================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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


                                    FORM 10-Q

[X]      Quarterly  Report  pursuant  to Section  13 or 15(d) of the  Securities
         Exchange Act of 1934 for the quarterly period ended June 30, 2002.

                                       or

[   ]       Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from _____ to _______

         Commission File Number 000-25015


                         WORLDPORT COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                                  84-1127336
              --------                                  ----------
  (State or other jurisdiction of                (IRS Employer ID Number)
  incorporation or organization)

                           975 Weiland Road, Ste. 160
                          Buffalo Grove, Illinois 60089
                          -----------------------------
                    (Address of principal executive offices)

                                 (847) 229-8200
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (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 [ ]



As of August 9, 2002, the Registrant had 39,087,252  shares of Common Stock, par
value $0.0001, outstanding.


================================================================================

                                       1

<PAGE>




                         WORLDPORT COMMUNICATIONS, INC.
                                TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----
PART I - FINANCIAL INFORMATION
------------------------------

       Item 1.      Financial Statements (unaudited)

                    Condensed Consolidated Balance Sheets as of
                    June 30, 2002 and December 31, 2001......................  3

                    Condensed Consolidated Statements of Operations
                    for the Three and Six Months Ended June 30, 2002
                    and 2001.................................................  4

                    Condensed Consolidated Statements of Cash Flows for the
                    Three and Six Months Ended June 30, 2002 and 2001........  5

                    Notes to Condensed Consolidated Financial Statements.....  6

       Item 2.      Management's Discussion and Analysis of
                    Financial Condition and Results of Operations............ 15

       Item 3.      Quantitative and Qualitative Disclosures About
                    Market Risk.............................................. 21

PART II - OTHER INFORMATION
---------------------------

       Item 1.      Legal Proceedings........................................ 22

       Item 2.      Changes in Securities.................................... 23

       Item 6.      Exhibits and Reports on Form 8-K......................... 23


SIGNATURE.................................................................... 25



                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>

                 WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<CAPTION>

                                                                                              JUNE 30,          DECEMBER 31,
                                         ASSETS                                                 2002               2001
<S>                                                                                              <C>               <C>
CURRENT ASSETS:
    Cash and cash equivalents...................................................                 $ 109,578         $ 61,475
    Marketable securities.......................................................                    10,996           10,759
    Income tax receivable.......................................................                        --           51,964
    Other current assets........................................................                     1,013            3,230
                                                                                                 ---------         --------
                  Total current assets..........................................                   121,587          127,428
    PROPERTY AND EQUIPMENT, net.................................................                       773            5,666
    OTHER ASSETS................................................................                       673            1,722
                                                                                                 ---------         --------
                       TOTAL ASSETS.............................................                 $ 123,033        $ 134,816
                                                                                                 =========        =========


                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable...........................................................                  $  3,115         $  9,938
     Accrued expenses...........................................................                    14,469           21,264
     Net liabilities of non-controlled subsidiaries ............................                    10,833            1,277
     Current portion of obligations under capital leases .......................                     3,125            4,335
     Other current liabilities..................................................                     1,482            2,543
                                                                                                 ---------         --------
                    Total current liabilities...................................                    33,024           39,357
      Long-term obligations under capital leases, net of current portion........                     2,316            3,433
                                                                                                 ---------         --------
                    Total liabilities...........................................                    35,340           42,790

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Undesignated preferred stock, $0.0001 par value, 4,004,000 shares
        authorized, no shares issued and outstanding............................                        --               --
     Series A convertible preferred stock, $0.0001 par value, 750,000 shares
        authorized, no shares issued and outstanding............................                        --               --
     Series B convertible preferred stock, $0.0001 par value, 3,000,000 shares
        authorized, 956,417 and 965,642 shares issued and outstanding in 2002                           --               --
        and 2001, respectively..................................................
     Series C convertible preferred stock, $0.0001 par value, 1,450,000 shares
        authorized, 1,416,030 shares issued and outstanding.....................                        --               --
     Series D convertible preferred stock, $0.0001 par value, 650,000 shares
        authorized, 316,921 shares issued and outstanding.......................                        --               --
     Series E convertible preferred stock, $0.0001 par value, 145,000 shares
        authorized, 141,603 shares issued and outstanding.......................                        --               --
     Series G convertible preferred stock, $0.0001 par value, 1,000 shares
        authorized, 1,000 shares issued and outstanding.........................                        --               --
     Common stock, $0.0001 par value, 200,000,000 shares authorized, 39,087,252
        shares issued and outstanding...........................................                         4                4
     Warrants...................................................................                     2,611            2,611
     Additional paid-in capital.................................................                   187,213          187,213
     Accumulated other comprehensive loss.......................................                    (4,713)          (1,938)
     Accumulated deficit........................................................                   (97,422)         (95,864)
                                                                                                 ---------         --------
                    Total stockholders' equity .................................                    87,693           92,026
                                                                                                 ---------         --------
                    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................                 $ 123,033        $ 134,816
                                                                                                 =========        =========

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

</TABLE>


                                       3
<PAGE>

<TABLE>

                 WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (Unaudited)

<CAPTION>




                                                     Three Months Ended      Six Months Ended
                                                            June 30,              June 30,
                                                            --------              --------
                                                       2002        2001       2002        2001
                                                       ----        ----       ----        ----

<S>                                                 <C>         <C>         <C>         <C>
REVENUES ........................................   $   --      $   --      $   --      $   --

COST OF SERVICES ................................       --          --          --          --
                                                    --------    --------    --------    --------
     Gross profit ...............................       --          --          --          --
                                                    --------    --------    --------    --------

OPERATING EXPENSES:
     Selling, general and administrative expenses        978       1,483       1,908       3,406
     Depreciation and amortization ..............         38          59          77          99
                                                    --------    --------    --------    --------
           Operating loss .......................     (1,016)     (1,542)     (1,985)     (3,505)
                                                    --------    --------    --------    --------

OTHER INCOME (EXPENSE):
     Interest income ............................        595       1,330         899       3,159
     Interest expense ...........................       --          --          (111)        (67)
    Loss on sale of assets ......................       --          (289)         (4)       (289)
     Other income (expense), net ................       --          --          --            28
                                                    --------    --------    --------    --------

LOSS BEFORE INCOME TAXES ........................       (421)       (501)     (1,201)       (674)

INCOME TAX PROVISION ............................       --          --          --          --
                                                    --------    --------    --------    --------

NET LOSS FROM CONTINUING OPERATIONS .............       (421)       (501)     (1,201)       (674)

INCOME (LOSS) FROM DISCONTINUED
  OPERATIONS, net of tax ........................      6,962     (15,821)       (357)    (24,385)
                                                    --------    --------    --------    --------

NET INCOME (LOSS) ...............................   $  6,541    $(16,322)   $ (1,558)   $(25,059)
                                                    ========    ========    ========    ========

NET LOSS PER SHARE FROM CONTINUING OPERATIONS:
   BASIC ........................................   $  (0.01)   $  (0.02)   $  (0.03)   $  (0.02)
                                                    ========    ========    ========    ========
   DILUTED ......................................   $  (0.01)   $  (0.02)   $  (0.03)   $  (0.02)
                                                    ========    ========    ========    ========

NET INCOME (LOSS) PER SHARE:
   BASIC ........................................   $   0.17    $  (0.44)   $  (0.04)   $  (0.70)
                                                    ========    ========    ========    ========
   DILUTED ......................................   $   0.11    $  (0.44)   $  (0.04)   $  (0.70)
                                                    ========    ========    ========    ========

SHARES USED IN NET INCOME (LOSS) PER SHARE
  CALCULATION:
    BASIC .......................................     39,087      37,313      39,087      35,641
    CONVERTIBLE PREFERRED STOCK .................     22,066        --          --          --
    WARRANTS ....................................        665        --          --          --
    OPTIONS .....................................       --          --          --          --
                                                    --------    --------    --------    --------
    DILUTED .....................................     61,818      37,313      39,087      35,641
                                                    ========    ========    ========    ========

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


</TABLE>

                                       4
<PAGE>

<TABLE>

                 WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (Unaudited)
<CAPTION>


                                                                                    Three Months Ended          Six Months Ended
                                                                                         June 30,                   June 30,
                                                                                         --------                   --------
                                                                                    2002          2001           2002         2001
                                                                                    ----          ----           ----         ----

<S>                                                                                <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..............................................................   $   6,541    $ (16,322)   $  (1,558)   $ (25,059)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
          (Income) loss from discontinued operations ...........................      (6,962)      15,821          357       24,385
          Depreciation and amortization ........................................          38           59           77           99
          Loss on sale of assets ...............................................        --            289            4          289
          Change in other current and noncurrent assets ........................        (733)         132           93          (76)
          Change in accounts payable, accrued expenses and other liabilities ...        (154)      (2,576)      (1,430)      (1,547)
                                                                                   ---------    ---------    ---------    ---------

                    Net cash flows from operating activities ...................      (1,270)      (2,597)      (2,457)     (12,419)

CASH FLOWS FROM INVESTING ACTIVITIES:
          Capital expenditures .................................................        --             (4)        --            (24)
          Sale of assets .......................................................        --          1,311         --          1,311
                                                                                   ---------    ---------    ---------    ---------

                    Net cash flows from investing activities ...................        --          1,307         --          1,287

CASH FLOWS FROM FINANCING ACTIVITIES:
           Principal payments on obligations under capital leases ..............        --           --         (1,229)        (405)
                                                                                   ---------    ---------    ---------    ---------

                    Net cash flows from by financing activities ................        --           --         (1,229)        (405)

Net cash flows from discontinued operations ....................................      55,943       (5,990)      51,789      (23,066)
                                                                                   ---------    ---------    ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...........................      54,673       (7,280)      48,103      (24,093)

CASH AND CASH EQUIVALENTS, beginning of the period .............................      54,905      115,583       61,475      132,396
                                                                                   ---------    ---------    ---------    ---------

CASH AND CASH EQUIVALENTS, end of the period ...................................   $ 109,578    $ 108,303    $ 109,578    $ 108,303
                                                                                   =========    =========    =========    =========

CASH PAID DURING THE PERIOD FOR INTEREST .......................................   $      87    $     172    $     198    $     244
                                                                                   =========    =========    =========    =========

CASH PAID DURING THE PERIOD FOR INCOME TAXES ...................................   $    --      $    --      $    --      $    --
                                                                                   =========    =========    =========    =========

SUPPLEMENTAL SCHEDULE OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:

       Acquisition of hostmark through the issuance of common stock ............   $    --      $  11,975    $    --      $  11,975
                                                                                   =========    =========    =========    =========
       Acquisition of property and equipment under capital lease ...............   $    --      $   7,875    $    --      $   7,875
                                                                                   =========    =========    =========    =========


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


</TABLE>


                                       5
<PAGE>


                 WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization
         ------------

               Worldport Communications,  Inc., a Delaware corporation (together
         with its subsidiaries,  the "Company"),  was originally  organized as a
         Colorado  corporation  under the name Sage  Resources,  Inc. in January
         1989.  Worldport  remained  inactive  until  1996  when  the  Company's
         domicile  was changed to Delaware and the name was changed to Worldport
         Communications, Inc.

               From 1997 to 1999,  the  Company  was a  facilities-based  global
         telecommunications    carrier   offering   voice,    data   and   other
         telecommunications  services to carriers,  Internet service  providers,
         medium and large corporations and distributors and resellers  operating
         in Europe and the United States. In order to meet its obligations under
         its interim loan facility,  the Company sold  substantially  all of its
         material assets during the first quarter of 2000.

                During  2000  and  2001,  the  Company  pursued  a new  business
         strategy,  focused on the  delivery  of  Internet  solutions  to global
         companies  doing  business in the European  marketplace.  However,  the
         Company did not achieve the revenue growth it had  anticipated,  which,
         combined  with  the  general  economic  downturn  and the  slowdown  in
         technology   spending,   prompted   the   Company  to  review   various
         alternatives  to its  existing  business  plan.  The  Company  made the
         decision to take further  restructuring actions and to divest itself of
         certain  assets during the fourth quarter of 2001 and the first quarter
         of 2002, as described in Note 3. As a result,  we no longer have active
         business  operations.  Accordingly,  results of these exited operations
         have been  classified  as  discontinued,  and prior  periods  have been
         restated in order to conform to the new presentation.

                After  completing the  activities  related to the exiting of our
         subsidiaries  and  satisfying  the  related  liabilities,  we expect to
         continue to have significant cash resources. We are currently operating
         with a minimal  headquarters  staff  while we complete  the  activities
         related to exiting our prior  businesses  and  determine how to use our
         cash resources. We will have broad discretion in determining how to use
         these cash  resources,  and we may choose to make an  acquisition or to
         liquidate the Company.

                Since  ceasing  our  business  operations,  we have  sought  and
         reviewed acquisition  opportunities.  However, we have not yet actively
         pursued any of these opportunities since we did not believe that any of
         them were in the best interests of our shareholders. Although we intend
         to continue to consider potential  acquisition  opportunities,  we have
         not identified a specific industry on which we intend to focus and have
         no  present  plans,  proposals,  arrangements  or  understandings  with
         respect to the acquisition of any specific business.

               We are also continuing to analyze a potential  liquidation of the
         Company  and  its  effects  on the  Company's  stockholders.  Upon  any
         liquidation,  dissolution or winding up of the Company,  the holders of
         our   outstanding   preferred   stock  would  be  entitled  to  receive
         approximately  $68 million prior to any  distribution to the holders of
         our common stock.

               We have also actively  worked to resolve and settle the Company's
         outstanding  liabilities.  For  example,  as  described  in  Note 4, we
         recently settled a $7.7 million  liability  related to a lease for real
         property in Slough, U.K.


         Basis of Presentation
         ---------------------

                The accompanying  financial statements have not been reviewed by
         an  independent  public  accountant  in  accordance  with  Statement of
         Auditing  Standards  No. 71, as required by Rule 10-01(d) of Regulation
         S-X, since the Company's historical independent accounting firm, Arthur
         Andersen LLP, is no longer able to provide these services.  The Company


                                       6
<PAGE>

         is  currently in the process of engaging a new  independent  accounting
         firm to complete such a review as soon as practical. Upon completion of
         a SAS 71 review,  the Company intends to file an Amendment to this Form
         10-Q.

                The accompanying  condensed  consolidated  financial  statements
         have been prepared by the Company  without audit.  Certain  information
         and footnote  disclosures  normally  included in  financial  statements
         prepared in accordance with generally  accepted  accounting  principles
         have been  condensed or omitted in this Form 10-Q pursuant to the rules
         and  regulations of the Securities  and Exchange  Commission;  however,
         management  believes that the  disclosures  herein are adequate to make
         the information presented not misleading.  The financial statements and
         notes thereto  included in this Form 10-Q should be read in conjunction
         with  the  financial  statements  and  notes  thereto  included  in the
         Company's  Annual  Report on Form 10-K for the year ended  December 31,
         2001.

                In the opinion of the  Company's  management,  the  accompanying
         condensed  consolidated  financial  statements  contain all adjustments
         necessary to present fairly the Company's financial position as of June
         30, 2002,  and the results of  operations  and cash flows for the three
         and six  months  ended June 30,  2002 and 2001.  However,  since  these
         financial   statements   have  not  been  reviewed  by  an  independent
         accounting  firm,  it is possible  that changes will be made to them in
         connection with such a review.  The results of operations for the three
         and six months ended June 30, 2002, are not  necessarily  indicative of
         the operating results for the full year.


         Consolidation
         -------------

                The accompanying  consolidated  financial statements include the
         accounts  of the  Company and its  wholly-owned  subsidiaries  that are
         under the Company's control. All significant  intercompany accounts and
         transactions have been eliminated.


         Use of Estimates
         ----------------

              The Company's financial statements are prepared in accordance with
         accounting principles generally accepted in the United States ("GAAP").
         Financial  statements  prepared in accordance with GAAP require the use
         of  management  estimates  and  assumptions  that  affect the  reported
         amounts of assets and liabilities,  the disclosure of contingent assets
         and  liabilities  at the  date  of the  financial  statements,  and the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from those estimates.


         Foreign Currency
         ----------------

                Prior to the transactions described in Note 3, substantially all
         of the Company's  operations were in Europe. The assets and liabilities
         of non-U.S. subsidiaries are translated at month-end rates of exchange,
         and  income  statement  items  are  translated  at  the  average  rates
         prevailing during the period. The resulting  translation  adjustment is
         recorded as a component of  stockholders'  equity.  Exchange  gains and
         losses on intercompany  balances of a long-term  investment  nature are
         also  recorded as a component of  stockholders'  equity.  Other foreign
         exchange gains and losses are recorded in income on a current basis and
         have been included in Loss from  Discontinued  Operations.  These other
         foreign  exchange  gains and losses and were  minimal for the three and
         six months ended June 30, 2002 and 2001, respectively.


         Derivatives
         -----------

                The Company has used derivative instruments to hedge its foreign
         currency exposure only on a limited basis. Accordingly,  the Company is
         not subject to any additional  significant foreign currency market risk
         other than normal fluctuations in exchange rates.

               In June 2000, the Financial  Accounting  Standards Board ("FASB")


                                       7
<PAGE>

         issued Statement of Financial  Accounting  Standards  ("SFAS") No. 138,
         "Accounting  for Certain  Derivative  Instruments  and Certain  Hedging
         Activities--an Amendment of FASB Statement No. 133," which is effective
         for  fiscal  years   beginning  after  June  15,  2000.  SFAS  No.  133
         establishes   accounting   and  reporting   standards  for   derivative
         instruments and transactions  involving hedge  accounting.  The Company
         adopted  SFAS No.  133, as  amended,  on January 1, 2001,  which had no
         impact on the consolidated financial statements.

               At June 30, 2002 there were no foreign  currency hedge  contracts
         outstanding.


         Earnings (Loss) per Share
         -------------------------

                The  Company  has  applied  the  provisions  of  SFAS  No.  128,
         "Earnings  Per Share",  which  establishes  standards for computing and
         presenting  earnings per share. Basic earnings per share is computed by
         dividing  income  available  to  common  stockholders  by the  weighted
         average  number  of  common  shares  outstanding  for the  period.  The
         calculation  of  diluted  earnings  per share  includes  the  effect of
         dilutive  common stock  equivalents.  For the six months ended June 30,
         2002,  and for the three and six months ended June 30, 2001,  basic and
         diluted loss per share is the same because all dilutive  securities had
         an  antidilutive  effect on loss per share.  For the three months ended
         June 30, 2002,  diluted earnings per share includes the effect, if any,
         of  the  Company's  convertible  preferred  stock,  stock  options  and
         warrants.  The If Converted  method was used to calculate  the weighted
         average  shares  outstanding  for  convertible   preferred  stock.  The
         Treasury Stock method was used to calculate the weighted average shares
         outstanding for warrants and options.


         New Accounting Pronouncements
         -----------------------------

               In  June  2001,   the  FASB  issued   SFAS  No.  141,   "Business
         Combinations,"  and  SFAS  No.  142,  "Goodwill  and  Other  Intangible
         Assets." SFAS No. 141 prospectively  prohibits the pooling of interests
         method of accounting for business combinations initiated after June 30,
         2001.  Under SFAS No. 142,  goodwill  amortization  ceases when the new
         standard is adopted.  In the three and six months  ended June 30, 2001,
         the  Company  recorded  goodwill  amortization  of  approximately  $0.8
         million and $1.7 million,  respectively.  No goodwill  amortization was
         recorded  in 2002.  SFAS No.  142 also  requires  an  initial  goodwill
         impairment  assessment in the year of adoption and an  impairment  test
         both on an annual basis and upon the  occurrence of any event or change
         in  circumstances  that would reduce the fair value of a reporting unit
         below its  carrying  value.  SFAS No. 142 also  requires the Company to
         complete a transitional  goodwill  impairment  test six months from the
         date of adoption. The Company adopted this standard at the beginning of
         its 2002 fiscal year. As the Company had no goodwill or  intangibles at
         December 31, 2001,  the adoption of this statement had no impact on the
         Company's consolidated financial statements.

               In August 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived  Assets." The statement provides a
         single  accounting  model for long-lived  assets to be disposed of. The
         Company  adopted SFAS No. 144 at the beginning of its 2002 fiscal year.
         The  adoption  of  this  statement  had  no  impact  on  the  Company's
         consolidated financial statements.

               In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal  Activities."  The statement  requires
         that a  liability  for a cost  associated  with  an  exit  or  disposal
         activity be recognized when the liability is incurred as opposed to the
         date of an entity's  commitment to an exit plan. The Company will adopt
         SFAS  No.  146 for any  exit or  disposal  activities  initiated  after
         December 31, 2002.


         Certain Reclassifications
         -------------------------

               Certain  reclassifications  have been made to amounts  previously
         reported to conform to current period presentation.



                                       8
<PAGE>


(2)      COMPREHENSIVE INCOME (LOSS)

               Total  comprehensive  income  (loss) for the three and six months
         ended June 30, 2002 and 2001 was as follows:

<TABLE>


                                                           Three Months Ended      Six Months Ended
                                                                  June 30,              June 30,
                                                             2002        2001        2002        2001
                                                             ----        ----        ----        ----
<S>                                                       <C>         <C>         <C>         <C>
Net income (loss) .....................................   $  6,541    $(16,322)   $ (1,558)   $(25,059)
Foreign currency translation adjustments ..............     (3,405)     (4,286)     (3,012)     (9,718)
Unrealized gains on marketable securities held-for-sale        126       --           237        --
                                                          --------    --------    --------    --------
Total comprehensive income (loss) .....................   $  3,262    $(20,608)   $ (4,333)   $(34,777)
                                                          ========    ========    ========    ========
</TABLE>


(3)      DISCONTINUED OPERATIONS

               During  2001,  the Company did not achieve its  expected  revenue
         growth in its Managed Hosting business.  The general economic downturn,
         the slowdown in technology  spending and the  lengthening  in the sales
         cycle for Managed  Hosting  services all  contributed  to these revenue
         shortfalls.  Company management believed that these conditions, as well
         as the increasing  level of competition  and  consolidation  in the Web
         hosting and Internet  infrastructure markets, would continue to have an
         adverse  effect on the  Company's  ability to achieve near term revenue
         targets and, if they continued,  could erode the financial resources of
         the Company more rapidly than planned.

               Following   the   exploration   and   review  of  the   strategic
         alternatives,  the Company determined that it was necessary to take the
         following  actions  to  dramatically  reduce  the  rate  at  which  its
         operations  were using cash and to minimize the  Company's  exposure in
         markets  that were  experiencing  significantly  slower  than  expected
         market growth.

               0    In November  2001, we announced  that our Irish  subsidiary,
                    Worldport  Ireland  Limited,  was ceasing  operations at its
                    Dublin, Ireland facility. An orderly shutdown of the Ireland
                    operations was commenced, and was substantially completed by
                    December 31, 2001. In April 2002,  Worldport Ireland Limited
                    was given  notice  that a petition  for winding up was filed
                    and would be  presented to the Irish High Court on behalf of
                    Global Crossing Ireland  Limited.  The petition was heard by
                    the Irish High Court on May 13,  2002 and a  liquidator  was
                    appointed  for  this  subsidiary  to  act on  behalf  of the
                    creditors.  As a result of this action,  the  liquidator has
                    control  over  this  subsidiary's  assets.  The  assets  and
                    liabilities of the Irish subsidiary in Liquidation have been
                    deconsolidated in the Company's financial  statements in the
                    current  quarter and are  reflected  in Net  Liabilities  of
                    Non-controlled  Subsidiaries on the Company's  balance sheet
                    as a net liability of  approximately  $4.2 million (see Note
                    5).

               0    In December 2001, we sold the assets and certain liabilities
                    of our Managed Services business in Stockholm, Sweden, to OM
                    Technology AB for $0.9 million, subject to the resolution of
                    a final working capital adjustment.  The parties agreed to a
                    final  sales  price of $0.8  million in July  2002.  OM also
                    agreed to assume  the  ownership  of  Worldport's  Stockholm
                    Internet solutions center and the operations at that center,
                    and all customers' contracts.

               0    In  December  2001,  we also sold our  Swedish  Professional
                    Services business (formerly known as VIS-able  International
                    AB)  to  its  employees  in a  management  buyout  for  $0.9
                    million, the majority of which is in the form of a note. Due
                    to uncertainties related to the collectibility of this note,
                    it has been fully reserved for.

               0    In December 2001, we placed our German subsidiary,  Hostmark
                    GmbH,  into  receivership  under  German law. As a result of
                    this action, the receiver has control over this subsidiary's
                    assets.  The assets and liabilities of Hostmark GmbH held in
                    receivership were  deconsolidated in the Company's financial
                    statements  in the fourth  quarter of 2001 and are reflected
                    in Net  Liabilities of  Non-controlled  Subsidiaries  on the
                    Company's  balance sheet as a net liability of approximately
                    $1.4 million (see Note 5).

               0    In March  2002,  we made  the  decision  to make no  further
                    investment in our U.K. Managed Hosting  operation.  On March
                    26, 2002, our U.K. subsidiaries,  Hostmark World Limited and



                                       9
<PAGE>

                    Hostmark U.K. Limited,  filed a petition for  Administration
                    under the United Kingdom  Insolvency  Act. An  administrator
                    was appointed for these  subsidiaries to either  reorganize,
                    find new  investors,  sell or liquidate the U.K.  businesses
                    for  the  benefit  of its  creditors.  As a  result  of this
                    action,   the   administrator   has   control   over   these
                    subsidiaries' assets. The assets and liabilities of the U.K.
                    subsidiaries in  Administration  were  deconsolidated in the
                    Company's financial  statements in the first quarter of 2002
                    and  are  reflected  in Net  Liabilities  of  Non-controlled
                    Subsidiaries  on  the  Company's  balance  sheet  as  a  net
                    liability of approximately $5.2 million (see Note 5).

                 In addition,  we completed  the sale of our  remaining  carrier
         business, Telenational Communications, Inc. ("TNC") in October 2001 for
         $0.4 million.

                As a result of these  transactions,  the  Company had exited all
         three of its  operating  segments as of March 31, 2002 and is currently
         operating with only a minimal headquarters staff. Accordingly,  results
         of these  operations  have been classified as  discontinued,  and prior
         periods have been restated in order to conform to the new presentation.

               The operating results of discontinued operations were as follows:

<TABLE>

                                                  Three Months Ended       Six Months Ended
                                                        June 30,                June 30,
                                                        --------                --------
                                                    2002         2001       2002       2001
                                                    ----         ----       ----       ----
           <S>                                   <C>         <C>         <C>         <C>
           Net revenue .......................   $   --      $  3,361    $    291    $  5,842
           Restructuring costs (see Note 4) ..   $ (7,717)   $   --      $  2,283    $   --
           Gain (loss) before income taxes ...   $  6,962    $(15,844)   $ (5,954)   $(24,529)
           Income tax benefit ................   $   --      $     23    $  5,597    $    144
           Net income (loss) from discontinued
              operations .....................   $  6,962    $(15,821)   $   (357)   $(24,385)
</TABLE>


                Assets and liabilities related to the discontinued operations as
         of June 30, 2002 and December 31, 2001 consist of the following:

<TABLE>

                                                                June 30,         December 31,
                                                                  2002                2001
                                                                  ----                ----
                <S>                                              <C>              <C>
                Current assets                                   $        1      $    3,733
                 Noncurrent assets                                      502           6,347
                Current liabilities                                 (28,052)        (30,313)
                Long-term liabilities                                (2,316)         (3,433)
                                                                 ----------       ---------
               Net liabilities of discontinued operations        $  (29,865)     $  (23,666)
                                                                 ==========       =========
</TABLE>


(4)      RESTRUCTURING ACTIVITIES

               In the fourth  quarter  ended  December 31, 2001 and in the first
         quarter  ended  March 31,  2002,  the  Company  recorded  restructuring
         charges of $101.5 million and $10.0 million,  respectively  relating to
         the actions described in Note 3. These restructuring  charges primarily
         included severance, facility exit costs, bandwidth contract termination
         costs,  and the write down of assets to their  expected net  realizable
         value  and have  been  primarily  included  in Loss  from  Discontinued
         Operations.

               The Company compared the carrying value of the long-lived  assets
         located  primarily  in  Ireland,  Germany  and the U.K.  to fair values
         determined  substantially through independent  appraisals and estimated
         future  discounted  cash  flows.  The  excess  carrying  value of $84.8
         million  was  recorded  as a non-cash  asset  impairment  charge in the
         fourth quarter of 2001.

               Facility  exit  costs  of $9.3  million  and  $7.9  million  were
         recorded in the fourth  quarter of 2001 and the first  quarter of 2002,
         respectively.  These facility exit costs  represented rent payments the
         Company was  contractually  obligated  to pay on its U.K.,  Ireland and
         German  facilities,  net of certain estimated sublease  recoveries.  In
         August 2002, the U.K. administrator identified a new third party tenant
         for the Slough, U.K., data center. In connection with this transaction,


                                       10
<PAGE>

         the landlord  agreed to release the  underlying  lease  guarantee  and,
         therefore,  relieve  the  Company  from this lease  liability  upon the
         payment of 0.2 million  British  pounds  (approximately  $0.3 million),
         which  payment  was  funded  by  the  Company.   This  transaction  was
         consummated  in August  2002.  Accordingly,  the  Company  reduced  the
         restructuring  reserve  at  June  30,  2002  by  $7.7  million,   which
         represented  the unpaid  rent  under this lease for the  balance of its
         term through 2015.

               Bandwidth  contract  termination  costs of $4.7  million and $0.4
         million  were  recorded  in the  fourth  quarter  of 2001 and the first
         quarter of 2002, respectively.  These costs represent early termination
         penalties incurred by the Company to cancel certain bandwidth contracts
         related to its ceased  Managed  Hosting  operations  in Ireland and the
         U.K.

               Severance of $1.3  million was recorded in the fourth  quarter of
         2001 and all  severance  payments had been made by June 30,  2002.  The
         headcount  reduction  affected  approximately  100 employees,  who were
         primarily located in Ireland.  Substantially  all employees  terminated
         under  this plan were  released  by  December  31,  2001,  with the few
         remaining employees terminated in the first quarter of 2002.

               Other costs of $1.3 million and $1.6 million were recorded in the
         fourth quarter of 2001 and the first quarter of 2002, respectively, and
         include estimated legal expenses,  costs to settle outstanding purchase
         commitments, and other shutdown related expenses.

               The following table summarizes the significant  components of the
         restructuring reserve included in Accrued Expenses at June 30, 2002 (in
         thousands):

<TABLE>

                                             Balance At                                              Balance At
                                              December                     Cash        Non-cash         June
                                              31, 2001     Additions     Payments     Adjustments    30, 2002
                                              --------     ---------     --------     -----------    --------
       <S>                                     <C>         <C>          <C>           <C>             <C>
       Facility exit costs                     $ 9,213     $  7,936     $   (249)     $ (11,265)      $  5,635
       Bandwidth contract termination            4,329          418            --          (706)         4,041
       Asset impairment                             --           --            --                           --
       Severance                                   761           --         (761)            --             --
       Other costs                               1,257        1,646         (331)        (2,244)           328
                                               -------     --------     --------      ---------       --------
       Total                                   $15,560     $ 10,000     $ (1,341)     $ (14,215)      $ 10,004
                                               =======     ========     ========      =========       ========

</TABLE>

               The non-cash  adjustments of $14.2 million  primarily  consist of
         $7.7 million  related to the Slough,  U.K.,  lease  liability  that the
         Company was released from in August 2002 (as discussed  above) and $6.9
         million  of  liabilities   related  to  the  U.K.,  German,  and  Irish
         subsidiaries that, along with the other assets and liabilities of those
         subsidiaries, have been deconsolidated into a separate line item on the
         Company's  balance  sheet  called  Net  Liabilities  of  Non-controlled
         Subsidiaries (see Note 5).

               The  Company's  management is currently  evaluating  the possible
         sale or  disposition  of the remaining  assets,  including  potentially
         subleasing the facilities  remaining under operating lease  agreements.
         All  remaining  restructuring  costs are due to be paid by December 31,
         2010, with $3.4 million due in 2002, $0.9 million in 2003, $0.9 million
         in 2004,  $0.9  million in 2005,  $0.8 million in 2006 and $3.1 million
         thereafter.

               The  Company  used  estimates  to  calculate  the   restructuring
         charges,  including  the  ability and timing of the Company to sublease
         space and the net realizable value of remaining assets. These estimates
         are subject to change based on the sale of the  remaining  assets along
         with the sublease or settlement of future rent obligations.


(5)      NET LIABILITIES OF NON-CONTROLLED SUBSIDIARIES

                As  described  in Note  3,  we  placed  our  German  subsidiary,
         Hostmark GmbH, into receivership  under German law in December 2001 and
         a receiver was appointed for this  subsidiary.  In March 2002, our U.K.
         subsidiaries, Hostmark World Limited and Hostmark U.K. Limited, filed a
         petition for Administration under the United Kingdom Insolvency Act and
         an administrator was appointed for these  subsidiaries.  In April 2002,
         our Irish subsidiary,  Worldport Ireland Limited, was given notice that
         a petition for winding up was filed and would be presented to the Irish


                                       11
<PAGE>

         High Court on behalf of Global Crossing Ireland  Limited.  The petition
         was heard by the Irish High Court on May 13, 2002 and a liquidator  was
         appointed for this  subsidiary to act on behalf of the creditors.  As a
         result of these  actions,  the Company no longer has control over these
         subsidiaries' assets.

                Under generally accepted accounting principles, consolidation is
         generally  required for investments of more than 50% of the outstanding
         voting  stock of any  investee,  except when control is not held by the
         majority owner. Under these principles,  legal  reorganization or other
         proceedings (including  Administration,  receivership,  or liquidation)
         represent  conditions  which can  preclude  consolidation  in instances
         where  control  rests with an  administrator,  receiver  or  liquidator
         rather than the majority owner. As discussed above, the U.K., Irish and
         German subsidiaries filed or were placed into the local  jurisdiction's
         applicable  proceedings.  As a result,  the Company  deconsolidated the
         subsidiaries'  financial  results and began reporting its investment in
         the subsidiaries using the cost method.

                Prior  to  the   filing  or   placement   into  the   respective
         proceedings,   under  generally  accepted   accounting   principles  of
         consolidation,  the  Company  had  recognized  losses  in excess of its
         investment  in  these  subsidiaries  of  $10.8  million.   Since  these
         subsidiaries' results  are  no  longer  consolidated  and  the  Company
         believes  that it is not  probable  that it will be  obligated  to fund
         losses related to these investments,  any adjustments  reflected in the
         subsidiaries' financial statements subsequent to the effective dates of
         these proceedings are not expected to affect the Company's consolidated
         results.

               However,  as the  liabilities  of these  subsidiaries  exceed the
         value of its assets,  there can be no  assurance  that these  creditors
         will not make claims against  Worldport  Inc. for these  obligations or
         that, through the proceedings,  Worldport Inc. would not be required to
         satisfy  any of these  obligations.  As a result,  the  Company has not
         reflected  any  adjustments  relating to the  deconsolidation  of these
         subsidiaries  other than by  presenting  the net  liability for each of
         these  subsidiaries as Net Liabilities of  Non-controlled  Subsidiaries
         and  discontinuing  the  recording  of  earnings  or losses  from these
         subsidiaries  after the effective  dates of these  proceedings.  To the
         extent that any of these  liabilities  are  extinguished  through these
         proceedings without funding from the Company, the Company may recognize
         non-cash gains in future periods as a result of the forgiveness of such
         obligations.   Conversely,  when  the  proceedings  are  completed  and
         liabilities are extinguished, the Company may recognize non-cash losses
         on the foreign currency  translation losses currently included in Other
         Comprehensive Income.

               Additionally,  prior  to our  subsidiaries  entering  into  these
         proceedings,  Worldport  Inc.  from time to time made advances to these
         subsidiaries.  Therefore,  Worldport  Inc.  is also a creditor of these
         subsidiaries in these proceedings. We are not able to determine at this
         time the priority of  Worldport  Inc.'s  claim in such  proceedings  or
         whether or not  Worldport  Inc.  will be able to recover any portion of
         these  advances.  If Worldport  Inc. is successful  in  collecting  any
         portion of these advances, we would recognize a gain and an increase in
         cash at that time.

               The Company used  estimates to calculate the Net  Liabilities  of
         Non-controlled  Subsidiaries.  These  estimates  are  subject to change
         based on the ability of the administrator,  receiver or liquidator,  as
         applicable,  to sell the  remaining  assets  and  negotiate  the  final
         liability  amounts.  Net Liabilities of Non-controlled  Subsidiaries do
         not   include   obligations   that  the   parent   company,   Worldport
         Communications,  Inc.  ("Worldport  Inc."),  has guaranteed or incurred
         directly.  Only those liabilities of these subsidiaries which Worldport
         Inc.  believes it will not be required to pay have been included in Net
         Liabilities of Non-controlled Subsidiaries.

               As discussed  in Note 4, a new third party tenant was  identified
         for the Slough,  U.K. data center by the U.K.  administrator  in August
         2002. The third party paid  approximately 5.7 million British pounds to
         the U.K.  administrator,  in  addition to the  assumption  of the lease
         liability, for the Slough data center operation and related assets. The
         5.7 million  British  pounds  proceeds  may be used to satisfy all or a
         portion of the Net Liabilities of  Non-controlled  Subsidiaries for the
         U.K.  entities,  and  accordingly,  the Company may recognize  non-cash
         gains  in  future  periods  as a  result  of  this  transaction.  Since
         Worldport  Inc.  had  agreed  to  guarantee  this  lease,  the  related
         liability  was  not  included  in  Net  Liabilities  of  Non-controlled
         Subsidiaries,  and the  assumption  of  that  liability  by the  tenant
         resulted in the recognition of a gain from  discontinued  operations in
         the current quarter.


                                       12
<PAGE>

               Excluding  the   liabilities  of  the  U.K.,   German  and  Irish
         subsidiaries  that are recorded in Net  Liabilities  of  Non-controlled
         Subsidiaries as discussed above, there are approximately  $24.5 million
         of liabilities  reflected on the Company's June 30, 2002, balance sheet
         attributable  to Worldport Inc. and the remaining  subsidiaries  not in
         Administration,  receivership  or  liquidation.  We have  assumed,  for
         purposes of calculating these liabilities,  that we will not be able to
         mitigate certain of these liabilities,  however,  Company management is
         currently seeking opportunities to further reduce its other liabilities
         related to the exited  businesses.  There can be no assurance  that the
         Company will be successful in its efforts to mitigate these liabilities
         or that additional claims will not be asserted against Worldport Inc.


(6)      CAPITAL STOCK

                In May 2002,  the Company  issued 1.0  million  shares of common
         stock pursuant to the terms of the purchase  agreement  entered into by
         the Company in April 2001 in connection with the Hostmark  acquisition.
         These  shares  represented  the balance of the  purchase  price for the
         Hostmark companies.


(7)      SEGMENT REPORTING

                SFAS No. 131,  "Disclosures  about Segments of an Enterprise and
         Related  Information",  requires  the  reporting  of  profit  and loss,
         specific revenue and expense items and assets for reportable  segments.
         It also requires the  reconciliation of total segment  revenues,  total
         segment  profit  or loss,  total  segment  assets,  and  other  amounts
         disclosed  for  segments  to the  corresponding  amounts in the general
         purpose financial statements.

                The  Company had three  reportable  segments:  Managed  Hosting,
         Professional  Services  and Carrier  Operations.  The  Managed  Hosting
         segment  derived  revenues  primarily  from the  delivery  of  services
         including Internet networking,  applications and value-added  services,
         infrastructure,  and systems support. The Professional Services segment
         derived revenues primarily from  Internet-based  applications,  systems
         development,  and content  management  support.  The Carrier Operations
         segment  derived  revenues   primarily  from  voice,   data  and  other
         telecommunication   services.   Company  management  viewed  the  three
         distinct business strategies as different business segments when making
         operating and investment decisions and for assessing performance.

                As a result of the transactions discussed in Note 3, the Company
         has exited all three of its operating segments as of March 31, 2002.


(8)      CONTINGENCIES

               Since July 14, 1999, Worldport and certain of its former officers
         have been named as  defendants  in multiple  shareholder  class  action
         lawsuits  filed in the United  States  District  Court for the Northern
         District  of  Georgia.  On or about  March  21,  2000,  a  Consolidated
         Complaint was filed which adds The Heico Companies,  LLC and Michael E.
         Heisley,  Sr. as  defendants.  The plaintiffs in these lawsuits seek to
         represent a class of  individuals  who purchased or otherwise  acquired
         the Company's  common stock from January 4, 1999 through June 28, 1999.
         Among other things,  the plaintiffs  allege that the  defendants  spoke
         positively about the Heico financing  without  disclosing the risk that
         non-compliance  with  certain  Nasdaq  rules  in  connection  with  the
         financing  might  cause  Worldport  to be  delisted  from  Nasdaq.  The
         plaintiffs  further  allege the  subsequent  disclosure  that Worldport
         might be  delisted  from  Nasdaq  adversely  affected  the value of the
         Company's  common stock. The plaintiffs  allege  violations of Sections
         10(b)  and  20(a)  of the  Securities  Exchange  Act of 1934  and  seek
         unspecified compensatory damages,  interest,  attorneys' fees and costs
         of  litigation.  A proposed  settlement  was  reached by the parties on
         terms  reflected in a Stipulation of Compromise  and  Settlement  dated
         July 20, 2001. This settlement was approved by the Court on October 19,
         2001 and has been entirely  funded by  insurance.  No appeal was taken,
         but  there  can be no  assurance  that  additional  claims  will not be
         asserted by any class member who opted out of the settlement.  However,
         the outcome of this matter is not  expected to have a material  adverse
         effect on the consolidated  financial position or results of operations
         of the Company.


                                       13
<PAGE>

               In March 2002,  Sturm Group  Inc.,  Donald L. Sturm and  Hostmark
         World  Holdings,  LLC,  filed a  complaint  against the Company and its
         wholly owned  subsidiary,  Worldport  Holding Inc. in the Circuit Court
         For the Nineteenth  Judicial Circuit,  Lake County,  Illinois -Chancery
         Division.  This  claim  relates to the April  2001  acquisition  of the
         Company's  Hostmark  subsidiaries  (the "Hostmark  Subsidiaries").  The
         Hostmark Subsidiaries were acquired by Worldport Holdings from Hostmark
         World  Holdings,  LLC  pursuant  to  a  Stock  Purchase  Agreement.  In
         connection  with  these  transactions,  the  Company  agreed to use its
         reasonable efforts to obtain the release of the plaintiffs from certain
         guarantees  that the  plaintiffs  had  entered  into on  behalf  of the
         Hostmark Subsidiaries prior to the acquisition.  The reasonable efforts
         of the Company were to include,  if required,  the Company providing to
         the landlord of the property  located in Slough,  U.K. a rent indemnity
         and keeping such rent  indemnity in place until  November 20, 2008.  If
         required in order to obtain such rent indemnity,  the Company agreed to
         deposit funds with a commercial bank (or provide such other  collateral
         or security  required by the bank).  If required by the  landlord,  the
         reasonable  efforts of the  Company  were also to include  providing  a
         one-year rent indemnity  after November 2008 until the lease expires in
         November  2015. In this action,  the  plaintiffs  originally  sought an
         injunction  ordering  the  Company  to  comply  with the terms of these
         agreements.  In August  2002,  the Company  obtained the release of the
         plaintiffs from the related guarantees.  Therefore, the Company expects
         that  this  portion  of  the  suit  will  be  dismissed.  However,  the
         plaintiffs are continuing to seek damages for the  defendants'  alleged
         breach of these agreements. The Company does not expect to pay material
         damages in this suit.

               One of the Company's subsidiaries, Hostmark World Limited, is the
         subject of court action by WSP Communications  ("WSP") in the Companies
         Court of the  Chancery  Division of the High Court in the U.K.  for the
         payment of  approximately  $0.5 million.  In addition,  WSP has alleged
         that a total of  approximately  $3  million  is owed to it by  Hostmark
         World  Limited.  WSP  alleges  that  these  amounts  are  owed for work
         completed on Internet solution centers in Germany,  Sweden and the U.K.
         This action has been stayed by the appointment of an Administrator  for
         Hostmark World.

               In June 2002, the High Court of Ireland issued a Summary  Summons
         to the parent  company,  Worldport  Inc., on behalf of Cable & Wireless
         (Ireland) Limited, who is seeking payment of 1.0 million British pounds
         and 2.3 million Euros,  together with applicable  VAT.  (Excluding VAT,
         this  represents  approximately  $3.9 million.)  These claims relate to
         unpaid  invoices  for  Internet  services  provided by Cable & Wireless
         (Ireland)  Limited  to the  Company's  subsidiary  in  Ireland  (now in
         liquidation) and termination of contract charges.  The Company believes
         that the claims,  to the extent valid, are obligations of the Company's
         Irish  subsidiary  and not of  Worldport  Inc.,  but is  continuing  to
         investigate the claims. There can be no assurance that such claims will
         not be successful  against Worldport Inc.  However,  the outcome of the
         matter  is not  expected  to  have a  material  adverse  effect  on the
         consolidated  results  of the  Company  in  excess of  amounts  already
         recorded.

                In the  fourth  quarter  of 2001,  the  SuperCentre  in  Dublin,
         Ireland operated by our Irish  subsidiary,  Worldport  Ireland Limited,
         was closed;  substantially all of the assets of our Swedish subsidiary,
         Hostmark   AB,  were  sold  and  that   subsidiary   retained   certain
         liabilities; and our German subsidiary,  Hostmark GmBh, was placed into
         preliminary   receivership  under  German  law  by  the  order  of  the
         Bankruptcy  Court in Darmstadt.  In addition,  we ceased funding of our
         U.K.  subsidiaries,  Hostmark  World and  Hostmark  U.K.,  in the first
         quarter of 2002. On March 28, 2002, an Administrator  was appointed for
         the U.K.  subsidiaries  by an order of the  Companies  Court,  Chancery
         Division  of High Court  under the United  Kingdom  Insolvency  Act. In
         April 2002, the Irish subsidiary,  Worldport Ireland Limited, was given
         notice that a petition  for winding up was filed and would be presented
         to the Irish High Court on behalf of Global Crossing  Ireland  Limited.
         The  petition  was heard by the Irish High Court on May 13,  2002 and a
         liquidator  was appointed  for this  subsidiary to act on behalf of the
         creditors.  As a result of this action, the liquidator has control over
         this subsidiary's  assets.  We believe that each of these  subsidiaries
         has potential liabilities that exceed the value of its assets.  Certain
         creditors  of these  subsidiaries  have made  claims  directly  against
         Worldport  Inc.  for  liabilities  related  to the  operation  of these
         subsidiaries  and additional  creditors  could assert  similar  claims.
         There can be no assurance  that  Worldport  Inc.  will be successful in
         defending   these  claims  and  in  limiting  its   liability  for  the
         obligations of its subsidiaries.

                In  addition  to  the  aforementioned  claims,  the  Company  is
         involved in various  lawsuits or claims arising in the normal course of
         business.  In the  opinion of  management,  none of these  lawsuits  or
         claims  will  have  a  material  adverse  effect  on  the  consolidated
         financial position or results of operations of the Company.


                                       14
<PAGE>

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

         NOTE ON "FORWARD-LOOKING" STATEMENTS
         ------------------------------------

                The  information  set  forth  in  Management's   Discussion  and
         Analysis of  Financial  Condition  and Results of  Operations  ("MD&A")
         contains  certain  "forward-looking  statements"  within the meaning of
         Section 27A of the Securities Act of 1933, as amended,  and Section 21E
         of the Securities  Exchange Act of 1934, as amended,  including,  among
         others,   (i)   expected   changes  in  the   Company's   revenues  and
         profitability,  (ii) prospective  business  opportunities and (iii) the
         Company's  strategy for  redirecting  and financing  its  business;  as
         further explained in Item 1 of the Company's Annual Report on Form 10-K
         for the year ended  December 31, 2001.  Forward-looking  statements are
         statements  other than historical  information or statements of current
         condition. Some forward-looking  statements may be identified by use of
         terms such as "believes", "anticipates",  "intends" or "expects". These
         forward-looking   statements  relate  to  the  plans,   objectives  and
         expectations of the Company for future operations. Although the Company
         believes  that its  expectations  with  respect to the  forward-looking
         statements are based upon reasonable  assumptions  within the bounds of
         its knowledge of its business and operations, in light of the risks and
         uncertainties  inherent in all future  projections,  the  inclusion  of
         forward-looking  statements  in this report should not be regarded as a
         representation  by the Company or any other person that the  objectives
         or plans of the Company will be achieved.

                During 2001, we acquired and sold numerous operating  companies,
         which   significantly   affects  the  comparability  of  the  following
         information.  In addition,  in the fourth quarter of 2001 and the first
         quarter  of  2002,  we  either  sold  or  ceased  operating  all of our
         operating  businesses.  Therefore,  our historical  results will not be
         indicative of future performance.  The Company undertakes no obligation
         to release  publicly the results of any future revisions it may make to
         forward-looking statements to reflect events or circumstances after the
         date hereof or to reflect the occurrence of unanticipated events.

                The following  discussion should be read in conjunction with the
         Condensed  Consolidated Financial Statements and Notes thereto included
         under Item 1 of this Form 10-Q. In addition,  the Financial  Statements
         and Notes thereto and related  Management's  Discussion and Analysis of
         Financial Condition and Results of Operations included in the Company's
         Annual  Report on Form 10-K for the year ended  December 31, 2001,  and
         the Company's  Current Report on Form 8-K dated June 6, 2002, should be
         read in conjunction with this Form 10-Q.


         OVERVIEW
         --------

               From  1997  to  1999,  Worldport  was a  facilities-based  global
         telecommunications    carrier   offering   voice,    data   and   other
         telecommunications  services to carriers,  Internet service  providers,
         medium and large corporations and distributors and resellers  operating
         in Europe and the United States. To finance certain  acquisitions,  the
         Company  borrowed  $120  million  in June 1998  under an  interim  loan
         facility  ("Interim Loan  Facility").  In order to meet its obligations
         under its Interim Loan Facility,  the Company sold substantially all of
         its material assets during the first quarter of 2000.

               In November  1999,  we entered into a series of  agreements  with
         Energis to sell our 85% stake in the issued and  outstanding  shares of
         EnerTel.  The sale was  consummated  on  January  14,  2000 for  $453.2
         million,  net of certain  transaction  expenses.  The Company applied a
         portion of the net proceeds  realized  from the sale to repay  existing
         debt,  including debt incurred  under the Interim Loan Facility,  trade
         credit and other liabilities, and paid U.S. federal income taxes on the
         gain of approximately $57 million.  Additionally, the Company completed
         the sale of IIC in March 2000.

               In the  second  quarter  of  2000  we  announced  a new  business
         strategy,  focused on the  delivery  of  Internet  solutions  to global
         companies doing business in the European marketplace.  Pursuant to this
         strategy,  we  invested  over $40 million to  construct a new  Internet
         solutions SuperCentre in Dublin,  Ireland,  which became operational in
         October  2000.  In September  2000,  we purchased  VIS-able,  a Swedish
         professional  services firm specializing in complex systems development
         and consulting,  for  approximately  $17.7 million.  Finally,  in April
         2001,  we acquired  hostmark  entities in the U.K.,  Sweden and Germany


                                       15
<PAGE>

         ("hostmark"),  including the assumption of approximately $22 million in
         liabilities, for 5.1 million shares of common stock. The acquisition of
         hostmark provided Worldport with Internet solution centers ("ISC's") in
         London,  Stockholm and  Frankfurt.  The hostmark  companies had minimal
         revenues when we completed the  transaction,  and only one ISC was open
         for business.

               Following the acquisition of hostmark, we initiated an aggressive
         integration  program to rapidly identify and eliminate  operational and
         system  redundancies in the two companies and to further streamline the
         combined business. Additionally, we shut down the unprofitable U.S. and
         U.K.  professional  services  operations  and took steps toward further
         cost alignment in our Swedish Professional  Services operation.  By the
         end of the third quarter of 2001, we had reduced our total workforce by
         approximately 41 percent and reduced total monthly  operating  expenses
         by over 50 percent.  Our statement of operations  for the third quarter
         of 2001 included $1.3 million of expenses related to employee severance
         costs,  termination  penalties for excess bandwidth contracts and lease
         disposition   costs  associated  with  this  integration   activity  to
         streamline the combined business.

               After the  completion  of the  Hostmark  acquisition,  we did not
         achieve the revenue growth in our Managed Hosting  business that we had
         anticipated.  We also  experienced  a decline in revenue in our Swedish
         Professional  Services  business.  The general economic  downturn,  the
         slowdown in technology  spending and the lengthening in the sales cycle
         for  Managed   Hosting   services  all  contributed  to  these  revenue
         shortfalls. In addition, our Swedish Professional Services business was
         negatively  affected  by  excess  capacity  in the  Swedish  consulting
         market, major pricing pressures,  and slower customer decisions related
         to new IT projects for those services.  The Company believed that these
         conditions,  as  well  as  the  increasing  level  of  competition  and
         consolidation in the Web hosting and Internet  infrastructure  markets,
         would  continue  to have an adverse  effect on  Worldport's  ability to
         achieve near term revenue targets and, if they  continued,  could erode
         the financial resources of the Company more rapidly than planned.

               Therefore,  the Company began a review of various alternatives to
         its  existing  business  plan.  As  part of this  review,  the  Company
         considered,  among  other  alternatives,  partnering  with a  strategic
         investor,   taking   additional   actions  to  reduce   its   operating
         expenditures,  closing one or more facilities or selling all or part of
         the  Company's  assets or  operations.  At the  beginning  of the third
         quarter of 2001, the Company engaged  Schroder  Salomon Smith Barney to
         assist the  Company in its  efforts to  explore  and  evaluate  various
         strategic and financial  alternatives.  Following the  exploration  and
         review  of  the  strategic  alternatives,  we  determined  that  it was
         necessary to dramatically  reduce the rate at which our operations were
         using  cash  and  to  minimize   our  exposure  in  markets  that  were
         experiencing  significantly  slower than expected  market growth.  As a
         result,  the  Company  made a decision  to take  further  restructuring
         actions and to divest itself of certain  assets.  Accordingly,  we took
         the following actions in the fourth quarter of 2001:

               0    In November 2001, we announced that our Irish subsidiary was
                    ceasing  operations  at its  Dublin,  Ireland  facility.  An
                    orderly  shutdown of the Ireland  operations  was commenced,
                    and was  substantially  completed by December  31, 2001.  In
                    April 2002,  Worldport Ireland Limited was given notice that
                    a petition  for winding up was filed and would be  presented
                    to the Irish High Court on behalf of Global Crossing Ireland
                    Limited.  The  petition was heard by the Irish High Court on
                    May  13,  2002  and a  liquidator  was  appointed  for  this
                    subsidiary to act on behalf of the creditors. As a result of
                    this   action,   the   liquidator   has  control  over  this
                    subsidiary's assets.

               0    In December 2001, we sold the assets and certain liabilities
                    of our Managed Services business in Stockholm, Sweden, to OM
                    Technology AB for $0.9 million, subject to the resolution of
                    a final working capital adjustment.  The parties agreed to a
                    final  sales  price of $0.8  million in July  2002.  OM also
                    agreed to assume  the  ownership  of  Worldport's  Stockholm
                    Internet  solution center and the operations at that center,
                    and all customers' contracts.

               0    In  December  2001,  we also sold our  Swedish  Professional
                    Services business (formerly known as VIS-able  International
                    AB)  to  its  employees  in a  management  buyout  for  $0.9
                    million, the majority of which is in the form of a note. Due
                    to uncertainties related to the collectibility of this note,
                    it has been fully reserved for.


                                       16

<PAGE>

               0    In December 2001, we placed our German subsidiary,  Hostmark
                    GmbH,  into  receivership  under Germany law. As a result of
                    this action, the receiver has control over this subsidiary's
                    assets.

               0    We also  took  steps to  reduce  corporate  expenses  at our
                    Buffalo Grove,  Illinois,  headquarters  in connection  with
                    these transactions.

               In  addition,  we  completed  the sale of our  remaining  carrier
         business, Telenational Communications, Inc. ("TNC") in October 2001 for
         $0.4 million.

              After completing these fourth quarter activities,  we continued to
         operate our Managed  Hosting center in the U.K.,  where we believed the
         greatest opportunities for the European Managed Hosting market existed.
         However,  during the first quarter of 2002,  the U.K.  Managed  Hosting
         market continued to develop at a much slower rate than anticipated.  In
         addition,   increasing  industry  consolidations  and  the  closure  or
         bankruptcy of competitors in the industry led us to believe that market
         conditions  would not improve in the near  future,  bringing  increased
         risk to the financial requirements for this business.

               Therefore,  in March 2002, the Company's  board of directors made
         the decision to make no further  investment in its U.K. Managed Hosting
         operation.  On March 26, 2002,  our U.K.  subsidiaries,  Hostmark World
         Limited and Hostmark U.K. Limited,  filed a petition for Administration
         under the United Kingdom Insolvency Act. An administrator was appointed
         for these subsidiaries to either reorganize,  find new investors,  sell
         or liquidate the U.K. businesses for the benefit of its creditors. As a
         result  of this  action,  the  administrator  has  control  over  these
         subsidiaries' assets.

               As a result of the  transactions  described  above,  we no longer
         have active business operations. Accordingly, the historical results of
         operations  for prior periods are not  comparable to the current period
         and are not representative of what future results will be.

                The accompanying  financial statements have not been reviewed by
         an  independent  public  accountant  in  accordance  with  Statement of
         Auditing  Standards  No. 71, as required by Rule 10-01(d) of Regulation
         S-X, since the Company's historical independent accounting firm, Arthur
         Andersen LLP, is no longer able to provide these services.  The Company
         is  currently in the process of engaging a new  independent  accounting
         firm to complete such a review as soon as practical. Upon completion of
         a SAS 71 review,  the Company intends to file an Amendment to this Form
         10-Q.


         RESULTS OF OPERATIONS
         ---------------------

                As  described  above,  the  Company  has exited all three of its
         operating segments as of March 31, 2002. Accordingly,  results of these
         operations have been classified as discontinued, and prior periods have
         been restated in order to conform to the new presentation.

                There  were no  revenues  or cost of  services  from  continuing
         operations for the three months and six months ending June 30, 2002 and
         2001.

                Selling,  general and administrative ("SG&A") expenses were $1.0
         million and $1.5 million for the quarters ended June 30, 2002 and 2001,
         respectively  and were $1.9 million and $3.4 million for the six months
         ended June 30, 2002 and 2001,  respectively.  SG&A  expenses  primarily
         consisted of  corporate  salaries and  benefits,  professional  service
         fees,  corporate  governance  expenses and facility costs. The decrease
         from the prior year  expenses is  primarily  attributable  to the steps
         taken at the end of 2001 to reduce  corporate  expenses  at our Buffalo
         Grove,  Illinois,  headquarters  in  connection  with the  transactions
         described above.

                Depreciation and amortization  expense represented  depreciation
         on the corporate office and related computer  hardware and software and
         was less than $0.1  million for the three and six months ended June 30,
         2002 and 2001.


                                       17
<PAGE>


                Interest income, which was earned on the Company's cash and cash
         equivalents,  was $0.6 million and $1.3 million for the quarters  ended
         June 30,  2002 and 2001,  respectively,  and was $0.9  million and $3.2
         million for the six months ended June 30, 2002 and 2001,  respectively.
         The Company's interest expense of $0.1 million in the current and prior
         year primarily related to equipment  financed under capital leases. The
         Company  incurred a $0.3 million loss in the second  quarter of 2001 on
         the sale of a Virginia residence  originally  purchased in October 2000
         in  connection  with an  employment  arrangement  with a  former  chief
         executive officer of the Company.

                Net loss from  continuing  operations  was $0.4 million and $0.5
         million for the quarters ended June 30, 2002 and 2001, respectively and
         was $1.2  million and $0.7  million  for the six months  ended June 30,
         2002 and 2001, respectively.

                The  Company  had income from  discontinued  operations  of $7.0
         million in the second  quarter of 2002.  In the first  quarter of 2002,
         the Company  recorded a liability  of $7.8  million for  facility  exit
         costs as part of its  $10.0  million  restructuring  charge on the U.K.
         business.  These facility exit costs related primarily to the Company's
         agreement to guarantee  the  liability  of its U.K.  subsidiary  on the
         Slough,  U.K., data center lease expiring in 2015.  However,  in August
         2002,  the U.K.  administrator  identified a new third party tenant for
         the Slough  data  center.  In  connection  with this  transaction,  the
         landlord  agreed  to  release  the  underlying   lease  guarantee  and,
         therefore,  relieve  the  Company  from this lease  liability  upon the
         payment of 0.2 million  British  pounds  (approximately  $0.3 million),
         which  payment  was  funded  by  the  Company.   This  transaction  was
         consummated  in August  2002.  Accordingly,  the  Company  reduced  its
         liabilities  by, and recorded income from  discontinued  operations of,
         $7.7 million in the second quarter of 2002. This $7.7 million of income
         was partially  offset by current  quarter  losses due to adjustments to
         previously estimated accruals and asset impairments on items related to
         the discontinued businesses.

                The  Company  had a loss from  discontinued  operations  of $0.4
         million  for the  six-month  period  ending  June 30,  2002.  This $0.4
         million loss  primarily  consisted of the $10.0  million  restructuring
         change  recorded in the first quarter of 2002 on the U.K.  business and
         approximately  $3.0 million of operating losses from the U.K.  business
         prior to it being discontinued, partially offset by the $7.0 million of
         income  recorded in the second  quarter which is described  above and a
         $5.6 million tax benefit that was  recognized  in the first  quarter of
         2002.  The  first  quarter  tax  benefit  was the  result of a new U.S.
         federal  tax law that was  enacted in March  2002,  which  allowed  the
         Company to  carryback a $5.6  million AMT tax credit from 2001  against
         taxable income in 2000.

              The losses from  discontinued  operations  for the quarter and six
         months  ended  June  30,  2001 of  $15.8  million  and  $24.4  million,
         respectively,   primarily  represent  operating  losses  on  the  U.K.,
         Ireland, German and Sweden entities.

                As a result,  the Company had net income of $6.5  million in the
         second  quarter of 2002,  as compared to net loss of $16.3  million for
         the second  quarter of 2001. The Company had a net loss of $1.6 million
         for the six months  ended June 30,  2002,  as compared to a net loss of
         $25.1 million for the same period in 2001.


         LIQUIDITY AND CAPITAL RESOURCES
         -------------------------------

              Operations used $1.3 million and $2.5 million during the three and
         six months  ending  June 30,  2002,  respectively,  as compared to $1.9
         million and $2.6 million during the three and six months ended June 30,
         2001,  respectively.  These  expenditures  were  primarily to salaries,
         legal  fees  and  other  expenses  related  to  the  Company's  minimal
         corporate   operations   remaining   after   the  shut  down  and  sale
         transactions described above.

                The Company had no cash flows from investing  activities  during
         the  first  three and six  months  ended  June 30,  2002.  The  Company
         generated  approximately $1.3 million in cash in the second quarter and
         first  six  months  of 2001,  primarily  from  the  sale of a  Virginia
         residence  originally  purchased in October 2000 in connection  with an
         employment  arrangement  with a former chief  executive  officer of the
         Company.

                                       18
<PAGE>

              Financing activities used $1.2 million and $0.4 million during the
         six months ended June 30, 2002 and 2001,  respectively,  for  principal
         payments on capital leases.

              Net cash flows from discontinued operations were $55.9 million and
         $51.8  million  for the  three  and six  months  ended  June 30,  2002,
         respectively,  and were  primarily  attributable  to the receipt of our
         $57.6 million  income tax refund in April 2002.  Receipt of this refund
         does not indicate  that the Internal  Revenue  Service  agrees with the
         positions taken by the Company in its tax returns.  The refund is still
         subject to review by the Internal Revenue Service of the Company's 2001
         tax return.  The Internal  Revenue Service could require the Company to
         return all or a portion of this refund.


               We had  approximately  $108 million in cash and cash  equivalents
         and $10.8  million in marketable  securities as of August 8, 2002.  Our
         cash equivalents  currently  consist of highly rated money market funds
         and government securities.

               Our June 30, 2002  consolidated  balance  sheet  reflected  total
         liabilities of approximately $35.3 million. Included in this amount are
         $10.8 million of Net Liabilities of Non-Controlled Subsidiaries for the
         U.K.,  German, and Irish operations (see Note 5). We believe the parent
         company, Worldport Communications, Inc. ("Worldport Inc."), will not be
         required to pay these liabilities.  However,  there can be no assurance
         that these  creditors will not make claims  against  Worldport Inc. for
         these  obligations.  The Company used estimates to calculate  these net
         liabilities. These estimates are subject to change based on the ability
         of the administrator,  receiver or liquidator,  as applicable,  to sell
         the remaining assets and negotiate the final liability amounts.

               In  August   2002,   an   agreement   was  reached   between  the
         Administrator for Hostmark U.K. Limited and a third party, in which the
         third party paid  approximately 5.7 million British pounds, in addition
         to the assumption of the lease  liability,  for the Slough,  U.K., data
         center and related assets.  The 5.7 million British pounds proceeds may
         be  used  to  satisfy  all or a  portion  of  the  Net  Liabilities  of
         Non-controlled Subsidiaries for the U.K. entities, and accordingly, the
         Company may recognize  non-cash  gains in future periods as a result of
         this transaction. Additionally, prior to our subsidiaries entering into
         receivership and administrative  proceedings,  Worldport Inc. from time
         to time made advances to these  subsidiaries.  Therefore Worldport Inc.
         is also a creditor of these subsidiaries in these  proceedings.  We are
         not able to determine  at this time the  priority of  Worldport  Inc.'s
         claim in such proceedings or whether or not Worldport Inc. will be able
         to  recover  any  portion  of these  advances.  If  Worldport  Inc.  is
         successful  in  collecting  any  portion  of these  advances,  we would
         recognize a gain and an increase of cash at that time.

               Excluding  the   liabilities  of  the  U.K.,   German  and  Irish
         subsidiaries  discussed above, there are approximately $24.5 million of
         liabilities  reflected on the  Company's  June 30, 2002,  balance sheet
         attributable  to Worldport Inc. and the remaining  subsidiaries  not in
         Administration, receivership or liquidation, which include:

               0    $5.3 million of future rent  payments and early  termination
                    penalties,  for which Worldport Inc. is directly liable,  on
                    the Dublin data center lease expiring in 2010,

               0    $5.4 million of  obligations  under  capital  leases,  which
                    expire in 2004, and

               0    $3.9 million accrued for the potential  exposure  related to
                    the litigation by Cable & Wireless described below.

               We have assumed,  for purposes of calculating these  liabilities,
         that  we  will  not be able to  mitigate  these  liabilities,  however,
         Company management is currently seeking opportunities to further reduce
         its other liabilities related to the exited businesses. There can be no
         assurance  that  the  Company  will be  successful  in its  efforts  to
         mitigate  these  liabilities  or that  additional  claims  will  not be
         asserted against Worldport Inc.

               In March 2002,  Sturm Group  Inc.,  Donald L. Sturm and  Hostmark
         World  Holdings,  LLC,  filed a  complaint  against the Company and its
         wholly owned  subsidiary,  Worldport  Holding Inc. in the Circuit Court
         For the Nineteenth  Judicial Circuit,  Lake County,  Illinois -Chancery
         Division.  This  claim  relates to the April  2001  acquisition  of the
         Company's  Hostmark  subsidiaries  (the "Hostmark  Subsidiaries").  The


                                       19
<PAGE>

         Hostmark Subsidiaries were acquired by Worldport Holdings from Hostmark
         World  Holdings,  LLC  pursuant  to  a  Stock  Purchase  Agreement.  In
         connection  with  these  transactions,  the  Company  agreed to use its
         reasonable efforts to obtain the release of the plaintiffs from certain
         guarantees  that the  plaintiffs  had  entered  into on  behalf  of the
         Hostmark Subsidiaries prior to the acquisition.  The reasonable efforts
         of the Company were to include,  if required,  the Company providing to
         the landlord of the property located in Slough,  U.K., a rent indemnity
         and keeping such rent  indemnity in place until  November 20, 2008.  If
         required in order to obtain such rent indemnity,  the Company agreed to
         deposit funds with a commercial bank (or provide such other  collateral
         or security  required by the bank).  If required by the  landlord,  the
         reasonable  efforts of the  Company  were also to include  providing  a
         one-year rent indemnity  after November 2008 until the lease expires in
         November  2015. In this action,  the  plaintiffs  originally  sought an
         injunction  ordering  the  Company  to  comply  with the terms of these
         agreements.  In August  2002,  the Company  obtained the release of the
         plaintiffs from the related guarantees.  Therefore, the Company expects
         that  this  portion  of  the  suit  will  be  dismissed.  However,  the
         plaintiffs are continuing to seek damages for the  defendants'  alleged
         breach of these agreements. The Company does not expect to pay material
         damages in this suit.

                In June 2002, the High Court of Ireland issued a Summary Summons
         to the parent  company,  Worldport  Inc., on behalf of Cable & Wireless
         (Ireland) Limited, who is seeking payment of 1.0 million British pounds
         and 2.3 million Euros,  together with applicable  VAT.  (Excluding VAT,
         this  represents  approximately  $3.9 million.)  These claims relate to
         unpaid  invoices  for  Internet  services  provided by Cable & Wireless
         (Ireland)  Limited  to the  Company's  subsidiary  in  Ireland  (now in
         liquidation) and termination of contract charges.  The Company believes
         that the claims,  to the extent valid, are obligations of the Company's
         Irish  subsidiary  and not of  Worldport  Inc.,  but is  continuing  to
         investigate the claims. There can be no assurance that such claims will
         not be successful  against Worldport Inc.  However,  the outcome of the
         matter  is not  expected  to  have a  material  adverse  effect  on the
         consolidated  results  of the  Company  in  excess of  amounts  already
         recorded.

               After  completing  the  activities  related to the exiting of our
         Irish, Swedish, German and U.K. subsidiaries and satisfying the related
         liabilities,  we expect to continue to have significant cash resources.
         We are currently  operating with a minimal  headquarters staff while we
         complete the  activities  related to exiting our prior  businesses  and
         determine  how  to  use  these  cash  resources.  We  will  have  broad
         discretion in determining how to use these cash  resources,  and we may
         choose to make an acquisition or to liquidate the Company.

               Since  ceasing  our  business  operations,  we  have  sought  and
         reviewed acquisition  opportunities.  However, we have not yet actively
         pursued any of these opportunities since we did not believe that any of
         them were in the best interests of our  shareholders.  Although we will
         continue to consider potential acquisition  opportunities,  we have not
         identified a specific  industry on which we intend to focus and have no
         present plans,  proposals,  arrangements or understandings with respect
         to the acquisition of any specific business.

               We are also continuing to analyze a potential  liquidation of the
         Company  and  its  effects  on the  Company's  stockholders.  Upon  any
         liquidation,  dissolution or winding up of the Company,  the holders of
         our   outstanding   preferred   stock  would  be  entitled  to  receive
         approximately  $68 million prior to any  distribution to the holders of
         our common stock.



         NEW ACCOUNTING PRONOUNCEMENTS
         -----------------------------

               In June 2001, the Financial  Accounting  Standards Board ("FASB")
         issued Statement of Financial  Accounting  Standards  ("SFAS") No. 141,
         "Business   Combinations,"  and  SFAS  No.  142,  "Goodwill  and  Other
         Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of
         interests  method of  accounting  for business  combinations  initiated
         after June 30, 2001. Under SFAS No. 142, goodwill  amortization  ceases
         when the new  standard  is adopted.  In the three and six months  ended
         June 30,  2001,  the Company  recorded  goodwill  amortization  of $0.8
         million and $1.7 million,  respectively.  No goodwill  amortization was
         recorded  in 2002.  SFAS No.  142 also  requires  an  initial  goodwill
         impairment  assessment in the year of adoption and an  impairment  test
         both on an annual basis and upon the  occurrence of any event or change
         in  circumstances  that would reduce the fair value of a reporting unit
         below its  carrying  value.  SFAS No. 142 also  requires the Company to


                                       20
<PAGE>

         complete a transitional  goodwill  impairment  test six months from the
         date of adoption. The Company adopted this standard at the beginning of
         its 2002 fiscal year. As the Company had no goodwill or  intangibles at
         December 31, 2001,  the adoption of this statement had no impact on the
         Company's consolidated financial statements.

               In August 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived  Assets." The statement provides a
         single  accounting  model for long-lived  assets to be disposed of. The
         Company  adopted SFAS No. 144 at the beginning of its 2002 fiscal year.
         The  adoption  of  this  statement  had  no  impact  on  the  Company's
         consolidated financial statements.

               In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal  Activities."  The statement  requires
         that a  liability  for a cost  associated  with  an  exit  or  disposal
         activity be recognized when the liability is incurred as opposed to the
         date of an entity's  commitment to an exit plan. The Company will adopt
         SFAS  No.  146 for any  exit or  disposal  activities  initiated  after
         December 31, 2002.






ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

               The majority of the Company's  exited  businesses were in Europe,
         and many of the remaining  assets and  liabilities of those  businesses
         are denominated in local currencies.  Due to the volatility of currency
         exchange  rates,  among other factors,  we cannot predict the effect of
         exchange rate  fluctuations on the ultimate  settlement of these assets
         and liabilities.  The Company has used derivative  instruments to hedge
         its  foreign  currency  exposure  only on a limited  basis,  and had no
         foreign  currency hedge contracts  outstanding at June 30, 2002.  Other
         foreign  exchange gains and losses  recorded in income were minimal for
         the three and six months ended June 30, 2002 and 2001, respectively.



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                           PART II. OTHER INFORMATION



ITEM 1.  LEGAL PROCEEDINGS


                Since  July  14,  1999,  Worldport  and  certain  of its  former
         officers have been named as defendants  in multiple  shareholder  class
         action  lawsuits  filed in the  United  States  District  Court for the
         Northern   District  of  Georgia.   On  or  about  March  21,  2000,  a
         Consolidated  Complaint was filed which adds The Heico  Companies,  LLC
         and Michael E.  Heisley,  Sr. as  defendants.  The  plaintiffs in these
         lawsuits  seek to  represent a class of  individuals  who  purchased or
         otherwise  acquired  the  Company's  common  stock from January 4, 1999
         through June 28, 1999. Among other things,  the plaintiffs  allege that
         the  defendants  spoke  positively  about the Heico  financing  without
         disclosing  the risk that  non-compliance  with certain Nasdaq rules in
         connection with the financing might cause Worldport to be delisted from
         Nasdaq.  The plaintiffs  further allege the subsequent  disclosure that
         Worldport might be delisted from Nasdaq adversely affected the value of
         the  Company's  common  stock.  The  plaintiffs  allege  violations  of
         Sections  10(b) and 20(a) of the  Securities  Exchange  Act of 1934 and
         seek unspecified  compensatory damages,  interest,  attorneys' fees and
         costs of litigation.  A proposed  settlement was reached by the parties
         on terms reflected in a Stipulation of Compromise and Settlement  dated
         July 20, 2001. This settlement was approved by the Court on October 19,
         2001 and has been entirely  funded by  insurance.  No appeal was taken,
         but  there  can be no  assurance  that  additional  claims  will not be
         asserted by any class member who opted out of the settlement.  However,
         the outcome of this matter is not  expected to have a material  adverse
         effect on the consolidated  financial position or results of operations
         of the Company.


               In March 2002,  Sturm Group  Inc.,  Donald L. Sturm and  Hostmark
         World  Holdings,  LLC,  filed a  complaint  against the Company and its
         wholly owned  subsidiary,  Worldport  Holding Inc. in the Circuit Court
         For the Nineteenth  Judicial Circuit,  Lake County,  Illinois -Chancery
         Division.  This  claim  relates to the April  2001  acquisition  of the
         Company's  Hostmark  subsidiaries  (the "Hostmark  Subsidiaries").  The
         Hostmark Subsidiaries were acquired by Worldport Holdings from Hostmark
         World  Holdings,  LLC  pursuant  to  a  Stock  Purchase  Agreement.  In
         connection  with  these  transactions,  the  Company  agreed to use its
         reasonable efforts to obtain the release of the plaintiffs from certain
         guarantees  that the  plaintiffs  had  entered  into on  behalf  of the
         Hostmark Subsidiaries prior to the acquisition.  The reasonable efforts
         of the Company were to include,  if required,  the Company providing to
         the landlord of the property located in Slough,  U.K., a rent indemnity
         and keeping such rent  indemnity in place until  November 20, 2008.  If
         required in order to obtain such rent indemnity,  the Company agreed to
         deposit funds with a commercial bank (or provide such other  collateral
         or security  required by the bank).  If required by the  landlord,  the
         reasonable  efforts of the  Company  were also to include  providing  a
         one-year rent indemnity  after November 2008 until the lease expires in
         November  2015. In this action,  the  plaintiffs  originally  sought an
         injunction  ordering  the  Company  to  comply  with the terms of these
         agreements.  In August  2002,  the Company  obtained the release of the
         plaintiffs from the related guarantees.  Therefore, the Company expects
         that  this  portion  of  the  suit  will  be  dismissed.  However,  the
         plaintiffs are continuing to seek damages for the  defendants'  alleged
         breach of these agreements. The Company does not expect to pay material
         damages in this suit.

               One of the Company's subsidiaries, Hostmark World Limited, is the
         subject of court action by WSP Communications  ("WSP") in the Companies
         Court of the  Chancery  Division of the High Court in the U.K.  for the
         payment of  approximately  $0.5 million.  In addition,  WSP has alleged
         that a total of  approximately  $3  million  is owed to it by  Hostmark
         World  Limited.  WSP  alleges  that  these  amounts  are  owed for work
         completed on Internet solution centers in Germany,  Sweden and the U.K.
         This action has been stayed by the appointment of an Administrator  for
         Hostmark World.

               In June 2002, the High Court of Ireland issued a Summary  Summons
         to the  parent  company,  Worldport  Communications,  Inc.  ("Worldport
         Inc."), on behalf of Cable & Wireless (Ireland) Limited, who is seeking
         payment of 1.0 million  British pounds and 2.3 million Euros,  together
         with applicable VAT. (Excluding VAT, this represents approximately $3.9
         million.) These claims relate to unpaid invoices for Internet  services
         provided  by  Cable  &  Wireless  (Ireland)  Limited  to the  Company's
         subsidiary in Ireland (now in liquidation)  and termination of contract
         charges. The Company believes that the claims, to the extent valid, are
         obligations  of the  Company's  Irish  subsidiary  and not of Worldport


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<PAGE>

         Inc.,  but is continuing  to  investigate  the claims.  There can be no
         assurance  that such claims will not be  successful  against  Worldport
         Inc.  However,  the  outcome  of the matter is not  expected  to have a
         material adverse effect on the  consolidated  results of the Company in
         excess of amounts already recorded.


               In the fourth  quarter of 2001,  the  Managed  Hosting  center in
         Dublin,  Ireland operated by our Irish  subsidiary,  Worldport  Ireland
         Limited,  was  closed;  substantially  all of the assets of our Swedish
         subsidiary, Hostmark AB, were sold and that subsidiary retained certain
         liabilities; and our German subsidiary,  Hostmark GmBh, was placed into
         preliminary   receivership  under  German  law  by  the  order  of  the
         Bankruptcy  Court in Darmstadt.  In addition,  we ceased funding of our
         U.K.  subsidiaries,  Hostmark  World and  Hostmark  U.K.,  in the first
         quarter of 2002. On March 28, 2002, an Administrator  was appointed for
         the U.K.  subsidiaries  by an order of the  Companies  Court,  Chancery
         Division  of High Court  under the United  Kingdom  Insolvency  Act. In
         April 2002, the Irish subsidiary,  Worldport Ireland Limited, was given
         notice that a petition  for winding up was filed and would be presented
         to the Irish High Court on behalf of Global Crossing  Ireland  Limited.
         The  petition  was heard by the Irish High Court on May 13,  2002 and a
         liquidator  was appointed  for this  subsidiary to act on behalf of the
         credits.  As a result of this action,  the  liquidator has control over
         this subsidiary's  assets.  We believe that each of these  subsidiaries
         has potential liabilities that exceed the value of its assets.  Certain
         creditors of these  subsidiaries  have made claims directly against the
         parent company, Worldport Communications,  Inc. ("Worldport Inc."), for
         liabilities   related  to  the  operation  of  these  subsidiaries  and
         additional  creditors  could  assert  similar  claims.  There can be no
         assurance  that  Worldport  Inc. will be successful in defending  these
         claims  and in  limiting  its  liability  for  the  obligations  of its
         subsidiaries.  See  Management's  Discussion  and Analysis of Financial
         Condition and Results of Operation - Liquidity  and Capital  Resources"
         for a more detailed  discussion of the liabilities of our  subsidiaries
         and how we have  accounted for those  liabilities  on our  consolidated
         financial statements.

               In addition to the aforementioned claims, the Company is involved
         in various lawsuits or claims arising in the normal course of business.
         In the  opinion of  management,  none of these  lawsuits or claims will
         have a material adverse effect on the consolidated  financial  position
         or results of operations of the Company.




ITEM 2.  CHANGES IN SECURITIES

                During the quarter  ended June 30, 2002,  one million  shares of
         the  Company's  common  stock were issued  pursuant to the terms of the
         purchase  agreement  entered  into  by the  Company  in  April  2001 in
         connection with the Hostmark acquisition.  The issuance of these shares
         was exempt from the registration  under Section 4 (2) of the Securities
         Act of 1933, as amended,  as a  transaction  by an issuer not involving
         any public offering.



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  EXHIBITS

                3.2     Bylaws of the Company, as amended


         (b)  REPORTS ON FORM 8-K


               The  Company  filed a Current  Report on Form 8-K on May 8, 2002.
         The Form 8-K was dated May 7, 2002, and reported information under Item
         5  related  to the  Company's  announcement  that  i)  its  subsidiary,
         Worldport  Ireland  Limited,  had been given notice that a petition for
         winding up had been filed, ii) the Company had received a $57.6 million
         tax refund, and iii) the Company had recently issued one million shares

                                       23
<PAGE>

         of  common  stock  pursuant  to the terms of the  Hostmark  acquisition
         purchase agreement.

               The Company  filed a Current  Report on Form 8-K on June 7, 2002.
         The Form 8-K was dated June 6, 2002,  and  reported  information  under
         Item 5 and  restated  financial  statements  under  Item  7 to  reflect
         discontinued  operations as a result of the events that occurred in the
         fourth  quarter of 2001 and the first quarter of 2002,  after which the
         Company no longer had any active business operations.




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<PAGE>





                                    SIGNATURE


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



                         WORLDPORT COMMUNICATIONS, INC.


         Date:    August 14, 2002                   By:  /s/ Kathleen A. Cote
                                                         -----------------------
                                                         Kathleen A. Cote
                                                         Chief Executive Officer

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