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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2005

or

Commission file number 1-16805

RCN Corporation

(Exact name of registrant as specified in charter)

Registrant’s telephone number, including area code: (703) 434-8200

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common stock, par value $0.01 per share

(Title of Classes)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

Indicate by check mark whether the registrant has filed all documents and reports to be filed by section 12, 13 or 15(d) of the Securities Exchange Act 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

The number of shares of the Registrant’s common stock, par value of $0.01 per share, outstanding at June 17, 2005 was 36,020,850 which includes 857,825 shares of Common Stock issued pursuant to RCN’s Plan of Reorganization but reserved pending the resolution of certain disputed claims arising out of RCN’s bankruptcy proceeding.

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RCN CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED MARCH 31, 2005

INDEX

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

RCN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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RCN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Per Share Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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RCN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Per Share Data)

(Continued)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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RCN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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RCN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

(Continued)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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RCN CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

RCN Corporation and its consolidated subsidiaries (“RCN” or the “Company”) provide local and long distance telephone, video programming (including digital cable and high definition television), and data services (including cable modem, high-speed and dial-up Internet access) primarily to residential customers over a broadband network in densely populated markets in the U.S. Approximately 64% of RCN’s customers have two or more of its services (i.e., bundles) with the remainder having only one service. RCN operates in Boston, New York, eastern Pennsylvania, Chicago, San Francisco, Los Angeles and the Washington, D.C. metropolitan market. RCN also served the communities in and around Carmel, New York, until March 9, 2004, when it completed the sale of its Carmel, New York, cable and voice system for approximately $120.2 million in cash before closing adjustments.

On May 27, 2004, RCN and four of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) and on August 5 and August 20, 2004, five additional subsidiaries of RCN filed voluntary petitions for reorganization under Chapter 11 (RCN and such subsidiaries are collectively referred to as, the “RCN Debtors”). On December 21, 2004 (the “Effective Date”), the RCN Debtors’ joint plan of reorganization (the “Plan”) became effective and the RCN Debtors emerged from Chapter 11 of the Bankruptcy Code. Pursuant to the Plan, RCN’s consolidated indebtedness and its debt service requirements were reduced substantially, its capital structure was realigned and substantially all of the new equity of RCN was issued to certain of its former creditors. In these notes to the condensed consolidated financial statements references to the “Predecessor” and “Old RCN” mean RCN and its subsidiaries prior to the Effective Date and references to the “Successor,” “Reorganized RCN” and the “Reorganized RCN Companies” mean RCN and its subsidiaries after the Effective Date of December 21, 2004.

The accompanying unaudited condensed consolidated financial statements of RCN have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q (the “Report”). Accordingly, some information and footnote disclosures required by accounting principles generally accepted in the United States (“US, GAAP”) for complete financial statements have been condensed or omitted.

In the opinion of RCN’s management, the unaudited condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. The results of operations for the period ended March 31, 2005 are not necessarily indicative of operating results expected for the full year or future interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

The consolidated financial statements include the accounts of RCN and it’s consolidated subsidiaries. All intercompany transactions and balances among consolidated entities have been eliminated. On December 21, 2004, RCN increased its ownership interest in Starpower Communications, LLC (“Starpower”) from 50% to 100%. Starting on December 21, 2004, the assets acquired and assumed liabilities of Starpower were recorded at their respective fair values and RCN’s consolidated results of operations included Starpower. Prior to December 21, 2004, RCN accounted for its interest in Starpower under the equity method. RCN accounts for its investment in Megacable, S.A. de C.V. and Megacable Communications de Mexico S.A. (collectively, “Megacable”) under the equity method.

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Reclassifications

Effective January 1, 2005 RCN changed the classifications of certain expenses from operating and selling, general and administrative to direct expenses. Management feels expenses for pole rental, right of way use fees and plant utilities are directly related to generating revenue and therefore are more appropriately classified as direct expenses. In addition, after filing for bankruptcy in the second quarter of 2004, RCN classified reorganization expense for the six months ended June 30, 2004 as a separate category pursuant to SOP 90-7. RCN has changed the classification of these expenses incurred in the three-months ending March 31, 2004. These classification changes were made to the consolidated statement of operations for the three months ended March 31, 2004 for comparability purposes as follows:

Change in Accounting for Legal Fees

During the first quarter, the Company changed its method of accounting for legal fees related to legal actions directed against it. RCN previously accrued anticipated legal fees for these actions based on an estimate of fees contemplated should it decide to litigate these matters. Management believes it is preferable to accrue legal fees when the work is performed, consistent with all other services. Management believes this position is consistent with the definition of a liability in Financial Accounting Standards Concept Statement No. 6. In accordance with Accounting Principles Board Opinion No. 20, “Accounting Changes,” the Company recorded the cumulative amount of the change in the three months ended March 31, 2005, resulting in a reversal of $2.6 million of expense recorded in previous periods. The change is reflected as a reduction in Operating and selling, general and administration expense.

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2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The Company’s condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).These accounting principles require management to make estimates, judgements and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. When sources of information regarding the carrying values of assets, liabilities and reported amounts of revenue and expenses are not readily apparent, RCN bases its estimates on historical experience and on various other assumptions that RCN’s management believes to be reasonable for making judgments. RCN evaluates all of its estimates on an on-going basis and may consult outside experts to assist in RCN’s evaluations. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Actual results could differ from those estimates.

Change in accounting estimates

In connection with the Company’s fourth quarter 2003 asset impairment assessment, the Company reviewed the useful life estimates of its long-lived assets. The Company capitalizes the cost of technical labor and material associated with the installation of new customers. Effective January 1, 2004 the Company changed the useful life of these assets to five years from ten. This represents a change in accounting estimate. The change resulted in $27.9 million of additional depreciation expense for the three months ended March 31, 2004.

Starpower

Starpower is a Delaware limited liability company formed in 1997 as a joint venture between a subsidiary of RCN and Pepco Communications, L.L.C., a subsidiary of Pepco Holdings, Inc. (“Pepco”), to sell video and telecommunications services to residential and commercial customers in Washington D.C. and the surrounding areas in Maryland and Virginia. On December 21, 2004, RCN increased its ownership in Starpower from 50% to 100% by purchasing the 50% interest in Starpower owned by Pepco for $29.0 million. RCN financed the $29.0 million purchase price with borrowings under its credit facility. Starpower continues to lease certain portions of Pepco’s fiber system and Pepco provides construction and construction management services to Starpower. RCN believes that the terms and conditions of the services provided by Pepco to Starpower are consistent with those which would be obtainable from other utilities.

Segment Reporting

RCN’s management views RCN’s business of providing bundled communications services to residential and commercial customers as one business segment. Included among these bundled services are video, data and voice communications. All services are provided from the same telecommunications backbone and the cost of these revenue streams is largely allocated based on respective service revenues. No separate asset information is maintained or reviewed. Residential customers, including dial-up data subscribers, provide approximately 95% of RCN’s consolidated revenues. RCN’s management believes RCN can aggregate these revenue streams under the quantitative and qualitative thresholds defined in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”.

Revenue Recognition

Revenues are recognized as earned when the services are rendered, the selling price is determinable and collection is reasonably assured. Video and high-speed data revenues are recognized in the month service is provided and related cable installation revenues are recognized in the period of installation since they do not exceed the direct selling costs. Dial-up Internet revenues are earned based on the contract period. Telephone service revenues are recognized when services are provided. Local telephone revenues are based on tariff rates while long distance telephone revenues are based upon minutes of traffic processed in accordance with tariffs and the rates of long-distance providers. Reciprocal compensation revenue, the fees that local exchange carriers pay to terminate calls on each other’s networks, is recognized when other carriers’ calls are terminated on RCN’s network.

Intangibles

Intangible assets consist of trademarks, tradenames, customer relationships and franchise rights. The fair values at the Effective Date were based on a number of significant factors determined by RCN and its independent appraisal expert. RCN’s identifiable intangible assets, with the exception of franchise rights, are amortized over three to five years, estimate of the assets useful lives. Franchise rights are deemed to have an indefinite life because of the high probability of renewal.

RCN adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002.

SFAS No. 142 requires that goodwill and intangible assets be tested annually for impairment using a two-step process. The first step is to identify a potential impairment. The second step of the impairment test measures the amount of the impairment loss, if any, and must be completed by the end of RCN’s fiscal year.

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Megacable

RCN has 48.93% interests in both Megacable, S.A. de C.V., a cable television and high-speed data services provider in Mexico, and Megacable Communicaciones de Mexico S.A. (“MCM”), a provider of local voice and high-speed data services in Mexico (collectively, “Megacable”). RCN accounts for these investments under the equity method. Despite the Company’s repeated requests, Megacable management has not provided audited financial statements for the year ended December 31, 2004 and unaudited financial statements for the three months ended March 31, 2005. Therefore, the Company has not recorded any income or loss on its investment in Megacable for the three months ended March 31, 2005 (Successor). For the three months ended March 31, 2004 (Predecessor), the Company recorded income of $10.5 million on its investment in Megacable. The Company disclosed its inability to obtain Megacable’s financial statements as a material weakness in its internal control over financial reporting at December 31, 2004.

Recently issued Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock Based Compensation”, and supersedes APB 25, “Accounting for Stock Issued to Employees”. SFAS 123R requires companies to recognize the cost of stock-based compensation awards by applying the grant date fair value of those awards as a charge to results of operations over the remaining vesting period. The effective date of SFAS 123R is January 1, 2006, for calendar year companies. Since RCN has recognized stock-based compensation expenses under SFAS 123 since January 1, 2000, the application of SFAS No. 123R will not have an additional effect on RCN’s financial statements. In addition, while the Company did not record any stock-based compensation for the three months ended March 31, 2005 (due to the fact that no stock or options had been issued to directors, management, or employees of the Successor as of March 31, 2005), the Company expects to incur stock-based compensation expense going forward, as the Company has submitted a management incentive plan for stockholder approval that would allow for the issuance of up to 10% of its stock on a fully diluted basis. See Note 10 for additional information.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”). FIN 47 clarifies the definition and treatment of conditional asset retirement obligations as discussed in FASB Statement No. 143, “Accounting for Asset Retirement Obligations.” A conditional asset retirement obligation is defined as an asset retirement activity in which the timing and/or method of settlement are dependent on future events that may be outside the control of the Company. FIN 47 requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is intended to provide more information about long-lived assets, more information about future cash outflows for these obligations and more consistent recogniti on of these liabilities. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. Retrospective application of interim financial information is permitted but is not required. Early adoption of this Interpretation is encouraged. The Company is currently evaluating the impact, if any, of FIN 47 on its financial position, results of operations and cash flows.

In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3” (SFAS No. 154). Previously, APB No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” required the inclusion of the cumulative effect of changes in accounting principle in net income of the period of the change. SFAS No. 154 requires companies to recognize changes in accounting principle, including changes required by a new accounting pronouncement when the pronouncement does not include specific transition provisions, retrospectively to prior periods’ financial statements. The Company will assess the impact of a retrospective application of a change in accounting principle in accordance with SFAS No. 154 if the need for such a change arises

after the effective date of January 1, 2006.

3. FRESH START ACCOUNTING

On the Effective Date, Reorganized RCN emerged with a new capital structure and with no retained earnings or accumulated losses. This resulted in a new reporting entity under a new basis of accounting (the Successor as of December 21, 2004). Following the emergence on December 21, 2004, the Successor commenced operations and thus experienced an eleven-day operating period at the end of 2004. The results for the period January 1, 2004 through December 20, 2004 represent the Predecessor’s operations.

RCN implemented “fresh start” accounting and reporting in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position No. 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”) upon its emergence from Chapter 11 on the Effective Date, because the holders of existing voting shares immediately before confirmation received less than 50% of the voting shares of Successor RCN. Fresh start accounting required RCN to re-value its assets and liabilities based upon their estimated fair values. Adopting “fresh start” accounting resulted in material adjustments to the historical carrying amount of RCN’s assets and liabilities. Reorganization

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adjustments were recorded to the consolidated balance sheet to reflect the discharge of debt and other obligations and the adoption of fresh-start reporting. RCN engaged an independent appraisal expert to assist in the determination of RCN’s reorganization value as defined in SOP 90-7. The value was based on a variety of estimates and assumptions which, though considered reasonable by management, may not be realized and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond RCN’s control.

In applying fresh-start reporting as of the Effective Date, the reorganization value of RCN was allocated to its assets in conformity with the procedures specified by SFAS No. 141, “ Business Combinations. “ The sum of the amounts assigned to assets and liabilities exceeded the reorganization value. This excess was allocated as a pro rata reduction of the amounts that otherwise would have been assigned to the Successor’s long-lived assets.

The “fresh start” balance sheet at December 21, 2004 includes RCN’s 50% interest in Starpower at fair value. Successor acquired the remaining 50% of Starpower.

New debt, which was used to settle certain Predecessor liabilities, pay-off old debt and increase available working capital, was treated as Predecessor debt since it primarily serviced Predecessor liabilities.

The following table reflects the debt and equity restructuring, reorganization adjustments and the adoption of “fresh start” reporting adjustments to RCN’s consolidated balance sheet as of the Effective Date.

RCN CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Share and Per Share Data)

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RCN CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in Thousands, Except Share and Per Share Data)

Notes to “Fresh Start” Activity

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4. DEFERRED REORGANIZATION COSTS

Under U.S. bankruptcy law, actions by creditors to collect indebtedness a debtor owes prior to the petition date are generally stayed and certain other pre-petition contractual obligations may not be enforced against such debtor. All pre-petition liabilities of the RCN Debtors were classified as liabilities subject to compromise in the consolidated balance sheets prior to the Effective Date. On emergence, unsettled claims totaling $21.6 million were reclassified to deferred reorganization costs and settlement negotiations have been ongoing. Adjustments to these amounts may result from negotiations, payments authorized by the Bankruptcy Court, and/or rejection of executory contracts and leases. Settlement amounts of the above claims recorded may ultimately be less than amounts filed by the creditors under the Bankruptcy Court claims reconciliation and resolution process.

The total unsettled claims at March 31, 2005 were $21.6 million. In April 2005, $11.4 million of these claims were paid in cash leaving unsettled claims with a maximum possible pay-out of $10.2 million as of June 17, 2005.

5. DISCONTINUED OPERATIONS

On March 9, 2004, RCN completed the sale of its Carmel cable system for approximately $120.2 million, resulting in a gain on the sale of approximately $88.5 million (excluding net income from operations of $1.6 million). The transaction was structured as an asset purchase, with the buyer assuming certain liabilities related to the business. Approximately $5.0 million was placed into escrow for future claims of the buyer. In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”), the results of operations for Carmel are reported as discontinued operations. As of December 31, 2004, $1.0 million was deducted from the escrow based on the claims received from the buyer and agreed to by RCN. In April 2005, the remaining escrow balance of approximately $4 million was released and paid to the Successor Company.

The following are the summarized results of operations for the Carmel operation for the three months ended March 31,2004:

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6. IMPAIRMENT CHARGES AND ACCRUED EXIT COSTS

The total asset impairment and other charges are comprised of the following:

The Company continually reviews its facility requirements and lease obligations to identify excess space and opportunities to consolidate, exit or sublease excess facilities. As facilities are vacated, exit costs are recognized in accordance with Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” (“SFAS No.146”). During the three months ended March 31, 2005 and 2004, the Company recognized approximately $2.6 million and $2.5 million, respectively, of additional accrued costs to exit excess real estate facilities. Additionally, during the three months ended March 31, 2004, the Company abandoned approximately $2.6 million in furniture and fixtures as additional consideration, as part of a lease settlement. During the three months ended March 31, 2005 and 2004, the Company recognized approximately $0.3 million and $6.9 million, respectively, of recoveries resulting from settlements and changes in estimates related to certain lease obligations as a result of negotiations with landlords and/or better than expected sublease rentals.

The Company has entered into non-exclusive franchise agreements with local and state governmental authorities to construct and operate cable systems for specified periods of time. These franchise agreements include stipulations that the Company will build its network throughout the governmental authority’s geographic area. Most franchises are subject to termination proceedings in the event of a material breach. In the past, the Company has determined that it was not feasible to continue to build out its network in certain franchise areas and entered into negotiations to terminate those franchise agreements. The Company has accrued an amount that it estimates it will pay these local franchise authorities to exit those franchise agreements. In the three month ended March 31, 2005, the Company has accrued $0.2 million. In the three months ended March 31, 2004, the Company recorded a net reduction in expense of ($0.5) million as it was able to negotiate a settlement of one franchise agreement on more favorable terms that it previously estimated. Amounts expensed are included in operations and selling, general and administration expenses.

The total activity for the three months ended March 31, 2005 for accrued exit costs, representing estimated damages, costs and penalties relating to franchises and real estate facilities is presented below.

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7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at March 31, 2005 (Successor) and December 31, 2004 (Successor):