UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________

FORM 10-K

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

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

FOR THE TRANSITION PERIOD FROM JULY 1, 2000 TO DECEMBER 31, 2000

COMMISSION FILE NUMBER: 333-50049

DTI HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

MISSOURI 43-1828147

(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)

8112 MARYLAND AVE, 4TH FLOOR

ST. LOUIS, MISSOURI 63105

(Address of principal executive offices)

(314) 880-1000

(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

No non-affiliates of the registrant own common stock of the
registrant.

DOCUMENTS INCORPORATED BY REFERENCE

None

DTI HOLDINGS, INC.

FORM 10-K

FOR THE TRANSITION PERIOD FROM JULY 1, 2000 TO DECEMBER 31, 2000

TABLE OF CONTENTS
PAGE

PART I

Item 1. Business 4
Item 2. Properties 31
Item 3. Legal Proceedings 31
Item 4. Submission of Matters to a Vote of 31
Security Holders

PART II

Item 5. Market for Registrant's Common Equity 32
and Related Stockholder Matters
Item 6. Selected Financial Data 34
Item 7. Management's Discussion and Analysis 36
of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative 45
Disclosures about Market Risk
Item 8. Financial Statements and 45
Supplementary Data
Item 9. Changes in and Disagreements with 45
Accountants on Accounting and
Financial Disclosure

PART III

Item 10. Directors and Executive Officers of 46
the Registrant
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain 53
Beneficial Owners and Management
Item 13. Certain Relationships and Related 54
Transactions

PART IV

Item 14. Exhibits, Financial Statement 55
Schedules and Reports on Form 8-K

Signatures
Exhibit Index

FORWARD-LOOKING STATEMENTS

We have included "forward-looking statements" throughout this
document. These statements describe our attempt to predict future
events. We use the words "believe," "anticipate," "expect,"
"well" and "estimated completion" similar expressions to identify
forward-looking statements. You should be aware that these
forward-looking statements are subject to a number of risks,
assumptions, and uncertainties, such as:

- - Risks associated with our capital requirements and existing
debt;
- - Risks associated with increasing competition in the
telecommunications industry, including industry over-capacity and
declining prices;
- - Changes in laws and regulations that govern the
telecommunications industry;
- - Risks related to obtaining significant revenue increases;
- - Risks related to continuing our network expansion without
delays, including the need to obtain permits and rights-of-way
and performance penalties for failure to meet delivery deadlines;
and
- - Other risks discussed below under "Risk Factors."

This list is only an example of some of the risks that may affect
our forward-looking statements. If any of these risks or
uncertainties materialize (or if they fail to materialize), or if
the underlying assumptions are incorrect, then our results may
differ materially from those we have projected in the forward-
looking statements. The Company does not intend to update these
statements to reflect future events or circumstances, except to
the extent, if any, required by law.

PART I

ITEM 1. BUSINESS

In this Annual Report on Form 10-K, we will refer to DTI
Holdings, Inc., a Missouri Corporation organized in 1997, as "DTI
Holdings", the "Company", "we", "us", and "our". We will refer
to Digital Teleport, Inc., our wholly-owned operating subsidiary
organized in 1989, as "Digital Teleport."

INTRODUCTION

We are a facilities-based communications company that is creating
an approximately 18,700 route mile fiber optic network comprised
of approximately 20 regional rings interconnecting primary,
secondary and tertiary cities in 36 states and the District of
Columbia. By providing high-capacity voice and data transmission
services to and from secondary and tertiary cities, we intend to
become a leading wholesale provider of regional communications
transport services to interexchange carriers ("IXCs") and other
communications companies ("carrier's carrier services"). We are
offering our carrier customers dedicated, virtual circuits
through the exclusive use of high capacity, ring-redundant
optical windows on the regional rings throughout our network. We
will use the optical windows to offer our carrier customers a
high quality, ring-redundant means to efficiently deliver their
traffic and data to a significant number of end-users along these
rings. Our regional rings will also offer carriers a means to
aggregate, for further long haul transport, the outgoing traffic
of that carrier's customers along such rings to regional points
of interconnection between the carrier's network and our network
for further transport by the carrier. We also offer our carrier
customers point-to-point non-ring protected transport services on
our facilities. Customers utilizing carrier's carrier services
include Tier 1 and Tier 2 carriers and other communication
companies. We also provide private line services to targeted
business and governmental end-user customers ("end-user
services").

On February 8, 2001, KLT Telecom Inc. (KLTT), the
telecommunications subsidiary of Kansas City Power & Light
Company ("KCP&L") acquired 20,093,936 shares (30.7 percent) of
Company common stock from Richard D. Weinstein, former Chairman,
President and CEO of the Company, for $33.6 million in cash.
KLTT also completed a tender offer for warrants which had become
detached from the Senior Discount Notes pursuant to which KLTT
acquired warrants to purchase 3,434,723 shares (5 percent) of
Company common stock. In addition, KLTT acquired a separate
warrant that had been issued to a bank lender entitling it to
purchase 303,030 shares of Company common stock. As a result of
these acquisition, as of March 31, 2001 KLTT owned 82.1 percent
of the Company's common stock on a fully-diluted basis, excluding
shares underlying stock options granted under the Company's 2001
Stock Option Plan. Shares underlying options granted under that
plan are excluded from this calculation because each optionee,
upon exercise of the options, is entitled only to receive cash in
lieu of shares in an amount equal to the spread between the fair
market of the shares and the exercise price in the event that
such exercise would either (i) cause the Company to cease being a
member of the affiliated group with KLTT for federal income tax
purposes, or (ii) cause a change of control as defined in the
Indenture, as amended, for the Senior Discount Notes.

Our principal business office is located at 8112 Maryland Avenue
- - 4th Floor, St. Louis, Missouri 63105, United States, and our
telephone number is (314) 880-1000.

RECENT EVENTS

approximately $2.9 million. These reductions resulted in a net
benefit to the Company of $95.6 million consisting of a net gain
on early extinguishment of debt to the Company of $57.3 million
and a tax benefit of $38.3 million as a result of an adjustment
in the Company's deferred tax valuation allowance as of February 1, 2001.
The purchase of the Senior Discount Notes also reduces the amount
of cash interest that will be due with respect to the Senior
Discount Notes by approximately $32 million annually starting in
September 2003, when these payments begin, and replaced this
interest with approximately $9.4 million in annual interest which
will be payable in accordance with the Demand Loan or its
eventual replacement financing. The consent solicitation made in
connection with the tender offer authorized certain changes in
the indenture associated with the Senior Discount Notes,
including expanding the Company's allowable secured borrowings by
an additional $194 million to a total of $294 million. These
changes also permit the Demand Loan to be secured by the stock of
the Company's subsidiaries and other financings to be secured by
the assets of the Company and its subsidiaries.

On February 8, 2001, KLTT acquired an additional 30.7 percent
of the fully diluted shares of the Company from Richard D. Weinstein,
the former Chairman, President and CEO of the Company for $33.6
million in cash. An additional 5 percent of the fully diluted
shares were purchased by KLTT through a tender offer for DTI's
outstanding warrants issued in connection with the Senior
Discount Notes and the purchase by KLTT of a separate warrant
for 1 percent of the Company's common stock, that results in
KLTT now owning 82.1 percent of DTI's fully diluted shares,
excluding shares underlying stock options granted under the
Company's 2001 Stock Option Plan.

Under the purchase agreement, Mr. Weinstein has resigned as
Chairman, President and CEO and will retain just over 15 percent
of the fully diluted ownership and a seat on the DTI board. Paul
Pierron was appointed the new President and CEO of the Company in
April 2001. KLTT also acquired Mr. Weinstein's interest in the
Company's St. Louis point-of-presence and switch facility, which
now results in the Company making payments to KLTT for use of
this facility. Additionally, as a part of the purchase agreement
in February 2001, Mr. Weinstein repaid an outstanding loan to the
Company in the amount of $1.6 million including interest, which
had resulted from the settlement of certain litigation against
the Company and Mr. Weinstein.

KLTT has also committed to provide or arrange (through guaranty
or otherwise) a revolving credit facility to the Company, to be
made in 2001 in the amount of $75 million, the proceeds of which
would be used for operations and capital expenditures as set
forth in a reasonable capital budget to be established by the
Company's Board of Directors. Under that commitment KLTT has
currently extended a demand revolving credit facility loan
("Revolving Credit Facility") of $35 million at 9.5% interest to
the Company, and is working with the Company to arrange third-
party financing in the form of a $100 million senior credit
facility ("Senior Credit Facility") for the Company. DTI will
use these combined sources of financing to complete the
construction of the planned DTI network and meet other operating
requirements.

OUR BUSINESS STRATEGY

The Company intends to become a leading wholesale provider of
long haul and regional communications transport services by
providing high-capacity voice and data transmission services in
under-served secondary and tertiary cities to interexchange
carriers ("IXC"), other communications companies and other data-
centric bandwidth customers. Key elements of DTI's business
strategy include:

COMPLETE CONSTRUCTION OF A LOW-COST NETWORK

Phase one of the Company's business strategy, the construction
and acquisition of its network backbone, is expected to be
complete by approximately December 2001. Phase two, lighting the
remainder of the network, is expected to be completed by
approximately December 2002. DTI currently offers services over
2000 miles of its network. DTI has been able to achieve a low-
cost network by (i) taking advantage of the potential cost
efficiencies provided by the network design; (ii) continuing to
deploy advanced fiber optic network technology, which lowers
operating and maintenance costs, and (iii) realizing cost
efficiencies by entering into rights-of-way agreements with
governmental authorities and trading excess fibers on Company
built routes with other telecommunications companies in exchange
for the routes necessary to complete the network.

The Company anticipates that industry pricing between major
markets will continue to remain under pressure. Achieving a low
network cost basis will provide the Company with a competitive
advantage since it will allow it to profitably offer customers
regional transport at an attractive price.

LEVERAGE INTEGRATED LONG-HAUL ROUTES, REGIONAL RINGS AND LOCAL
NETWORK DESIGN

The strategic network design will allow the Company to offer
reliable, high-capacity transmission services on a region-by-
region basis to carrier and end-user customers who seek a
competitive alternative to incumbent providers of such services.
The regional and local Synchronous Optical Network ("SONET")
rings, which provide virtually instantaneous restoration of
service in the event of a fiber cut, will interconnect primary,
secondary and tertiary markets, major IXC's points of presence
and incumbent local exchange carrier access tandems and, in
selected metropolitan areas, potential end-user customers. This
design permits DTI to provide carrier customers with reliable
transmission capacity between the carriers' network and access
tandems serving a significant number of end-users in each region.
Using a technologically advanced design, the ringed network will
provide virtually instantaneous rerouting of traffic in the event
of a fiber cut.

FOCUS ON SECONDARY AND TERTIARY MARKETS

Many secondary and tertiary markets in the United States have
limited access to high-capacity broadband networks. This is
because most major carriers have optimized their networks to
provide connectivity between Tier 1 markets where much of the
current data traffic originates and terminates. DTI's network
design, however, has been optimized to allow more economic entry
and access into underserved secondary and tertiary markets. The
Company believes that these markets will allow DTI to sell its
services on a more profitable basis than in Tier 1 markets
because of the limited competitive activity in these smaller
markets. By having connectivity as well in Tier 1 markets, DTI's
network allows for termination of this secondary and tertiary
market traffic in many Tier 1 content centers.

LEVERAGE EXPERIENCED MANAGEMENT TEAM

Our management team includes individuals with significant
experience in the deployment and marketing of telecommunications
services. Mr. Pierron was appointed President and CEO of DTI in
April 2001. From January 2000 to March 2001, Mr. Pierron was
Vice President - Sales of New Edge Networks in Vancouver, WA
responsible for all sales and support personnel for Digital Local
Exchange Company ("DLEC") in 60 markets in the West, Central and
Southeast United States. Prior to joining New Edge Networks, Mr.
Pierron was Vice President - Sales of Gabriel Communications,
Inc. in St. Louis, MO. from January 1999 to January 2000. He was
responsible for all sales and operations support for 3rd
generation

CLEC (14 markets) and establishing distribution
presence in Tier 1-3 markets. Mr. Pierron has also held various
sales management positions with Sprint PCS, AirTouch Teletrac and
Southwestern Bell over his 23 years of experience. Gary W.
Douglass our Senior Vice President and Chief Financial Officer
was previously the Executive Vice President and Chief Financial
Officer of publicly-held Roosevelt Financial Group, Inc., which
was acquired by Mercantile Bancorporation in 1997, and had
previously spent 23 years at Deloitte & Touche LLP. Jerry W.
Murphy, our President - DTI Network Services and Chief Technology
Officer, spent 18 years with MCI, having spent the last 11 years
in senior positions in engineering, network implementation and
network operations positions. William P. McDonough, our Vice
President of Network Engineering and Operations, has spent 37
years in the telecommunications industry with 34 of those years
having been spent at SBC in various engineering and operations
positions. Matt Portterfield, Senior Vice President of Sales and
Marketing, has over 20 years of telecommunications management
experience including having been the Vice President-Strategic
Sales for New Edge Networks in Vancouver, WA responsible for the
national carrier sales division for this Digital Local Exchange
Company ("DLEC") in markets thoughout the U.S and General Manager
of Gabriel Communications' in St. Louis an Integrated
Cummunications Provider ("ICP"). Daniel A. Davis, Vice President
and General Counsel joined us in June 1998 from the law firm
of Bryan Cave LLP where he practiced in the corporate transactions
and corporate finance groups, representing primarily
telecommunications and other technology based companies.

OUR BUSINESS

OUR NETWORK

DTI's network is constructed in approximately 20 regional rings
covering 36 states and the District of Columbia. The network has
access points that are intended to provide economic entry into
secondary and tertiary markets as the Company believes that its
routes are ideally suited to efficiently provide services through
its SONET ring based network.

Expected completion of the network in 2001 will place the Company
in a competitive position to provide service to secondary and
tertiary markets. The fiber DTI already has in the ground would
take a potential competitor 1-3 years to replicate if starting
from scratch today. In addition, due to the restrictions on
rights-of-way, many of the routes are impossible to replicate in
a cost efficient manner. Finally, the DTI constructed routes are
"fiber rich", which allows for greater flexibility regarding
deployment decisions. Since most of the network is not lit, there is
the flexibility for a "provision-to-suit" customer strategy. Additional
fibers are available for point-to-point, mesh, and proprietary
architectures, which allow several different networks to function
concurrently with common infrastructure. Point of Presence ("POP")
buildings and splice points located in secondary markets allow economic
access to fiber throughout the network.

[GRAPH]
MAP OF UNITED STATES SHOWING THE COMPANY'S NETWORK OF 20
REGIONAL RINGS COVERING 36 STATES AND THE DISTRICT OF COLUMBIA
[END OF GRAPH]

DTI NETWORK DESIGN

The DTI network will be exclusively fiber optic, substantially
all of which will use a self-healing SONET ring architecture to
provide virtually instantaneous rerouting in the event of a cut
in a fiber ring. Unlike DTI's planned network, many regional
communications transport methods available today do not provide
ring protection or equivalent measures of reliability that end
users are increasingly seeking from their carriers. DTI expects
that more than 90% of its network will be installed underground,
typically 36 to 48 inches under the surface, providing protection
from weather and other environmental hazards affecting the
reliability of communication connections.

The DTI network will have both high-bandwidth capacity and
flexibility as a result of:

- - High speed transmission electronics equipment.

- - High capacity DWDM equipment.

- - The selective installation on Company-built routes of high
fiber count fiber optic cables and extra conduits, providing DTI
with the ability to expand the capacity of its network and to
sell dark fiber in certain areas.

STATUS OF NETWORK DEVELOPMENT

As of April 2001, DTI has substantially completed or acquired
approximately 14,360 route miles of its planned network. Only
approximately 865 route miles remain to be constructed or
developed (see the table below). The Company also has pending or
anticipated agreements to exchange fiber with other carriers,
which, when completed, will finalize the development of its
planned nationwide network backbone.

ROUTE COMPLETION
STATUS OF CONSTRUCTION MILES DATE
------------------------------ ------ -------------
SUBSTANTIALLY COMPLETE 14,360

UNDER CONSTRUCTION OR
DEVELOPMENT 865
Springfield - Indianapolis 250 July-01
Chicago Metro 40 August-01
Atlanta - Nashville 285 September-01
Louisville - Indianapolis 100 December-01
Nashville - Louisville (duct 190 December-01
complete)

FIBER SWAPS 3,475
Florida/Georgia Rings 1,760 June-01
Indianapolis - Chicago (1) 205 July-01
Washington D.C. - 150 September-01
Philadelphia (1)
Las Vegas - Dallas 1,360 December-01
- -----------------------------------------------------------
(1) Agreement to be completed
- -----------------------------------------------------------

NETWORK ELECTRONICS

Long-haul routes on DTI's network will generally utilize Dense
Wavelength Division Multiplexing equipment. DWDM equipment
provides individual wavelength-specific circuits of OC-48 and OC-
192 capacity that carries data from different sources together on
one optical fiber, with each signal carried on its own separate
wavelength. In September 1998, DTI entered into a three-year
agreement with Cisco Systems, Inc. ("Cisco"), successor to
Pirelli's optical networking division, pursuant to which it
agreed to purchase from Cisco at least 80% of the Company's needs
for DWDM equipment. In January 2001, DTI entered into a four-
year master purchase agreement with Cisco, which included an
initial commitment to purchase $70 million in optronic equipment.
The purchase commitment is contingent upon the satisfaction of
certain financing contingencies, including the completion of the
Senior Credit Facility. Network DWDM equipment will permit DTI
to offer its carrier customers optical transport on regional
rings providing a dedicated virtual circuit that can interconnect
any two points on that regional ring. The DWDM equipment, with
the accompanying optical add/drop multiplexing ("OADM") equipment
and SONET layer, also will permit DTI to efficiently provide high
capacity telecommunications services to secondary and tertiary
markets that are currently underserved. The use of open
architecture, DWDM equipment on regional rings and long-haul
routes will also give the network the ability to inter-operate
with carrier customers' existing fiber optic transmission
systems, which have a broad range of transmission speeds and
signal formats. The network's current and planned system
architecture, with minor additions or modifications, will
accommodate asynchronous transfer mode ("ATM"), frame relay and
IP protocols.

On all routes, whether constructed by the Company or purchased,
leased or swapped from another carrier, DTI will install
centrally controllable high-bit-rate transmission electronics.
The use of such fiber optical terminal equipment will provide
customers the ability to monitor, in their own network control
centers, the optical windows on the regional rings that they
utilize. This equipment should also permit customers to utilize
their own network control centers to add and remove services on
the optical windows serving that carrier. This network design
will permit carriers to utilize DTI's network as a means to
efficiently expand their networks to areas not previously served,
to provide redundancy to their networks or to upgrade the
technology in areas already served by such networks. DTI's
network will also be capable of providing services to carriers
and end-users in increments of less than a full OC-48 optical
window, from OC-12s to T-1s and optical ethernet services.

The Company's network design standards are expected to provide
sufficient transmission capacity to meet anticipated future
increases in call volume and the development of more bandwidth-
intensive voice, data and video telecommunication uses. All
network operations are currently controlled by a network control
center in suburban St. Louis, Missouri.

HIGHWAY AND UTILITY RIGHTS-OF-WAY

Much of the Company constructed network is located in rights-of-
way obtained through strategic relationships with utilities,
state transportation departments and other governmental
authorities. To build the point-to-point segments between
population centers in Arkansas, Kansas, Missouri, Oklahoma and
future builds in Virginia, DTI has generally used rights-of-way
in the median of and along the interstate highway system. As a
result of this strategy, DTI has entered into agreements with the
Department of Transportation ("DOTs") for various states and
others that allow the Company to construct its network facilities
along specified routes. In exchange for these rights-of-way, DTI
is required to provide the DOTs either fibers, ducts, fiber optic
capacity and connection points within the network or a
combination of these services.

IRU ACQUISITIONS

A substantial portion of the DTI network has come from the
acquisition of IRUs of fiber optic facilities of other
telecommunications companies in exchange for the payment of cash
or IRUs to use DTI fiber optic facilities. In this manner, DTI
has been able to establish telecommunications facilities along
the network routes more quickly than by constructing all of its
own facilities. Additionally, a short-term lease agreement along
routes from Dallas, TX to Joplin, MO for five years with over
approximately 470 route miles and from Indianapolis, IN to
Greenwood, IN for two years with approximately 20 route miles are
in place. These short-term leases were executed in order to
provide facilities prior to a long-term solution for these routes
through the construction of, or the execution of long-term IRUs
for these routes.

METROPOLITAN NETWORK ASSETS

In addition to the long haul assets, the Company also owns
substantial metropolitan assets in nine cities.

METRO AREA ROUTE STRAND
MILES COUNT

St. Louis, MO 220 48 to 288
Kansas City, MO 200 48 to 348
Memphis, TN 30 156
Oklahoma City, OK 24 172
Ft. Smith, AR 15 48
Little Rock, AR 8 12 to 96
Springfield, MO 8 24 to 96
Tulsa, OK 5 24 to 144
Jefferson City, MO 5 24 to 48
---
TOTAL 515
---

MONITORING AND MAINTENANCE

From the network management center in St. Louis, DTI monitors
equipment and facilities, and provides technical assistance and
support 24 hours a day, year-round. Various quality measures are
monitored on an ongoing basis, with the aim of identifying
problems at an early stage before they affect the customer.
Through the use of sophisticated network management equipment,
DTI is able to effectively control bandwidth and provide
diagnostic services. DTI uses internal technicians to install
and repair electronics and to provide service to customers. The
Company uses external installers as necessary, to perform some
initial equipment installation work.

NETWORK RESILIENCE

DTI's network infrastructure is designed to provide resilience
through back-up power systems, automatic traffic re-routing and
computerized automatic network monitoring. If the network
experiences a failure of one of its links, the routing
intelligence of the equipment is designed to enable the circuit
to be transferred to the next choice route, thus ensuring circuit
delivery without affecting the customer.

DARK FIBER SALES STRATEGY

Portions of the completed network not currently lit are at times
sold in order to generate cash in order to fund capital
expenditure requirements. DTI is very selective about the
carriers to which it is willing to sell fiber. Specifically, the
Company tries to avoid selling fiber to companies with similar
strategies who may erode DTI's competitive position in
underserved markets.

OUR PRODUCTS AND SERVICES

CARRIERS' CARRIER SERVICES

Carriers' carrier services are generally the high capacity
transmission services used by IXCs, ILECs and competitive local
exchange carriers to transmit telecommunications traffic.
Customers using carriers' carrier services include:
- - Facilities-based carriers that require transmission capacity
where they have geographic gaps in their facilities, need
additional capacity or require alternative routing.
- - Non facilities-based carriers requiring transmission
capacity to carry their customers' telecommunications traffic.

DTI currently provides carriers' carrier services through
wholesale network capacity agreements. Planned carriers' carrier
services are outlined below:

OPTICAL WINDOWS

DTI offers carrier customers, through wholesale network capacity
agreements, dedicated, virtual circuits through the exclusive use
of an OC-48 to OC-192 or lesser capacity, ring redundant
wavelength of light, or optical window, on the regional rings.
DTI supplies all fiber optic electronic equipment necessary to
transmit telecommunications traffic along the regional ring. DTI
offers agreements for the provision of optical windows for a term
of years with fixed monthly payments over the term of the
agreement, regardless of the level of usage. Uses of optical
windows by an IXC can include point-to-point, dedicated data and
voice circuit communications connections, as well as redundancy
and overflow capacity for existing facilities of the IXC.
Possible uses of optical windows by ILECs include connection of
its central offices to other central offices or access tandems.
An ILEC may also use such agreements as a cost-effective way to
upgrade its network facilities. A CLEC may use optical window
agreements as a way of "filling out" its network or bypassing the
ILEC and/or IXC.

DTI is offering carrier customers the use of an OC-48 to OC-192
or lesser optical window to create a high quality, ring redundant
means to efficiently deliver its traffic to a significant number
of end-users along

these rings and aggregate, for further long
haul transport, the outgoing traffic of that carrier's customers
along such rings to regional points of interconnection between
the carrier's network and DTI's network. DTI is able to offer
this service because (i) the network is and will be physically
interconnected with major IXC POPs in a region, and (ii) the
network will typically be interconnected through DTI's own or
leased facilities to major ILEC access tandems in a region.
Currently, IXCs have to provide for transport between each of
their POPs and from each of those POPs to each access tandem in
the areas adjacent to such POPs, which can involve the use of
multiple networks and carriers. DTI's method of transporting an
IXC's traffic directly to access tandems would be attractive to
an IXC because it (i) reduces the administrative burden on the
IXC of terminating such traffic, because the IXC will have to
contract with only one carrier to reach the ILEC access tandems,
(ii) results in greater reliability, because the traffic is
transported over a newer system, with fewer potential points of
failure, and (iii) results in greater accountability, because
fewer telecommunications companies may be involved in the
delivery of such traffic.

DEDICATED BANDWIDTH SERVICES

Through the Company's dedicated bandwidth agreements, DTI
provides carriers with bandwidth capacity in increments of less
than a full OC-48, such as a DS-3. The carrier's customer in a
dedicated bandwidth agreement does not have exclusive use of any
particular strand of fiber or wavelength, but instead, has the
right to transmit a certain amount of bandwidth between two
points along the network. The carrier's customer provides a
telecommunications signal, and DTI provides all fiber and
electronic equipment necessary to transmit the signal to the end
point. This capacity may or may not be along a regional ring
providing redundancy. Dedicated bandwidth agreements typically
have terms ranging from one to five years, require the customer
to pay for such capacity regardless of the level of usage, and
require fixed monthly payments or a combination of advance
payments and subsequent monthly payments over the term of the
agreement.

OTHER WHOLESALE SERVICES

DTI offers end-user services on a wholesale basis to other
carriers for resale. For example, a private line could be leased
to an IXC to transmit the traffic of its large business
customers, which are located on or near the network from the
premises of such customers to the IXC's POPs, using the network
exclusively.

END-USER SERVICES

End-user services are telecommunications services provided to
business and governmental end-users. DTI currently provides
private line services connecting certain points on a given end-
user's private telecommunications network and in the past has
established connections between such private network and the
facilities of that end-user's long distance service provider.

PRIVATE LINE SERVICES

A private line is an unswitched, generally non-exclusive, lighted
telecommunications transmission circuit used to transport data,
voice and video communications. The customer may use a private
line for communications between otherwise unconnected points on
its internal network or to connect its facilities to a switched
IXC. Private line traffic is generally routed by a customer
through the customer's Private Branch Exchange ("PBX") facilities
to a receiving terminal on the network and then transmitted over
the network to the customer's terminal in the call recipient's
area or to the POP for the customer's long distance provider.
The current private line service agreements have terms ranging
from three to forty years and typically require a one-time
installation charge as well as fixed monthly payments throughout
the term of the agreement regardless of level of usage.

IRUS

Through dark fiber IRUs, DTI provides carrier customers specific
strands of optical fiber (which are used exclusively by the
carrier customer), while the carrier customers are responsible
for providing the electronic equipment necessary to transmit
communications along the fiber. IRUs typically have terms of 20
or more years and require substantial advance payments and
additional fixed annual maintenance and

building space payments over the term of the agreement.

OUR APPROACH TO SALES AND MARKETING
MARKETING

DTI intends to position itself as the leading choice for optical
transport services for carriers, Incumbent Local Exchange
Carriers ("ILEC"), Competitive Local Exchange Carriers ("CLEC"),
IXC's, Application Service Providers ("ASP"), Internet Service
Providers ("ISP") and Enterprise accounts in secondary and
tertiary marketplaces. These services will be market positioned
to offer higher bandwidth, more reliable SONET based access
services with greater flexibility in bandwidth deployment and
improved time to create market advantages, including a
competitive price. By utilizing the latest optronic
technologies, DTI is able to customize solutions to meet client
requirements.

DTI will deploy into markets based on an opportunity matrix that
considers population, ILEC usage information (business,
residential, public and special access lines) by end office wire
center, other carrier competitive presence, as well as customer
specific deployment needs.

SALES

DTI is currently revising its sales force organizational
structure to accurately mirror both organizational priorities as
well as existing and projected market dynamics. The initial
sales force structure and design will be comprised of separate
sales teams targeting the carrier, service provider and
enterprise account segments. Current prioritized sales
activities include:

- - Negotiation of additional Master Service Agreements ("MSA"),
expanding upon current agreements with Tier 1 carriers, to
include other strategic carrier accounts, to position DTI as a
qualified vendor for services in the carriers' automated
provisioning systems.
- - Implementation of integrated, web based Sales Force
Automation ("SFA") and Customer Relationship Management ("CRM")
software applications to effectively manage prospect and customer
account and opportunity information.
- - Designing and implementing a compensation plan that
stimulates new business acquisition activities, while also
encouraging existing account development activities through the
use of retention compensation.
- - Development of an effective "inside" sales support function
to assist in responding to opportunities, developing detailed
business case analyses, tracking order and provisioning document
flow, and coordinating with Finance and Accounting to streamline
the billing processes.

OUR CUSTOMERS

DTI believes that its product offerings, network diversity and
status primarily as a wholesaler of telecommunications services
will be attractive to customers such as telecommunications
carriers and other communications providers, ISPs, data
providers, television and video providers, and corporations and
governmental entities with unique bandwidth network requirements.

The Company expects to market capacity on its network to a
variety of customers such as:

- - INCUMBENT LOCAL EXCHANGE CARRIERS - ILECs typically require
some interstate paths for internal communications, signal control
and operator services. ILECs also require intrastate capacity to
connect central offices to one another and to connect central
offices to POPs and customer premises.
- - FACILITIES BASED IXCS - IXCs typically require redundant
routing to ensure reliability in their networks and additional
capacity for their customers as minutes-of-use and IP bandwidth
requirements increase.
- - COMPETITIVE LOCAL EXCHANGE CARRIERS - CLECs typically
require long-haul capacity between their local networks.

- - APPLICATION SERVICES PROVIDERS - As communications costs
become more affordable, many software companies and service
providers are beginning to offer shared software applications,
allowing multiple companies to access the same programs. These
companies, referred to as ASPs, require significant amounts of
bandwidth to connect their customers to their centralized
applications.
- - INTERNET SERVICE PROVIDERS - Regional ISPs that are seeking
to expand their geographical coverage to the multi-regional or
national level, as well as larger ISPs and non-facilities-based
and private label ISPs such as Earthlink. ISPs typically require
distribution channels to IXC and LEC switches and interconnection
to ISP switches.
- - DATA STORAGE COMPANIES - Data Storage companies typically
require large amounts of bandwidth to allow remote access to and
delivery of the data that they are storing on behalf of third
parties.
- - FORTUNE 1000 COMPANIES AND GOVERNMENTAL ENTITIES - Many of
these customers require dedicated point-to-point connections that
have the capacity to carry a wide range of communications
services (e.g., high speed intranet access).
- - CABLE TELEVISION COMPANIES AND VIDEO CARRIERS - Cable
companies typically require fiber optic capacity to upgrade their
systems to higher speed bandwidths, which allow them to increase
the number of channels available, add incentive programming and
Internet and data transfer capabilities and to consolidate head-
end facilities. Broadcasters typically require inexpensive video
paths to extend their reach to distant locations.
- - WIRELESS COMMUNICATIONS COMPANIES - Wireless companies
typically require land-based back-hauling of traffic from towers
to their switches and also capacity between their switches and
IXCs, POPs and ILECs central offices.

DTI believes that its network will provide its customers with a
low-cost alternative to building their own infrastructure or
purchasing metered services from communications carriers. DTI
currently serves customers in the ILECs, IXCs, CLECs, ISPs and
wireless communication industries.

INTERCONNECTION AND PEERING

As a result of the Telecommunications Act of 1996 (the "Telecom
Act"), telecommunications carriers may, as a matter of law,
interconnect with incumbent local exchange carriers. The Company
plans to interconnect its network to existing carriers' networks
by building or acquiring fiber to existing "carrier hotels" and
POPs. Interconnection is necessary for the Company to be able to
transmit traffic to other carriers, trade traffic with other
carriers and terminate traffic with other carriers.

Peering is the arrangement whereby ISPs agree to exchange traffic
with each other, thereby supporting internetworking between
providers. Typically, ISPs meet at public exchange points, known
as network access points, to support peering arrangements on a
large scale with many peering partners. Peering is very distinct
from transit services, where an ISP accepts traffic for all
possible internet destinations via a given interconnect.

OUR COMPETITION

The Telecommunications Act of 1996 defines "telecommunications"
as "the transmission, between or among points specified by the
user, of information of the user's choosing, without change in
the form or content of the information as sent and received."
Transmissions can consist of data (IP), voice (telephone) or
video (video conferencing, music, photos and television). The
demand for all types of telecommunications services has been
increasing, with especially rapid growth in high-speed data
services, including the Internet. A report of the President's
Council of Economic Advisers estimated total U.S.
telecommunications services and equipment revenues in 1998 of
$408.0 billion, up from approximately $250.0 billion in 1993.

One very small, but the fastest growing, segment within the
telecommunications industry, is the carriers' carrier market.
Carriers' carrier sell long and short-haul communications
services to licensed telecommunications carriers. Growth in the
carriers' carrier market has been driven by the deregulation of

telephony and the growing demand for bandwidth services.

There is a wide diversity of new entrants into the carriers'
carriers market, in addition to the traditional telecommunication
company. Many large energy pipeline and utility companies have
aggressively entered the carriers' carrier market in order to
better monetize their rights-of-way assets and utilize their
construction expertise. The primary customers of the carriers'
carrier market include competitive local exchange carriers
("CLEC"), Internet Service Providers ("ISP"), inter-exchange
carriers ("IXC"), the regional bell operating companies ("RBOC"),
and incumbent local exchange carriers ("ILEC"). The principal
factors influencing buying decisions in the carriers' carrier
market are access, geography and route diversity, price and
service.

The carriers' carrier business strategy can be broken down into
four main areas:

- - rights-of-way - selling and leasing access to network rights-
of-way;
- - dark fiber - selling or leasing conduit and dark fiber
services;
- - long-haul carriers' carrier - providing lit fiber bandwidth
on long distance routes;
- - metro carriers' carrier - providing lit fiber bandwidth
along metropolitan routes.

The long-haul carriers' carrier market can be segmented into
national and regional carriers. Historically, the national
market, the primary focus of the carriers' carrier market, has
been dominated by AT&T, Sprint and WorldCom. However several
other companies have or will shortly have large national fiber
networks. These companies include Qwest, Broadwing, Williams
Communications, Global Crossing, Enron, Level 3 Communications,
and Velocita. The leaders in the regional carriers market
include NEON in the Northeast and ITC(up carrot symbol)DeltaCom
and e.spire in the Southeast.

As technology improves and fiber capacity increases, carriers
have been confronted with falling prices. The ongoing primary
success factors for the carriers' carrier market are unique
markets, market demand and a low-cost fiber network. With new
applications developed that require easy, reliable transfers of
voice, video, and data over a single network, there seems to be
an insatiable demand for bandwidth. Because the installed base
of fiber was originally intended to handle only voice telephone
calls, the existing systems are overloaded by bandwidth-hogging
data and multimedia applications. This has created a critical
need for a cost-effective way of increasing the capacity of fiber
networks. To meet the need to lower cost and maximize utilization,
most carriers' carriers form their networks through various strategies
including: (i) construction, (ii) leasing dark fibers, (iii)
buying bandwidth, (iv) swapping, or (v) acquiring or forming
joint ventures/alliances. These strategies, combined with the
aggressive deployment of new technologies, are increasing the
supply of bandwidth.

OUR EMPLOYEES

As of December 31, 2000, we employed 67 people. We believe
our future success will depend on our continued ability to
attract and retain highly skilled and qualified employees. We
believe that the relations with our employees are good.

INDUSTRY OVERVIEW

Over the past several years, the telecommunications industry has
undergone significant changes as follows:

CONSOLIDATION OF PROVIDERS

Many of the largest equipment and service providers have achieved
growth through acquisitions and mergers. These combinations have
provided access to new markets, new products and economies of
scale. Despite this consolidation, the number of new entrants is
increasing and small new entrants are gaining market share from
the large and established providers. In this highly competitive
environment, telecommunications providers are increasingly
focusing on core activities and core competencies and outsourcing
non-core activities to other providers. This trend is a
significant change from the traditional integrated model that has
prevailed in the industry since its inception.

ADVANCES IN TELECOMMUNICATIONS AND NETWORKING TECHNOLOGY

OPTICAL FIBERS

Telecommunications providers transmit voice, data and video
signals primarily over coaxial cable, copper cables, microwave
systems, satellites and fiber optic cables. Beginning in the
1960s, microwave systems began to replace copper cable, and by
1990, fiber optic cables had largely replaced copper cable for
long distance transmission. Compared to copper, fiber optic
cables provide significantly greater capacity at lower cost with
fewer errors and increased reliability.

Optical fibers, small strands of glass that are used to transmit
communications signals via beams of light, make up the world's
telecommunications backbone, or long distance networks, spanning
every continent, even under the oceans (serving to connect
continents with one another). There are five major types of
optical fiber: single-mode fiber and three subsequent generations
(all aimed at longer distance networks) and multi-mode fiber,
used in shorter distance networks. The four variations of single-
mode fiber (and particularly the latest two generations) dominate
deployments with more than 90% of the share annually, as multi-
mode fiber is very limited by distance.

Single-mode fiber (SMF) was the original fiber designed for local
and longer distance networks. Single-mode is optimized for two
different band spectrums, 1310 nanometer (nm) wavelengths, which
are used for shorter distance transmissions, and 1550 nm
wavelengths, used for longer distance transmissions. In reality,
all fibers serve light signals (frequencies) that are between
certain ranges, such as 1530 nm to 1565 nm, which is more
simplistically called 1550 nm.

Dispersion shifted fiber is the second generation of single-mode
fiber, designed more specifically for long distance networks.
Dispersion shifted fiber has better attenuation and dispersion
characteristics than traditional single-mode fiber, making it
even better optimized for 1550 nm wavelengths. The 1550 nm
spectrum is important because signals traveling within this
frequency range can be easily amplified by optical amplifiers, a
much more efficient and cost-effective means of amplifying a long
distance signal. Non-zero dispersion shifted fiber is the third
generation of single-mode fiber and currently makes up the
bulk of shipments for telecom networks. Again, non-zero dispersion
shifted fiber is even better optimized for high-speed wavelengths
in the 1550 nm band spectrum, with even lower attenuation and
dispersion characteristics. The lower the dispersion and
attenuation effects, the further a high-speed light wave can
travel without having to be amplified.

High-speed data optimized fiber (Corning's LEAF and Lucent's
TrueWave), the latest generation of single-mode fiber, is geared
toward next-generation high-speed networks. This newer fiber is
again optimized for the 1550 nm band spectrum, but typically
contains a wider core and better dispersion/attenuation
characteristics to allow OC-192 traffic to travel over longer
distances without having to be amplified. The fiber core is the
part of the fiber that actually carries the light signal
transmission. A typical fiber is about 125 microns in diameter
(one micron is one-millionth of a meter), but the core is only a
fraction of this size

(8-50 microns, depending on the type of fiber). Given today's
fiber-optic cable strand, optical light is transmitted over only
a smaller portion than the actual diameter of the strand, like
inserting a period into the letter 'o.' This approach is to
"shine" the light over a greater portion of the same fiber.
A greater area of light allows more information to be transmitted.
Corning's LEAF (Large Effective Area Fiber) has a 32% wider
core than the other single-mode fibers, allowing carriers to
pump more powerful signals across the fiber network. These
fibers are well suited to handle next-generation optical
networking systems, such as high channel count OC-192 (10 Gbps)
DWDM systems and beyond. However, traditional single mode fiber
is most efficient when utilizing high channel count OC-48 (2.5
Gbps) DWDM systems.

Multi-mode fiber is designed to handle both 850 nm wavelengths
and l3l0 nm wavelengths (both optimized for shorter distances).
Multi-mode has a much wider core than single-mode fiber, allowing
hundreds of light waves to travel through the core
simultaneously. Unfortunately, multi-mode fiber also allows for
higher levels of attenuation and dispersion over longer
distances, and hence the fiber is typically used in networks that
are less than 2 km in length. Multi-mode fiber was actually the
first type of fiber to be commercialized and is still widely
deployed in small campus and in-building networks. Multi-mode
fiber accounted for about 5-10% of total fiber deployments in
1998.

DENSE WAVE DIVISION MULTIPLEXING

Several advances in switching and electronics have further
increased the bandwidth, or transmission capacity, of
telecommunications networks. DWDM is a technology which allows
telecommunications carriers to increase bandwidth on fiber
networks without laying more fiber. A DWDM system is made up of
three major pieces of equipment: DWDM terminals, optical
amplifiers, and optical add/drop multiplexers. DWDM allows for
more wavelengths to be placed on a single fiber strand (sometimes
referred to as virtual fibers). The concept is relatively
simple. Carriers, all of which face varying levels of bandwidth
constraints, can either lay down more fiber or deploy DWDM, which
increases the number of channels (capacity) that each existing
fiber can support. In the past, one fiber strand could carry one
channel of communications (only one light wave could travel over
the fiber strand at any given time), limiting capacity to the
amount of information that could be combined on to that one
channel. DWDM, on the other hand, takes the light wave and
separates it into the various colors of the spectrum, each of
which travels at a unique frequency and can carry separate
communications transmissions. Now each color, or wavelength, can
carry as much information as the original "combined" light wave,
allowing multiple channels of information to be transmitted
across a single strand of fiber simultaneously. In three years,
the maximum number of channels that can travel on a single fiber
pair has gone from 8 to 160, and this number is expected to
increase in the near future.

DWDM is an efficient method with which to meet exploding demand
with an exponential increase in capacity in very little time and
significant cost savings. The combination of capacity gains from
advance multiplexing, coupled with new advanced fiber optic
cable, could expand capacity on existing competitive systems.

CIRCUIT AND PACKET SWITCHING

Historically, carriers have built telecommunications networks
based on circuit switching. Circuit switching establishes and
keeps open a dedicated path until the call is terminated. While
circuit switching has worked well for decades to provide voice
communications, it does not efficiently use transmission
capacity. Once a circuit is dedicated, it is unavailable to
transmit any other information, even when the particular users of
that circuit are not speaking or otherwise transmitting
information. Packet switching is replacing circuit switching.
Packet switching divides data into small "packets" which are then
independently transmitted to their destination via the quickest
path. Upon their arrival, the packets are reassembled. Packet
switching provides more efficient use of the capacity in the
network because the network does not establish inefficient
dedicated circuits, which waste unused capacity. The new packet
networking technologies operate at very high speeds ranging from
1.544 million bits per second, or DS-1, to 2.488 billion bits per
second, or OC-48, and beyond. A bit is the smallest unit of
information a computer can process and is the basic unit of data
communications. By comparison, one voice call requires roughly
64,000 bits per second. Packet networks are especially efficient
at carrying data signals.

CONVERGENCE OF VOICE, DATA AND VIDEO SERVICES

Telecommunications network designs have traditionally created
separate networks using separate equipment for voice, data and
video signals. The evolution from analog to digital
technologies, which convert voice and other signals into a stream
of "1"s and "0"s, erases the traditional distinctions between
voice, data and video transmission services. High-bandwidth
networks that use advanced packet-switched technology transmit
mixed digital voice, data and video signals over the same
network. This enables telecommunications customers to use a
single device for voice, data and video communications. Although
these devices are new to the market, customer interest and
acceptance are rapidly growing. Each evolution, from copper
to fiber optic cables, from one to many light signals, from
circuit switching to packet switching and from analog to
digital signals, has produced significant increases in network
capacity. When considered together, these evolutions have produced
enormous increases in the ability to transfer large amounts
of information across vast distances almost instantaneously. With
each new leap in transmission capacity, end-users have come
to rely on their ability to access and manipulate even greater
amounts of information quickly and easily.

INCREASING DEMAND FOR HIGH-SPEED INTERNET ACCESS

The rapidly expanding number of Internet users and the growth in
bandwidth-intensive applications, combined with the availability
of reasonably priced high-speed access products, such as cable
modems and DSL, is increasing demand for high-speed Internet
connections, particularly among small- and medium-sized
businesses and individual consumers. Higher access speeds enable
businesses to maintain complex web sites, including web sites
that allow them to access critical business information, conduct
electronic business, or e-commerce, and communicate more
efficiently with business partners, customers and employees.
Additionally, many companies are supporting increasing numbers of
remote offices and workers who require high-speed access to
network resources.

Traditionally, small- and medium-sized businesses, telecommuters
and individuals have relied on low-speed lines for data
transport. For example, according to International Data
Corporation, approximately 72% of Internet access revenue derived
from small- and medium-sized business in 1998 was generated using
relatively slow 28.8 to 56 kilobits per second dial-up modems or
integrated services digital networks, or ISDN lines. In the
future, the Company believes there will be an increasing demand
for high-speed connectivity as businesses, telecommuters and
individuals seek solutions with higher data transmission speeds.

TREND TOWARDS OUTSOURCING OF INTERNET OPERATIONS

Companies are increasingly finding that investing in the
resources and personnel required to maintain their web
infrastructure is cost-prohibitive, and extremely difficult given
the shortage of technical talent and risk of technological
obsolescence. As a result of these factors, many small- and
medium-sized businesses are seeking to outsource their web
facilities and system needs to focus on their core competencies.
Demand for web hosting, collocation services and outsourced e-
commerce solutions is expected to grow. International Data
Corporation has estimated the demand for web hosting services in
the U.S. was approximately $770.0 million in 1998 and is expected
to grow to approximately $12.0 billion by 2002.

CAPACITY

Only 10% of the entire fiber deployed are actually lit, and of
that 10% of the fiber miles that are lit, only 1% is the current
generation of fiber. Fiber is potential capacity that requires a
great deal of effort, equipment and money to turn into bandwidth.

As demand continues to expand, carriers may make use of the most
up-to-date equipment available for lighting their fiber. Of
course, because different carriers employ different technologies
to equip their fiber, their abilities to cope with unexpected
changes in traffic levels will vary. Although up-front costs for
fiber deployment are high, a significant portion of the total
investment can be deferred until actual demand materializes.
However, fiber in a conduit does not mean that there is
inexhaustible capacity, because

lighting that fiber to carry payload contributes significantly to
the cost of building a network. The type of fiber determines
the number of colors of light that you can install, the wavelengths,
and the rate at which you can flash the laser on and off.

REGULATORY ENVIRONMENT

GENERAL REGULATORY ENVIRONMENT

The Company's operations are subject to extensive federal and
state regulation. Carriers' carrier and end-user services are
subject to the provisions of the Communications Act of 1934, as
amended, including the Telecommunications Act of 1996 (the
"Telecom Act"), and the FCC regulations thereunder, as well as
the applicable laws and regulations of the various states,
including regulation by public utility commissions ("PUCs") and
other state agencies. Federal laws and FCC regulations apply to
interstate telecommunications, while state regulatory authorities
have jurisdiction over telecommunications that originate and
terminate within a single state. Moreover, as deregulation at
the federal level occurs, some states are reassessing the level
and scope of regulation that may be applicable to
telecommunications service providers, such as DTI. All
operations are also subject to a variety of environmental,
safety, health and other governmental regulations. There can be
no assurance that future regulatory, judicial or legislative
activities will not have a material adverse effect on us, or that
domestic regulators or third parties will not raise material
issues with regard to our compliance or noncompliance with
applicable regulations.

The Telecom Act will continue to have significant effects on
DTI's operations. The Telecom Act, among other things, allows
the RBOCs to enter the long distance business after meeting
certain competitive market conditions, and enables other
entities, including entities affiliated with power utilities and
ventures between ILECs and cable television companies, to provide
an expanded range of telecommunications services. DTI therefore,
believes the RBOCs and other companies' participation in the long
distance market will also provide opportunities to lease fiber or
sell wholesale network capacity. Entry of such companies into
the long distance business may also result in competition for
carriers' carrier service customers and may have an adverse
effect on DTI. The focus of these companies on retail customers,
however, makes this outcome less likely.

Under the Telecom Act, the RBOCs may immediately provide long
distance service outside those states in which they provide local
exchange service ("out-of-region" service), and may subsequently
provide long distance service within the regions in which they
provide local exchange service ("in-region" service) upon meeting
certain conditions. Out-of-region services by RBOCs are subject
to receipt of any necessary state and/or Federal regulatory
approvals that are otherwise applicable to the provision of
intrastate and/or interstate long distance service. In-region
services by RBOCs are subject to specific FCC approval and
satisfaction of other conditions, including a checklist of pro-
competitive requirements. Verizon and SBC recently received
permission from the FCC to begin providing in-region long
distance services in New York and Massachusetts (Verizon) and
Texas, Oklahoma and Kansas (SBC), and Verizon's approval for New
York was recently upheld by the U.S. Court of Appeals for the
D.C. Circuit. Each of the RBOCs currently has filed applications
with state commissions in one or more of its in-region states,
and each is expected to file applications this year at the FCC
for up to six of its in-region states.

The RBOCs may provide in-region long distance services only
through separate subsidiaries with separate books and records,
financing, management and employees, and all affiliate
transactions must be conducted on an arm's length and
nondiscriminatory basis. Further, the RBOCs must obtain in-
region long distance authority before jointly marketing local and
long distance services in a particular state. The Telecom Act
also imposes interconnection and other requirements on all ILECs,
including the BOCs.

FEDERAL REGULATION

The FCC classifies DTI as a non-dominant carrier. Under existing
regulations, non-dominant carriers are permitted to file FCC
tariffs listing the rates, terms and conditions of both
interstate and international services provided by the carrier.
However, under current regulations, by July 31, 2001, non-
dominant carriers must cancel all tariffs for interstate domestic
long distance service and provide such service by contract.
International services are scheduled to be de-tariffed in 2002.
Generally, the FCC has chosen not to exercise its statutory power
to closely regulate the charges, practices or classifications of
non-dominant carriers. However, the FCC has the power to impose
more stringent regulation requirements on

non-dominant carriers such as the Company. In the current
regulatory atmosphere, DTI believes the FCC is unlikely to do so.

As a non-dominant carrier, DTI may install and operate wireline
facilities for the transmission of domestic interstate
communications without prior FCC authorization, but must obtain
all necessary authorizations from the FCC for use of any radio
frequencies. Non-dominant carriers are required to obtain prior
FCC authorization to provide international telecommunications;
however, DTI currently does not and has no intent to provide
international services. The FCC also must provide prior approval
of certain transfers of control and assignments of operating
authorizations. Non-dominant carriers are required to file
periodic reports with the FCC concerning their interstate
circuits and deployment of network facilities. DTI is required
to offer DTI's interstate services on a nondiscriminatory basis,
at just and reasonable rates, and DTI is subject to FCC complaint
procedures. While the FCC generally has chosen not to exercise
direct oversight over cost justification or levels of charges for
services of non-dominant carriers, the FCC acts upon complaints
against such carriers for failure to comply with statutory
obligations or with the FCC's rules, regulations and policies.
DTI could be subject to legal actions seeking damages, assessment
of monetary forfeitures and/or injunctive relief filed by any
party claiming to have been injured by DTI's practices. DTI has
never been the subject of a FCC complaint, though DTI cannot
predict either the future likelihood of the filing of any such
complaints or the results if filed.

On August 1, 1996, the FCC adopted an order in which it created a
framework of minimum, national rules to enable the states and the
FCC to implement the local competition provisions of the Telecom
Act. This order included pricing rules that apply to state
commissions when they are called on to arbitrate rate disputes
between ILECs and entities entering the local telephone market.
The order also included rules addressing the three paths of entry
into the local telephone market. Several parties filed appeals
of the order, which were consolidated in the Eighth Circuit. On
July 18, 1997, the Court vacated portions of the FCC's decision
and found that the FCC lacked the power to prescribe and enforce
certain of its rules implementing the Telecom Act. On January
25, 1999, the U.S. Supreme Court reversed the Eighth Circuit
decision and reaffirmed the FCC's authority to issue those rules,
although it did invalidate certain rules, including the rule
determining which network elements the ILECs must provide to
competitors on an unbundled basis.

The FCC issued certain new orders on remand from the Supreme
Court. On September 15, 1999, the FCC reaffirmed that ILECs must
provide particular unbundled network elements ("UNEs") to
competitors. The FCC determined that ILECs must provide six of
the original seven network elements that it required to be
unbundled in its original 1996 order. On November 5, 1999, the
FCC detailed three changes affecting the ILECs' obligations to
provide unbundled network elements to competitors. First, the
FCC removed requirements previously imposed on ILECs to provide
access to operator and directory assistance services. Second,
the FCC modified the definitions of two previously defined
bundled network elements to require ILECs to provide unbundled
access to portions of local loops and to dark fiber. Third, the
FCC also removed requirements previously imposed on ILECs to
provide access to unbundled local circuit switching for certain
customers (i.e., customers with four or more lines that are
located in the densest parts of the top 50 metropolitan
statistical areas in the country), provided that the ILECs
instead provide access to combinations of loop and transport
network elements known as "enhanced extended links." The United
States Telecom Association has appealed the FCC's November 5
order, and the Company cannot predict the outcome of that appeal
or other proceedings that might arise from the FCC's 1999 orders
on remand from the Supreme Court.

On July 18, 2000, the Eighth Circuit issued a decision on remand
from the Supreme Court's reversal of its 1997 decision. In that
decision, the Eighth Circuit invalidated parts of the FCC's
interconnection pricing standards set forth in the August 1996
order. Those rules had required state commissions to base the
rates that ILECs charge to CLECs for interconnection and for the
use of unbundled network elements on the costs that would be
incurred by the ILECs using the most efficient technology
available, rather than the technology actually used by the ILEC
and furnished to the CLEC. The Eighth Circuit held that the FCC
should have based such rates on the cost of the ILEC's actual
facilities. On September 22, 2000, the Eighth Circuit stayed
part of its July 18 decision pending Supreme Court disposition of
appeals of that decision filed by AT&T, WorldCom, the FCC and
others. The Supreme Court has granted certiorari and is expected
to decide the appeal during its 2001-2002 term. If the July 18
decision is upheld by the Supreme

Court, it is not clear whether,
to what extent, or how quickly, the pricing standard adopted by
the Eighth Circuit would be reflected in state commission
approved interconnection agreements. Eventually, however,
ifwidely adopted by states (which, however, need not do so), the
pricing standard adopted by the Eighth Circuit could result in
higher interconnection and unbundled element rates, which could
make it more difficult for carriers such as DTI to compete
profitably with the ILECs.

In three orders released on December 24, 1996, May 16, 1997, and
May 31, 2000, the FCC made major changes in the interstate access
charge structure. In the 1996 order, the FCC removed
restrictions on ILECs' ability to lower access prices and relaxed
the regulation of new switched access services in those markets
where there are other providers of access services. If this
increased pricing flexibility is not effectively monitored by
federal regulators, it could have a material adverse effect on
the Company's ability to compete in providing interstate access
services.

In the 1997 order, the FCC announced and began to implement its
plan to bring interstate access rate levels more in line with
costs. Pursuant to this plan, the FCC has adopted rules that
grant ILECs subject to price cap regulation increased pricing
flexibility upon demonstrations of increased competition or
potential competition in relevant markets. The FCC elaborated on
these access pricing flexibility rules in an order released on
August 27, 1999. The manner in which the FCC implements this
approach to lowering access charge levels could have material
effect on the Company's access charge revenues and on its ability
to compete in providing interstate access services. Several
parties appealed the 1997 order and on August 19, 1998, the 1997
order was affirmed by the U.S. Court of Appeals for the Eighth
Circuit in the 2000 order, the FCC adopted several proposals to
further reform access charge rate structures, relying heavily on
a proposal submitted by a coalition of long distance companies
and ILECs referred to as "CALLS." These and related actions will
result in significant changes to access charge rate structures
and rate levels. As ILECs' access rates are reduced, the Company
may experience downward market pressure on its own access rates.
The impact of these new changes will not be fully known until
they are fully implemented.

In an order issued April 27, 2001, the FCC addressed claims by
some long distance carriers that CLECs were charging those
carriers excessively high rates for access to CLEC customers.
Specifically, the FCC established benchmark CLEC access charges
to ensure that these charges are not unreasonable. The FCC also
prevented long distance carriers from withdrawing its long
distance services from customers of those local telephone
companies. This decision by the FCC to regulate the level of
CLEC access charges will result in lower CLEC access charges and
decrease the revenues CLECs receive from providing access
services.

On April 27, 2001, the FCC also announced the adoption of new
rules to clarify the proper intercarrier compensation for
telecommunications traffic delivered to ISPs. The FCC concluded
that telecommunications traffic delivered to an ISP is interstate
access traffic, specifically "information access," thus not
subject to reciprocal compensation. Rather than immediately
eliminate the current system, which has created opportunities for
regulatory arbitrage and distorted market incentives, the FCC
established a transitional cost recovery mechanism for the
exchange of this traffic.

For the first six months following the effective date of the
Order, intercarrier compensation of ISP-bound traffic will be
capped at a rate of $.0015/minute-of-use (mou). For the 18 months
thereafter, the rate will be capped at $.0010/mou. Thereafter,
the rate will be capped at $.0007/mou. The rate caps for ISP-
bound traffic apply only if an incumbent LEC offers to exchange
all local traffic at the same rate. A cap will be imposed on
total ISP-bound minutes for which a CLEC may receive this
compensation equal to the number of ISP-bound minutes for which
that CLEC was previously entitled to compensation, plus a ten
percent growth factor. To identify ISP-bound traffic, the
Commission adopted a rebuttable presumption that traffic
exchanged between carriers that exceeds a 3:1 ratio of
terminating to originating traffic is ISP-bound.

Finally, on April 27, 2001, the FCC also issued a notice of
proposed rulemaking for the development of a unified intercarrier
compensation regime covering, among other things, reciprocal
compensation for local traffic, compensation for ISP traffic and
long distance access charges. The outcome of this proceeding is
likely to be a reduction in the level of most types of
intercarrier compensation.

Meanwhile, certain state commissions have asserted that they will
be active in promoting local telephone competition using the
authority they have under the ruling, lessening the significance
of the FCC role in certain areas of regulation. Furthermore,
other FCC rules related to local telephone competition remain the
subject of challenges, and there can be no assurance that
decisions affecting those rules will not be adverse to companies
seeking to enter the local telephone market.

When the FCC released its access reform order in 1987, it also
released a companion order on universal service reform. The
universal availability of basic telecommunications service at
affordable prices has been a fundamental element of U.S.
telecommunications policy since enactment of the Communications
Act of 1934. The current system of universal service is based on
the subsidization of local residential service pricing, funded
through a system of direct charges on some ILEC customers,
including interstate telecommunication carriers such as DTI, and
above-cost charges for certain ILEC services such as local
business rates and access charges. In accordance with the
Telecom Act, the FCC adopted plans to implement the
recommendations of a Federal-State Joint Board to preserve
universal service, including a definition of services to be
supported, and defining carriers eligible for contributing to and
receiving from universal service subsidies. The FCC ruled, among
other things, that: contributions to universal service funding be
based on all interstate telecommunications carriers' gross
revenues from both interstate and international
telecommunications services; only common carriers providing a
full complement of defined local services be eligible for
support; and up to $2.25 billion in new annual subsidies for
discounted telecommunications services used by schools,
libraries, and rural health care providers be funded by an
assessment on total interstate and intrastate revenues of all
interstate telecommunications carriers. The FCC has initiated a
proceeding to obtain comments on the mechanism for continued
support of universal service in high cost areas in a subsequent
proceeding. The Fifth Circuit Court of Appeals recently upheld
the FCC in most respects, but rejected the FCC's effort to base
contributions on intrastate revenues. The FCC's universal
service program may also be altered as a result of the agency's
reconsideration of its policies, or by future Congressional
action. DTI is unable to predict the outcome of these
proceedings or any other judicial appeal or petition for FCC
reconsideration on DTI's operations.

The FCC has interpreted the Telecom Act to require that, where a
subscriber of one local telephone company places a local call
that must be handed off to a second local telephone company for
delivery to the called party, the first carrier must pay
reciprocal compensation to the second carrier for terminating the
call. ILECs challenged whether the obligation to pay reciprocal
compensation should apply to telephone calls received by end
users who provide Internet access services. These end users are
commonly known as Internet service providers or "ISPs," who have
large amounts of incoming calls. The ILECs claimed that calls
made to ISPs are interstate in nature and that calls to ISPs
therefore should be exempt from reciprocal compensation
arrangements applicable to local calls carried by two local
telephone companies. CLECs claim that interconnection
agreements providing for reciprocal compensation contain no
exception for local calls to ISPs and reciprocal compensation is
therefore applicable. On February 25, 1999, the FCC determined
that Internet traffic is largely interstate in nature, and
accordingly the reciprocal compensation requirement in the
Telecom Act does not apply to calls to ISPs. The FCC did not,
however, determine whether calls to ISPs are subject to
reciprocal compensation in any particular instance, and concluded
that carriers are bound by their existing interconnection
agreements, as interpreted by state commissions, and thus are
subject to reciprocal compensation obligations to the extent
provided in their interconnection agreements or as determined by
state commissions.

In March 2000, the U.S. Court of Appeals for the D.C. Circuit
invalidated the FCC's February 1999 ruling, holding that the FCC
order failed to include a satisfactory explanation for its
determination that calls to ISPs are not subject to the Telecom
Act's reciprocal compensation provisions. The FCC may either
clarify its former decision or adopt a new one. DTI is unable to
predict the outcome of this process. Until the matter is
resolved, DTI expects that ILECs will continue to challenge
reciprocal compensation payments in cases before state
regulators.

To the extent that DTI operates as an LEC, we will be required to
comply with local number portability rules and regulations.
Compliance may require changes in our business processes and
support systems.

STATE REGULATION

DTI is also subject to various state laws and regulations. Most
PUCs require providers such as DTI to obtain authority from the
commission prior to the initiation of service. In most states,
DTI is also required to file tariffs setting forth the terms,
conditions and prices for services that are classified as
intrastate and, in some cases, interstate. DTI is also required
to update or amend DTI's tariffs when DTI adjusts rates or adds
new products, and is subject to various reporting and record-
keeping requirements.

DTI has all the necessary authority to offer its services in the
states DTI now serves. DTI also holds other authorities in
various other states in which DTI plans to provide service. DTI
will obtain those operating authorities in other states on an as
needed basis. DTI's receipt of necessary state certifications is
dependent upon the specific procedural requirements of the
applicable PUC and the workload of its staff. Additionally,
receipt of state certifications may be subject to delay as a
result of a challenge to the applications and/or tariffs by third
parties, including the ILECs, which could delay DTI's provision
of services over affected portions of the planned DTI network and
could cause the Company to incur substantial legal and
administrative expenses. To date, DTI has not experienced
significant difficulties in receiving certifications, maintaining
tariffs, or otherwise complying with DTI's regulatory
obligations. There can be no assurances, however, that DTI will
not experience delay or be subject to third-party challenges in
obtaining necessary regulatory authorizations. The failure to
obtain such authorizations on a timely basis would have a
material adverse effect on DTI's business, financial condition
and results of operations.

Many states also require prior approval for transfers of control
of certified carriers, corporate reorganizations, acquisitions of
telecommunications operations, assignment of carrier assets,
carrier stock offerings and incurrence by carriers of significant
debt obligations. Certificates of authority can generally be
conditioned, modified, canceled, terminated or revoked by state
regulatory authorities for failure to comply with state law
and/or the rules, regulations and policies of state regulatory
authorities. Fines or other penalties also may be imposed for
such violations. There can be no assurance that state utilities
commissions or third parties will not raise issues with regard to
DTI's compliance with applicable laws or regulations.

Many issues remain open regarding how new local telephone
carriers will be regulated at the state level. For example,
although the Telecom Act preempts the ability of states to forbid
local service competition, the Telecom Act preserves the ability
of states to impose reasonable terms and conditions of service
and other regulatory requirements. However, these statutes and
related questions arising from the Telecom Act will be elaborated
through rules and policy decisions made by PUCs in the process of
addressing local service competition issues.

DTI also will be heavily affected by state PUC decisions related
to the ILECs. For example, PUCs have significant responsibility
under the Telecom Act to oversee relationships between ILECs and
their new competitors with respect to such competitors' use of
the ILEC's network elements and wholesale local services. PUCs
arbitrate interconnection agreements between the ILECs and new
competitors such as DTI when necessary. PUCs are considering
ILEC pricing issues in major proceedings now underway. PUCs will
also determine how competitors can take advantage of the terms
and conditions of interconnection agreements that ILECs reach
with other carriers. It is too early to evaluate how these
matters will be resolved, or their impact on DTI's ability to
pursue its business plan.

LOCAL REGULATION

The Company's networks will be subject to numerous local
regulations such as building codes and licensing. Such
regulations vary on a city-by-city, county-by-county and state-by-
state basis. To install its own fiber optic transmission
facilities, the Company will need to obtain rights-of-way over
privately and publicly owned land. Rights-of-way that are not
already secured may not be available to the Company on
economically reasonable or advantageous terms.

RISK FACTORS

Set out below is a description of certain risk factors that may
adversely affect our business and results of operations. You
should carefully consider these risk factors and the other
information contained in this report before investing in our
Senior Discount Notes issued in 1998, which are described below
in Item 5 - "Market for the Company's Common Stock and Related
Shareholder Matters". Investing in our securities involves a high
degree of risk. Any or all of the risks listed below could have
a material adverse effect on our business, operating results or
financial condition, which could cause the market price of our
Senior Discount Notes to decline. You should also keep these risk
factors in mind when you read forward-looking statements. There
are other risks that may adversely affect our business that we
are not able to anticipate, and the risks identified here may
adversely affect our business or financial condition in ways that
we cannot anticipate.

WE HAVE SUSTAINED SUBSTANTIAL NET LOSSES

We have historically sustained substantial operating and net
losses. For the following periods, we reported net losses of:

Year ended June 30, 1997...................... $ .6 million
Year ended June 30, 1998...................... $ 9.4 million
Year ended June 30, 1999...................... $ 32.7 million
Year ended June 30, 2000...................... $ 57.3 million
Six-month period ended December 31, 2000...... $ 35.2 million
Inception through December 31, 2000........... $138.0 million

These net losses may continue. During calendar 2001 and
thereafter, our ability to generate operating income, earnings
before interest, taxes, depreciation and amortization ("EBITDA ")
and net income will depend largely on demand for carrier's
carrier services and our ability to sell those services. We
cannot assure you that we will be profitable in the future.
Failure to accomplish these goals may impair our ability to:

- meet our obligations under the Senior Discount Notes, or
other indebtedness; or
- raise additional equity or debt financing needed to expand
our network or for other reasons.

These events could have a material adverse effect on our
business, financial condition and results of operations.

WE MAY BE UNABLE TO MEET OUR SUBSTANTIAL DEBT OBLIGATIONS

We have a substantial amount of debt. As of December 31, 2000, we
had approximately $388 million of indebtedness outstanding, most
of which was evidenced by our Senior Discount Notes. As noted in
Item 1 - "Business - Recent Events" the Company repurchased 50.4
percent of its Senior Discount Notes for $94.8 million using a
$94 million loan from KLTT and obtained a commitment for a $75
million credit facility from KLTT of which $35 million had
currently been extended in the form of a demand revolving credit
facility. Because we are a holding company that conducts our
business through Digital Teleport, all existing and future
indebtedness and other liabilities and commitments of our
subsidiary, including trade payables, are effectively senior to
the Senior Discount Notes, and Digital Teleport is not a
guarantor of the Senior Discount Notes. As of December 31, 2000,
DTI Holdings had aggregate liabilities of $466 million, including
$41 million of deferred revenues. The indenture under which the
Senior Discount Notes were issued (the "Indenture") limits but
does not prohibit the incurrence of additional indebtedness by
us, and we expect to incur additional indebtedness in the future,
some of which may be incurred by Digital Teleport and any future
subsidiaries. As a result of our high level of debt, we:

- will need significant cash to service our debt, which will
reduce funds available for operations, future business
opportunities and investments in new or developing technologies
and make us more vulnerable to adverse economic conditions;

- may not be able to refinance our existing debt or raise
additional financing to fund future working capital, capital
expenditures, debt service requirements, acquisitions or other
general corporate requirements;
- may have less flexibility in planning for, or reacting to,
changes in our business and in the telecommunications industry
that affect how we implement our financing, construction or
operating plans; and
- we may be at a competitive disadvantage with respect to
competitors who have lower levels of debt.

Additionally, we believe our business plan is fully funded upon
the completion of the following events:

- Proposed Senior Credit Facility
- Financing required to fund the optronics purchase necessary
to light the remainder of our network and;
- Certain planned asset sales

Our ability to pay the principal of and interest on our
indebtedness will depend upon our future performance, which is
subject to a variety of factors, uncertainties and contingencies,
many of which are beyond our control. If we fail to make the
required payments or to comply with our debt covenants we will
default on our debt, which could result in acceleration of the
debt. In such event there can be no assurance that we would be
able to make the required payments or borrow sufficient funds
from alternative sources to make any such payments. Even if
additional financing could be obtained, there can be no assurance
that it would be on terms that are acceptable to us.

COVENANTS IN OUR DEBT AGREEMENTS RESTRICT OUR OPERATIONS

The covenants in our Indenture related to our Senior Discount
Notes and any new borrowings we may incur as a result of the
repurchase of the Senior Discount Notes that were described in
Item 1 - "Business - Recent Events" may materially and adversely
affect our ability to finance our future operations or capital
needs or to engage in other business activities. Among other
things, these covenants limit our ability and the ability of our
subsidiaries to:

- incur certain indebtedness;
- pay dividends, make certain other restricted payments;
- permit other restrictions on dividends and other payments by
our subsidiaries;
- guarantee certain indebtedness;
- dispose of assets;
- made any investments in any Unrestricted Subsidiary;
- enter into transactions with affiliates or related persons;
or
- consolidate, merge or transfer all or substantially all of
our assets.

Further, there can be no assurance that we will have available,
or will be able to acquire from alternative sources of financing,
funds sufficient to repay the Senior Discount Notes, as required
under the Indenture.

WE MAY BE UNABLE TO RAISE THE ADDITIONAL CAPITAL NECESSARY TO
IMPLEMENT OUR BUSINESS STRATEGY

We believe our business plan is fully funded upon the completion
of the following events:

- Proposed Senior Credit Facility
- Financing required to fund the optronics purchase necessary
to light the remainder of our network; and
- Certain planned asset sales

The development of our business and the installation and
expansion of our network have required and will continue to
require substantial capital. While we anticipate that our
existing financial resources will be adequate to fund our current
priorities and our existing capital commitments through the next
twelve months, we expect to require significant additional
capital in the future to fully complete the planned DTI

network. We also may require additional capital in the future to fund
operating deficits and net losses and for potential strategic
alliances, joint ventures and acquisitions. Our ability to fund
our required capital expenditures depends in part on:

- completing our network as scheduled;
- satisfying our existing fiber sale obligations;
- arranging planned financing facilities;
- completing planned asset sales; and
- increasing revenues and related cash flows.

Our failure to accomplish any of these may significantly delay or
prevent capital expenditures. If we are unable to make our
capital expenditures as planned, our business may grow slower
than expected. This could have a material adverse effect on our
business, financial condition and results of operation.

The actual amount and timing of future capital requirements may
differ materially from our current estimates depending on demand
for our services, our ability to implement our current business
strategy and regulatory, technological and competitive
developments in the telecommunications industry. We may seek to
raise additional capital from public or private equity or debt
sources, including secured bank loans. There can be no assurance
that we will be able to raise such capital on satisfactory terms
or at all. If we decide to raise additional capital through the
incurrence of debt, we may become subject to additional or more
restrictive financial covenants and be required to grant security
interest in assets of Digital Teleport. In the event that we are
unable to obtain such additional capital on acceptable terms or
at all, we may be required to reduce the scope or pace of
deployment of our network, which could have a material adverse
effect on our business, financial condition and results of
operation.

WE NEED TO EXPAND OUR NETWORK INTO TARGET MARKETS AND OBTAIN AND
MAINTAIN FRANCHISES, PERMITS AND RIGHTS-OF-WAY

Our continuing network expansion into target markets is an
essential element of our future success. In the past, we have
experienced delays in constructing our network backbone and may
experience similar delays in accessing target markets in the
future. We have substantial existing commitments to purchase
materials and labor for expanding our network. In addition, we
will need to obtain additional materials and labor that may cost
more than anticipated. Some sections of our network are
constructed by other carriers or their contractors. We cannot
guarantee that these third parties will complete their work
according to schedule. If any delays prevent or slow down our
network expansion these could have a material adverse effect on
our business, financial condition and results of operation.

The expansion of our network into target markets depends, among
other things, on acquiring rights-of-way and required permits
from railroads, utilities and governmental authorities on
satisfactory terms and conditions and on financing such
expansion, acquisition and construction. In addition, after our
network is completed and required rights and permits are
obtained, we cannot guarantee that we will be able to maintain
all of the existing rights and permits. If we fail to obtain
rights and permits or we lose a substantial number of rights and
permits our financial results would suffer which could have a
material adverse effect on our business, financial condition and
results of operation.

WE ARE DEPENDENT ON A LIMITED NUMBER OF LARGE CUSTOMERS

A relatively small number of customers account for a significant
amount of our total revenues. Our three largest customers during
the six-month period ended December 31, 2000, accounted for
approximately 48% of our revenues. Our three largest customers
for the twelve month periods ended June 30, 2000 and 1999,
accounted for approximately 68% and 85%, respectively, of our
revenues.

Our business plan assumes that a large proportion of our future
revenues will come from our carrier's carrier services, which by
their nature are marketed to a limited number of
telecommunications carriers. Most of our arrangements with large
customers do not provide any guarantees that they will continue
using our services at current levels. In addition, if our
customers build their own facilities, our competitors build
additional facilities or increase capacity in existing facilities
or there are further consolidations in the

telecommunications industry involving our customers or competitors, then
our customers could reduce or stop their use of our services which
could have a material adverse effect on our business, financial
condition and results of operation.

COMPETITORS WITH GREATER RESOURCES MAY ADVERSELY AFFECT OUR
BUSINESS

The telecommunications industry is highly competitive. Our
ability to compete effectively in the interstate and local
exchange telecommunications markets depends on our ability to
maintain high quality services at competitive prices. We cannot
assure you that we will be able to compete successfully with our
competitors or new entrants in our carrier's carrier service or
local exchange markets. Our failure to do so would have an
adverse impact on our ability to attract and maintain customers,
resulting in decreased revenues and/or increased costs, either of
which could have a material adverse impact on our business,
financial condition and operating results.

Competitors for our carrier's carrier services include many large
and small interexchange carriers ("IXCs"), as well as other
providers of long-haul telecommunications services. Many of
these providers own nationwide fiber optic networks and have far
greater financial and technical resources. These providers also
have the added competitive advantage of existing customer bases.
These advantages may lead these competitors to build additional
fiber capacity in the geographic areas that our network serves or
in which we plan to expand. Recent merger and acquisition
activity in the telecommunications industry also has created
expanded network footprints and increased competitive pressures.
We expect this merger and acquisition activity to continue and
increase in the future, and to include the entrance of foreign
competitors.

We also will face competition for our carrier's carrier services
from the Regional Bell Operating Companies ("RBOCs"). Section
271 of the Telecommunications Act of 1996 ("1996 Act") requires
the RBOCs to apply to the FCC, on a state-by-state basis, for
authorization to provide originating, in-region interLATA
services. To date, the FCC has granted RBOC 271 petitions for
Kansas, Massachusetts, New York, Oklahoma and Texas. These
authorizations have enabled the RBOCs to gain a substantial share
of these respective state interstate voice and data markets.
Further approvals and entry into the interstate voice and data
markets may result in the RBOCs taking substantial business from
our customers or us.

In the local exchange market, we face competition from the
larger, better capitalized incumbent local exchange carriers
("ILECs") (including RBOCs such as Verizon and Ameritech), from
other competitive local exchange carriers ("CLECs"), private
network operators and various wireless and cable television
providers. Many of these competitors have committed substantial
resources to building their own networks or to purchasing
facilities from ILECs. These networks may provide our
competitors with greater flexibility and lower cost structure
than our own. Moreover, several of our competitors are offering
a bundled package of telecommunications products, including local
voice and data services, in direct competition to the services
and products that we now offer or plan to offer.

PRICING PRESSURES AND THE RISK OF INDUSTRY OVER-CAPACITY MAY
ADVERSELY AFFECT OUR BUSINESS

The long distance transmission industry has generally been
characterized by over-capacity and declining prices since shortly
after the AT&T break-up in 1984. Because the cost of fiber is a
relatively small portion of the cost of building new
telecommunications networks, companies building such networks
installed more fiber optic transmission capacity than was needed
over the short or medium term. The current competitive market
has led many companies to increase substantially the capacity of
their networks, resulting in sharp price declines for capacity
and network services. We anticipate that these price declines
will continue over the next several years.

Our prices also may decline due to recent technological advances
greatly expanding the capacity of existing and new fiber optic
cable. Although such technological advances may enable us to
increase our network's capacity, a corresponding increase in our
competitors' capacity could adversely affect our business.

If overall capacity in the industry exceeds demand in general or
along any of our routes, severe additional

pricing pressure could develop. These price declines may be
particularly severe if recent trends causing increased demand for
network capacity change. For example, rapid growth in the use of
the Internet is a recent phenomenon and may not continue at its
current pace.

SYSTEM FAILURES OR INTERRUPTIONS IN OUR NETWORK MAY CAUSE LOSS OF
CUSTOMERS

Our success depends on the seamless uninterrupted operation of
our network and on the management of traffic volumes and route
preferences over our network. Furthermore, as we continue to
expand our network to increase both its capacity and reach, and
as traffic volume continues to increase, we will face increasing
demands and challenges in managing our circuit capacity and
traffic management systems. Any prolonged failure of our
communications network or other systems or hardware that causes
significant interruptions to our operations could seriously
damage our reputation and result in customer attrition and
financial losses which could have a material adverse effect on
our business, financial condition and results of operation.

REGULATORY CHANGE COULD OCCUR WHICH MIGHT ADVERSELY AFFECT OUR
BUSINESS

Some of our operations are regulated by the FCC and various state
public utility or public service commissions ("PUCs").
Regulatory changes by the FCC or the state PUCs or new
legislation that affects our operations could have a material
adverse effect on our business, financial condition and results
of operations.

The FCC and the state PUCs are currently considering various
aspects of local exchange competition, including rates for
unbundled network elements, collocation obligations of the ILECs
and inter-carrier compensation issues. All of these pending
regulatory proceedings could greatly affect our ability to
compete in the telecommunications market. In addition, a number
of competitive issues are currently the subject of judicial
challenges, including the methodology that ILECs must use to
price network elements. An unfavorable decision on any one of
these items could hamper our competitive ability and decrease our
revenues, increase our costs and hinder our ability to attract
and retain customers. It remains impossible for us to determine
how the FCC, the states or the courts will rule on these issues
at this time.

Several pending legislative developments relating to the ability
of the RBOCs to offer interstate data services also may affect
our ability to compete. Specifically, legislation has been
proposed that would allow the RBOCs to provide interLATA data and
broadband services even if Section 271 relief has not been
received for voice services in a specific state. The enactment
of such legislation would greatly impact our competitive
position, since the RBOCs would be strong competitors in the
interstate carrier's carrier data services market.
See Item 1 - "Business - Industry Overview;" and "Business -
Regulatory Environment."

We are required to obtain certain authorizations from the FCC and
the state PUCs to offer certain of our telecommunication
services. In addition, the state PUCs require that we file
tariffs for many of our services. We have obtained all of the
authorizations necessary to offer the intrastate and interstate
telecommunications services in the states we now serve and filed
all required tariffs. As it becomes necessary, we will obtain
similar operating authorities in the states in which we expand
our business. The Company's receipt of the necessary state
certifications is dependent upon the specific procedural
requirements of the applicable PUC and the workload of its staff.
In addition, third party challenges to our state certification
applications and tariff filings may delay our receipt of the
necessary authorizations and, correspondingly, our provision of
services causing us to incur substantial legal and administrative
expenses. To date, we have not experienced significant
difficulties in receiving certifications, maintaining tariffs, or
otherwise complying with FCC or state PUC regulatory obligations.
There can be no assurances, however, that we will not experience
delays or be subject to third-party challenges in obtaining the
necessary regulatory authorizations. The failure to obtain such
authorizations on a timely basis would have a material adverse
effect on our business, financial condition and results of
operations.

WE ARE DEPENDENT ON A MAJOR SUPPLIER FOR KEY ELECTRONIC EQUIPMENT

We are dependent upon Cisco Systems, Inc. (Cisco) for our
electronic equipment used in completing our network. In
September 1998, DTI entered into a three-year agreement with
Cisco Systems, Inc. ("Cisco"), successor to Pirelli's optical
networking division, pursuant to which it agreed to purchase from
Cisco at least 80% of the Company's needs for DWDM equipment. In
January 2001, DTI entered into a four-year master purchase
agreement with Cisco, which included an initial commitment to
purchase $70 million in optronic equipment. The purchase
commitment is contingent upon the satisfaction of certain
financing contingencies, including the completion of the Senior
Credit Facility. Therefore, we are dependent on Cisco for DWDM
equipment. To date, our arrangements have provided us DWDM equipment
at a generally stable, attractive price. There can be no assurance
that Cisco will be able to meet our future requirements on a
timely basis. We could obtain equipment and services of
comparable quality from several alternative suppliers. However,
we may fail to acquire compatible services and equipment from
such alternative sources on a timely and cost-efficient basis
which could have a material adverse effect on our business,
financial condition and results of operation.

WE MAY BE ADVERSELY AFFECTED IF WE CANNOT RETAIN KEY PERSONNEL

We continue to rely upon the contribution of a number of key
executives. We have entered into employment agreements with
certain of these executives. We can not assure you that we will
be able to retain such qualified personnel. Our future success
and ability to manage growth will be dependent also upon our
ability to hire and retain additional highly skilled employees
for a variety of management, engineering, technical, and sales
and marketing positions. The competition for such personnel is
intense. We can not assure you that we will be able to attract
and retain such qualified personnel which could have a material
adverse effect on our business, financial condition and results
of operation.

WE MAY FACE DIFFICULTIES IN INTEGRATING, MANAGING AND OPERATING
NEW TECHNOLOGY

Our operations depend on our ability to successfully integrate
new and emerging technologies and equipment. These include the
technology and equipment required for DWDM, which allows multiple
signals to be carried simultaneously, and IP transmission using
DWDM technology. Integrating these new technologies could
increase the risk of system failure and result in further
strains. Additionally, any damage to our network control center
in our carrier's carrier services line of business could harm our
ability to monitor and manage the network operations and could
have a material adverse effect on our business, financial
condition and results of operation.

ITEM 2. PROPERTIES

Our network in progress and fiber optic cable, transmission
equipment and other component assets are our principal
properties. Our installed fiber optic cable is laid under various
rights-of-way that we maintain. Other fixed assets are located at
various leased locations in geographic areas served by us. We
believe that our existing properties are adequate to meet our
anticipated needs in the markets in which we have deployed or
begun to deploy our network and that additional facilities are
and will be available to meet our development and expansion needs
in existing and planned markets for the foreseeable future.

Our principal executive offices and Network Control Center are
located in St. Louis, Missouri. We lease this 16,000 square-feet
of space pursuant to the terms of the lease that expires in July
2001. The Company also leases additional office and equipment
space in St. Louis, Missouri from KLTT at market rates on a month-
to-month basis. See Item 13 - "Certain Relationships and Related
Transactions."

ITEM 3. LEGAL PROCEEDINGS

In June 1999, the Company and Mr. Weinstein, the founder, and
former President and CEO of the Company, settled a suit brought
in the Circuit Court of St. Louis County, Missouri, in a matter
styled Alfred H. Frank v. Richard D. Weinstein and Digital
Teleport, Inc. Pursuant to the terms of the settlement the
Company paid $1.25 million and Mr. Weinstein paid $1.25 million
to the plaintiff and the Company released Mr. Weinstein from his
indemnification. Mr. Weinstein obtained a loan from the Company
for his portion of the settlement cost plus approximately
$200,000 representing 50% of the legal costs incurred by the
Company. The loan was repaid in full with interest in February
2001 in connection with the change of control described in Item 1
- - "Business - Recent Events".

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

None.

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS

There is no established public trading market for our common
stock. As of December 31, 2000, there was one holder of our
common stock, one holder of our restricted stock and one holder
of our preferred stock. We have never declared or paid cash
dividends on our common stock. It is our present intention to
retain all future earnings for use in our business and,
therefore, we do not expect to pay cash dividends on the common
stock in the foreseeable future. The declaration and payment of
dividends on the common stock is restricted by the terms of our
indebtedness under the indenture pursuant to which we issued our
Senior Discount Notes.

On February 23, 1998, we consummated a private placement in
reliance upon the exemption from registration under Section 4(2)
of the Securities Act of 1933 (the "Securities Act"), pursuant to
which we issued and sold 506,000 units (the "Units") consisting
of $506 million aggregate principal amount at maturity of Senior
Discount Notes and warrants to purchase 3,926,560 shares of
Common Stock (the "Warrants"). The Senior Discount Notes were
sold at an aggregate price of $275 million, and we received
approximately $265 million net proceeds, after deductions for
offering expenses. The Warrants were allocated a value of $10
million. The Senior Discount Notes were initially purchased by
Merrill Lynch, Pierce, Fenner & Smith Incorporated and TD
Securities USA Inc., and were resold in accordance with Rule 144A
and Regulation S under the Securities Act of 1933, as amended.
On September 15, 1998, we completed an Exchange Offering under
the Securities Act of 1933, of Series B Senior Discount Notes due
2008 and Warrants to Purchase 3,926,560 Shares of Common Stock
for the Company's then outstanding Senior Discount Notes due 2008
and Warrants to Purchase 3,926,560 Shares of Common Stock. The
form and terms of the Series B Senior Discount Notes are
identical in all material respects to those of the Senior
Discount Notes, except for certain transfer restrictions and
registration rights relating to the Senior Discount Notes and
except for certain interest provisions related to such
registration rights. Together the Series B Senior Discount Notes
and Senior Discount Notes are referred to as the "Senior Discount
Notes" throughout this document.

On February 1, 2001, the Company purchased 50.4 percent of its
Senior Discount Notes for a purchase price of $94.8 million
pursuant to a tender offer. KLTT provided a demand loan ("Demand
Loan") to the Company of $94 million at an annual interest rate
of 10% in order to complete this transaction. The Demand Loan
received from KLTT is in the form of a demand note in which all
principal and interest is due upon demand and is secured by a
pledge of all the outstanding stock of Digital Teleport, Inc and
Digital Teleport of Virginia, Inc. As a result of the purchase
made pursuant to the completion of the tender offer the Company
reduced the principal amount outstanding of its Senior Discount
Notes, net of unamortized underwriter's discount, by
approximately $193.5 million and Deferred Financing Costs by
approximately $2.9 million. These reductions resulted in a net
benefit to the Company of $95.6 million consisting of a net gain
on early extinguishment of debt to the Company of $57.3 million
and a tax benefit of $38.3 million as a result of an adjustment
in the Company's deferred tax valuation allowance as of February 1, 2001.
The purchase of the Senior Discount Notes also reduces the amount
of cash interest that will be due with respect to the Senior
Discount Notes by approximately $32 million annually starting in
September 2003, when these payments begin, and replaced this
interest with approximately $9.4 million in annual interest which
will be payable in accordance with the Demand Loan or its
eventual replacement financing. The consent solicitation made in
connection with the tender offer authorized certain changes in
the indenture associated with the Senior Discount Notes,
including expanding the Company's allowable secured borrowings by
an additional $194 million to a total of $294 million. These
changes also permit the Demand Loan to be secured by the stock of
the Company's subsidiaries and other financings to be secured by
the assets of the Company and its subsidiaries.

Senior Discount Notes and the purchase by KLTT of a separate
warrant for 1 percent of the Company's common stock, that results
in KLTT now owning 82.1 percent of DTI's fully diluted shares,
excluding shares underlying stock options granted under the
Company's 2001 Stock Option Plan.

Through March 31, 2001, under our 1997 Long-Term Incentive Award
Plan, we granted or became obligated to grant options to purchase
an aggregate of 1,110,000 shares of our Common Stock to certain
of our directors and key employees at exercise prices ranging
from $2.60 to $6.66 per share. In March 2001, the Company
established the 2001 Stock Option Plan ("2001 Plan"). Pursuant
to this 2001 Plan we have currently granted or became obligated
to grant options to purchase an aggregate of 2,063,500 shares of
our Common Stock to certain of our employees at an exercise price
of $1.50 per share. Shares underlying options granted under the
2001 Plan entitle each optionee, upon exercise of the options, only
to receive cash in lieu of shares in an amount equal to the spread
between the fair market of the shares and the exercise price in
the event that such exercise would either (i) cause the Company
to cease being a member of the affiliated group with KLTT for federal
income tax purposes, or (ii) cause a change of control as defined in
the Indenture, as amended, for the Senior Discount Notes.

Such transactions were completed without registration under the
Securities Act in reliance on the exemption provided by Section
4(2) of the Securities Act and Rule 701 under the Securities Act.

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The following is a summary of selected historical financial data
as of and for the five years in the period ended June 30, 2000
and six-month period ended December 31, 2000 which has been
derived from our audited Consolidated Financial Statements. The
information for the six-month period ended December 31, 1999 is
unaudited. The information set forth below should be read in
conjunction with the discussion under Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", Item 1 - "Business" and the audited Consolidated
Financial Statements and notes thereto appearing elsewhere in
this document.

YEAR ENDED JUNE 30, SIX-MONTHS ENDED
DECEMBER 31,
-------------------------------------------------------------------- --------------------------
1996(A) 1997 1998 1999 2000 1999 2000
(Unaudited)
-------------------------------------------------------------------- --------------------------

OPERATING
STATEMENT
DATA:

Total revenues $676,801 $2,033,990 $3,542,771 $7,209,383 $8,985,534 $4,142,033 $6,090,582
---------- ---------- ---------- ----------- ---------- ---------- ----------
Operating
expenses:

Telecommun- 296,912 1,097,190 2,294,181 6,307,678 11,977,936 5,879,452 8,542,774
ication
services

Write-off of - - - - - - 1,976,000
prepaid fiber
rights

Other services - 364,495 - - - - -

Selling, 548,613 868,809 3,668,540 5,744,417 5,306,526 2,543,975 2,702,499
general and
administrative

Depreciation
and
amortization 425,841 757,173 2,030,789 4,653,536 13,922,515 6,720,112 8,445,284
---------- ---------- ---------- ----------- ---------- ---------- ----------
Total 1,271,366 3,087,667 7,993,510 16,705,631 31,206,977 15,143,539 21,666,557
operating
expenses
---------- ---------- ---------- ------------ ----------- ---------- ----------
Loss from (594,565) (1,053,677) (4,450,739) (9,496,248) (22,221,443) (11,001,506) (15,575,975)
operations

Interest (191,810) (798,087) (6,991,773) (22,219,999) (32,825,756) (15,723,575) (19,613,966)
income
(expense) -
net
---------- ---------- ---------- ------------ ----------- ----------- -----------
Loss before (786,375) (1,851,764) (11,442,512) (31,716,247) (55,047,199) (26,725,081) (35,189,941)
income taxes

Income tax - 1,214,331 2,020,000 (1,000,000) (2,234,331) - -
benefit/
(provision) - ---------- ---------- ---------- ------------ ----------- ------------ ----------

Net loss (e) $(786,375) $(637,433) $(9,422,512) $(32,716,247) $(57,281,530) $(26,725,081) $(35,189,941)
========== ========== ========== ============ =========== ============ ==========

BALANCE SHEET
DATA:

Cash and cash $ 817,391 $4,366,906 $251,057,274 $132,175,829 $32,841,453 $73,190,771 $10,639,366
equivalents

Network and 13,064,169 34,000,634 77,771,527 213,469,187 317,103,473 281,426,049 361,314,245
equipment,
net

Total assets 15,025,758 39,849,136 342,865,160 363,760,890 374,822,002 371,544,948 381,127,388

Accounts 1,658,836 5,086,830 4,722,418 9,561,973 10,248,286 8,967,813 23,566,886
payable

Vendor
financing:

Current - - - 2,298,946 6,566,250 5,713,159 5,836,766

Long-term - - - 2,298,946 3,843,158 2,187,569 2,100,030

Senior discount - - 277,455,859 314,677,178 356,712,668 335,036,321 379,791,443
notes, net

Deferred
revenues 6,734,728 9,679,904 16,814,488 22,270,006 41,917,427 34,780,204 41,148,937

Redeemable - 28,889,165 - - - - -
Convertible
Preferred
Stock(b)

Stockholders' (1,100,703) (4,729,867) 41,958,122 7,919,145 (49,415,607) (18,823,797) (84,640,908)
equity
(deficit)(b)

OTHER FINANCIAL
DATA:

Cash flows $ 299,710 $ 7,674,272 $9,707,957 $11,461,067 $5,322,630 $9,315,282 $28,064,216
from
operations

Cash flows (1,122,569) (19,417,073) (44,952,682) (128,367,335) (102,456,285) (68,300,340) (48,650,544)
from
investing
activities

Cash flows 1,500,030 15,292,316 281,935,093 (1,975,177) (2,200,721) - (1,615,759)
from
financing
activities

EBITDA (c) (168,724) (259,068) (2,419,950) (4,842,712) (8,298,928) (4,281,394) (7,130,691)

Capital 5,663,047 19,876,595 44,952,682 128,367,335 102,456,285 68,300,340 48,650,544
expenditures

<FN>
(a) Through June 30, 1996, we were considered a development
stage enterprise focused on developing our network and
customer base.

(b) On February 13, 1998, in conjunction with the Senior
Discount Notes Offering, we amended the terms of the Series A
Preferred Stock to provide that it is no longer mandatorily
redeemable, and, as a result, the Series A Preferred Stock has
been classified with stockholders' equity.

(c) EBITDA represents net loss before interest income (expense),
loan commitment fees, income tax benefit, depreciation and
amortization. EBITDA is included because we understand that such
information is commonly used by investors in the
telecommunications industry as an additional basis on which to
evaluate our ability to pay interest, repay debt and make

capital expenditures. Excluded from EBITDA are interest income
(expense), loan commitment fees, income taxes, depreciation and
amortization, each of which can significantly affect our results
of operations and liquidity and should be considered in
evaluating our financial performance. EBITDA is not intended to
represent, and should not be considered more meaningful than, or
an alternative to, measures of operating performance determined
in accordance with generally accepted accounting principles
("GAAP"). Additionally, EBITDA should not be used as a comparison
between companies, as it may not be calculated in a similar
manner by all companies.

(d) Net loss attributable to Common Stock, loss per share data
and weighted average number of shares outstanding are not
meaningful as there was only one common shareholder and no class
of securities was registered.

</FN>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS RELATES TO OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR EACH OF THE THREE YEARS
ENDED JUNE 30, 2000 AND SIX-MONTH PERIOD ENDING DECEMBER 31,
2000. THIS INFORMATION SHOULD BE READ IN CONJUNCTION WITH OUR
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE
OTHER FINANCIAL DATA APPEARING ELSEWHERE IN THIS DOCUMENT.

OVERVIEW

INTRODUCTION

We are a facilities-based communications company that is creating
an approximately 18,700 route mile digital fiber optic network
comprised of approximately 20 regional rings interconnecting
primary, secondary and tertiary cities in 36 states and the
District of Columbia. By providing high-capacity voice and data
transmission services to and from secondary and tertiary cities,
the Company intends to become a leading wholesale provider of
regional communications transport services to IXCs and other
communications companies. We currently provide carrier's carrier
services under contracts with Tier 1 and Tier 2 carriers and
other telecommunication companies. We also provide private line
services to a few targeted business and governmental end-user
customers. We are 82.1 percent owned, on a fully diluted basis,
by an affiliate of Kansas City Power & Light Company ("KCP&L"),
excluding shares underlying stock options granted under the Company's
2001 Stock Option Plan. Shares underlying options granted under
that plan are excluded from this calculation because each optionee, upon
exercise of the options, is entitled only to receive cash in lieu
of shares in an amount equal to the spread between the fair market
of the shares and the exercise price in the event that such exercise
would either (i) cause the Company to cease being a member of the
affiliated group with KLTT for federal income tax purposes, or (ii)
cause a change of control as defined in the Indenture, as amended, for
the Senior Discount Notes.

REVENUES

We derive revenues principally from (i) the sale of wholesale
telecommunications services, primarily through IRUs and wholesale
network capacity agreements, to IXCs, such as the Tier 1 and Tier
2 carriers, and other telecommunications entities and (ii) the
sale of telecommunications services directly to business and
governmental end-users. For the six-month period ended December
31, 2000, we derived approximately 96% and 4% of our total
revenues from carrier's carrier services and end-user services,
respectively. Of our total carrier's carrier service revenues,
approximately 76% related to wholesale network capacity services
and 24% related to IRU agreements.

During the past several years, market prices for many
telecommunications services have been declining, which is a trend
we believe will likely continue. This decline has had and will
continue to have a negative effect on our gross margin, which may
not be offset by decreases in our cost of services. However, we
believe that such decreases in prices may be partially offset by
increased demand for our telecommunications services as we expand
our network and introduce new services.

We derive carrier's carrier services revenues from IRUs and
wholesale network capacity agreements. IRUs typically have a term
of 20 or more years. We provide wholesale network capacity
services through service agreements for terms of one year or
longer which typically require customers to pay for such capacity
regardless of level of usage. IRUs, which are accounted for as
operating leases, generally require substantial advance payments
and periodic maintenance fees over the terms of the agreements.
Advance payments are recorded by us as deferred revenue and are
then recognized on a straight-line basis over the terms of the
IRU agreements. Fixed periodic maintenance payments are also
recognized on a straight-line basis over the term of the
agreements as ongoing maintenance services are provided.
Wholesale network capacity agreements generally provide for a
fixed monthly payment based on the capacity and length of circuit
provided and sometimes require substantial advance payments.
Advance payments and fixed monthly service payments are
recognized on a straight-line basis over the terms of

the agreements, which represent the periods during which services are
rendered. For the six-month period ended December 31, 1999 and
2000, our three largest carrier customers combined accounted for
an aggregate of 72% and 50%, respectively, of carrier's carrier
services revenues or 70% and 48%, respectively, of total
revenues. Our IRU contracts provide for the return of advance
payments and reduced future payments and varying penalties for
late delivery of route segments, and allow the customers, after
expiration of grace periods, to delete such non-delivered
segments from the system route to be delivered.

End-user services are telecommunications services provided
directly to businesses and governmental end-users. We currently
provide private line services to end-users to connect certain
points on an end-user's private telecommunications network as
well as to bypass the applicable ILEC in accessing such end-
user's long distance provider. Our end-user services agreements
to date have generally provided for services for a term of one
year or longer and for a fixed monthly payment based on the
capacity and length of circuit provided, regardless of level of
usage. For the six-month periods ended December 31, 1999 and
2000, six customers accounted for all of our end-user services
revenue, or an aggregate of 3% and 4%, respectively, of total
revenues.

As of December 31, 2000, we have received aggregate advance
payments of approximately $47 million from certain of our IRU,
carrier's carrier and end-user customers which are recorded as
deferred revenue when received. Deferred revenues from IRUs,
carrier's carrier and end-user customers are recognized on a
straight-line basis over the life of the contract. Upon
expiration, such agreements may be renewed or services may be
provided on a month-to-month basis.

OPERATING EXPENSES

Our principal operating expenses consist of the cost of
telecommunications services, selling, general and administrative
("SG&A") expenses, depreciation and amortization.

The cost of telecommunications services consists primarily of the
cost of leased line facilities and capacity, operating costs in
connection with our owned facilities and costs related to fibers
accepted under our long-term IRUs. Because we currently provide
carrier's carrier and end-user services principally over our own
network, the cost of providing these services includes a minor
amount of leased space (in the form of physical collocation at
ILEC access tandems and IXC POPs) and leased line capacity (to
fill requirements of a customer contract which are otherwise
substantially met on our network and typically where we plan to
expand our network) and ILEC access charges. Leased space, power
and maintenance costs have increased significantly as we have
accepted fibers related to our long-term IRUs. Further, leased
line capacity costs and access charges are expected to increase
significantly because we expect to obtain access to a greater
number of ILEC facilities through leased lines in order to reach
end-users and access tandems that cannot be cost-effectively
connected to our network in a given local market. Operating costs
include, but are not limited to, costs of managing our network
facilities, technical personnel salaries and benefits, rights-of-
way fees, locating installed fiber to minimize the risk of fiber
cuts, repairs and maintenance, relocations and property taxes.

SG&A expenses include the cost of salaries, benefits, occupancy
costs, sales and marketing expenses and administrative expenses.
We plan to add sales offices in selected markets, as additional
segments of our network become operational. Depreciation and
amortization are primarily related to fiber optic cable plant,
electronic terminal equipment and network buildings, and are
expected to increase as we incur substantial capital expenditures
to build and acquire the components of our network. In general,
SG&A expenses have increased significantly as we have developed
and expanded our network. We expect to incur significant
increases in SG&A expenses to realize the anticipated growth in
revenue for carrier's carrier services and end-user services. In
addition, SG&A expenses will increase as we continue to recruit
experienced personnel to implement our business strategy.

OPERATING LOSSES

As a result of build-out and operating expenses, we have incurred
significant operating and net losses to date. Losses from
operations in the years ended June 30, 1998, 1999 and 2000 and
six-month period ended December 31, 2000 were $4.5 million, $9.5
million, $22.2 million and $15.6 million, respectively.

We may incur significant and possibly increasing operating losses.
There can be no assurance that we will achieve or sustain
profitability or generate sufficient positive cash flow to meet
our debt service obligations and working capital requirements. If
we cannot achieve operating profitability or positive cash flows
from operating activities, we may not be able to service the
Senior Discount Notes or meet our other debt service or working
capital requirements, which could have a material adverse effect
on us.

RESULTS OF OPERATIONS

The table set forth below summarizes our percentage of revenue by
source and operating expenses as a percentage of total revenues:

SIX-MONTH PERIOD
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
-------------------- ------------------

1998 1999 2000 1999 2000
---- ---- ---- ---- ----

Revenue:
Carrier's 87% 94% 97% 97% 96%
carrier
services

End-user 13 6 3 3 4
services
---- ---- ---- ---- ----
Total revenue 100% 100% 100% 100% 100%
---- ---- ---- ---- ----
---- ---- ---- ---- ----

Operating Expenses:
Telecommunications 65% 88% 133% 142% 140%
services

Write-off - - - - 32
of prepaid
fiber usage
ritghts

Selling, general and 104 80 59 61 45
administrative

Depreciation and 57 64 155 163 139
amortization
---- ---- ---- ---- ----

Total operating 226% 232% 347% 366% 356%
expenses
---- ---- ---- ---- ----
---- ---- ---- ---- ----

SIX-MONTH PERIOD ENDED DECEMBER 31, 1999 COMPARED TO THE SIX-
MONTH PERIOD ENDED DECEMBER 31, 2000

REVENUE. Total revenue for the six-months ended December 31,
2000 increased $1.9 million (47%) from the comparable 1999
period. This growth is primarily attributable to increased
revenues from carrier's carrier services. Revenues from
carrier's carrier services for the same periods were up 44%. The
increases were due principally to sales of transport business on
our in-service routes. We have had a 60% increase in the number
of customers we serve and, therefore, have reduced our reliance
on any one customer.

OPERATING EXPENSES. Total operating expenses increased $6.5
million for the six-month period ended December 31,2000 compared
to the same period in 1999. Telecommunication services expenses
increased $2.7 million for the six-months ended December 31, 2000
compared to the same period in 1999. This increase primarily
reflects the increase of personnel costs related to the growth of
the operational infrastructure, costs related to accepted dark
fiber segments and property taxes. Additionally, the Company
abandoned the Las Vegas to Dallas and St. Louis to Chicago
segments of its short-term two-fiber lease as the Company has now
developed alternative solutions for these routes. As a result of
this decision, the Company recorded a write-off of prepaid fiber
usage rights of $2.0 million during the six-months ended December
31, 2000.

Selling, general and administrative expenses for the six-months
ended December 31, 2000 increased $159,000 compared to the same
period in 1999. The increase is due mainly to increases in legal
and professional costs.

Depreciation and amortization grew $1.7 million for the six-month
period ended December 31, 2000 in comparison to the same period
in 1999 due to increasing amounts of our fiber optic network
being placed into service in 2000. Depreciation and amortization
will continue to grow as additional network routes are placed
into service and as we move forward with our investment in
capital assets in order to increase network capacity.

OTHER INCOME (EXPENSES). Net other income (expense) for the
first six-months increased from a net expense of $15.7 million in
1999 to a net expense of $19.6 million in 2000. This change is
due to the continued accretion of the Senior Discount Notes
issued in February 1998, which results in increasing noncash
interest expense, offset in part by interest income earned on the
portion of the proceeds from the

Senior Discount Notes invested in short-term investment-grade
securities. As the average cash balances have decreased as we
implemented our business strategy so has the related interest
income generated from our short-term investment-grade securities.

INCOME TAXES. No income tax benefit or provision was recorded
for the six-month period ended December 31, 2000. A valuation
allowance is being provided to reserve for significant deferred
tax assets generated from net operating loss carryforwards and
the nondeductible interest expense related to our Senior Discount
Notes, issued in February 1998, that may not be realizable due to
uncertainties surrounding income tax law changes and future
operating income levels.

FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED
JUNE 30, 2000

REVENUE. Total revenue grew 25% from $7.2 million in 1999 to $9.0
million in 2000 principally due to increased revenue from
carrier's carrier services. Revenue from carrier's carrier
services was up 29% to $8.7 million primarily due to increased
sales of capacity on our completed routes. End-user revenues
declined 40%, which is attributable to the expiration of a
customer's contract.

OPERATING EXPENSES. Operating expenses grew 87% from $16.7
million in 1999 to $31.2 million in 2000, due primarily to
increases in telecommunications services and depreciation and
amortization. Telecommunications services expenses were up 90% to
$12.0 million in 2000 due to increased personnel costs to support
the expansion of our network, property taxes, leased capacity
costs incurred to support customers in areas not yet reached by
our network, and costs related to recently accepted dark fiber
segments on previously acquired routes. Selling, general and
administrative expenses were down 8% to $5.3 million in 2000 due
mainly to a reduction in outside legal, professional and
consulting costs as more of these functions are now performed
internally. Depreciation and amortization grew 199% over last
year due to higher amounts of plant and equipment being in
service in 2000 versus 1999.

OTHER INCOME (EXPENSES). Net interest and other income (expense)
increased from a net expense of $22.2 million in 1999 to net
expense of $32.8 million in 2000. Interest income decreased from
$10.7 million in 1999 to $4.0 million in 2000 as the average cash
balances and related interest income from our investment-grade
securities have decreased as we have implemented our business
strategy. Similarly, as a result of the Senior Discount Notes
issued in February 1998, interest expense increased from $31.5
million in 1999 to $36.8 million in 2000 due to the continued
accretion of the Senior Discount Notes, which result in
increasing noncash interest expense. Additionally, we and Mr.
Weinstein, former President and CEO of the Company, settled a
lawsuit which resulted in a one-time charge of $1.5 million in
1999.

INCOME TAXES. An income tax provision of $1.0 million was
recorded in fiscal 1999 related to the anticipated settlement of
an income tax examination. This matter was settled at no cost to
the Company and the related $1 million provision was reversed in
June 2000. Additionally, as management believes it is likely
that we will not generate taxable income sufficient to realize
certain of the tax benefits associated with future deductible
temporary differences and net operating loss carryforwards prior
to their expiration a tax provision of $3.2 million was recorded
in June 2000 to provide a valuation allowance for the Company's
deferred tax asset. The net effect of the two transactions in
fiscal 2000 was $2.2 million.

NET LOSS. Net loss for the fiscal year ended June 30, 1999 was
$32.7 million compared to $57.3 million for the fiscal year ended
June 30, 2000 as a result of the factors discussed above.

FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED
JUNE 30, 1999

REVENUE. Total revenue grew 103% from $3.5 million in 1998 to
$7.2 million in 1999 principally due to increased revenue from
carrier's carrier services. Revenue from carrier's carrier
services was up 121% to $6.8 million primarily due to increased
sales of capacity on our completed routes. End-user revenues
declined 9%, which is attributable to the expiration of a
customer's contract.

OPERATING EXPENSES. Operating expenses grew 109% from $8.0
million in 1998 to $16.7 million in 1999, due primarily to
increases in telecommunications services, selling, general and
administrative expenses

and depreciation and amortization. Telecommunications services expenses
were up 175% to $6.3 million in 1999 due to increased personnel
costs to support the expansion of our network, property taxes, leased
capacity costs incurred to support customers in areas not yet reached
by our network, and costs related to recently accepted dark fiber
segments on previously acquired routes. Selling, general and administrative
expenses were up 57% to $5.7 million in 1999, in order to support
the expansion of our network, which includes an increase in
administrative and sales personnel and the related expenses of
supporting these personnel. Depreciation and amortization grew
129% over last year due to higher amounts of plant and equipment
being in service in 1999 versus 1998.

OTHER INCOME (EXPENSES). Net interest and other income (expense)
increased from a net expense of $7.0 million in 1998 to net
expense of $22.2 million in 1999. Interest income increased from
$5.1 million in 1998 to $10.7 million in 1999 due to the
investment of the proceeds from the Senior Discount Notes.
Similarly, as a result of the Senior Discount Notes issued in
February 1998, interest expense increased from $12.1 million in
1998 to $31.5 million in 1999. Additionally, we and Mr.
Weinstein, former President and CEO of the Company, settled a
lawsuit which resulted in a one-time charge of $1.5 million in
fiscal 1999.

INCOME TAXES. An income tax benefit of $2.0 million was recorded
in fiscal 1998 as management believed it is more likely than not
that we will generate taxable income sufficient to realize
certain of the tax benefits associated with future deductible
temporary differences and net operating loss carryforwards prior
to their expiration. A tax provision of $1.0 million was
recorded in fiscal 1999 related to the anticipated settlement of
an income tax examination.

NET LOSS. Net loss for the fiscal year ended 1998 was $9.4
million compared to $32.7 million for the fiscal year ended June
30, 1999 as a result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our capital expenditures, working capital and debt
requirements and operating losses through a combination of
advance payments for future telecommunications services received
from certain major customers, debt and equity financing and
external borrowings.

At December 31, 2000, we had a working capital deficiency of
$221.3 million, which represents a decrease in working capital of
$248.5 million compared to the working capital surplus of $27.2
million at June 30, 2000. This decrease is primarily
attributable to the continued build-out of our network and the
reclassification to current of certain previously classified long-
term debt in anticipation of the buyback of the Senior Discount
Notes (see Item 1 - "Business - Recent Events").

The net cash provided by operating activities for the six-month
period ended December 31, 1999 and 2000 totaled $9.3 million and
$28.1 million, respectively. During the six-month period ended
December 31, 2000, net cash provided by operating activities
resulted primarily from collection of an IRU-related receivable
of $13.3 million recorded as an Other Receivable at June 30, 2000
and an increase in Accounts Payable as the Company has continued
to build-out its network.

Our investing activities consumed cash of $68.3 million for the
six-month period ended December 31, 1999 and $48.7 million for
the six-month period ended December 31, 2000. During both
periods, 100% of the investing activities were related to network
and equipment.

Cash used in financing activities was $0 for the period ended
December 31, 1999 and $1.6 million for the period ended December
31, 2000 representing amounts due under our vendor financing
agreement.

offer the Company reduced the principal amount outstanding of its
Senior Discount Notes, net of unamortized underwriter's discount, by
approximately $193.5 million and Deferred Financing Costs by
approximately $2.9 million. These reductions resulted in a net
benefit to the Company of $95.6 million consisting of a net gain
on early extinguishment of debt to the Company of $57.3 million
and a tax benefit of $38.3 million as a result of an adjustment
in the Company's deferred tax valuation allowance as of February 1, 2001.
The purchase of the Senior Discount Notes also reduces the amount
of cash interest that will be due with respect to the Senior
Discount Notes by approximately $32 million annually starting in
September 2003, when these payments begin, and replaced this
interest with approximately $9.4 million in annual interest which
will be payable in accordance with the Demand Loan or its
eventual replacement financing. The consent solicitation made in
connection with the tender offer authorized certain changes in
the indenture associated with the Senior Discount Notes,
including expanding the Company's allowable secured borrowings by
an additional $194 million to a total of $294 million. These
changes also permit the Demand Loan to be secured by the stock of
the Company's subsidiaries and other financings to be secured by
the assets of the Company and its subsidiaries.

On February 8, 2001, KLTT acquired an additional 30.7 percent of
the fully diluted shares of the Company from Richard D. Weinstein,
the former Chairman, President and CEO of the Company for $33.6
million in cash. An additional 5 percent of the fully diluted
shares were purchased by KLTT through a tender offer for DTI's
outstanding warrants issued in connection with the Senior Discount
Notes and the purchase by KLTT of a separate warrant for 1 percent
of the Company's common stock, that results in KLTT now owning 82.1
percent of DTI's fully diluted shares, excluding shares
underlying stock options granted under the Company's 2001 Stock
Option Plan.

To achieve our business plan, we will need significant financing
to fund our capital expenditure, working capital, debt service
requirements and our anticipated future operating losses. Our
estimated capital requirements primarily include the estimated
cost of (i) constructing the remaining portions of the planned
DTI network routes, (ii) purchasing, for cash, fiber optic
facilities pursuant to long-term IRUs for planned routes that we
will neither construct nor acquire through swaps with other
telecommunication carriers, and (iii) additional network
expansion activities, including the construction of additional
local loops in secondary and tertiary cities as network traffic
volume increases. We estimate that total capital expenditures
necessary to complete our network will approximate $550 million,
of which we had expended $388 million as of December 31, 2000.
During the balance of calendar 2001, we anticipate our
capital expenditure priorities will be focused principally on
completing our nationwide backbone, accessing target markets and
lighting our network in areas in which we believe there is strong
carrier interest. Our existing capital commitments consist
principally of construction commitments of $9 million for network
segments under construction and payments required under existing
IRU and short-term lease agreements, totaling $8 million, which
are payable within the next twelve months as related contract
completion criteria are met. We also may require additional
capital in the future to fund operating deficits and net losses
and for potential strategic alliances, joint ventures and
acquisitions. These activities could require significant

additional capital not included in the foregoing estimated
capital requirements.

In November 1999, we entered into an IRU agreement with Adelphia
Business Solutions ("ABS") for over 4000 route miles on our
network initially valued at between $27 to $42 million to DTI
depending on the number of options for additional routes of fiber
strands exercised by the parties. ABS paid $10 million in
advance cash payments under the terms of the Agreement. In
August 2000, ABS cancelled five routes or portions thereof, which
will result in approximately $4.2 million in reduced future cash
collections under the Agreement, plus the repayment to ABS of
approximately $1.6 million previously paid to DTI by ABS, which
was repaid in September 2000. In addition to providing for
certain rights to cancel delivery of route segments not delivered
to them by agreed upon dates, the Agreement also provides for
monthly financial penalties for late deliveries. Subsequent to
December 31 the Company reached an agreement with ABS to amend
the Agreement between the parties. Under the terms of the
Amendment, all penalties accruing to ABS as a result of the
Company's failure to deliver routes by the contractual due dates
ceased as of December 31, 2000. In addition, the Amendment
allows ABS to terminate four additional routes or portions
thereof. However, the Amendment does not allow further route
terminations if DTI delivers all remaining routes by September
30, 2001. The route cancellations will not require the repayment
to ABS of any prepayments received by the Company for those
cancelled routes. Those prepayments will be credited against
amounts owed to the Company when the remaining routes are
accepted by ABS. ABS will be allowed to defer all remaining
route acceptances until January 2002, along with the payment of
the remaining net approximately $9.6 million due to DTI. The
amounts payable to DTI upon route delivery will accrue interest
at 11% from the actual dates of delivery of the routes until
their acceptance in January 2002, or their earlier acceptance at
the option of ABS.

We have a swap agreement with a counter party under which both
DTI and the counter party did not deliver their respective routes
by the contracted due date. The counter party to the agreement
has delivered both of its routes and we have delivered one of our
two routes. As the counter party delivers their routes and we
accept them we are required to make annual cash payments to them
totaling approximately $1.4 million, plus quarterly building and
maintenance fees, in advance of their making payments to us for
our routes. Additionally, we may be required to accrue penalties
for late delivery of $100,000 per route per month. We have
received notice from the counter party that they intend to
exercise their rights to cancel delivery of our routes due to
late delivery which would result in our not receiving
approximately $1.3 million annually in lease payments over the
twenty year term of the agreements plus quarterly maintenance,
building space and other quarterly and annual payments due under
the terms of the agreements. The Company believes that the
counter party's notice of intent to terminate is subject to
challenge and is in the process of reviewing its potential
remedies under the contract.

DTI has a swap agreement with a counter party under which both
DTI and the counter party did not deliver their respective routes
by the contracted due date. DTI and the counter party are in the
process of amending the agreement to provide for mid to late
summer concurrent deliveries.

In another swap agreement, if DTI does not settle an obligation
by providing the counter party with additional DTI fiber by
December 31, 2001, DTI will be required to pay an additional $7
million in cash to the counter party.

An agreement dating back to October 1994, between AmerenUE and
ourselves requires us to construct a fiber optic network linking
AmerenUE's 86 sites throughout the states of Missouri and
Illinois in return for cash payments to DTI and the use of
various rights-of-way including downtown St. Louis. As of March
31, 2001, we had completed approximately 77% of the sites
required for AmerenUE and expect to complete all such
construction by the end of calendar 2001. AmerenUE has set off
against amounts payable to us up to $67,000 per month as damages
and penalties under our contract with them due to our failure to
meet certain construction deadlines, and AmerenUE has reserved
its rights to seek other remedies under the contract which could
potentially include reclamation of the rights-of-way granted to
DTI. We are behind schedule with respect to such contract. Upon
completion and turn-up of services, AmerenUE is contractually
required to pay us a remaining lump sum expected to be
approximately $1.7 million for their telecommunications services
over our network.

On February 23, 1998, we completed the issuance and sale of the
Senior Discount Notes, from which we received proceeds, net of
underwriting discounts and expenses, totaling approximately $265
million. As a result of the completion of the Company's tender
offer for its Senior Discount Notes on February 1, 2001, the
amount of Senior Discount Notes has been reduced by 50.4 percent
and certain changes have been made to the indenture including
expanding the Company's allowable secured borrowings by an
additional $194 million to a total of $294 million, permitting
the tender offer indebtedness, and permitting the acquisition of
any or all of the Senior Discount Notes at any time. These
changes would also permit the tender offer financing and credit
facility to be secured by the assets and stock of the Company and
its subsidiaries. We have used the net proceeds (i) to fund
additional capital expenditures required for the completion of
the our network, (ii) to expand our management, operations and
sales and marketing infrastructure and (iii) for additional
working capital and other general corporate purposes. We may
incur significant and possibly increasing operating losses and
expect to generate negative net cash flows after capital
expenditures during at least the next year as we continue to
invest substantial funds to complete our network and develop and
expand our telecommunications services and customer base.
Accordingly, if we cannot achieve operating profitability or
positive cash flows from operating activities, we may not be able
to service the Senior Discount Notes or to meet our other debt
service or working capital requirements, which would have a
material adverse effect on us.

Subject to the Indenture provisions that limit restrictions on
the ability of any of our Restricted Subsidiaries to pay
dividends and make other payments to us, future debt instruments
of Digital Teleport may impose significant restrictions that may
affect, among other things, the ability of Digital Teleport to
pay dividends or make loans, advances or other distributions to
us. The ability of Digital Teleport to pay dividends and make
other distributions also will be subject to, among other things,
applicable state laws and regulations. Although the Senior
Discount Notes do not require cash interest payments until
September 1, 2003, at such time the Senior Discount Notes will
require annual cash interest payments of approximately $31
million, after giving effect to the repurchase of the Senior
Discount Notes as described in Item 1 - "Business - Recent
Events". In addition, the Senior Discount Notes mature on March
1, 2008. We currently expect that the earnings and cash flow, if
any, of Digital Teleport will be retained and used by such
subsidiary in its operations, including servicing its own debt
obligations. We do not anticipate that we will receive any
material distributions from Digital Teleport prior to September
1, 2003. Even if we determine to pay a dividend on or make a
distribution in respect of the capital stock of Digital Teleport,
there can be no assurance that Digital Teleport will generate
sufficient cash flow to pay such a dividend or distribute such
funds to us or that applicable state law and contractual
restrictions, including negative covenants contained in any
future debt instruments of Digital Teleport, will permit such
dividends or distributions. The failure of Digital Teleport to
pay or to generate sufficient earnings or cash flow to distribute
any cash dividends or make any loans, advances or other payments
of funds to us would have a material adverse effect on our
ability to meet our obligations on the Senior Discount Notes.
Further, there can be no assurance that we will have available,
or will be able to acquire from alternative sources of financing,
funds sufficient to repurchase the Senior Discount Notes in the
event of a Change of Control as defined in the Indenture.

INFLATION

We do not believe that inflation has had a significant impact on
our consolidated results of operations.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity" ("SFAS 133") which requires that all
derivatives be recognized in the statement of financial position
as either assets or liabilities and measured at fair value. In
addition, all hedging relationships must be designated,
reassessed and documented pursuant to the provisions of SFAS No.
133. In June 1999, FASB delayed the effectiveness of SFAS 133 to
fiscal years beginning after June 15, 2000. The adoption of SFAS
133 did not have an impact on DTI's financial position, results
of operations or cash flows.

The FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation." This interpretation
modifies the current practice of accounting for certain stock
award agreements and was generally effective beginning July 1,
2000. There was no initial impact of this interpretation on DTI's
results of operations and financial position.

In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements." Among other things, SAB No. 101 clarifies
certain conditions regarding the culmination of an earnings
process and customer acceptance requirements in order to
recognize revenue. There was no initial impact of this SAB on
DTI's results of continued operations and financial position.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

As of December 31, 2000 the Company had $379.8 million of 12 1/2%
Senior Discount Notes, due 2008. The Company's long-term
obligations are principally fixed interest rate, and as a result,
the Company is less sensitive to market rate fluctionations. The
Company currently does not use derivative financial instruments
to manage its interest rate risk and has no cash flow exposure
due to general interest rate changes for its fixed interest rate
long-tem debt. See Item - "Business - Recent Events" regarding
changes in the Company's future obligations.

All of the Company's revenue is derived from domestic operations,
so risk related to foreign currency exchange rates is considered
minimal.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the Index to Consolidated Financial
Statements on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information concerning directors
and executive officers of the Company as of December 31, 2000.

DIRECTORS AND EXECUTIVE OFFICERS TABLE

NAME AGE POSITION(S) WITH THE COMPANY
- ------------------------------------------------------------------------------

Richard D. Weinstein (2) 48 President, CEO and Secretary; Director
and Chairman
Gary W. Douglass 50 Senior Vice President, Finance and
Administration and CFO
Jerry W. Murphy 43 President - DTI Network Services and
Chief Technology Officer
Daniel A. Davis (5) 35 Vice President and General Counsel
Ronald G. Wasson 56 Director
Gregory J. Orman 32 Director
Richard S. Brownlee, III (3) 55 Director
Kenneth V. Hager (1) 50 Director

- -------------------------
<FN>

(1) Member of Compensation Committee
(2) Resigned as President, CEO, Secretary and Chairman on February 8, 2001
as a result of the purchase of 30.7% of the fully diluted shares
from Mr. Weinstein by KLTT - refer to Item 1 - "Business - Recent
Events"
(3) Resigned as Director on February 8, 2001 as a result of the
change in control - refer to Item 1 - "Business - Recent Events"
(4) Messrs. Andrew V. Johnson, member of the compensation
committee, MarkSchroeder, Vice President of KLT, Inc., and Mr.
Paul Pierron, President and CEO of DTI, have subsequently been
added as directors to the Board in March and April, 2001.
(5) Mr. Davis became Secretary in February 2001.

</FN>

BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS

RICHARD D. WEINSTEIN the founder of the Company was President,
CEO and Secretary until February 8, 2001 at which time, as a
result of the purchase of 30.7% of the fully diluted shares from
Mr. Weinstein by KLTT (see Item 1 - "Business - Recent Events"),
Mr. Weinstein was replaced by Paul Pierron, the new CEO. Mr.
Weinstein now serves soley as a Director of the Company.

GARY W. DOUGLASS became our Senior Vice President, Finance and
Administration and Chief Financial Officer, in July 1998. From
February 8, 2001,Mr. Douglass served in the interim capacity as
President and CEO until the appointment of Mr. Paul Pierron in
April 2001. From March 1995 to December 1997, Mr. Douglass was
Executive Vice President and Chief Financial Officer of Roosevelt
Financial Group, Inc., a publicly held banking corporation that
merged with Mercantile Bancorporation Inc. in July 1997. Prior to
joining Roosevelt Financial, Mr. Douglass was a partner with
Deloitte & Touche LLP, where he was in charge of the accounting
and auditing function and financial institution practice of the
firm's St. Louis office.

JERRY W. MURPHY our President - DTI Network Services and Chief
Technology Officer, joined us in June 1998. From October 1996 to
December 1997, Mr. Murphy was the Director of Construction
Support of MCImetro. Mr. Murphy was MCImetro's Director of
Engineering and Construction from January 1994 to October 1996,
and was Vice President of Engineering and Construction of
Advanced Transmissions Systems, Inc., a wholly-owned subsidiary
of MCI, from January 1990 to January 1995. Prior to such time,
Mr. Murphy spent over 10 years with MCI in various engineering,
network implementation and network operations positions.

DANIEL A. DAVIS our Vice President and General Counsel, joined us
in June 1998 from the law firm of Bryan Cave LLP. At Bryan Cave,
Mr. Davis practiced in the corporate transactions and corporate
finance groups, representing primarily telecommunications and
other technology based companies. Mr. Davis specialized in
mergers and acquisitions, public offerings, financings and
federal securities law. Mr. Davis received a B.A, from the
University of Illinois and a J.D. from St. Louis University
School of Law, cum laude.

RONALD G. WASSON has been one of our directors since March 1997.
He currently serves as Chairman of the Board of KLT Inc., a
wholly-owned subsidiary of KCP&L. He was President of KLT
Telecom Inc., a wholly-owned subsidiary of KLT Inc. (together
"KLT") from 1995 through 2000. Mr. Wasson joined KCP&L in 1966
as Power Sales Engineer and held various positions in marketing,
engineering, corporate planning and economic controls until 1977.
After working briefly for R.W. Beck and Associates as a Principal
Engineer, he rejoined KCP&L in 1979 in the Operational Analysis
and Development Department as a Management Analyst. In 1980, he
was appointed Manager of Fossil Fuels, became Vice President of
Purchasing in 1983, Vice President of Administrative Services in
1986 and Senior Vice President of Administration and Technical
Services in 1991. Effective January 1995, he transferred to KLT
as Executive Vice President, and was named President in November
1996, a position he held until he was named Chairman of the Board
of KLT Inc. Mr. Wasson transferred back to KCP&L in 2000 as
Executive Vice President, and retired from KCP&L on April 30,
2001.

GREGORY J. ORMAN has been one of our directors since February
2000. Mr. Orman currently serves as CEO, President and Director
of KLT which position he has held since January 2000. Mr. Orman
started with KLT in November 1996 as President of KLT Energy
Services Inc. which position he held through 2000. Mr. Orman is
also a director for Bracknell, Inc. Mr. Orman has held positions
as Chairman of the Board of Nationwide Electric from September
1997 to September 1999 and CEO and President of Custom Energy,
LLC form January 1997 to July 1999. Prior to these positions he
was Chairman and CEO of Environmental Lighting Concepts, a
company he co-founded in 1992 and sold to KLT in 1996. Mr. Orman
graduated from Princeton University and began his career at
McKinsey & Company, an international management consulting firm.

RICHARD S. BROWNLEE, III had been one of our directors since
December 1998. Mr. Brownlee is currently a partner at Hendren and
Andrae, LLC whose practice is primarily devoted to matters
dealing with governmental, civil and environmental litigation.
He has a regular administrative practice before the State of
Missouri Public Service Commission, Department of Insurance and
Department of Natural Resources. In addition, he has served as
principal counsel in the certification process of over 50
interexchange carriers and currently services as counsel on
certain regulatory matters of the Company. He also serves as
Missouri counsel for the Williams Companies of Tulsa, Oklahoma.
As a result of as a result of the purchase of 30.7% of the fully
diluted shares form Mr. Weinstein by KLTT noted in Item 1 -
"Business - Recent Events" Mr. Brownlee tendered his resignation
as a DTI director.

KENNETH V. HAGER has been one of our directors since November
1997. Mr. Hager has been employed by DST Systems, Inc. since 1988
and is currently its Vice President, Chief Financial Officer and
Treasurer. DST Systems, Inc. is a provider of information
processing and computer software services and products, primarily
to mutual funds, insurance companies, banks and other financial
services organizations. Since 1980, Mr. Hager has been a member
of the Board of Directors of the American Cancer Society --
Kansas City Unit, and is the current Chairman of the Society's
Metropolitan Kansas City Coordinating Council. Mr. Hager also
serves on the Board of Directors of the Greater Kansas City
Sports Commission and is a member of the Accounting and
Information Systems Advisory Council for the University of Kansas
School of Business.

GENERAL

Officers are elected by and serve at the discretion of the Board
of Directors. There are no family relationships among the
directors and executive officers of our Company.

As of April 2001 three new directors have been appointed to the
board including Messrs. Andrew V. Johnson, Mark Schroeder, Vice
President of KLT, Inc. and Mr. Paul Pierron, President and CEO of
DTI.

ANDREW V. JOHNSON retired as President of Fingerhut's E-Commerce
business. Prior to serving as President of Fingerhut's E-
Commerce business Mr. Johnson served in the role of Senior Vice
President of Marketing and Senior Vice President of Business
Development at Fingerhut.

MARK SCHROEDER joined KLT Inc. in May 2000 and has overall
responsibility for corporate development. Prior to joining KLT,
Mr. Schroeder was President of Environmental Lighting Concepts,
Inc. ("ELC"), a company that he co-founded in 1992. ELC marketed
and installed energy efficient lighting to commercial and
industrial customers. At ELC, Mr. Schroeder was responsible for
operations, sales management, and marketing. ELC merged with
PSS, another energy services company to form Custom Energy LLC in
1997. After the merger, Mr. Schroeder served as Chief Financial
Officer and Chief Operating Officer.

PAUL PIERRON was appointed President and CEO of DTI in April
2001. From January 2000 to March 2001, Mr. Pierron was Vice
President - Sales of New Edge Networks in Vancouver, WA
responsible for all sales and support personnel for Digital Local
Exchange Company ("DLEC") in 60 markets in the West, Central and
Southeast markets. Prior to joining New Edge Networks, Mr.
Pierron was Vice President - Sales of Gabriel Communications,
Inc. in St. Louis, MO. from January 1999 to January 2000. He was
responsible for all sales and operations support for 3rd
generation CLEC (14 markets) and establishing distribution
presence in Tier 1-3 markets. Mr. Pierron has also held various
sales management positions with Sprint PCS, AirTouch Teletrac and
Southwestern Bell over his 23 years of experience.

The Board of Directors has a Compensation Committee comprised of
Messrs. Andrew V. Johnson and Kenneth Hager.

A Shareholders' Agreement provides for a Board of Directors
consisting of the number of directors determined from time to
time by KLTT. Mr. Weinstein has the right to designate one
director (who may either be Mr. Weinstein or his designee) and
KLT has the right to designate the remaining directors. The
current directors have been elected to serve until the expiration
of the term to which they have been elected and until their
respective successors are elected and qualified or until the
earlier of their death, resignation or removal.

All directors are reimbursed for expenses incurred in connection
with attending Board and committee meetings. We have also granted
options to purchase 150,000 shares under the Plan to each of
Messrs. Hager and formerly Brownlee, non-affiliated directors,
however, Mr Brownlee's options expired in April 2001 sixty days
after having left the board.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded, earned
or paid during each of the three years ended June 30, 2000 to
our: (i) Chief Executive Officer and (ii) the four most highly
compensated executive officers, (collectively, the "Named
Executive Officers").

SUMMARY COMPENSATION TABLE

LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
PRINCIPAL ----------------------- COMPENSATION STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS ($) AWARDS($) OPTIONS(#) ($)
- ---------------- ---- --------- ------------ ------------ --------- ---------- ------------

Richard D. 2000 155,769 - - - - 280,300(1)
Weinstein, 1999 150,000 - - - - 85,098(1)
President, 1998 150,000 - - - - 83,234(1)
Chief
Executive
Officer and
Secretary (8)

H.P. Scott, 2000 55,000 - - - - 280,800(2)
Senior Vice 1999 168,350 - - - - 169,600(2)
President 1998 28,800 $100,000 - - - -

Gary W. Douglass, 2000 207,692 50,000 - - - 105,642(2)(6)
Senior VP, 1999 192,308 66,667 - $200,000(3) 200,000(4) -
Finance and 1998 - - - - - -
Administration
and Chief
Financial
Officer

Jerry W. Murphy 2000 186,058 15,000 - - - -
President - 1999 170,385 83,333 - - 300,000(5) 12,297(6)
DTI Network 1998 5,538 - - - - -
Services and
Chief
Technology
Officer

Daniel A. Davis, 2000 151,422 45,000 - - - 100,000(2)
VP and General 1999 127,308 45,000 - - 150,000(5) -
Counsel 1998 23,846 - - - - -

____________

<FN>

(1) Amount represents rent paid for our POP and switch facility
site in St. Louis, equipment sold to the Company and other fringe
benefits.
(2) Amount reflects payment of sales and business development
awards.
(3) Represents the dollar value (net of consideration to be paid
by Mr. Douglass) for 200,000 shares of restricted stock, which
represents the aggregate value and number of shares of restricted
stock held by Mr. Douglass. The shares vest in an amount of one-
third each year on the three anniversary dates of grant,
beginning on July 9, 1999. Mr. Douglass received a tax gross-up
for taxes due related to this restricted stock award.
(4) Shares of common stock underlying stock options awarded
under the Stock Option Plan. Mr. Douglass also has a put feature
that will allow him to put these shares to us at a price of
$12.16 per share. Additionally, Mr. Douglass will receive a tax
gross-up for taxes due related to this award.
(5) Shares of common stock underlying stock options awarded
under the Stock Option Plan.
(6) Represents reimbursed relocation expenses or other fringe benefits.
(7) Resigned in April 2000.
(8) Resigned in February 2001

</FN>

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

There were no stock option grants to the five most highly
compensated officers during the six-month period ended December 31,
2000 under the Stock Option Plan.

EMPLOYMENT AND CONSULTING AGREEMENTS

WEINSTEIN EMPLOYMENT AGREEMENT

As a condition of KLT's initial investment into DTI, we and Mr.
Weinstein entered into an employment agreement (the "Weinstein
Employment Agreement"), which provides that Mr. Weinstein would
serve as our President and CEO and in such other capacities as
the Board may determine. The Agreement expired on January 1,
2000 and pursuant to the purchase of 30.7 percent of the fully
diluted shares purchased from him by KLTT (see Item 1 - "Business
- - Recent Events") Mr. Weinstein is no longer an officer of the
Company. Mr. Weinstein now serves soley as a Director of the
Company.

DOUGLASS EMPLOYMENT AGREEMENT

In July 1998, Digital Teleport and Mr. Douglass entered into an
employment agreement (the "Douglass Agreement"), which provides
that Mr. Douglass will serve in a full-time capacity as Senior
Vice President, Finance and Administration and Chief Financial
Officer, of both Digital Teleport and ourselves for a term of
three years for a minimum base compensation of $200,000 per year,
in addition to group health or other benefits generally provided
to other Digital Teleport employees. Moreover, Mr. Douglass is
eligible for discretionary incentive compensation of up to one-
third of his annual base compensation each year.

In addition to his cash compensation, we granted Mr. Douglass (i)
200,000 shares of restricted shares of our Common Stock (which
restricted stock will not carry voting rights and will vest in
equal portions for each of the three years of the term of the
Douglass Agreement, subject to certain acceleration events) and
(ii) nonqualified options to purchase 200,000 shares of our
Common Stock at $6.66 per share. We have a right to call the
vested restricted nonvoting shares in the event that Mr. Douglass
is no longer employed by us for any reason at a price equal to
the greater of $1.00 per share or our per share book value;
provided that such call right lapses upon a "Change of Control"
(as defined in the Douglass Agreement) or the consummation of an
initial public offering of our Common Stock. In the event that
Mr. Douglass is terminated for any reason other than for cause at
any time following a Change of Control, Mr. Douglass may put his
shares to us at fair market value (determined in accordance with
the Douglass Agreement); provided that such put right terminates
upon consummation of an initial public offering of our Common
Stock. We have agreed to make a three-year loan at the applicable
minimum federal interest rate to Mr. Douglass to enable him to
pay tax on income recognized as a result of the restricted stock
grants. This loan will be forgiven upon the earliest of the
expiration of the three year period, Mr. Douglass' termination
without cause or a Change in Control, and we will pay Mr.
Douglass additional cash in an amount sufficient to pay federal
and state income taxes on the ordinary income recognized as a
result of such loan forgiveness.

The options include a put right similar to that attendant to the
restricted nonvoting shares, except that the price that we must
pay is equal to fair market value reduced by the exercise price
and further that "fair market value" for such purpose is no less
than $12.16 per share. The stock option put right terminates upon
consummation of an initial public offering of our Common Stock;
provided that the option put right does not terminate unless our
Common Stock is listed on a national stock exchange or on the
NASDAQ National Market and has an average closing price of at
least $12.16 for the 90 day period prior to the expiration of
such lock-up period. In order to allow Mr. Douglass to meet his
tax obligations arising from the option grants, we have agreed to
pay him cash in such amounts as are sufficient to pay federal and
state income taxes on the ordinary income (up to a maximum of
$1.1 million of ordinary income) required to be recognized in the
event of any exercise of such options.

The Douglass Agreement restricts the ability of Mr. Douglass to
compete with Digital Teleport during the term thereof and for up
to one year thereafter as a principal, employee, partner,
consultant, agent or otherwise in any region in which Digital
Teleport does business at such time. The Douglass agreement also
imposes on Mr. Douglass certain confidentiality obligations and
proprietary and non-solicitation restrictions with respect to
Digital Teleport employees, customers and clients.

SCOTT CONSULTING AGREEMENT

In April 1999, the Company and Mr. H.P. Scott entered into a new
consulting agreement (the "Scott Agreement"), which provided that
Mr. Scott would serve as a Senior Vice President of the Company
for a term of one year, providing such consulting services as the
Company requests, in the areas of carrier's carrier sales, fiber
swaps and any other services as mutually agreed. Mr. Scott
retired in 2000 and is no longer working on the Company's behalf.

MURPHY EMPLOYMENT AGREEMENT

In November 1998, Digital Teleport and Mr. Murphy entered into an
employment agreement (the "Murphy Agreement"), which provides
that Mr. Murphy will serve in a full-time capacity as President -
DTI Network Services and Chief Technology Officer, of Digital
Teleport for a term of three years for a minimum base
compensation of $180,000 per year, in addition to group health or
other benefits generally provided to other Digital Teleport
employees. Moreover, Mr. Murphy is eligible for discretionary
incentive compensation of up to one-third of his annual base
compensation each year. In addition to his cash compensation, we
granted Mr. Murphy nonqualified options to purchase 300,000
shares of our Common Stock at $6.66 per share.

The Murphy Agreement restricts the ability of Mr. Murphy to
compete with Digital Teleport during the term thereof and for up
to one year thereafter as a principal, employee, partner,
consultant, agent or otherwise in any region in which Digital
Teleport does business at such time. The Murphy Agreement also
imposes on Mr. Murphy certain confidentiality obligations and
proprietary and non-solicitation restrictions with respect to
Digital Teleport employees, customers and clients.

DAVIS EMPLOYMENT AGREEMENT

In June 1998, Digital Teleport and Mr. Davis entered into an
employment agreement which was subsequently amended (the "Davis
Agreement"), which provides that Mr. Davis will serve in a full-
time capacity as Vice President and General Counsel of Digital
Teleport for a term of six years for a minimum base compensation
of $185,000 per year, in addition to group health or other
benefits generally provided to other Digital Teleport employees.
Moreover, Mr. Davis is eligible for discretionary incentive
compensation of up to one-third of his annual base compensation
each year. In addition to his cash compensation, we granted Mr.
Davis nonqualified options to purchase 150,000 shares of our
Common Stock at $6.66 per share.

The Davis Agreement restricts the ability of Mr. Davis to compete
with Digital Teleport during the term thereof and for up to one
year thereafter as a principal, employee, partner, consultant,
agent or otherwise in any region in which Digital Teleport does
business at such time, provided that Mr. Davis is not restricted
from any activity in the practice of law or any business
activities incident thereto. The Davis Agreement also imposes on
Mr. Davis certain confidentiality obligations and proprietary and
non-solicitation restrictions with respect to Digital Teleport
employees, customers and clients.

INCENTIVE AWARD PLAN

Our 1997 Long-Term Incentive Award Plan (the "Plan") was adopted
by our Board of Directors in December 1997. A total of 3,000,000
shares of our Common Stock have been reserved for issuance under
the Plan. As of March 31, 2001, we have granted or are obligated
to grant options to purchase an aggregate of 960,000 shares of
Common Stock to certain of our key employees at an exercise price
equal to the fair market value of the Common Stock on the
applicable date of grant. We have also granted options to
purchase 150,000 shares of Common Stock to our non-affiliated
director (i.e., Mr. Hager) at an exercise price equal to the fair
market value of the Common Stock on the date of grant. We are
also obligated to issue 200,000 shares of restricted stock to an
executive officer under the Plan. No other options or other
awards are outstanding under the Plan. The Plan will terminate in
December 2007, unless sooner terminated by the Board of
Directors.

In March 2001, the Company established the 2001 Stock Option Plan
("2001 Plan"). A total of 6,000,000 shares of our Common Stock
have been reserved for issuance under the Plan. Pursuant to this
2001 Plan the Company has currently granted or became obligated
to grant options to purchase an aggregate of 2,063,500 shares of
our Common Stock to certain of our employees at an exercise price
of $1.50 per share. Shares underlying options granted under the
2001 Plan entitle each optionee, upon exercise of the options,
only to receive cash in lieu of shares in an amount equal to the
spread between the fair market of the shares and the exercise price
in the event that such exercise would either (i) cause the Company
to cease being a member of the affiliated group with KLTT for federal
income tax purposes, or (ii) cause a change of control as defined
in the Indenture, as amended, for the Senior Discount Notes.

Both the Plan and 2001 Plan (together the "Plans") provide for
grants of "incentive stock options," within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, to
employees (including employee directors) and grants of
nonqualified options to employees and directors. Both Plans also
allow for the grant of stock appreciation rights, restricted
shares and performance shares to employees. The Plans are
administered by a committee designated by the Board of Directors.
Messrs. Wasson and Weinstein comprised the committee as of
December 31, 2000 but have subsequently been replaced by Messrs.
Andrew V. Johnson and Kenneth V. Hager. The exercise price of
incentive stock options granted under the Plans must not be less
than the fair market value of the Common Stock on the date of
grant. With respect to any optionee who owns stock representing
more than 10% of the voting power of all classes of the Company's
outstanding capital stock, the exercise price of any incentive
stock option must be equal to at least 110% of the fair market
value of the Common Stock on the date of grant, and the term of
the option must not exceed five years. The terms of all other
options may not exceed ten years. To the extent that the
aggregate fair market value of Common Stock (determined as of the
date of the option grant) for options which would otherwise be
incentive stock options may for the first time become exercisable
by any individual in any calendar year exceeds $100,000, such
options shall be nonqualified stock options.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of the outstanding Common Stock of DTI as of
March 31, 2001 by each person or entity who is known by us to
beneficially own 5% or more of the Common Stock, which includes
our former President, CEO and current director, each of our directors and all of
our directors and executive officers as a group.

Number Of Shares Percent Of
Beneficially Common Stock
Name Of Beneficial Owner Owned Outstanding (a)
- -------------------------------- ---------------- ----------------
Richard D. Weinstein 9,906,064 15%
8112 Maryland Avenue, 4th Floor
St. Louis, Missouri 63105

KLT Telecom Inc.(b) 53,831,689 82%
10740 Nall, Suite 230
Overland Park, KS 66211

Ronald G. Wasson(b) 53,831,689 82%
Gregory J. Orman(b) 53,831,689 82%
Richard S. Brownlee, III -- --
Kenneth V. Hager -- --
---------------- ----------------
Directors and executive officers
as a group (7 persons) 63,737,753 97%

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

(a) Reflects Common Stock outstanding, on a fully diluted basis,
after giving effect to the conversion of all outstanding shares
of the Series A Preferred Stock into Common Stock and conversion
of the Warrants and options outstanding. KLT owns 30,000 shares
of the Series A Preferred Stock, which constitutes 100% of such
stock. Each such share of Series A Preferred Stock is convertible
into 1,000 shares of Common Stock of the Company.

(b) All of the shares shown as owned by each of Messrs. Wasson
and Orman are the shares of Series A Preferred Stock owned by KLT
Telecom Inc. KLT Telecom Inc. is a wholly-owned subsidiary of KLT
Inc. (together "KLT"), a wholly-owned subsidiary of KCP&L. Mr.
Wasson is the Chairman of the Board of KLT. Mr. Orman is the
Chief Executive Officer, President and Director of KLT. Each of
Messrs. Wasson and Orman disclaims beneficial ownership of such
shares held by KLT.

KLT owns 100% of the Series A Preferred Stock. Except for any
amendment affecting the rights and obligations of holders of
Series A Preferred Stock or as otherwise provided by law, holders
of Series A Preferred Stock vote together with the holders of
Common Stock as a single class. The holders of the Series A
Preferred Stock vote separately as a class with respect to any
amendment affecting the rights and obligations of holders of
Series A Preferred Stock and as otherwise required by law.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 31, 1996, Mr. Weinstein, Mr. Weinstein's wife and we
formalized a lease with respect to our POP and switch facility
site in St. Louis (the "Lease Agreement"). The lease pertains to
10,000 of the 14,400 square feet available in such building and
provides for monthly lease payments of $6,250. The lease is
currently running on a month-to-month basis. The Company
believes that the terms of the current Lease Agreement are
comparable to those that would be available to an unaffiliated
entity on the basis of an arm's-length negotiation. Effective
with the purchase of stock from Mr. Weinstein described earlier in
Item 1 - "Business - Recent Events" this building was acquired by KLTT
from Mr. Weinstein. As a result of this transaction the Company
is now leasing its POP and switch facility from KLTT under the
same terms and conditions.

On December 29, 1999, the Company and Mr. Weinstein entered into
an agreement whereby for the sum of $201,200 the Company
purchased from Mr. Weinstein equipment used by the Company in its
operations.

Effective July 1996, we formed a joint venture with KLT to
develop, construct and operate a network in the Kansas City
metropolitan area, using in part the electrical duct system and
certain other real estate owned by KCP&L and licensed to the
joint venture. In March 1997, KLT became a strategic investor in
DTI when it entered into an agreement with DTI (the "KLT
Agreement") pursuant to which KLT committed to make an equity
investment of up to $45.0 million in preferred stock of the
Company. As of December 31, 1997 there were 18,500 shares of
Series A Preferred Stock outstanding to KLT with the remaining
11,500 shares of Series A Preferred Stock to be issued as
additional capital as required by the Company upon twenty days
notice by DTI to KLT and verification by KLT as to the use of the
monies pursuant to the terms of the Stock Purchase Agreement. In
September and October 1997, DTI issued the remaining 11,500
shares of Series A Preferred Stock to KLT for aggregate cash
payments of approximately $17.3 million. See Note 5 of the notes
to the consolidated financial statements. Each share of Series A
Preferred Stock of the Company is entitled to the number of votes
equal to the number of shares into which such share of Series A
Preferred Stock is convertible with respect to any and all
matters presented to the stockholders of the Company for their
action or consideration. Except for any amendments affecting the
rights and obligations of holders of Series A Preferred Stock,
with respect to which such holders vote separately as a class, or
as otherwise provided by law, holders of Series A Preferred Stock
vote together with the holders of the Common Stock as a single
class. Pursuant to the KLT Agreement, KLT has the right of first
offer concerning energy services rights and contracts involving
DTI. In connection with the issuance of the Series A Preferred
Stock, Mr. Weinstein had guaranteed to KLT the performance by the
Company of its obligations under the KLT Agreement, including
without limitation, representations and warranties under such
agreement. Mr. Weinstein had pledged his Common Stock to secure
such guarantee. Such obligations to KLT were subordinated to Mr.
Weinstein's obligations to hold the Company and KLT harmless for
any losses resulting from judgments and awards rendered against
Digital Teleport or the Company in the matter of Alfred H. Frank
v. Richard D. Weinstein and Digital Teleport, Inc. See Item 3 -
"Legal Proceedings." Mr. Weinstein had pledged his shares of
Common Stock to KLT, which had agreed to reimburse the Company
and Digital Teleport for losses incurred by them in connection
with the Frank litigation to the extent of any proceeds KLT
receives from Weinstein pursuant to such pledge, less KLT's costs
in pursuing such claim against Weinstein. KLT had also agreed to
bear one-half of any such losses. As a result of the settlement
of the Frank litigation in June 1999 the guaranty and stock
pledge agreements were terminated. A new loan and security
agreement was entered into in June 1999 with Mr. Weinstein for
$1,450,000 which was collateralized by 1,500,000 shares of Mr.
Weinstein's common stock in the Company. As a result of the
purchase of stock from Mr. Weinstein described in Item 1 -
"Business - Recent Events" this loan was repaid and the Company
has entered into new borrowing arrangements with KLTT.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

(a)(1) Financial statements

See index to Consolidated Financial Statements

(a)(2) Financial statement schedules

None.

(a)(3) Exhibits required by Item 601 of Regulation S-K

See Exhibit Index for the exhibits filed as part of or
incorporated by reference into this Report.

(b) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DTI HOLDINGS, INC.

BY: /S/ GARY W. DOUGLASS
Gary W. Douglass
Senior Vice President, Finance and
Administration and Chief Financial
Officer (principal financial
and accounting officer)
May 11, 2001

Pursuant to the requirements of the Securities and Exchange Act
of 1934, as amended, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Signature Title Date

/S/PAUL PIERRON President and Chief Executive Officer, May 11, 2001
Paul Pierron (Principal Executive Officer)

/S/GARY W. DOUGLASS Senior Vice President, Finance and May 11, 2001
Gary W. Douglass Administration and Chief Financial
Officer (Principal Financial and
Accounting Officer)

/S/RONALD G. WASSON Director May 11, 2001
Ronald G. Wasson

/S/GREGORY J. ORMAN Director May 11, 2001
Gregory J. Orman

/S/ANDREW JOHNSON Director May 11, 2001
Andrew Johnson

/S/KENNETH V. HAGER Director May 11, 2001
Kenneth V. Hager

/S/MARK SCHROEDER Director May 11, 2001
Mark Schroeder

/S/RICHARD D. WEINSTEIN Director May 11, 2001
Richard D. Weinstein

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

DTI HOLDINGS, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS

PAGE

Independent Auditors' Report F-2

Consolidated Balance Sheets as of June 30, 2000 and F-3
December 31, 2000

Consolidated Statements of Operations for the years ended F-4
June 30, 1998, 1999, 2000 and six-month period ended
December 31, 2000

Consolidated Statements of Stockholders' Equity (Deficit) F-5
for the years ended June 30, 1998, 1999, 2000 and six-
month period ended December 31, 2000

Consolidated Statements of Cash Flows for the years ended F-6
June 30, 1998, 1999, 2000 and six-month period ended
December 31, 2000

Notes to Consolidated Financial Statements F-7

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of DTI Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of
DTI Holdings, Inc., and subsidiaries (the "Company") as of June
30, 2000 and December 31, 2000 and the related consolidated
statements of operations, stockholders' equity (deficit), and
cash flows for each of the three years in the period ended June
30, 2000 and the six-month period ended December 31, 2000. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of June 30, 2000 and December 31, 2000 and the results
of its operations and its cash flows for each of the three years
in the period ended June 30, 2000 and the six-month period ended
December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE, LLP

St. Louis, Missouri
April 16, 2001

F-2

DTI HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 2000
June 30, December 31,
2000 2000
Assets ---- ----

Current assets:
Cash and cash equivalents $ 32,841,453 $ 10,639,366
Trade accounts receivable 451,467 626,091
Other receivables 13,271,495 -
Prepaid and other current assets 752,518 1,550,789
------------- -------------
Total current assets 47,316,933 12,816,246
Network and equipment, net 317,103,473 361,314,245
Deferred financing costs, net 7,042,054 6,020,632
Prepaid fiber usage rights and fees 2,929,639 349,628
Other assets 429,903 626,637
------------- -------------
Total $ 374,822,002 $ 381,127,388
============= =============
Liabilities and stockholders' equity

Current liabilities:
Accounts payable $ 10,248,286 $ 23,566,886
Senior discount notes, net of unamortized
underwriter's discount of $0 and
$2,634,050, respectively - 191,376,908
IRU payable - 7,093,000
Vendor financing 5,876,638 5,836,766
Taxes payable 2,490,589 2,311,584
Other current liabilities 1,548,819 3,919,650
------------- -------------
Total current liabilities 20,164,332 234,104,794
Senior discount notes, net of unamortized
underwriter's discount of $6,183,209
and $2,593,278, respectively 356,712,668 188,414,535
Deferred revenues 41,917,427 41,148,937
Vendor financing 3,843,158 2,100,030
Other liabilities 1,600,024 -
------------- -------------
Total liabilities 424,237,609 465,768,296
------------- -------------
Commitments and contingencies

Stockholders' equity (deficit):
Preferred stock, $.01 par value, 20,000,000
shares authorized, no shares issued and
outstanding - -
Convertible series A preferred stock, $.01 par
value,(aggregate liquidation preference of
$45,000,000) 30,000 shares authorized,
issued and outstanding 300 300
Common stock, $.01 par value, 100,000,000
shares authorized, 30,000,000 shares issued
and outstanding 300,000 300,000
Additional paid-in capital 44,213,063 44,213,063
Common stock warrants 10,421,336 10,421,336
Loan to stockholder (1,539,582) (1,593,122)
Unearned compensation (36,370) (18,190)
Accumulated deficit (102,774,354) (137,964,295)
------------- -------------
Total stockholders' equity (deficit) (49,415,607) (84,640,908)
------------- -------------
Total $ 374,822,002 $ 381,127,388
============= =============
See notes to consolidated financial statements.

F-3

DTI HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1998, 1999, 2000 AND THE SIX-MONTH PERIOD
ENDED DECEMBER 31, 2000

Six-Month Periods
Years Ended June 30, Ended December 31,
----------------------------------------------- -----------------------------
1998 1999 2000 1999 2000
---- ---- ---- ---- ----
REVENUES: (Unaudited)
Telecommunications services:

Carrier's carrier services $ 3,075,527 $ 6,783,571 $ 8,729,789 $ 4,036,556 $ 5,817,339
End-user services 467,244 425,812 255,745 105,477 273,243
------------ ------------- ------------- ------------ ------------
Total revenues 3,542,771 7,209,383 8,985,534 4,142,033 6,090,582
------------ ------------- ------------- ------------ ------------
OPERATING EXPENSES:
Telecommunications services 2,294,181 6,307,678 11,977,936 5,879,452 8,542,774
Write-off of prepaid
fiber usage rights - - - - 1,976,000
Selling, general and
administrative 3,668,540 5,744,417 5,306,526 2,543,975 2,702,499
Depreciation and amortization 2,030,789 4,653,536 13,922,515 6,720,112 8,445,284
------------ ------------- ------------- ------------ ------------
Total operating expenses 7,993,510 16,705,631 31,206,977 15,143,539 21,666,557
------------ ------------- ------------- ------------ ------------
Loss from operations (4,450,739) (9,496,248) (22,221,443) (11,001,506) (15,575,975)
------------ ------------- ------------- ------------ ------------

OTHER INCOME (EXPENSES):
Interest income 5,063,655 10,724,139 3,976,727 2,459,711 904,324
Interest expense (12,055,428) (31,494,138) (36,802,483) (18,183,286) (20,518,290)

Litigation settlement - (1,450,000) - - -
Total other income
(expenses) ------------ ------------- ------------- ------------ ------------
(6,991,773) (22,219,999) (32,825,756) (15,723,575) (19,613,966)
------------ ------------- ------------- ------------ ------------
Loss before income taxes (11,442,512) (31,716,247) (55,047,199) (26,725,081) (35,189,941)

INCOME TAX BENEFIT/(PROVISON) 2,020,000 (1,000,000) (2,234,331) - -
------------ ------------- ------------- ------------ ------------
NET LOSS $ (9,422,512 $(32,716,247) $ (57,281,530) $(26,725,081) $(35,189,941)
=========== ============= ============= ============ ============

See notes to consolidated financial statements.

F-4

DTI HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1998, 1999, 2000 AND THE SIX-MONTH PERIOD
ENDED DECEMBER 31, 2000

Six-Month
Years Ended June 30, Periods Ended December 31,
---------------------------------------- ---------------------------
1998 1999 2000 1999 2000
(Unaudited)
- ----------------------------------------------------------------------------------------------------------

Preferred stock:
Balance at beginning of
period $ - $ - $ - $ - $ -
- ----------------------------------------------------------------------------------------------------------
Balance at end of period - - - - -
- ----------------------------------------------------------------------------------------------------------

Convertible series A
preferred stock:
Balance at beginning of period - 300 300 300 300
Reclassification of redeemable
convertible stock to
convertible series A
preferred stock and
reversal of related
accretion 300 - - - -
- ----------------------------------------------------------------------------------------------------------
Balance at end of period 300 300 300 300 300
- ----------------------------------------------------------------------------------------------------------

Common stock:
Balance at beginning of period 300,000 300,000 300,000 300,000 300,000
- ----------------------------------------------------------------------------------------------------------
Balance at end of period 300,000 300,000 300,000 300,000 300,000
- ----------------------------------------------------------------------------------------------------------

Additional paid-in capital:
Balance at beginning of period - 44,013,063 44,213,063 44,213,063 44,213,063
Reclassification of redeemable
convertible stock to convertible
series A preferred stock and
reversal of related accretion 44,283,033 - - - -
Reclassification to additional
paid-in capital of charge to
accumulated deficit to effect
of stock splits (269,970) - - - -
Allocation of restricted stock - 200,000 - - -
- ----------------------------------------------------------------------------------------------------------
Balance at end of period 44,013,063 44,213,063 44,213,063 44,213,063 44,213,063
- ----------------------------------------------------------------------------------------------------------

Common stock warrants:
Balance at beginning of period 450,000 10,421,336 10,421,336 10,421,336 10,421,336
Allocation of proceeds from
senior discount notes offering
to related warrants 9,971,336 - - - -
- ----------------------------------------------------------------------------------------------------------
Balance at end of period 10,421,336 10,421,336 10,421,336 10,421,336 10,421,336
- ----------------------------------------------------------------------------------------------------------

Loan to stockholder:
Balance at beginning of period - - (1,450,000) (1,450,000) (1,539,582)
Issuance of loan to stockholder - (1,450,000) - - -
Interest on loan to stockholder - - (89,582) (36,041) (53,540)
- ----------------------------------------------------------------------------------------------------------
Balance at end of period - (1,450,000) (1,539,582) (1,486,041) (1,593,122)
- ----------------------------------------------------------------------------------------------------------

Unearned compensation:
Balance at beginning of period - - (72,730) (72,730) (36,370)
Issuance of restricted stock - (200,000) - - -
Amortization of unearned
compensation - 127,270 36,360 18,180 18,180
- ----------------------------------------------------------------------------------------------------------
Balance at end of year - (72,730) (36,370) (54,550) (18,190)
- ----------------------------------------------------------------------------------------------------------

Accumulated deficit:
Balance at beginning of period (5,479,867) (12,776,577) (45,492,824) (45,492,824) (102,774,354)
Accretion of redeemable
convertible preferred stock
to redemption price (4,985,442) - - - -
Reclassification of redeemable
convertible stock to
convertible series A
preferred stock and reversal
of related accretion 6,841,274 - - - -
Reclassification to additional
paid-in capital of charge
to accumulated deficit to
effect of stock splits 269,970 - - - -
Net loss for the period (9,422,512) (32,716,247) (57,281,530) (26,725,081) (35,189,941)
- ----------------------------------------------------------------------------------------------------------
Balance at end of period (12,776,577) (45,492,824) (102,774,354) (72,217,905) (137,964,295)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total stockholder's
equity (deficit) $ 41,958,122 $ 7,919,145 $ (49,415,607) $(18,823,797) $ (84,640,908)
- ----------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements.

F-5

DTI HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1999, 2000 AND SIX-MONTH PERIOD ENDED
DECEMBER 31, 2000

Six-Month Periods
Years Ended June 30, Ended December 31,
1998 1999 2000 1999 2000
(Unaudited)
Cash flows from operating activities:

Net loss $ (9,422,512) $ (32,716,247) $ (57,281,530) $ (26,725,081) $ (35,189,941)
Adjustments to reconcile net loss to
cash provided by
operating activities:
Depreciation and amortization 2,030,789 4,653,536 13,922,515 6,720,112 8,445,284
Accretion of senior discount notes 11,355,675 29,638,899 34,286,809 17,054,536 19,073,263
Amortization of deferred
financing costs 509,869 1,657,870 1,853,811 896,754 1,021,422
Deferred income taxes (2,020,000) - 3,234,331 - -
Amortization of prepaid fiber
usage rights and fees - 886,933 2,343,708 1,171,855 2,580,010
Other - 323,721 607,180 212,948 276,677
Changes in assets and liabilities:
Accounts receivable (342,344) 240,240 (190,095) (114,064) (174,624)
Other assets (164,861) (6,339,381) (14,002,957) (766,799) 12,276,491
Accounts payable (364,412) 4,839,555 686,313 (594,160) 13,318,600
IRU payable - - - - 7,093,000
Other current liabilities 83,605 1,510,410 865,216 135,747 291,529
Taxes payable 907,564 1,310,013 (650,092) (1,186,764) (179,005)
Deferred revenues 7,134,584 5,455,518 19,647,421 12,510,198 (768,490)
------------- ------------- ------------- ------------- -------------
Net cash flows provided by operating
activities 9,707,957 11,461,067 5,322,630 9,315,282 28,064,216
------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Increase in network and equipment (44,952,682) (128,367,335) (102,456,285) (68,300,340) (48,650,544)
------------- ------------- ------------- ------------- -------------
Net cash used in investing activities (44,952,682) (128,367,335) (102,456,285) (68,300,340) (48,650,544)
------------- ------------- ------------- ------------- -------------

Cash flows from financing activities:
Proceeds from issuance of senior
discount notes and
attached warrants 275,223,520 - - - -
Deferred financing costs (10,538,427) - - - -
Proceeds from issuance of redeemable
convertible preferred stock,
including cash from contributed
joint venture of $2,253,045 in 1997 17,250,000 - - - -
Deferred financing costs - (525,177) - - -
Payment of vendor financing - - (2,200,721) - (1,615,759)
Loan to stockholder - (1,450,000) - - -
Proceeds from credit facility 3,000,000 - - - -
Principal payments on credit facility (3,000,000) - - - -
------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities 281,935,093 (1,975,177) (2,200,721) - (1,615,759)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and
cash equivalents 246,690,368 (118,881,445) (99,334,376) (58,985,058) (22,202,087)

Cash and cash equivalents, beginning
of period 4,366,906 251,057,274 132,175,829 132,175,829 32,841,453
------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 251,057,274 $ 132,175,829 $ 32,841,453 $ 73,190,771 $ 10,639,366
============= ============= ============= ============= =============
Supplemental cash flow statement
information:
Non-cash investing and financing
activities:
Interest capitalized to fixed assets $ 848,000 $ 7,582,420 $ 7,748,681 $ 3,304,607 $ 4,005,512
============= ============= ============= ============= =============
Fixed assets acquired through vendor
financing $ - $ 4,401,441 $ 7,351,835 $ 3,072,027 $ -
============= ============= ============= ============= =============
Allocation of restricted stock $ - $ 200,000 $ - $ - $ -
============= ============= ============= ============= =============

See notes to consolidated financial statements.

F-6

DTI HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998, 1999, 2000 AND THE SIX-MONTH PERIOD
ENDED DECEMBER 31, 2000

1. DESCRIPTION OF BUSINESS

DTI Holdings, Inc. (the "Company" or "DTI") was incorporated in
December 1997 as part of the reorganization (the
"Reorganization") of Digital Teleport, Inc., a wholly-owned
subsidiary of DTI ("Digital Teleport"). Pursuant to the
Reorganization, the outstanding shares of common and preferred
stock of Digital Teleport were exchanged for the number of shares
of common and preferred stock of DTI having the same relative
rights and preferences as such exchanged shares. The
Reorganization was required in connection with the establishment
of a credit facility which was repaid with the net proceeds of
the Senior Discount Notes issued in February 1998 (see Note 4).
The business operations, name, charter, by-laws and board of
directors of the Company are identical in all material respects
to those of Digital Teleport, which did not change as a result of
the Reorganization. Accordingly, the consolidated financial
statements have been presented as if Digital Teleport had always
been a wholly-owned subsidiary of DTI. DTI is a holding company
and, as such, has no operations other than its ownership interest
in its subsidiaries. DTI, in turn, effective February 8, 2001,
as a result of a purchase of additional shares of the Company by
KLT Telecom Inc. (KLTT), the telecommunications subsidiary of
Kansas City Power & Light Company ("KCP&L") giving it total
ownership in excess of eighty percent of the outstanding shares
of stock, is now a subsidiary of KLTT (see Note 4).

DTI is a facilities-based provider of non-switched interexchange
and local network telecommunications services to interexchange
carriers ("IXCs"), and business and governmental end-users. DTI's
network is designed to include high-capacity (i) interexchange
long-haul routes between the larger metropolitan areas in the
region, (ii) local networks in such larger metropolitan areas,
and (iii) local networks in secondary and tertiary markets
located along the long-haul routes. All of the Company's
operations are subject to federal and state regulations, any
changes in these regulations could materially impact the Company.

At December 31, 2000, sales activities were primarily focused in
the States of Missouri, Arkansas and Oklahoma providing
interexchange end-user and carrier's carrier services. Carrier's
carrier services are provided through wholesale network capacity
agreements and indefeasible rights to use ("IRU") agreements.
Wholesale network capacity agreements provide carriers with
virtual circuits or bandwidth capacity on DTI's network for terms
specified in the agreements, ranging from one to five years. The
carrier customer in a wholesale network capacity agreement does
not have exclusive use of any particular strand of fiber, but
instead has the right to transmit along a virtual circuit or a
certain amount of bandwidth along DTI's network. These agreements
require the customer to pay for such capacity regardless of the
level of usage, and generally require fixed monthly payments over
the term of the agreement. In an IRU agreement the Company grants
indefeasible rights to use specified strands of optical fiber
(which are used exclusively by the carrier customer), while the
carrier customer is responsible for providing the electronic
equipment necessary to transmit communications along the fiber.
IRUs generally require substantial advance payments and
additional fixed annual maintenance payments over the terms of
the agreements, which typically have a term of 20 years or
longer. End-user services are telecommunications services
provided to business and governmental end-users and typically
require a combination of advanced payments and fixed monthly
payments throughout the term of the agreement regardless of the
level of usage. In all cases, title to the optical fiber is
retained by the Company and the Company is generally obligated
for all costs of ongoing maintenance and repairs, unless such
repairs are necessitated by acts or omissions of the customer.
Generally, the agreements may be terminated upon the mutual
written consent of both parties; however, certain of the
agreements may be terminated by the customer subject to
acceleration of all payments due thereunder.

F-7

adequate to fund our current priorities and our existing capital
commitments through the next twelve months, we expect to require
significant additional capital in the future to fully complete the
planned DTI network. We also may require additional capital in the
future to fund operating deficits and net losses and for potential
strategic alliances, joint ventures and acquisitions. Our ability to
fund our required capital expenditures depends in part on:

There can be no assurance, however, that DTI will be successful
in any of the above mentioned actions or plans in a timely basis
or on terms that are acceptable to it and within the restriction
of its existing financing arrangements, or at all.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of DTI and its wholly-owned
subsidiaries, Digital Teleport, Inc. and Digital Teleport of
Virginia, Inc. In September 1998 Digital Teleport of Virginia,
Inc. was established in order to conduct business in the state of
Virginia. All intercompany transactions and balances have been
eliminated.

Effective December 31, 2000 the Company changed its fiscal year
end from June 30 to December 31 in order to match that of its new
parent company, KLT Telecom, Inc. (see Note 4).

REVENUES - The Company recognizes revenue under its various
agreements as follows:

CARRIER'S CARRIER SERVICES:

WHOLESALE NETWORK CAPACITY AGREEMENTS - Advance payments, one-
time installation fees and fixed monthly service payments are
recognized on a straight-line basis as revenue over the terms
of the agreements, which represent the periods during which
services are provided.

IRU AGREEMENTS - These agreements are accounted for as
operating leases. All revenues are deferred until specified
route segments are completed and accepted by the customer.
Advance payments are then recognized on a straight-line basis
over the terms of the agreements. Fixed periodic maintenance
payments are also recognized on a straight-line basis over the
terms of the agreements as ongoing maintenance services are
provided.

END-USER SERVICE AGREEMENTS - Advance payments and fixed monthly
payments are recognized on a straight-line basis over the terms
of the agreements, which represent the periods during which
services are provided.

CASH AND CASH EQUIVALENTS - The Company considers all highly
liquid investments with original maturities of three months or
less to be cash equivalents.

F-8

NETWORK AND EQUIPMENT - Network and equipment are stated at cost.
Costs of construction are capitalized, including interest costs
on funds borrowed to finance the construction. Maintenance and
repairs are charged to operations as incurred. Fiber optic cable
plant includes primarily costs of cable, inner-duct and related
installation charges. Fiber usage rights include the costs
associated with obtaining the right to use fiber accepted under
long-term IRU agreements. Depreciation is provided using the
straight-line method over the estimated useful lives of the
assets as follows:

Fiber optical cable plant 25 years
Fiber usage rights 20 years
Network buildings 15 years
Leasehold improvements 10 years
Fiber optic terminal equipment 8 years
Furniture, office equipment 5 years
and other

The carrying value of long-lived assets is periodically evaluated
by management for impairment. Upon indication of impairment, the
Company will record a loss on its long-lived assets if the
undiscounted cash flows estimated to be generated by those assets
are less than the related carrying amount of the assets. In such
circumstances, the amount of impairment would be measured as the
difference between the estimated fair market value of the asset
and its carrying amount.

INCOME TAXES - The Company accounts for income taxes utilizing
the asset/liability method, and deferred taxes are determined
based on the estimated future tax effects of temporary
differences between the financial statement and tax bases of
assets and liabilities given the provisions of the enacted tax laws.
A valuation allowance will be recorded if the Company believes
that it is likely that it will not generate taxable income
sufficient to realize the tax benefit associated with future
deductible temporary differences and net operating loss
carryforwards prior to their expiration related to the net
deferred tax asset.

DEFERRED FINANCING COSTS - Deferred financing costs are stated at
cost and amortized over the life of the related debt using the
effective interest method. Amortization of deferred financing
costs is included in interest expense.

STOCK-BASED COMPENSATION - Statement of Financial Accounting
Standards ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, establishes a fair value method of accounting for
employee stock options and similar equity instruments. The fair
value method requires compensation cost to be measured at the
grant date based on the value of the award and is recognized over
the service period. SFAS No. 123 generally allows companies to
either account for stock-based compensation under the new
provisions of SFAS No. 123 or under the provisions of Accounting
Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES. The Company has elected to account for its
stock-based compensation in accordance with the provisions of APB
No. 25 and presents pro forma disclosures of net loss as if the
fair value method had been adopted.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of
cash and cash equivalents and other short-term financial
instruments approximate fair value because of the short-term
maturity of these instruments. As of June 30, 2000 and December
31, 2000, the fair value of debt was $215.0 million and $187.2
million compared to its carrying value of $356.7 million and
$379.8, respectively. The fair value of debt instruments as of
June 30, 2000 and December 31, 2000 was determined based on
quoted market prices. The recorded amounts for all other long-
term debt of the Company approximates fair value. Additionally,
in February, 2001, the Company repurchased 50.4 percent of its
Senior Discount Notes (see Note 4).

NEW ACCOUNTING STANDARDS - In June 1998, the FASB issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activity"
("SFAS 133") which requires that all derivatives be recognized in
the statement of financial position as either assets or
liabilities and measured at fair value. In addition, all hedging
relationships must be designated, reassessed and documented
pursuant to the provisions of SFAS No. 133. In June 1999, FASB
delayed the effectiveness of SFAS 133 to fiscal years beginning
after June 15, 2000. The adoption of SFAS 133 as of July 1, 2000
did not have an impact on DTI's financial position or results of
operations.

F-9

MANAGEMENT ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires that management make certain
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported
amounts of revenues and expenses during the reporting period may
also be affected by the estimates and assumptions management is
required to make. Actual results may differ from those estimates.

CONCENTRATIONS OF RISK - The Company currently operates in the
telecommunications industry within the States of Arkansas,
Missouri and Oklahoma. See Note 7 regarding concentration of
credit risk associated with deferred revenues and revenues.
Additionally, the Company is dependent upon single or limited
source suppliers for its fiber optic cable and for the electronic
equipment used in its network.

3. NETWORK AND EQUIPMENT

Network and equipment consists of the following as of June 30
and December 31:

June 30, 2000 December 31, 2000
------------- -----------------
Land $ 756,945 $ 1,946,343
Fiber optic cable plant 154,775,867 190,704,018
Fiber usage rights 128,667,295 137,436,763
Fiber optic terminal equipment 42,596,743 46,766,492
Network buildings 8,696,531 11,040,794
Furniture, office equipment and other 2,846,165 3,101,193
Leasehold improvements 605,407 601,406
------------- -----------------
338,944,953 391,597,009
Less - accumulated depreciation 21,841,480 30,282,764
------------- -----------------
Network and equipment, net $317,103,473 $ 361,314,245
============= =================

At June 30 and December 31, 2000, fiber optic cable plant, fiber
usage rights, fiber optic terminal equipment and network
buildings include $75 million and $67 million of construction in
progress, respectively, that was not in service and, accordingly,
has not been depreciated.

On December 29, 1999, the Company and Mr. Weinstein, the founder,
and former President and CEO of the Company, entered into an
agreement whereby for the sum of $201,200 the Company purchased
from Mr. Weinstein equipment used by the Company in its
operations.

F-10

4. Tender of Senior Discount Notes, Ownership Exceeding 80
Percent and Borrowing Arrangements

Senior Discount Notes - On February 23, 1998, the Company issued
506,000 Units consisting of $506.0 million aggregate principal
amount at maturity of 12 1/2% Senior Discount Notes (effective
interest rate 12.9%) due March 1, 2008 and warrants (the
"Warrants") to purchase 3,926,560 shares of Common Stock, for
which the Company received proceeds, net of underwriting
discounts and expenses (deferred financing costs), of
approximately $264.7 million. Of the $275.2 million gross
proceeds from the issuance of the Units, $265.2 million was
allocated to the Senior Discount Notes and $10.0 million was
allocated to Warrants included in stockholders' equity, based on
the fair market value of the Warrants as determined by the
Company and the initial purchasers of the Units utilizing the
Black-Scholes method. The Senior Discount Notes are senior
unsecured obligations of the Company. The discount on the Senior
Discount Notes accrues from the date of the issue until March 1,
2003 at which time cash interest on the Senior Discount Notes
accrues at a rate of 12 1/2% per annum and is payable semi-annually
in arrears on March 1 and September 1, commencing September 1,
2003.

The Senior Discount Notes contain certain covenants that restrict
the ability of the Company and its Restricted Subsidiaries (as
defined in the Indenture) to incur certain indebtedness, pay
dividends and make certain other restricted payments, create
liens, permit other restrictions on dividends and other payments
by Restricted Subsidiaries, issue and sell capital stock of its
Restricted Subsidiaries, guarantee certain indebtedness, sell
assets, enter into transactions with affiliates, merge,
consolidate or transfer substantially all of the assets of the
Company and make any investments in any Unrestricted Subsidiary
(as defined in the Indenture). The issuance of the Senior
Discount Notes does not constitute a "qualified public offering"
within the meaning of the Company's Articles of Incorporation
and, therefore, did not effect the conversion of the Series A
Preferred Stock into common stock (see Note 5).

In the event of a "Change of Control" (as defined in the
Indenture pursuant to which the Senior Discount Notes were
issued), holders of the Senior Discount Notes may require the
Company to offer to repurchase all outstanding Senior Discount
Notes at a price equal to 101% of the accreted value thereof,
plus accrued interest, if any, to the date of redemption. The
Senior Discount Notes also contain certain covenants that
restrict the ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to incur certain
indebtedness, pay dividends and make certain other restricted
payments, create liens, permit other restrictions on dividends
and other payments by Restricted Subsidiaries, issue and sell
capital stock of its Restricted Subsidiaries, guarantee certain
indebtedness, sell assets, enter into transactions with
affiliates, merge, consolidate or transfer substantially all of
the assets of the Company and make any investments in any
Unrestricted Subsidiary (as defined in the Indenture). See
discussion below regarding modifications to certain of these
covenants.

On April 14, 1998, the Company filed a Registration Statement on
Form S-4 (subsequently amended and registered) relating to an
offer to exchange, under substantially similar terms, the
Company's 12 1/2% Series B Senior Discount Notes due March 1, 2008
for its outstanding Senior Discount Notes (the "Exchange Offer").

Tender and Ownership Exceeding 80 Percent - On February 1, 2001,
the Company purchased 50.4 percent of its Senior Discount Notes
for a purchase price of $94.8 million pursuant to a tender offer.
KLTT provided a demand loan ("Demand Loan") to the Company of $94
million at an annual interest rate of 10% in order to complete
this transaction. The Demand Loan received from KLTT is in the
form of a demand note in which all principal and interest is due
upon demand and is secured by a pledge of all the outstanding
stock of Digital Teleport, Inc. and Digital Teleport of Virginia,
Inc. As a result of the purchase made pursuant to the completion
of the tender offer the Company reduced the principal amount
outstanding of its Senior Discount Notes, net of unamortized
underwriter's discount, by approximately $193.5 million and
Deferred Financing Costs by approximately $2.9 million. These
reductions resulted in a net benefit to the Company of $95.6
million consisting of a net gain on early extinguishment of debt
to the Company of $57.3 million and a tax benefit of $38.3
million as a result of an adjustment in the Company's deferred tax
valuation allowance as of February 1, 2001. The purchase of the
Senior Discount Notes also reduces the amount of cash interest
that will be due with respect to the Senior Discount Notes

F-11

by approximately $32 million annually starting in September 2003,
when these payments begin, and replaced this interest with approximately
$9.4 million in annual interest which will be payable in accordance with
the Demand Loan or its eventual replacement financing. The consent
solicitation made in connection with the tender offer authorized
certain changes in the indenture associated with the Senior Discount Notes,
including expanding the Company's allowable secured borrowings by
an additional $194 million to a total of $294 million. These
changes also permit the Demand Loan to be secured by the stock of
the Company's subsidiaries and other financings to be secured by
the assets of the Company and its subsidiaries.

On February 8, 2001, KLTT acquired an additional 30.7 percent of the
fully diluted shares of the Company from Richard D. Weinstein, the
former Chairman, President and CEO of the Company for $33.6 million in
cash. An additional 5 percent of the fully diluted shares were purchased
by KLTT through a tender offer for DTI's outstanding warrants
issued in connection with the Senior Discount Notes and the
purchase by KLTT of a separate warrant for 1 percent of the
Company's common stock, that results in KLTT now owning 82.1
percent of DTI's fully diluted shares, excluding shares
underlying stock options granted under the Company's 2001 Stock
Option Plan.

Vendor Financing Agreement - On December 15, 1998, the Company
entered into a vendor financing agreement with its fiber optic
cable vendor allowing for deferred payment terms for one and two-
year periods on qualifying cable purchases. This vendor
financing expired in June 2000 and was not renewed. Therefore,
all amounts due under this agreement will become payable between
January 2001 and June 30, 2002.

5. Convertible Series A Preferred Stock

On December 31, 1996, the Company entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") with KLT Inc. ("KLT"),
a wholly-owned subsidiary of Kansas City Power & Light, to sell
30,000 shares of redeemable convertible preferred stock
(designated "Series A Preferred Stock") for $45,000,000. Series
A Preferred Stock shareholders are entitled to one common vote
for each share of common stock that would be issuable upon
conversion of the Series A Preferred Stock. Each share of Series
A Preferred Stock is convertible into one thousand shares of
common stock (the "Conversion Shares") under the terms of the
Stock Purchase Agreement and is entitled to the number of votes
equal to the number of Conversion Shares into which such shares
of Series A Preferred Stock is convertible with respect to any
and all matters presented to the shareholders of the Company for
their action or consideration. The Series A Preferred Stock
shares will automatically convert into common stock upon the sale
of shares of common stock or debt securities of the Company in a
"qualified public offering" within the meaning of the Company's
Articles of Incorporation and subject to the satisfaction of
certain net proceed dollar thresholds. Series A Preferred Stock
shareholders rank senior to common shareholders in

F-12

the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company. Series A Preferred Stock shareholders are
entitled to receive such dividends as would be declared and paid
on each share of common stock.

In conjunction with the Stock Purchase Agreement, the Company
entered into a Shareholders' Agreement whereby the Series A
Preferred Stock shareholders will designate half of the directors
of the Company's Board of Directors. On February 8, 2001, this
Shareholders' Agreement was replaced by a new agreement,
providing for the designation of all but one of the Company's
directors by KLTT, with Mr. Weinstein having the right to
designate one director.

On February 13, 1998, in connection with the Company's offering
of Senior Discount Notes (See Note 4), the Company amended its
Articles of Incorporation amending the terms of the Series A
Preferred Stock such that the Series A Preferred Stock is no
longer redeemable. The Series A Preferred Stock, as a result of
such amendment, is classified with stockholders' equity
subsequent to such date.

6. Equity Transactions

Warrant to KLTT -The Company has a warrant outstanding to
KLTT representing the right to purchase 1% of the common stock of
the Company for $0.01 per share which is exercisable at the
option of the holder and expires in the year 2007.

Stock Based Compensation - The Company has a Long-Term Incentive
Award Plan (the "Plan"). A total of 3,000,000 shares of common
stock of the Company have been reserved for issuance under the
Plan. The employees' options vest 100% ratably over three to five
years from the date of grant, subject to certain acceleration
events, and have a term of 10 years. The directors' options vest
25% per year beginning one year from the date of grant. The
exercise prices per share of such options are based on fair
market value as determined in good faith by the Board of
Directors.

In March 2001, the Company established the 2001 Stock Option Plan
("2001 Plan"). A total of 6,000,000 shares of common stock of
the Company have been reserved for issuance under the 2001 Plan.
The employees' options vest 100% ratably over three years from
the date of grant, subject to certain acceleration events, and
have a term of seven to ten years. As of April 2001 the Company
granted or has become obligated to grant options to purchase an
aggregate of 2,063,500 shares of our Common Stock to certain of
our employees at an exercise price of $1.50 per share pursuant to
the 2001 Plan. Shares underlying options granted under the 2001
Plan entitle each optionee, upon exercise of the options, only to
receive cash in lieu of shares in an amount equal to the spread
between the fair market of the shares and the exercise price in
the event that such exercise would either (i) cause the Company to
ceae being a member of the affiliated group with KLTT for federal
income tax purposes, or (ii) cause a change of control as defined
in the Indenture, as amended, for the Senior Discount Notes.

For purposes of the pro forma disclosures required by SFAS 123,
the fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model with the
following weighted-average assumptions for the year ended June
30, 2000 and the six-month period ended December 31, 2000:
risk-free interest rate of 5.6%; no dividend yield; volatility
factor of the expected market price of the Company's common stock
of .678; and a weighted-average expected life of the options of
approximately 10 years. There were no options issued during the
six-month period ended December 31, 2000. The weighted average
grant date fair value of options granted during fiscal 2000 was $5.25.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its stock options.

F-13

For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting
period. The Company's pro forma information follows for the
three years ended June 30, 1998, 1999 and 2000 and the six-month
periods ended December 31:

Six-Month Periods
Years Ended June 30, Ended December 31,
-----------------------------------------------------------
1998 1999 2000 1999 2000
(unaudited)
---- ---- ---- ----------- ----
Loss applicable
to common stock
holders:
As reported $9,422,512 $32,716,247 $57,281,530 $26,725,081 $35,189,941
========== =========== =========== =========== ===========
Pro Forma $9,516,824 $34,728,351 $59,179,938 $27,674,285 $36,128,213
========== =========== =========== =========== ===========

A summary of the Company's stock option activity, and related
information for the years ended June 30, 1999 and 2000 and six-
month period ended December 31, 2000 is as follows:

Year Ended Year Ended Year Ended Six-Month Period Ended
June 30, 1998 June 30, 1999 June 30, 2000 December 31, 2000
-------------------- -------------------- -------------------- --------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Exercise Exercise Exercise
Options Price Options Price Options Price Options Price
--------- ------- --------- ------- --------- ------- --------- -------

Outstanding -
Beginning of year - $ - 575,000 $ 4.54 1,325,000 $ 6.20 1,260,000 $ 6.18
Granted 1,175,000 2.99 950,000 6.66 110,000 6.66 - -
Exercised - - - - - - - -
Forfeited (600,000) 1.50 (200,000) 3.62 (175,000) 6.66 - -
--------- ------- --------- ------- --------- ------- --------- -------
Outstanding -
end of year 575,000 $ 4.54 1,325,000 $ 6.20 1,260,000 $ 6.18 1,260,000 $ 6.18
========= ======= ========= ======= ========= ======= ========= =======
Exercisable -
end of year - $ - 202,500 $ 5.91 600,000 $ 6.15 795,000 $ 6.15
========= ======= ========= ======= ========= ======= ========= =======

The following table summarizes outstanding options at December 31, 2000
by price range:

Outstanding
- -----------------------------------------------------------------------------
Weighted Average
Number of Options Range of Exercise Weighted Average Remaining Contractual
Price Exercise Price Life of Options
- ----------------- ----------------- ---------------- ---------------------
150,000 $ 2.60 $2.60 7.01
1,110,000 6.66 6.66 7.94
--------- -------------- -------------- ---------------------
1,260,000 $2.60 to $6.66 $6.18 7.86
========= ============== ============== =====================

In December 1999, in conjunction with the execution of an
officer's employment agreement in July of 1998, the Company
granted the officer 200,000 shares of restricted stock. These
shares do not carry voting rights and will vest over the three-
year term of the employment agreement.

7. Customer Contracts

The Company enters into agreements with unrelated third parties
whereby the Company will provide IRUs in multiple fibers along
certain routes, wholesale network capacity agreements or end-user
service agreements for a minimum purchase price paid in advance
or over the life of the contract. These amounts are then
recognized over the terms of the related agreements, which terms
are typically 20 years or more, on a straight-line basis. The
Company has various contracts related to IRUs that in some cases
provide for advanced payments that can result in deferred revenue
as detailed below and may include monthly maintenance, power and
building payments. The Company also has various wholesale network
capacity agreements and end-user contracts that provide for a
combination of advance payments, which are detailed below, and
monthly payments. The following schedule details the payments
received or to be received over the life of the agreements under
IRU, wholesale network capacity agreements and end-user service
agreements and the components of deferred revenue at December 31,
2000:

F-14

December 31, 2000
-----------------
Wholesale
Network
Capacity End-user
IRUs Agreements Services Total
---- ---------- ---------- ------------

Total contract amounts $132,500,305 $2,365,200 $9,473,039 $144,338,544
Less: future payments due under
contracts 93,877,035 741,440 2,630,000 97,248,475
------------ ---------- ---------- ------------
Total amounts collected/billed to date 38,623,270 1,623,760 6,843,039 47,090,069
Less: total amounts recognized as
revenues to date 5,050,184 262,500 628,448 5,941,132
------------ ---------- ---------- ------------
Deferred revenues 33,573,086 1,361,260 6,214,591 41,148,937
Less: amounts to be recognized
within 12 months 1,763,425 118,260 139,844 2,021,529
------------ ---------- ---------- ------------
$ 31,809,661 $1,243,000 $6,074,747 $ 39,127,408
============ ========== ========== ============

Future minimum rentals, maintenance, power and building payments
due DTI over the next five years and thereafter under the IRU
agreements accounted for as operating leases are generally as
follows as of December 31, 2000:

2001 $14,851,562
2002 6,864,488
2003 6,411,988
2004 5,851,988
2005 5,604,488
Thereafter 54,292,521
----------
Total $93,877,035
==========

The future minimum rentals are also dependent on the satisfactory
delivery of IRU's in accordance with the related IRU agreement.
Any delay or default in delivery of fiber pursuant to the IRU
agreement can have a material effect on the amount of future
minimum rentals to be received (see discussion of certain IRU
agreements below).

The total costs of fiber optic cable plant for the route segments
completed to date are allocated to property subject to lease
under IRU agreements based on the percentage of fiber strands
under lease to total fiber count in the related route segments
and amount to approximately $9 million at December 31, 2000.
Recognition of these future payments is subject to completion of
additional route segments that are in process or planned for
construction under timelines established in the IRU agreements.

The Company's IRU contracts provide for reduced payments and
varying penalties for late delivery of route segments, and allow
the customers, after expiration of grace periods, to delete such
non-delivered segment from the system route to be delivered. A
significant reduction in the level of services the Company
provides for any of these customers could have a material adverse
effect on the Company's results of operations or financial
condition.

Pursuant to the terms of one of DTI's swap agreements DTI has
received approximately 480 miles of inner-duct from Atlanta to
Louisville during fiscal 2000 in exchange for fiber and cash. As
of June 30, 2000, DTI had a receivable recorded for $13.3 million
related to this transaction and deferred revenue of $8.2 million.
The receivable of $13.3 million was subsequently collected in the
first quarter of fiscal 2001.

In November 1999, the Company entered into an IRU agreement with
Adelphia Business Solutions ("ABS") for over 4000 route miles on
its network initially valued at between $27 to $42 million to DTI
depending on the number of options for additional routes of fiber
strands exercised by the parties. ABS paid $10 million in
advance cash payments under the terms of the Agreement. In
August 2000, ABS cancelled five routes or portions thereof, which
will result in approximately $4.2 million in reduced future cash
collections under the Agreement, plus the repayment to ABS of
approximately $1.6 million previously paid to DTI by ABS, which was
repaid in September 2000. In addition to providing for certain rights to

F-15

cancel delivery of route segments not delivered to them by agreed
upon dates, the Agreement also provides for monthly financial penalties
for late deliveries. Subsequent to December 31 the Company reached an
agreement with ABS to amend the Agreement between the parties. Under the
terms of the Amendment, all penalties accruing to ABS as a result of the
Company's failure to deliver routes by the contractual due dates
ceased as of December 31, 2000. In addition, the Amendment
allows ABS to terminate four additional routes or portions
thereof. However, the Amendment does not allow further route
terminations if DTI delivers all remaining routes by September
30, 2001. The route cancellations will not require the repayment
to ABS of any prepayments received by the Company for those
cancelled routes. Those prepayments will be credited against
amounts owed to the Company when the remaining routes are
accepted by ABS. ABS will be allowed to defer all remaining
route acceptances until January 2002, along with the payment of
the remaining net approximately $9.6 million due to DTI. The
amounts payable to DTI upon route delivery will accrue interest
at 11% from the actual dates of delivery of the routes until
their acceptance in January 2002, or their earlier acceptance at
the option of ABS.

DTI has a swap agreement with a counter party under which both
DTI and the counter party did not deliver their respective routes
by the contracted due date. The counter party to the agreement
has delivered both of its routes and DTI has delivered one of its
two routes. As the counter party delivers their routes and DTI
accept them DTI is required to make annual cash payments to them
totaling approximately $1.4 million, plus quarterly building and
maintenance fees, in advance of their making payments to DTI for
its routes. Additionally, DTI may be required to accrue
penalties for late delivery of $100,000 per route per month. DTI
has received notice from the counter party that they intend to
exercise their rights to cancel delivery of routes due them due
to late delivery which would result in DTI not receiving
approximately $1.3 million annually in lease payments over the
twenty year term of the agreements plus quarterly maintenance,
building space and other quarterly and annual payments due under
the terms of the agreements. The Company believes that the
counter party's notice of intent to terminate is subject to
challenge and is in the process of reviewing its potential
remedies under the contract.

An agreement dating back to October 1994, between AmerenUE and
DTI requires DTI to construct a fiber optic network linking
AmerenUE's 86 sites throughout the states of Missouri and
Illinois in return for cash payments to DTI and the use of
various rights-of-way including downtown St. Louis. As of March
31, 2001, DTI had completed approximately 77% of the sites
required for AmerenUE and expect to complete all such
construction by the end of calendar 2001. AmerenUE has set off
against amounts payable to DTI up to $67,000 per month as damages
and penalties under its contract with them due to DTI's failure
to meet certain construction deadlines, and AmerenUE has reserved
its rights to seek other remedies under the contract which could
potentially include reclamation of the rights-of-way granted to
DTI. DTI is behind schedule with respect to such contract. Upon
completion and turn-up of services, AmerenUE is contractually
required to pay DTI a remaining lump sum expected to be a net
amount of approximately $1.7 million after penalties for their
telecommunications services over DTI's network.

The Company's business plan assumes increased revenue from its
carrier's carrier services operations to partially fund the
expansion of the DTI network. Many of the Company's customer
arrangements are subject to termination and do not provide the
Company with guarantees that service quantities will be
maintained at current levels. The Company is aware that certain
interexchange carriers are constructing or considering new
networks. Accordingly, there can be no assurance that any of the
Company's carrier's carrier services customers will increase
their use of the Company's services, or will not reduce or cease
their use of the Company's services, either of which could have a
material adverse effect on the Company's ability to fund the
expansion of the DTI network.

F-16

The Company has substantial business relationships with several
large customers. Six customers accounted for 20%, 15%, 12%, 12%,
10% of deferred revenues at December 31, 2000. Additionally,
three customers accounted for 46%, 20% and 10% of amounts to be
received per the customer contracts referred to in the table above.

During the six-month period ended December 31, 2000, the
Company's three largest customers accounted for 26%, 11% and 11%
of revenues. During the year ended June 30 2000, the Company's
three largest customers accounted for 44%, 14% and 10% of
telecommunications services revenue. During the year ended June
30, 1999, the Company's two largest customers accounted for 60%
and 18% of revenues. During year ended June 30, 1998, the
Company's three largest customers accounted for 44%, 11% and 10%
of revenues.

8. Income Taxes

The actual income tax benefit (provision) for the years ended
June 30, 1998, 1999 and 2000 and the six-month periods ended
December 31, 1999 and 2000 differs from the "expected" income
taxes, computed by applying the U.S. Federal corporate tax rate
of 35% to loss before income taxes as follows:

Six-month Periods ended
Years Ended June 30, December 31,
------------------------------------------------ ----------------------------
1998 1999 2000 1999 2000
(unaudited)
----------- ------------ ------------ ------------ ------------

Tax benefit at federal
statutory rates $ 4,004,879 $ 11,100,686 $ 19,265,555 $ 9,353,778 $ 12,316,479
State income tax benefit
net of federal effect 572,126 1,330,152 1,853,929 1,336,254 1,759,497
Change in valuation
allowance (2,232,780) (12,402,275) (22,625,841) (10,502,792) (13,260,587)
Disqualified interest
related to the Senior
Discount Notes (414,967) (1,016,036) (1,700,888) (697,912) (791,140)
Discount Notes
Permanent and other
differences 90,742 (12,527) 972,914 510,672 (24,249)
----------- ------------ ------------ ------------ ------------
Benefit (provision)
for income taxes $ 2,020,000 $ (1,000,000) $ (2,234,331) $ - $ -
=========== ============ ============ ============ ============

Significant components of the benefits (provision) for income
taxes are as follows for the years ended June 30, 1998, 1999 and
2000 and the six-month periods ended December 31, 1999 and 2000:

Six-month Periods ended
Years Ended June 30, December 31,
------------------------------------- ------------------------
1998 1999 2000 1999 2000
(unaudited)
---------- ----------- ----------- ----------- ----------
Current:
Federal $ - $(1,000,000) $ 1,000,000 $ - $ -
State - - - - -
- (1,000,000) 1,000,000 - -
Deferred:
Federal 1,767,500 - (2,830,040) - -
State 252,500 - (404,291) - -
---------- ----------- ----------- ----------- ----------
2,020,000 - (3,234,331) - -
---------- ----------- ----------- ----------- ----------
Total benefit
(provision)
for income
taxes $2,020,000 $(1,000,000) $(2,234,331) $ - $ -
========== =========== =========== =========== ==========

Temporary differences, which give rise to long-term deferred
taxes as reported on the balance sheet, are as follows at June 30
and December 31:

June 30, 2000 December 31, 2000
------------- -----------------
Deferred tax assets:
Accretion on senior discount notes $ 28,424,114 $ 35,468,308
Deferred revenues - -
Net operating loss carryforward 11,745,152 17,958,844
Accelerated depreciation 136,888 -
Other 1,277,414 1,854,608
------------ --------------
Total deferred tax assets 41,583,568 55,281,760
Deferred tax liabilities:
Deferred revenues (4,322,672) (3,843,108)
Accelerated depreciation - (917,169)
Valuation allowance (37,260,896) (50,521,483)
------------- --------------
Net deferred tax assets $ - $ -
============= ==============

F-17

A valuation allowance of $50,521,483 was established to offset
the Company's deferred tax asset, primarily related to the
accretion on the Senior Discount Notes, that may not be
realizable due to the ultimate uncertainty of its realization.
The Company believes that it is likely that it will not generate
taxable income sufficient to realize the tax benefit associated
with future deductible temporary differences and net operating
loss carryforwards prior to their expiration related to the
remaining net deferred tax asset. The Company also settled an
income tax examination in June 2000 at no cost to the Company and
reversed a related $1 million previously accrued provision. Tax
net operating losses of approximately $45.0 million expire beginning
in 2021 if not utilized in future income tax returns. On February 1,
2001, the Company repurchased 50.4 percent of its outstanding Senior
Discount Notes. As a result of this transaction the Company was
required to reduce its net operating losses by approximately $38.3
million (see Note 4)

9. Operating Leases and IRU Commitments

The Company is a lessee under operating leases and IRUs for
fiber, equipment space, maintenance, power costs and office
space. The Company's point of presence ("POP") and switch
facility in St. Louis is leased, effective February 8, 2001, from
KLTT at a rate of $75,000 per year on a month to month basis.
The Company leases its headquarters and network control center
space, which lease expires in July 2001. Additionally, fiber,
equipment space, maintenance and power costs related to IRUs are
typically for periods up to 20 years. Also, most of the IRUs
contain renewal options of five to ten years. Minimum rental
commitments under these operating leases and IRUs are as follows:

Year ending December 31:
2001 8,016,036
2002 9,376,053
2003 9,167,388
2004 9,167,388
2005 9,167,388
Thereafter 135,772,765
-----------
Total $180,667,018
===========

Total expense of operating leases and IRUs aggregated $75,000,
$2.1 million, $7.0 million, $3.5 million (unaudited) and $3.8
million for the years ended June 30, 1998, 1999, 2000 and six-
month periods ended December 31, 1999 and 2000, respectively.

10. Commitments

Highway and Utility Rights-of-Way - The Company has entered into
certain agreements with the Department of Transportation ("DOTs")
for various states and others that require DTI to construct its
network facilities along specified routes and within certain time
frames. As of December 31, 2000 the Company has approximately
4,700 miles of rights-of-way required to be built pursuant to
these agreements of which DTI has completed approximately 3,450
miles. In exchange for these rights-of-way, the Company is
required to provide the DOTs either fibers, ducts, fiber optic
capacity and connection points within its network or a
combination thereof. If the Company does not complete its
designated routes as required or cure a breach of the agreement
in a timely manner as specified in the applicable agreement, the
Company may lose its rights under the contract which may include
exclusivity, access to its fiber or the ability to complete the
construction on the remaining unbuilt rights-of-way.
Additionally, the Company has been required to post $326,000 in
performance and payment bonds under the terms of these
agreements.

In addition to the agreements with the DOTs the Company has used
available public rights-of-way in certain states. Pursuant to
the agreements with these states the Company has been required to
post $1,350,000 in performance bonds.

The Company will continue to seek to obtain the rights-of-way
that it needs for the expansion of its network in areas where it
will construct network rather than purchase or swap fiber optic
strands by

F-18

entering into agreements with other state highway
departments and other governmental authorities, utilities or
pipeline companies and it may enter into joint ventures or other
"in-kind" transfers in order to obtain such rights. In addition,
DTI may use available public rights-of-way.

Licensing Agreements - The Company has entered into various
licensing agreements with municipalities. Under the terms of
these agreements, the Company maintains certain performance bonds,
totaling $568,000 in the aggregate, and minimum insurance
levels. Such agreements generally have terms from 10 to 15 years
and grant to the Company a non-exclusive license to construct,
operate, maintain and replace communications transmission lines
for its fiber optic cable system and other necessary
appurtenances on public roads, rights-of-way and easements within
the municipality. In exchange for such licenses, the Company
generally provides to the municipality in-kind rights and
services (such as the right to use certain dedicated strands of
optic fiber in the DTI network within the municipality,
interconnection services to the DTI network within the
municipality, and maintenance of the municipality's fibers), or,
less frequently, a nominal percentage of the gross revenues of
the Company for services provided within the municipality. In
some instances, the Company is obligated to make nominal annual
cash payments for such rights based on linear footage.

Employment Agreements - DTI has employment agreements entered
into during the years ended June 30, 1998, 1999 and 2000 with
certain senior management personnel. These agreements are
effective for various periods through June 30, 2003, unless
terminated earlier by the executive or DTI, and provide for
annual salaries, additional compensation in the form of bonuses
based on performance of the executive, and participation in the
various benefit plans of DTI. The agreements contain certain
benefits to the executive if DTI terminates the executive's
employment without cause.

Supplier Agreements - DTI's supplier agreements are with its
major network construction contractors and its material equipment
suppliers.

Purchase Commitments - DTI's remaining aggregate purchase
commitments for construction at December 31, 2000 are
approximately $9 million. Additionally, the Company has entered
into definitive agreements to purchase for cash IRUs for fiber
optic strands (fiber usage rights) with remaining advance
payments of approximately $8 million to be paid during 2001,
exclusive of any continuing monthly maintenance, building or
power payments.

In January 2001, DTI entered into a four-year master purchase
agreement with Cisco, which included an initial commitment to
purchase $70 million in optronic equipment. The purchase
commitment is contingent upon the satisfaction of certain
financing contingencies, including the completion of the Senior
Credit Facility.

11. Contingencies

In June 1999, the Company and Mr. Weinstein, the founder, and
then President and CEO of the Company, settled a suit brought in
the Circuit Court of St. Louis County, Missouri, in a matter
styled Alfred H. Frank v. Richard D. Weinstein and Digital
Teleport, Inc. Pursuant to the terms of the settlement the
Company paid $1.25 million and Mr. Weinstein paid $1.25 million
to the plaintiff and the Company released Mr. Weinstein from his
indemnification. Mr. Weinstein obtained a loan from the Company
for his portion of the settlement cost plus approximately
$200,000 representing 50% of the legal costs incurred by the
Company. The loan was repaid in full with interest in February
2001 in connection with the purchase of shares from Mr. Weinstein
by KLTT (see Note 4). From time to time the Company is named as
a defendant in routine lawsuits incidental to its business. The
Company believes that none of such current proceedings,
individually or in the aggregate, will have a material adverse
effect on the Company's financial position, results of operations
or cash flows.

F-19

12. Quarterly Results (Unaudited)

The Company's unaudited quarterly results are as follows:

For the fiscal 1999 Quarter Ended
---------------------------------
September 30, December 31, March 31, June 30,
1998 1998 1999 1999
------------ ------------ ------------ ------------
Total revenues $ 1,739,649 $ 1,730,432 $ 1,810,758 $ 1,928,544
============ ============ ============ ============
Loss from
operations $ (1,481,533) $ (1,544,543) $ (2,701,550) $ (3,768,622)
============ ============ ============ ============
Net loss $ (5,889,590) $ (6,289,135) $ (7,900,601) $(12,636,921)
============ ============ ============ ============

For the fiscal 2000 Quarter Ended
---------------------------------
September 30, December 31, March 31, June 30,
1999 1999 2000 2000
------------ ------------ ------------ ------------
Total revenues $ 1,959,450 $ 2,182,583 $ 2,370,493 $ 2,473,008
============ ============ ============ ============
Loss from
operations $ (5,153,131) $ (5,848,375) $ (5,521,212) $ (5,698,725)
============ ============ ============ ============
Net loss $(12,309,323) $(14,415,758) $(13,764,824) $(16,791,625)
============ ============ ============ ============

For the six-month period ended December 31, 2000
Quarter Ended
------------------------------------------------
September 30, 2000 December 31, 2000
------------------ -----------------
Total revenues $ 2,878,490 $ 3,212,092
================== =================
Loss from
operations $ (8,138,085) $ (7,437,890)
================== =================
Net loss $(17,348,335) $(17,841,606)
================== =================

******

F-20

Exhibit Index

Number Description

2.1 Stock Purchase Agreement by and between KLT Telecom Inc.
and Digital Teleport, Inc., dated December 31, 1996
(incorporated herein by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4 (File No.
333-50049) (the "S-4")).
2.2 Amendment No. 1 to Stock Purchase Agreement between KLT
Telecom Inc. and Digital Teleport, Inc. dated February
12, 1998 (incorporated herein by reference to Exhibit 2.2
to the S-4).
3.1 Restated Articles of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 to the S-
4).
3.2 Restated Bylaws of the Registrant.
4.1 Indenture by and between the Registrant and The Bank of
New York, as Trustee, for the Registrant's 12 1/2% Senior
Discount Notes due 2008, dated February 23, 1998 (the
"Indenture") (including form of the Company's 12 1/2%
Senior Discount Note due 2008 and 12 1/2% Series B Senior
Discount Note due 2008) (incorporated herein by reference
to Exhibit 4.1 to the S-4).
4.2 Note Registration Rights Agreement by and among the
Registrant and the Initial Purchasers named therein,
dated as of February 23, 1998 (incorporated herein by
reference to Exhibit 4.2 to the S-4).
4.3 Warrant Agreement by and between the Registrant and The
Bank of New York, as Warrant Agent, dated February 23,
1998 (incorporated herein by reference to Exhibit 4.3 to
the S-4).
4.4 Warrant Registration Rights Agreement by and among the
Registrant and the Initial Purchasers named therein,
dated February 23, 1998 (incorporated herein by reference
to Exhibit 4.4 to the S-4).
4.5 Digital Teleport, Inc. Shareholders' Agreement between
Richard D. Weinstein and KLT Telecom Inc., dated March
12, 1997 (incorporated herein by reference to Exhibit 4.5
to the S-4).
4.6 Amendment No. 1 to the Digital Teleport, Inc.
Shareholders' Agreement, dated November 7, 1997
(incorporated herein by reference to Exhibit 4.6 to the S-
4).
4.7 Amendment No. 2 to the Digital Teleport, Inc.
Shareholders' Agreement, dated December 18, 1997
(incorporated herein by reference to Exhibit 4.7 to the S-
4).
4.8 Amendment No. 3 to the Digital Teleport, Inc.
Shareholders' Agreement, dated February 12, 1998
(incorporated herein by reference to Exhibit 4.8 to the S-
4).
4.9 Warrant agreement, by and among the Digital Teleport,
Inc. and Banque Indosuez expiring October 21, 2007 (incorporated
by reference to Exhibit 4.13 to the Company's Annual Report on
Form 10K filed on September 27, 2000).
10.1 Director Indemnification Agreement between the Registrant
and Richard D. Weinstein, dated December 23, 1997
(incorporated herein by reference to Exhibit 10.2 to the
S-4).
10.2 Director Indemnification Agreement between the Registrant
and Ronald G. Wasson, dated December 23, 1997
(incorporated herein by reference to Exhibit 10.5 to the
S-4).
10.3 Director Indemnification Agreement between the Registrant
and Kenneth V. Hager, dated December 23, 1997
(incorporated herein by reference to Exhibit 10.7 to the
S-4).
10.4 1997 Long-Term Incentive Award Plan of the Registrant
(incorporated herein by reference to Exhibit 2.2 to the S-
4).
10.5 Product Attachment -- Carrier Networks Products Agreement
between Digital Teleport, Inc. and Northern Telecom,
Inc., effective October 23, 1997 (incorporated herein by
reference to Exhibit 10.12 to the S-4).
10.6 Agreement re: Fiber Optic Cable on Freeways in Missouri,
between the Missouri Highway and Transportation
Commission and Digital Teleport, Inc., effective July 29,
1994 (incorporated herein by reference to Exhibit 10.13
to the S-4).
10.7 First Amendment to Agreement re: Fiber Optic Cable on
Freeways in Missouri, between the Missouri Highway and
Transportation Commission and Digital Teleport, Inc.,
effective September 22, 1994 (incorporated herein by
reference to Exhibit 10.14 to the S-4).
10.8 Second Amendment to Agreement re: Fiber Optic Cable on
Freeways in Missouri, between the Missouri Highway and
Transportation Commission and Digital Teleport, Inc.,
effective November 7, 1994 (incorporated herein by
reference to Exhibit 10.15 to the S-4).

F-21

10.9 Third Amendment to Agreement re: Fiber Optic Cable on
Freeways in Missouri, between the Missouri Highway and
Transportation Commission and Digital Teleport, Inc.,
effective October 9, 1996 (incorporated herein by
reference to Exhibit 10.16 to the S-4).
10.10 Contract Extension to Agreement re: Fiber Optic Cable on
Freeways in Missouri, between the Missouri Department of
Transportation (as successor to the Missouri Highway and
Transportation Commission) and Digital Teleport, Inc.,
dated February 7, 1997, (incorporated herein by reference
to Exhibit 10.17 to the S-4).
10.11 Fiber Optic Cable Agreement, between the Arkansas State
Highway and Transportation Department and Digital
Teleport, Inc., dated May 29, 1997 (incorporated herein
by reference to Exhibit 10.18 to the S-4).
10.12 Missouri Interconnection, Resale and Unbundling Agreement
between GTE Midwest Incorporated, GTE Arkansas
Incorporated and Digital Teleport, Inc. executed November
7, 1997 (incorporated herein by reference to Exhibit
10.23 to the S-4).
10.13 Arkansas Interconnection, Resale and Unbundling Agreement
between GTE Southwest Incorporated, GTE Midwest
Incorporated, GTE Arkansas Incorporated and Digital
Teleport, Inc., executed November 7, 1997 (incorporated
herein by reference to Exhibit 10.24 to the S-4).
10.14 Oklahoma Interconnection, Resale and Unbundling Agreement
between GTE Southwest Incorporated, GTE Arkansas
Incorporated, GTE Midwest and Digital Teleport, Inc.,
executed November 7, 1997 (incorporated herein by
reference to Exhibit 10.25 to the S-4).
10.15 Texas Interconnection, Resale and Unbundling Agreement
between GTE Southwest Incorporated and Digital Teleport,
Inc., executed November 18, 1997 (incorporated herein by
reference to Exhibit 10.26 to the S-4).
10.16 Kansas Master Resale Agreement between United Telephone
Company of Kansas (Sprint) and Digital Teleport, Inc.,
dated September 30, 1997 (incorporated herein by
reference to Exhibit 10.27 to the S-4).
10.17 Commercial Lease between Richard D. Weinstein and Digital
Teleport, Inc., dated December 31, 1996 (incorporated
herein by reference to Exhibit 10.28 to the S-4).
10.18 Commercial Lease Extension Agreement between Richard D.
Weinstein and Digital Teleport, Inc., dated December 31,
1997 (incorporated herein by reference to Exhibit 10.29
to the S-4).
10.19 Purchase Agreement by and between the Registrant and the
Initial Purchasers named therein, dated as of February
13, 1998 (incorporated herein by reference to Exhibit
10.30 to the S-4).
10.20 Employment Agreement between Digital Teleport, Inc. and
Gary W. Douglass, dated July 20, 1998 (incorporated
herein by reference to Exhibit 10.34 to the S-4).
10.21 Agreement for Purchase and Sale of Equipment between
Digital Teleport, Inc. and Pirelli Cables and Systems
LLC, dated as of June 26, 1998 (incorporated herein by
reference to Exhibit 10.35 to the S-4).
10.22 Amendment to Agreement for the Purchase and Sale of
Equipment between Digital Teleport, Inc. and Pirelli
Cables and Systems LLC dated as of June 25, 2000
(incorporated by reference to Exhibit 10.26 to the Copmany's
Annual Report on Form 10K filed on September 27, 2000).
10.23 Agreement for the Purchase and Sale of Optical Amplifier
and Dense Wavelength Division Multiplexing Equipment
between Digital Teleport, Inc. and Pirelli Cables and
Systems LLC dated as of September 1, 1998 (incorporated
by reference to Exhibit 10.36 to the Company's Current
Report on Form 8-K filed October 13, 1998).
10.24 Consulting Agreement between Digital Teleport, Inc. and
Jerry W. Murphy, dated November 5, 1998
(incorporated by reference to Exhibit 10.28 to the Company's
Annual Report on Form 10K filed on September 27, 2000).
10.25 Employment Agreement between Digital Teleport, Inc. and
Daniel A. Davis, dated June 10, 1998
(incorporated by reference to Exhibit 10.29 to the Company's
Annual Report on Form 10K filed on September 27, 2000).
10.26 Amendment to Employment Agreement of Daniel A. Davis
(incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10K filed on September 27, 2000).

10.27 Demand Promissory Note between DTI Holdings and KLT Telecom Inc.
dated February 1, 2001. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8K filed on
February 14, 2001).
10.28 Senior Secured Revolving Credit Facility between Digital Teleport,
Inc. and KLT Telecom Inc. dated January 31, 2001 (incorporated
herein by reference to Exhibit 10.2 to the Registrant's Current
Report on Form 8-K filed on February 14, 2001).
10.29 DTI Holdings, Inc. Pledge Agreement between DTI Holdings, Inc. and
KLT Telecom Inc. dated February 1, 2001 (incorporated herein by
reference to Exhibit 10.3 to the Registrant's Current Report on Form
8-K filed on February 14, 2001).
21 Subsidiaries of the Registrant (incorporated herein by
reference to Exhibit 21.1 to the S-4).

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