified personnel.

Our future performance depends upon the continued contribution of our executive management team and other key employees, in particular, our Chairman and Chief Executive Officer, Dave Schaeffer. As founder of our company, Mr. Schaeffer's knowledge of our business combined with his engineering background and industry experience make him particularly well-suited to lead our company.

Our connections to the Internet require us to establish and maintain relationships with other providers, which we may not be able to maintain.

The Internet is composed of various public and private network providers who operate their own networks and interconnect them at public and private interconnection points. Our network is one such network. In order to obtain Internet connectivity for our network, we must establish and maintain relationships with other providers and incur the necessary capital costs to locate our equipment and connect our network at these various interconnection points.

By entering into what are known as settlement-free peering arrangements, providers agree to exchange traffic between their respective networks without charging each other. Our ability to avoid the higher costs of acquiring dedicated network capacity and to maintain high network performance is dependent upon our ability to establish and maintain peering relationships. The terms and conditions of our peering relationships may also be subject to adverse changes, which we may not be able to control. For example, several network operators with large numbers of individual users are arguing that they should be able to charge or charge more to network operators and businesses that send traffic to those users. If we are not able to maintain or increase our peering relationships in all of our markets on favorable terms, we may not be able to provide our customers with high performance or affordable services, which could have a material adverse effect on our business. We have in the past encountered some disputes with certain of our providers regarding our peering arrangements, but we have generally been able to route our traffic through alternative peering arrangements, resolve such disputes, or terminate such peering arrangements with a minimal adverse impact on our business. In the past we had two such disputes that resulted in a temporary disruption of the exchange of traffic between our network and the network of the other carrier. We continue to experience resistance from certain incumbent telephone companies, especially in Europe, to the upgrade of settlement free peering connections necessary to accommodate the growth of traffic we send to such carriers. We cannot assure you that we will be able to continue to establish and maintain relationships with providers or favorably resolve disputes with providers.

We make some of our connections to other Internet networks pursuant to agreements through carriers that make data transmission capacity available to us at negotiated rates. In some instances these agreements have minimum and maximum volume commitments. If we fail to meet the minimum, or exceed the maximum, volume commitments, our costs may rise.

Our business could suffer because telephone companies and cable companies may provide better delivery of Internet content originating on their own networks.

Broadband connections provided by cable TV and telephone companies have become the predominant means by which consumers connect to the Internet. The providers of these broadband connections may treat Internet content delivered from different sources differently. The possibility of this has been characterized as an issue of "net neutrality." As many of our customers operate websites and services that deliver content to consumers our ability to sell our services would be hurt if Internet content delivered by us was less easily received by consumers than Internet content delivered by others.

We have substantial debt which we may not be able to repay when due.

We have $200.0 million of senior convertible notes outstanding. The holders of the notes have the right to compel us to repurchase for cash on June 15, 2014, June 15, 2017 and June 15, 2022, all or some of their notes. They also have the right to be paid the principal upon default and upon certain designated events, such as certain changes of control. We may not have sufficient funds to pay the principal at the time we are obligated to do so, which could result in bankruptcy, or we may only be able to raise the funds on unfavorable terms.

The holders of our senior convertible notes have the right to convert their notes to common stock.

The holders of our senior convertible notes are under certain circumstances able to convert their notes into common stock at a conversion price of $49.18 per share of common stock and to obtain additional shares of common stock. If our share price exceeds $49.18 and the conversion right is exercised by the holders of the notes the number of our shares of common stock outstanding will increase which could reduce further appreciation in our stock price and impact our per share earnings. Rather than issue the stock we are permitted to pay the cash equivalent in value to the stock to be issued. We might not have sufficient funds to do this or doing so might have other detrimental impacts on us.

We have historically incurred operating losses and these losses may continue for the foreseeable future.

Since we initiated operations in 2000, we have generated operating losses and these losses may continue for the foreseeable future. In 2005 we had an operating loss of $62.1 million, in 2006 we had an operating loss of $46.6 million and in the nine months ended September 30, 2007 we had an operating loss of $23.2 million. As of September 30, 2007, we had an accumulated deficit of $289.0 million. Continued losses may prevent us from pursuing our strategies for growth or may require us to seek unplanned additional capital and could cause us to be unable to meet our debt service obligations, capital expenditure requirements or working capital needs.

Our operations outside of the United States expose us to economic, regulatory and other risks.

The nature of our operations outside of the U.S. involves a number of risks, including:

•: fluctuations in currency exchange rates;
•: exposure to additional regulatory requirements, including import restrictions and controls, exchange controls, tariffs and other trade barriers;
•: difficulties in staffing and managing our foreign operations;
•: changes in political and economic conditions; and
•: exposure to additional and potentially adverse tax regimes.

As we continue to expand our business outside of the U.S., our success will depend, in part, on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks and grow our operations outside of the U.S., may have a material adverse effect on our business and results of operations.

Fluctuations in foreign exchange rates may adversely affect our financial position and results of operations.

Our operations outside of the U.S. expose us to currency fluctuations and exchange rate risk. For example, while we record revenues and financial results from our European operations in euros, these results are reflected in our consolidated financial statements in U.S. dollars. Therefore, our reported results are exposed to fluctuations in the exchange rates between the U.S. dollar and the Euro. In particular, we fund the Euro-based operating expenses and associated cash flow requirements of our European operations, including IRU obligations, in U.S. dollars. Accordingly, in the event that the Euro strengthens versus the dollar to a greater extent than we anticipate, the expenses and cash flow requirements associated with our European operations may be significantly higher in U.S. dollar terms than planned.

Our business could suffer delays and problems due to the actions of network providers on whom we are partially dependent.

Our off-net customers are connected to our network by means of communications lines that are provided as services by local telephone companies and others. We may experience problems with the installation, maintenance and pricing of these lines and other communications links, which could adversely affect our results of operations and our plans to add additional customers to our network using such services. We have historically experienced installation and maintenance delays when the network provider is devoting resources to other services, such as traditional telephony. We have also experienced pricing problems when a lack of alternatives allows a provider to charge high prices for services in an area. We attempt to reduce this problem by using many different providers so that we have alternatives for linking a customer to our network. Competition among the providers tends to improve installation, maintenance and pricing.

If the information systems that we depend on to support our customers, network operations, sales and billing do not perform as expected, our operations and our financial results may be adversely affected.

We rely on complex information systems to operate our network and support our other business functions. Our ability to track sales leads, close sales opportunities, provision services and bill our customers for those services depends upon the effective integration of our various information systems. If our systems, individually or collectively, fail or do not perform as expected, our ability to process and provision orders, to make timely payments to vendors and to ensure that we collect revenue owed to us would be adversely affected. Such failures or delays could result in increased capital expenditures, customer and vendor dissatisfaction, loss of business or the inability to add new customers or additional services, all of which would adversely affect our business and results of operations.

We may have difficulty intercepting communications as required by the U.S. Communications Assistance for Law Enforcement Act.

The U.S. Communications Assistance for Law Enforcement Act requires that we be able to intercept communications when required to do so by law enforcement agencies. We may experience difficulties and incur significant costs in complying with the law. If we are unable to comply with the laws we could be subject to fines of up to $1 million per event and other penalties.

Our business could suffer from an interruption of service from our fiber providers.

The carriers from whom we have obtained our inter-city and intra-city dark fiber maintain that fiber. If these carriers fail to maintain the fiber or disrupt our fiber connections for other reasons, such as business disputes with us and governmental takings, our ability to provide service in the affected markets or parts of markets would be impaired. The companies that maintain our inter-city dark fiber and many of the companies that maintain our intra-city dark fiber are also competitors of ours. Consequently, they may have incentives to act in ways unfavorable to us. While we have successfully mitigated the effects of prior service interruptions and business disputes in the past, we may incur

significant delays and costs in restoring service to our customers in connection with future service interruptions, and we may lose customers if delays are substantial.

Our business depends on agreements with colocation operators, which we could fail to obtain or maintain.

Our business depends upon access to customers in carrier neutral colocation centers, which are facilities in which many large users of the Internet house the computer servers that deliver content and applications to users by means of the Internet and provide access to multiple Internet access networks. Most colocation centers with which we deal allow any carrier to operate within the facility (for a standard fee). We expect to enter into additional colocation agreements as part of our growth plan. Current government regulations do not require colocation operators to allow all carriers access on terms that are reasonable or nondiscriminatory. We have been successful in obtaining agreements with these operators in the past and have generally found that the operators want to have us in their colocation facilities because we offer low-cost, high capacity Internet service to their other customers. Any deterioration in our existing relationships with these colocation center operators could harm our marketing efforts and could substantially reduce our potential customer base.

Our business depends on license agreements with building owners and managers, which we could fail to obtain or maintain.

Our business depends upon our in-building networks. Our in-building networks depend on access agreements with building owners or managers allowing us to install our in-building networks and provide our services in the buildings. These agreements typically have terms of five to ten years, with one or more renewal options. Any deterioration in our existing relationships with building owners or managers could harm our marketing efforts and could substantially reduce our potential customer base. We expect to enter into additional access agreements as part of our growth plan. Current federal and state regulations do not require building owners to make space available to us or to do so on terms that are reasonable or nondiscriminatory. While the FCC has adopted regulations that prohibit common carriers under its jurisdiction from entering into exclusive arrangements with owners of multi-tenant commercial office buildings, these regulations do not require building owners to offer us access to their buildings. Building owners or managers may decide not to permit us to install our networks in their buildings or may elect not to renew or amend our access agreements. The initial term of most of our access agreements will conclude in the next several years. Most of these agreements have one or more automatic renewal periods and others may be renewed at the option of the landlord. While we have historically been successful in renewing these agreements and no single building access agreement is material to our success, the failure to obtain or maintain a number of these agreements would reduce our revenue, and we might not recover our costs of procuring building access and installing our in-building networks.

We may not be able to obtain or construct additional building laterals to connect new buildings to our network.

In order to connect a new building to our network we need to obtain or construct a lateral from our metropolitan network to the building. We may not be able to obtain fiber in an existing lateral at an attractive price from a provider and may not be able to construct our own lateral due to the cost of construction or municipal regulatory restrictions. Failure to obtain fiber in an existing lateral or to construct a new lateral could keep us from adding new buildings to our network and from increasing our revenues.

We may not be able to expand into new markets due to the unavailability of dark fiber.

Our ability to expand our network into new markets or within existing markets deemed strategic to our business is dependent on our ability to acquire the right to use optical fiber to serve these strategic locations. We acquire such fiber from other carriers that have constructed or are constructing optical fiber networks. If we can not acquire dark fiber in certain geographical areas because it is unavailable

or too expensive we will be unable to expand into those areas and our ability to geographically expand our business will be reduced.

Impairment of our intellectual property rights and our alleged infringement on other companies' intellectual property rights could harm our business.

We are aware of several other companies in our and other industries that use the word "Cogent" in their corporate names. One company has informed us that it believes our use of the name "Cogent" infringes on their intellectual property rights in that name. If such a challenge is successful, we could be required to change our name and lose the goodwill associated with the Cogent name in our markets.

The sector in which we operate is highly competitive, and we may not be able to compete effectively.

We face significant competition from incumbent carriers, Internet service providers and facilities- based network operators. Relative to us, many of these providers have significantly greater financial resources, more well-established brand names, larger customer bases, and more diverse strategic plans and service offerings.

Intense competition from these traditional and new communications companies has led to declining prices and margins for many communications services, and we expect this trend to continue as competition intensifies in the future. Decreasing prices for high-speed Internet services have somewhat diminished the competitive advantage that we have enjoyed as a result of our service pricing.

Our competitors may also introduce new technology or services that make our services less attractive to potential customers. For example, some providers are introducing a new version of the Internet protocol (Ipv6) that we do not plan to introduce at this time. If this protocol becomes important to Internet users our ability to compete may be lessened or we may have to incur additional costs in order to accommodate this technology.

Network failure or delays and errors in transmissions expose us to potential liability.

Our network uses a collection of communications equipment, software, operating protocols and proprietary applications for the high-speed transportation of large quantities of data among multiple locations. Given the complexity of our network, it is possible that data will be lost or distorted. Delays in data delivery may cause significant losses to one or more customers using our network. Our network may also contain undetected design faults and software bugs that, despite our testing, may not be discovered in time to prevent harm to our network or to the data transmitted over it. The failure of any equipment or facility on the network could result in the interruption of customer service until we effect necessary repairs or install replacement equipment. Network failures, delays and errors could also result from natural disasters, power losses, security breaches, computer viruses, denial of service attacks and other natural or man-made events. Our off-net services are dependent on the network of other providers or on local telephone companies. Network failures, faults or errors could cause delays or service interruptions, expose us to customer liability or require expensive modifications that could have a material adverse effect on our business.

We may not successfully make or integrate acquisitions or enter into strategic alliances.

As part of our growth strategy, we intend to pursue selected acquisitions and strategic alliances. To date, we have completed 13 acquisitions. We compete with other companies for acquisition opportunities and we cannot assure you that we will be able to effect future acquisitions or strategic alliances on commercially reasonable terms or at all. Even if we enter into these transactions, we may experience:

•: delays in realizing or a failure to realize the benefits we anticipate;
•: difficulties or higher-than-anticipated costs associated with integrating any acquired companies, products or services into our existing business;
•: attrition of key personnel from acquired businesses;

•: unexpected costs or charges; or
•: unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations.

In the past, our acquisitions have often included assets, service offerings and financial obligations that are not compatible with our core business strategy. We have expended management attention and other resources to the divestiture of assets, modification of products and systems as well as restructuring financial obligations of acquired operations. In most acquisitions, we have been successful in renegotiating long-term agreements that we have acquired relating to long distance and local transport of data and IP traffic. If we are unable to satisfactorily renegotiate such agreements in the future or with respect to future acquisitions, we may be exposed to large claims for payment for services and facilities we do not need.

Consummating these transactions could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have a material adverse effect on our business, financial condition and results of operations. Because we have purchased financially distressed companies or their assets, and may continue to do so in the future, we have not had, and may not have, the opportunity to perform extensive due diligence or obtain contractual protections and indemnifications that are customarily provided in corporate acquisitions. As a result, we may face unexpected contingent liabilities arising from these acquisitions. We may also issue additional equity in connection with these transactions, which would dilute our existing shareholders.

Following an acquisition, we have experienced a decline in revenue attributable to acquired customers as these customers' contracts have expired and they have entered into standard Cogent customer contracts at generally lower rates or have chosen not to renew service with us. We anticipate that we will experience similar declines with respect to customers we may acquire.

As an Internet access provider, we may incur liability for information disseminated through our network.

The law relating to the liability of Internet access providers and on-line services companies for information carried on or disseminated through their networks is unsettled. As the law in this area develops and as we expand our international operations, the potential imposition of liability upon us for information carried on and disseminated through our network could require us to implement measures to reduce our exposure to such liability, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings. Any costs that are incurred as a result of such measures or the imposition of liability could harm our business.

Legislation and government regulation could adversely affect us.

As an enhanced service provider, we are not subject to substantial regulation by the FCC or the state public utilities commissions in the United States. Internet service is also subject to minimal regulation in Europe and in Canada. If we decide to offer traditional voice services or otherwise expand our service offerings to include services that would cause us to be deemed a common carrier, we will become subject to additional regulation. Additionally, if we offer voice service using IP (voice over IP) or offer certain other types of data services using IP we may become subject to additional regulation. This regulation could impact our business because of the costs and time required to obtain necessary authorizations, the additional taxes than we may become subject to or may have to collect from our customers, and the additional administrative costs of providing voice services, and other costs. Even if we do not decide to offer additional services, governmental authorities may decide to impose additional regulation and taxes upon providers of Internet service. All of these could inhibit our ability to remain a low cost carrier.

Much of the law related to the liability of Internet service providers remains unsettled. For example, many jurisdictions have adopted laws related to unsolicited commercial email or "spam" in the last several years. Other legal issues, such as the sharing of copyrighted information, transborder

data flow, universal service, and liability for software viruses could become subjects of additional legislation and legal development. We cannot predict the impact of these changes on us. Regulatory changes could have a material adverse effect on our business, financial condition or results of operations.

Terrorist activity throughout the world and military action to counter terrorism could adversely impact our business.

The September 11, 2001 terrorist attacks in the United States and the continued threat of terrorist activity and other acts of war or hostility have had, and may continue to have, an adverse effect on business, financial and general economic conditions internationally. Effects from these events and any future terrorist activity, including cyber terrorism, may, in turn, increase our costs due to the need to provide enhanced security, which would adversely affect our business and results of operations. These circumstances may also damage or destroy the Internet infrastructure and may adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our network access points. We are particularly vulnerable to acts of terrorism because our largest customer concentration is located in New York, our headquarters is in Washington, D.C., and we have significant operations in Paris and Madrid, cities that have historically been targets for terrorist attacks.

We issue projected results and estimates for future periods from time to time, and such projections and estimates are subject to inherent uncertainties and may prove to be inaccurate.

Financial information, results of operations and other projections that we may issue from time to time are based upon our assumptions and estimates. While we believe these assumptions and estimates to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. You should understand that certain unpredictable factors could cause our actual results to differ from our expectations and those differences may be material. No independent expert participates in the preparation of these estimates. These estimates should not be regarded as a representation by us as to our results of operations during such periods as there can be no assurance that any of these estimates will be realized. In light of the foregoing, we caution you not to place undue reliance on these estimates. These estimates constitute forward-looking statements.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On August 14, 2007, we announced that on August 14, 2007 our Board of Directors had authorized a plan to permit the repurchase of up to $50 million of our common stock in negotiated and open market transactions through December 31, 2008. As of September 30, 2007, we had purchased 193,989 shares of our common stock pursuant to this authorization for an aggregate of $4,436,398; approximately $45,563,602 remained available for such negotiated and open market transactions concerning our common stock. We may purchase shares from time to time depending on market, economic, and other factors. The authorization will continue unless withdrawn by the Board of Directors.

The following table summarizes our common stock repurchases during the third quarter of 2007 made pursuant to this authorization. During the quarter, we did not purchase shares outside of this program, and all purchases were made by or on behalf of the Company and not by any "affiliated purchaser" (as defined by Rule 10b-18 of the Securities Exchange Act of 1934).

Issuer Purchases of Equity Securities

Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or (Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2007	N/A		N/A	N/A		N/A
August 1-13, 2007	N/A		N/A	N/A		N/A
August 14-31, 2007	—		—	—	$	50,000000
September 1-30, 2007	193,989	$	22.85	193,989	$	45,563,602

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

None

ITEM 6. EXHIBITS.

(a): Exhibits

Exhibit Number		Description
3.1		Amended and Restated Bylaws in effect from September 17, 2007
31.1		Certification of Chief Executive Officer pursuant of Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith)
31.2		Certification of Chief Financial Officer pursuant of Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith)
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)

(b): Reports on Form 8-K.

During the three months ended September 30, 2007, the Company filed three reports on Form 8-K containing the following information and filed on the following dates:

Date		Description
August 7, 2007		We issued a press release summarizing our financial results for the quarter ended June 30, 2007.
August 14, 2007		We issued a press release announcing that our Board of Directors had authorized a plan to permit the repurchase of up to $50 million of shares of our common stock in negotiated and open market transactions through December 31, 2008.
September 19, 2007		We adopted an amendment to our bylaws to permit direct registration of our stock as required by NASDAQ stock exchange listing rules.

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 8, 2007	COGENT COMMUNICATIONS GROUP, INC.
	By:	/s/ DAVID SCHAEFFER Name: David Schaeffer Title: Chairman of the Board and Chief Executive Officer
Date: November 8, 2007	By:	/s/ THADDEUS G. WEED Name: Thaddeus G. Weed Title: Chief Financial Officer (Principal Accounting Officer)