<PAGE>

                       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, 1999

                                       OR

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


                       Commission File Number: 333-76779
                            PAC-WEST TELECOMM, INC.
             (Exact name of registrant as specified in its charter)


        California                          68-0383568
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


4210 Coronado Avenue                        95204
Stockton, California                        (Zip Code)
(Address of principal executive offices)

                                 (209) 926-3300
              (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 [___] No [X]

As of August 31, 1999, the Company had an aggregate of 12,562,470 shares of
Common Stock issued and outstanding.
<PAGE>

                            PAC-WEST TELECOMM, INC.
                                Table of Contents



<TABLE>
<CAPTION>


                                                                                    PAGE
                                                                                    ----
PART I                      FINANCIAL INFORMATION
<S>       <C>                                                                       <C>

  Item 1. Financial Statements
          Condensed Balance Sheets (Unaudited) - June 30, 1999
            and December 31, 1998................................................     1
          Condensed Statements of Income (Unaudited) - Three month periods ended
            June 30, 1999 and 1998 and Six month periods ended
            June 30, 1999 and 1998...............................................     2
          Condensed Statements of Cash Flows (Unaudited) - six month periods
            ended June  30, 1999 and 1998........................................     3
          Notes to Unaudited Condensed Financial Statements......................     4

  Item 2. Management's Discussion and Analysis of Financial Condition
            and Results of Operations............................................    10

  Item 3. Quantitative and Qualitative Disclosures About Market Risks............    19

PART II                       OTHER INFORMATION

  Item 1. Legal Proceedings.....................................................     20
  Item 2. Changes in Securities and Use of Proceeds.............................     20
  Item 6. Reports on Form 8-K...................................................     20

SIGNATURES......................................................................     21

</TABLE>
<PAGE>

                                    PART I
                             FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                            PAC-WEST TELECOMM, INC.

                     Condensed Balance Sheets (Unaudited)

                                    ASSETS

<TABLE>
<CAPTION>
                                                                                                  June 30,       December 31,
                                                                                                    1999             1998
                                                                                                ------------     ------------
<S>                                                                                             <C>              <C>
Current Assets:
    Cash & cash equivalents                                                                     $ 38,886,000     $ 15,236,000
    Restricted cash                                                                               20,066,000              -
    Trade accounts receivable, net of allowances for doubtful
       accounts of $463,000 at June 30, 1999 and
       $400,000 at December 31, 1998, respectively                                                 5,107,000        4,623,000
    Accounts receivable from related parties                                                          68,000           64,000
    Income taxes receivable                                                                          374,000        1,971,000
    Inventories                                                                                      629,000          447,000
    Prepaid expenses and other current assets                                                        862,000          861,000
    Deferred financing costs, net                                                                    600,000          457,000
    Deferred tax assets                                                                            1,640,000          151,000
                                                                                                ------------     ------------
            Total current assets                                                                  68,232,000       23,810,000

Equipment, Vehicles and Leasehold Improvements, net                                               76,010,000       57,294,000

Deferred Financing Costs, Net                                                                      5,692,000        1,195,000

Other Assets                                                                                         274,000          194,000
                                                                                                ------------     ------------
            Total assets                                                                        $150,208,000     $ 82,493,000
                                                                                                ============     ============

                                     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
     Current portion of notes payable                                                           $    114,000     $    132,000
     Accounts payable                                                                             11,936,000        5,147,000
     Accrued payroll and related expenses                                                            915,000          846,000
     Accrued interest on Senior Notes                                                              8,547,000              -
     Other accrued liabilities                                                                     2,077,000        2,153,000
                                                                                                ------------     ------------
            Total current liabilities                                                             23,589,000        8,278,000

Long-Term Debt and Other Long-Term Obligations                                                   150,062,000      100,116,000

Deferred Income Taxes                                                                              3,542,000        1,888,000
                                                                                                ------------     ------------
            Total liabilities                                                                    177,193,000      110,282,000

 Commitments and Contingencies

 Convertible Redeemable Preferred Stock, $0.001 par value; 1,750,000 shares
     authorized; 1,250,000 issued and outstanding (preference in liquidation
     of $45,000,000, plus accrued cumulative dividends of $ 3,649,000 at June 30, 1999
     and $1,324,000 at December 31, 1998)                                                         48,649,000       46,324,000
                                                                                                ------------     ------------

Stockholders' Equity (Deficit):
     Common stock, $0.001 par value, 15,000,000 shares authorized
        and 12,562,470 shares issued and outstanding                                                  13,000           13,000
     Additional paid-in capital                                                                    6,585,000        8,910,000
     Notes receivable from stockholders                                                             (233,000)        (233,000)
     Retained earnings (deficit)                                                                 (81,999,000)     (82,803,000)
                                                                                                ------------     ------------
            Total stockholders' equity (deficit)                                                 (75,634,000)     (74,113,000)
                                                                                                ------------     ------------
            Total liabilities and stockholders' equity (deficit)                                $150,208,000     $ 82,493,000
                                                                                                ============     ============
</TABLE>

              See notes to these condensed financial statements.

                                       1
<PAGE>

                            PAC-WEST TELECOMM, INC.

                  Condensed Statements of Income (Unaudited)

<TABLE>
<CAPTION>
                                                          Three Month Period Ended             Six Month Period Ended
                                                       ------------------------------     --------------------------------
                                                       June 30, 1999    June 30, 1998     June 30, 1999      June 30, 1998
                                                       -------------    -------------     -------------      -------------
<S>                                                    <C>              <C>               <C>                <C>
Revenues                                                $15,848,000       $9,680,000       $30,264,000        $19,932,000

Costs and Expenses:
   Operating                                              4,691,000        4,060,000         8,753,000          7,791,000
   Selling, general and administrative                    5,260,000        2,217,000         9,563,000          4,219,000
   Depreciation and amortization                          1,843,000          856,000         3,292,000          1,701,000
                                                        -----------       ----------       -----------        -----------

           Total costs and expenses                      11,794,000        7,133,000        21,608,000         13,711,000
                                                        -----------       ----------       -----------        -----------

           Income from operations                         4,054,000        2,547,000         8,656,000          6,221,000

Other Expense (Income):
   Interest expense                                       4,452,000          409,000         8,502,000            786,000
   Interest income                                         (658,000)         (80,000)       (1,185,000)          (128,000)
   Cost of merger with PWT Acquisition Corp.
        and recapitalization                                    -             58,000               -               81,000
                                                        -----------       ----------       -----------        -----------
           Total other expense, net                       3,794,000          387,000         7,317,000            739,000
                                                        -----------       ----------       -----------        -----------

           Income before provision for income taxes         260,000        2,160,000         1,339,000          5,482,000

Provision for Income Taxes                                  103,000          864,000           535,000          2,193,000
                                                        -----------       ----------       -----------        -----------

           Net income                                   $   157,000       $1,296,000       $   804,000        $ 3,289,000
                                                        ===========       ==========       ===========        ===========

Accrued preferred stock dividends                       $(1,183,000)             -         $(2,325,000)               -
                                                        -----------       ----------       -----------        -----------
Net income (loss) applicable to
   common stockholders                                  $(1,026,000)      $1,296,000       $(1,521,000)       $ 3,289,000
                                                        ===========       ==========       ===========        ===========
Basic and diluted net income (loss) per share           $     (0.08)      $    12.96       $     (0.12)       $     32.89
                                                        ===========       ==========       ===========        ===========
Basic and diluted weighted average shares outstanding    12,562,470          100,000        12,562,470            100,000
                                                        ===========       ==========       ===========        ===========
</TABLE>

              See notes to these condensed financial statements.

                                       2
<PAGE>

                            PAC-WEST TELECOMM, INC.

                Condensed Statements of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
                                                                             Six Month Period Ended
                                                                        --------------------------------
                                                                         June 30, 1999     June 30, 1998
                                                                        ---------------    -------------
<S>                                                                       <C>              <C>
Operating Activities:
   Net income                                                            $     804,000      $ 3,289,000
   Adjustments to reconcile net income to
     net cash provided by operating activities:
        Depreciation and amortization                                        3,292,000        1,701,000
        Amortization of deferred financing costs                               775,000              -
        Interest earned on restricted cash                                    (370,000)             -
        Provision for doubtful accounts                                         63,000            6,000
        Deferred income tax provision                                          165,000          517,000
        Changes in operating assets and liabilities:
          Accounts receivable                                                 (551,000)         768,000
          Income taxes receivable                                            1,597,000              -
          Inventories                                                         (182,000)         (28,000)
          Prepaid expenses and other current assets                             (1,000)        (738,000)
          Other assets                                                        (180,000)          (4,000)
          Accounts payable and accrued liabilities                           6,782,000        1,876,000
          Accrued interest on Senior Notes                                   8,547,000              -
                                                                         -------------      -----------
            Net cash provided by operating activities                       20,741,000        7,387,000
                                                                         -------------      -----------

Investing Activities:
    Purchase of equipment, vehicles and leasehold improvements             (21,908,000)      (7,520,000)
    Purchase of investments (classified as restricted cash)                (19,696,000)             -
    Proceeds from disposal of equipment                                            -             87,000
                                                                         -------------      -----------
            Cash used in investing activities                              (41,604,000)      (7,433,000)
                                                                         -------------      -----------

Financing Activities:
    Proceeds from issuance of Senior Notes                                 150,000,000              -
    Payments for financing costs                                            (5,415,000)             -
    Repayment of senior secured borrowings                                (100,000,000)             -
    Borrowings under notes payable and capital leases                              -          5,723,000
    Principal payments on notes payable and capital leases                     (72,000)      (2,705,000)
                                                                         -------------      -----------

            Net cash provided by financing activities                       44,513,000        3,018,000
                                                                         -------------      -----------

            Net increase in cash and cash equivalents                       23,650,000        2,972,000

Cash and Cash Equivalents:
    Beginning of period                                                     15,236,000        3,603,000
                                                                         -------------      -----------

    End of period                                                        $  38,886,000      $ 6,575,000
                                                                         =============      ===========
</TABLE>

              See notes to these condensed financial statements.

                                       3
<PAGE>

                             PAC-WEST TELECOMM, INC.
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                                 JUNE 30, 1999



1.   Basis of Presentation:

     These accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation for the periods indicated have been included. Operating results for
the six month period ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. The balance
sheet at December 31, 1998 has been derived from the audited balance sheet at
that date, but does not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.
These unaudited interim condensed financial statements should be read in
conjunction with the audited financial statements and the notes thereto of Pac-
West Telecomm, Inc. (the Company) as of and for the year ended December 31,
1998.


2.   Organization:

     Pac-West Telecomm, Inc. is a rapidly growing provider of integrated
telecommunications services in the western United States to Internet service
providers (ISPs), medium and small businesses, and enhanced communications
service providers.

     On September 16, 1998, the Company completed a merger with PWT Acquisition
Corp. (PWT) and a recapitalization of the Company (the Transaction). PWT was
formed by a group of investors for the purpose of injecting additional equity
into the Company and effecting the recapitalization. In connection with the
Transaction, PWT was merged into the Company, with the Company being the
surviving corporation. Immediately following consummation of the Transaction,
the previous stockholders continued to hold approximately 28 percent of the
issued and outstanding common stock of the Company. As a result of the continued
significant ownership interests of the previous stockholders, no adjustments
were made to the historical carrying amounts of the Company's assets and
liabilities as a result of the Transaction.


3.   Recent Accounting Pronouncements:

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and for Hedging Activities," effective for fiscal years
beginning after June 15, 1999. Management does not expect adoption of SFAS No.
133 in future periods to have a significant impact on the Company's financial
statements.


4.  Restricted Cash:

  Restricted cash represents short-term investments deposited in an interest
reserve trust account to fund initial interest payments due through February 1,
2000 under the $150,000,000 of Senior Notes.

                                       4
<PAGE>

                            PAC-WEST TELECOMM, INC.
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)

5.   Equipment, Vehicles and Leasehold Improvements:

     Equipment, vehicles and leasehold improvements include network and other
communication equipment, office furniture and equipment, vehicles, leasehold
improvements, projects-in-progress and equipment deposits. These assets are
stated at cost, which includes direct costs and capitalized interest, and are
depreciated once placed in service using the straight-line method. Capitalized
interest of $1,387,000 and $0 was recorded during the six month periods ended
June 30, 1999 and 1998, respectively. Repair and maintenance costs are expensed
as incurred.

     Equipment, vehicles and leasehold improvements at June 30, 1999 and
December 31, 1998 consist of the following:
<TABLE>
<CAPTION>

                                                                 June 30,    December 31,
                                                                   1999          1998
                                                               ------------  -------------
        <S>                                                   <C>           <C>
        Network and other communication equipment............  $51,815,000    $29,817,000
        Office furniture and equipment.......................    2,567,000      1,965,000
        Vehicles.............................................      906,000        717,000
        Leasehold improvements...............................    7,834,000      5,581,000
        Projects-in-progress.................................   22,464,000     25,597,000
                                                               -----------    -----------
                                                                85,586,000     63,677,000
        Less: Accumulated depreciation and amortization......   (9,576,000)    (6,383,000)
                                                               -----------    -----------
        Equipment, vehicles and leasehold improvements, net..  $76,010,000    $57,294,000
                                                               ===========    ===========
 </TABLE>
     Included in projects-in-progress at December 31, 1998 is $20,828,000 for
deposits paid or payable on equipment not in service at year-end.


6.   Deferred Financing Costs, net:

     Deferred financing costs, net consist primarily of capitalized amounts for
underwriter fees, professional fees and other expenses related to the issuance
of the $150,000,000 of Senior Notes. The deferred financing costs are being
amortized over the estimated 10-year term of the Notes beginning January 29,
1999.  Amortization expense for the six month period ended June 30, 1999 was
$250,000, which is included in interest expense in the accompanying condensed
statements of income.


7.   Income Taxes:

     The provision for income taxes for the six month periods ended June 30,
1999 and 1998 consist of the income tax determined by applying the applicable
statutory federal income tax rate of 34% plus 6% for state income taxes net of
federal income tax benefit.

                                       5
<PAGE>

                            PAC-WEST TELECOMM, INC.
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)


8.   Long-Term Debt and Other Long-Term Obligations:

     Long-term debt and other long-term obligations at June 30, 1999 and
December 31, 1998 consists of the following:
<TABLE>
<CAPTION>

                                                  June 30,    December 31,
                                                    1999          1998
                                                ------------  ------------
<S>                                             <C>           <C>
         Senior secured borrowings and other
           long-term obligations..............  $          0  $100,000,000
         Senior Notes.........................   150,000,000             0
         Notes payable, less current portion..        62,000       116,000
                                                ------------  ------------
         Total long-term debt.................  $150,062,000  $100,116,000
                                                ============  ============
</TABLE>

     On January 29, 1999, the Company issued $150,000,000 of Senior Notes at
par. The Senior Notes bear interest at 13.5 percent payable in semiannual
installments, with principal due on February 1, 2009.

     Proceeds of the Senior Notes were used to repay $100,000,000 of senior
secured borrowings (including $9,000,000 of other long-term obligations
subsequently financed through senior secured borrowings) and to establish an
interest reserve account to cover interest payments due under the Senior Notes
through February 1, 2000.

     The Senior Notes carry provisions that allow the Company, at its option, to
(i) redeem up to 35 percent of the notes with proceeds of certain public
offerings of equity prior to February 1, 2002, (ii) redeem all or part of the
notes at specified prices on or after February 1, 2004, or (iii) offer to
exchange the notes within 180 days from the issue date for a new issue of
identical debt securities registered under the Securities Act of 1933, as
amended (the Securities Act).  The Company is in the process of registering
these notes under the Securities Act.

     Basic covenants of these notes restrict the Company's future ability to pay
dividends, repurchase stock, pledge or sell assets as security for other
transactions, or engage in mergers and business combinations. The covenants
allow the Company to incur additional debt subject to various limitations.

     The Company has a new three-year senior credit facility that provide for
initial borrowings of $20.0 million and future borrowings of up to an additional
$20.0 million to finance working capital, the cost of the Company's planned
capital expansion and other corporate transactions. The borrowings are secured
by substantially all of the Company's assets. Borrowings under this new senior
credit facility will bear interest, at the Company's option, at (1) the Base
Rate (as defined) or (2) the LIBOR Rate plus between 2.25% and 3.5%. As of June
30, 1999, there were no amounts outstanding under this facility and the
borrowing rate would have been approximately 8.0%. The credit facility requires
the Company to meet certain financial tests, including, without limitation,
maximum levels of debt as a ratio of EBITDA (as defined), minimum interest
coverage and maximum amount of capital expenditures. The credit facility
contains certain covenants which, among other things, limit the incurrence of
additional indebtedness, investments, dividends, transactions with affiliates,
asset sales, acquisitions, mergers and consolidations, prepayments of other
indebtedness (including the Senior Notes), liens and encumbrances and other
matters customarily restricted in such agreements.

                                       6
<PAGE>

                            PAC-WEST TELECOMM, INC.
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)


9.   Purchase Commitments:

     At June 30, 1999, the Company has approximately $38,000,000 of purchase
orders outstanding for network equipment due for delivery during 1999 and 2000.
These purchase orders are cancelable without penalty up to 60 days prior to
delivery and are expected to be financed from proceeds received from the Senior
Notes (see Note 8) and from internally generated cash flows.

     In addition, the Company is in the process of implementing a new billing
and operations support system. Total estimated costs for this system aggregate
approximately $15,000,000 of which approximately $7,500,000 is estimated to be
incurred in 1999, $6,000,000 in 2000, and $1,500,000 in 2001. Of the $7,500,000
estimated to be incurred in 1999, $2,700,000 is recorded in projects-in-progress
at June 30, 1999.


10.  Revenue Recognition:

     Service revenues are recognized in the month in which the service is
provided, except for reciprocal compensation generated by calls placed to
Internet service providers connected through the Company's network. The rights
of competitive local exchange carriers, such as the Company, to receive this
type of compensation is the subject of numerous regulatory and legal challenges
(see Note 14). Until this issue is ultimately resolved, the Company will
recognize this revenue on a cash-received basis.

     The two incumbent local exchange carriers (ILECs) with which the Company
has interconnection agreements have withheld payments from amounts billed by the
Company under their agreements since August 1997. Amounts withheld during the
six month periods ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
                                                                       Six Month Periods Ended
                                                                    June 30, 1999   June 30, 1998
                                                                   --------------  --------------
<S>                                                                 <C>             <C>
        Total amount billed to specified ILECs                      $ 41,022,000    $ 20,266,000

        Amount withheld by specified ILECs and not recorded as
          revenue in the Company's statements of operations
                                                                     (28,371,000)    (12,912,000)
                                                                    ------------------------------
        Net amount recorded as revenue from the specified ILECs     $ 12,651,000    $  7,354,000
                                                                    ==============================
</TABLE>

The cumulative amount of reciprocal compensation withheld by the specified ILECs
and not recorded as revenue by the Company through June 30, 1999 is $64,760,000.


11.  Stockholders' Equity:

     Ten-for-One Stock Split

     On March 19, 1999, the board of directors authorized a ten-for-one split of
the Company's authorized and outstanding common stock and Preferred Stock.  All
share and per share data have been restated to reflect the ten-for-one split.

                                       7
<PAGE>

                            PAC-WEST TELECOMM, INC.
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)



     Convertible Redeemable Preferred Stock

     The Preferred Stock has preference over common stock in liquidation equal
to its liquidation value of $36 per share, plus accrued dividends computed at a
10 percent rate, compounded quarterly (collectively, the Preference Amount).
After payment of the Preference Amount, the Preferred Stock and the common stock
share ratably in any distribution by the Company. At June 30, 1999, $3,649,000
(or $2.919 per outstanding share of Preferred Stock) is accrued for cumulative
preferred dividends.

     Stock Options

     In January 1999, the Company's Board of Directors approved the terms of the
1999 Stock Incentive Plan (the Plan) which authorizes the granting of stock
options, including restricted stock, stock appreciation rights, dividend
equivalent rights, performance units, performance shares or other similar rights
or benefits to employees, directors, consultants and advisors. Options granted
under the Plan have a term of ten years.

     An aggregate of 2,250,000 shares of common stock have been reserved for
option grants. Options to purchase 623,750 shares of common stock were granted
and options to purchase 9,500 shares of common stock were canceled during the
six month period ended June 30, 1999.

     The following table summarizes information about the Company's stock
options outstanding as of June 30, 1999:

<TABLE>
<CAPTION>
                Options Outstanding                                                     Options Exercisable
-------------------------------------------------------------      --------------------------------------------------------------
  Number                                                                         Number
Outstanding         Weighted Average                                           Exercisable
at June 30,         Contractual Life      Weighted Average                      at June 30,           Weighted Average
  1999              Remaining (Years)      Exercise Price                         1999                 Exercise Price
-----------        ------------------     ----------------                    -------------           -----------------
<S>                  <C>                  <C>                                    <C>                    <C>
    406,250                9.3                $0.67                              250,000                   $0.67
    614,250                9.7                $3.00                                 --                      --
-----------                                                                   -------------
  1,020,500                9.5                $2.07                              250,000                   $0.67
===========                                                                   =============
</TABLE>

12.  Income (Loss) Per Share:

     Diluted income (loss) per share information is presented in the
accompanying statements of income as being the same as basic income (loss) per
share information since the impact of the issuance of potential common shares
from the conversion of preferred stock and from the exercise of common stock
options is antidilutive.


13.  Comprehensive Income:

     In September 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes reporting and disclosure requirements for
comprehensive income and its components within the financial statements. There
were no items of other comprehensive income for the six-month periods ended June
30, 1999 and 1998; therefore comprehensive income is the same as net income for
both periods.

                                       8
<PAGE>

                            PAC-WEST TELECOMM, INC.
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)


14.  Legal Proceedings:

     The Company is a party to the Pacific Bell and California Public Utility
Commission proceedings related to reciprocal compensation payment and other
interconnection agreement issues. See Note 10 to these condensed financial
statements elsewhere in this report. Also see Note 5 section on "Revenue
Recognition - Billings Under Dispute" in the Company's audited financial
statements for the year ended December 31, 1998.

     On June 24, 1999, the California Public Utilities Commission adopted a
decision in the arbitration proceeding between the Company and Pacific Bell
which held that reciprocal compensation would be payable for Internet service
provider calls under the new interconnection agreement with Pacific Bell which
became effective on June 29, 1999. Pacific Bell has paid the full amount of
billings for calls since the effective date of the new agreement.

     On August 25, 1999, we, along with the Commissioners of the California
Public Utilities Commission and others, were named as a defendant in an action
filed by GTE. The action challenges the legality of the California Public
Utilities Commission's decisions regarding requiring reciprocal compensation for
traffic terminating to Internet service providers. GTE argues that such calls to
Internet service providers are not local calls within the meaning of its
agreement with the Company even though they are dialed and billed as local
calls.


15.  Segment Reporting:

     The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 131, "Disclosures about Segments of an Enterprise and Related Information".
As an integrated telecommunications provider, the Company has one reportable
operating segment. While the Company's chief decision-maker monitors the revenue
streams of various services, operations are managed and financial performance is
evaluated based upon the delivery of multiple services over common networks and
facilities. This allows the Company to leverage its costs in an effort to
maximize return. As a result, there are many shared expenses generated by the
various revenue streams; because management believes that any allocation of the
expenses to multiple revenue streams would be impractical and arbitrary,
management does not currently make such allocations internally. The chief
decision-maker does however, monitor revenue streams at a more detailed level
than those depicted in the Company's historical general-purpose financial
statements.

     Specifically, the following table presents revenues by service type:
<TABLE>
<CAPTION>


                                           Six Month Period Ended
                                      --------------------------------
<S>                                        <C>        <C>
                                             June 30,     June 30,
                                          -----------  -----------
                                             1999         1998
                                          -----------  -----------

          Local services................  $22,812,000  $12,901,000
          Long distance service.........    3,780,000    3,243,000
          Dedicated transport services..    2,253,000    1,957,000
          Product and services..........      608,000    1,042,000
          Other.........................      811,000      789,000
                                          -----------  -----------

                                          $30,264,000  $19,932,000
                                          ===========  ===========
</TABLE>
                                       9
<PAGE>

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

     Except for the historical information contained herein, this report
contains forward-looking statements, subject to uncertainties and risks, and as
a result, our actual results may differ materially from those discussed here.
These uncertainties and risks include among others, our substantial debt
leverage, the demand for our services, our ability to successfully attract and
retain personnel, competition, uncertainties regarding our dealings with
Incumbent Local Exchange Carriers ("ILECs"), other telecommunications carriers
and facility providers, regulatory uncertainties, reliance on leased
transmission capacity and the cost of the capacity, the need to finance future
capital expenditures, the possibility of an adverse decision related to
reciprocal compensation owing to us by ILECs, as well as our future success in
our rapid business expansion into additional markets.


Overview

     Pac-West Telecomm, Inc. is a rapidly growing provider of integrated
telecommunications services in the western United States to Internet service
providers (ISPs), medium and small businesses, and enhanced communications
service providers. Our predecessor (also known as Pac-West Telecomm, Inc.) began
selling office phone systems in 1980 and reselling long distance service to
medium and small businesses and residential customers in 1982. Beginning in
1986, our predecessor began offering paging and telephone answering services to
its customers. Effective September 30, 1996, our predecessor transferred its
telephone and answering service divisions to us. Prior to September 30, 1996, we
did not conduct any operations and, since that time, we have disposed of the
answering service division and have focused our business strategy on operating
as a provider of integrated communications services. For the three month period
ending June 30, 1999 and the six month period ending June 30, 1999, recognizing
compensation from other telecommunications companies for completing their
customers' calls only to the extent such compensation was actually received in
cash, we had net revenues of approximately $15.8 million and $30.3 million and
adjusted EBITDA of approximately $5.9 million and $11.9 million, respectively.


Factors Affecting Operations

     Revenues. We derive our revenues from monthly recurring charges, usage
charges and initial non-recurring charges and telephone equipment sales and
service. Monthly recurring charges include the fees paid by customers for lines
in service and additional features on those lines, as well as equipment
collocation services. Usage charges consist of fees paid by end users for each
call made, fees paid by ILECs as reciprocal compensation for completion of their
customers' calls through Pac-West and access charges paid by carriers for long
distance traffic terminated by Pac-West. Initial non-recurring charges are paid
by end users, if applicable, for the initiation of our service.

     We derive a substantial portion of our revenues from reciprocal
compensation paid by ILECs with which we have interconnection agreements.
Reciprocal compensation revenues increased significantly in recent fiscal
quarters as result of increasing inbound call volume from our Internet service
providers and other customers. For the three month periods ended June 30, 1998
and 1999, and the six month periods ended June 30, 1998 and 1999, recorded
reciprocal compensation accounted for approximately 31.7%, 41.6%, 36.9% and
41.8%, respectively, of our revenues. As of June 30, 1999, two ILECs with which
we have interconnection agreements, Pacific Bell and GTE, have refused to pay
that portion of reciprocal compensation that they estimate is the result of
inbound traffic terminating to ISPs. These ILECs contend that such ISP calls are
not local calls within the meaning of their respective interconnection
agreements and claim that no reciprocal compensation is therefore payable. The
total reciprocal compensation withheld by these ILECs and not included in
revenues was $3.8 million for the year ended December 31, 1997, $32.6 million
for the year ended December 31, 1998, and $28.4 million for the six months ended
June 30, 1999.

                                       10
<PAGE>


     On June 24, 1999, the California Public Utilities Commission adopted a
decision in an arbitration proceeding between us and Pacific Bell which held
that reciprocal compensation would be payable for Internet service provider
calls under our new interconnection agreement with Pacific Bell which became
effective on June 29, 1999. Pacific Bell has paid the full amount of our
billings for calls since the effective date of the new agreement.

     On August 25, 1999, we, along with the commissioners of the California
Public Utility Commission and others, were named as a defendant in an action
filed by GTE. The action challenges the legality of the California Public
Utility Commission's decisions regarding reciprocal compensation as discussed
above. We intend to seek dismissal of the action and otherwise contest the
claims of GTE.

     We expect that reciprocal compensation will continue to represent a
significant portion of our revenues in the future. We are currently negotiating
new interconnection agreements and the terms of the related reciprocal
compensation. The per minute reciprocal compensation rate we receive from
Pacific Bell under our new agreement is significantly lower than it was under
the previous agreement. Based on current market conditions, we also expect that
the per minute reciprocal compensation rate will similarly decline from historic
rates under any other future interconnection agreements.

     Operating Costs. Operating costs are comprised primarily of leased
transport charges, usage charges for long distance and intrastate calls and, to
a lesser extent, reciprocal compensation related to calls that originate with a
Pac-West customer and terminate on the network of an ILEC or other CLEC. Our
leased transport charges are the lease payments we incur for the transmission
facilities used to connect our customers to our switches and to connect to the
ILEC and other CLEC networks. Our strategy of leasing rather than building our
own transport facilities results in our operating costs being a significant
component of total costs and expenses.

     Selling, General and Administrative Expenses. Our selling, general and
administrative expenses include network operations, development, maintenance and
administration costs, selling and marketing, customer service, information
technology, billing, corporate administration and personnel. We expect to incur
significant selling and marketing costs as we continue to expand our operations,
a significant amount of which will be incurred in a particular market before the
switch becomes operational and begins to generate revenue. Consequently, selling
and marketing expenses are expected to increase until implementation of our
expansion plan is substantially complete. We will incur other costs and
expenses, including the costs associated with the development and maintenance of
our networks, administrative overhead, premises leases and bad debts. We expect
that these costs will grow significantly as we expand our operations and that
sales and marketing and administrative overhead will be a large portion of these
expenses during the start-up phase in each of our new markets.

                                       11
<PAGE>



Results of Operations

     The following table summarizes the results of operations as a percentage of
revenues for the three month periods ended June 30, 1999 and 1998 and also for
the six month periods ended June 30, 1999 and 1998. The following data should be
read in conjunction with the condensed financial statements and notes thereto
included elsewhere in this report:
<TABLE>
<CAPTION>
                                                Three Month Period Ended     Six Month Period Ended
                                                         June 30,                   June 30,
                                               --------------------------   --------------------------
                                                  1999            1998         1999           1998
                                               -----------    -----------   ----------      ---------
<S>                                            <C>          <C>            <C>            <C>
Statements of Income Data:
Revenues                                         100.0%         100.0%         100.0%        100.0%
Operating Costs                                   29.6%          41.9%          28.9%         39.1%
Selling, general and administrative expenses      33.2%          22.9%          31.6%         21.2%
Depreciation and amortization expense             11.6%           8.9%          10.9%          8.5%
Income from operations                            25.6%          26.3%          28.6%         31.2%
Net income                                         1.0%          13.3%           2.7%         16.5%
</TABLE>

     Six Month Period Ended June 30, 1999 Compared to Six Month Period Ended
June 30,1998.


     Revenues for the six month period ended June 30, 1999 increased $10.4
million to $30.3 million from $19.9 million for the corresponding period in
1998. The increase in revenues was primarily attributed to an increase of $5.3
million in paid local interconnection revenues and an increase of $4.1 million
in recurring charges and installation charges billed directly to ISPs.

     In the third quarter of 1998, we installed new higher capacity switches at
our Stockton and Los Angeles switching sites (Super POPs). During the fourth
quarter of 1998, we expanded switch capacity to existing and new customers. In
the second quarter of 1999, we activated a new higher capacity switch in Oakland
and continued to expand our switching capacity in Los Angeles. Our revenues for
the second quarter of 1999 significantly increased compared to the second
quarter of 1998 as a result of the increased utilization of, and additional,
switch capacities, primarily attributable to ISP customers. In addition, new
service orders from medium and small businesses have continued to accelerate in
the second quarter of 1999 as we have built our sales force.

     The number of access lines in service increased 137% to 76,263 as of June
30, 1999 from 32,176 as of June 30, 1998. Billable minutes of use were 6.6
billion in the first half of 1999, up 105% from 3.2 billion for the first half
of 1998.

     Inbound local calls and minutes subject to reciprocal compensation revenues
in accordance with interconnection agreements increased 65% and 106%,
respectively, for the first half of 1999 over the first half of 1998. However,
the incumbent local exchange carriers paid only 31% of the reciprocal
compensation billings for the first half of 1999 as compared to paying 36% in
1998. The net effect of those significant increases in inbound local calls and
minutes, offset by the lower payment percentage, resulted in the $5.3 million
(72%) increase in paid interconnection revenues.

     The $4.1 million increase in the first half of 1999 over the first half of
1998 in direct billings to Internet service providers represented a 94% year to
year increase. Lines used by our Internet service providers significantly
increased in the first half of 1999 over the same period in 1998, to 60,401
lines in service by Internet service providers at June 30, 1999, from 28,108
lines in service at June 30, 1998.

                                       12
<PAGE>


     Our operating costs for the six months ended June 30, 1999 increased $1.0
million, to $8.8 million from $7.8 million for the corresponding period in 1998.
Our operating costs as a percentage of revenues decreased to 28.9% for the six
months ended June 30, 1999 from 39.1% for the corresponding period in 1998. The
increase in operating costs was primarily due to an increase in network
operations associated with a higher level of telecommunications activity. We
made significant investments in our telephone infrastructure during the second
half of 1998 and the first half of 1999 to accommodate future growth of our
communications services. As a result of increased utilization of our newly
installed switching equipment and the use of higher capacity transmission
facilities, our operating costs decreased as a percentage of revenues.

     Our selling, general and administrative expenses for the six months ended
June 30, 1999 increased $5.4 million to $9.6 million from $4.2 million for the
corresponding period in 1998. As a percentage of revenues, our selling, general
and administrative expenses increased to 31.6% for the six months ended June 30,
1999 from 21.2% in the corresponding period in 1998. The increase in selling,
general and administrative expenses was primarily due to the addition of 36
employees in sales and marketing; an increase in network operational,
development and administration costs including 21 additional network employees;
an increase of 20 service technicians; and 11 additional employees in other
administration, customer service and information technology functions. Total
number of our employees increased from 99 at June 30, 1998 to 187 at June 30,
1999.

     Our depreciation and amortization expense for the six months ended June 30,
1999 increased $1.6 million to $3.3 million from $1.7 million for the
corresponding period in 1998. Depreciation and amortization as a percentage of
revenues increased to 10.9% for the six months ended June 30, 1999 from 8.5% in
the corresponding period in 1998. The increase in depreciation and amortization
expense was primarily due to the additional depreciation on the portion of the
$42.5 million of equipment acquired during 1998 which has been placed in
service. As the equipment acquired in 1999 is placed in service, depreciation
expense as a percentage of revenues is expected to increase in subsequent
quarters.

     Our interest expense for the six months ended June 30, 1999 increased $7.7
million to $8.5 million from $0.8 million in the corresponding period in 1998.
The increase in interest expense was primarily due to the financing of a
significant portion of the $42.5 million of equipment acquired during 1998 and
interest on the $150 million Senior Notes offering consummated January 29, 1999
including amortization over 10 years of the related deferred financing costs
associated with the Senior Notes offering.  In addition, the 13.5% Senior Notes
interest rate since January 29, 1999 is a higher interest rate than the rates
paid on the equipment financings outstanding in the first half of 1998.

     The effective tax rate (federal and state) was 40% for the first half of
both 1999 and 1998.

Three Month Period Ended June 30, 1999 Compared to Three Month Period Ended June
30, 1998.

     Our revenues for the three month period ended June 30, 1999 increased $6.2
million to $15.8 million from $9.7 million for the corresponding period in 1998.
The increase in revenues was primarily attributed to an increase of $3.4 million
in paid local interconnection revenues and an increase of $2.1 million in
recurring charges and installation charges billed directly to ISPs.

     In the third quarter of 1998, we installed new higher capacity switches at
our Stockton and Los Angeles switching sites (Super POPs).  During the fourth
quarter of 1998, we expanded switch capacity to existing and new customers.  Our
revenues for the three month period as of June 1999 significantly increased
compared to the three month period as of June 1998 as a result of the increased
utilization of this newly installed switch capacity, primarily attributable to
ISP customers.  In addition, new service orders from medium and small businesses
have continued to accelerate in the three month period as of June 1999 as we
have built our sales force.

     The number of access lines in service increased 102% by 8,572 for the three
month period ended June 30, 1999 from 4,246 for the three month period ended
June 30, 1998.  Billable minutes of use were 3.5 billion in the three month
period ended June 30, 1999, up 102% from 1.7 billion for the three month period
ended June 30, 1998.

                                       13
<PAGE>


     Inbound local calls and minutes subject to reciprocal compensation revenues
in accordance with interconnection agreements increased 62% and 103%,
respectively, for the three month period ended June 30 of 1999 over the three
month period ended June 30 of 1998. However, the incumbent local exchange
carriers paid only 31% of the reciprocal compensation billings for the three
month period ended June 30, 1999 as compared to paying 28% in the same period in
1998. The net effect of those significant increases in inbound local calls and
minutes, plus the slightly higher payment percentage, resulted in the $3.4
million (106%) increase in paid interconnection revenues.

     The $2.1 million increase in the three month period ended June 30, 1999
over the three month period ended June 30, 1998 in direct billings to Internet
service providers represented a 93% year to year increase. Lines used by our
Internet service providers significantly increased in the first half of 1999
over the same period in 1998, to 60,401 lines in service by Internet service
providers at June 30, 1999, from 28,108 lines in service at June 30, 1998.

     Our operating costs for the three month period ended June 30, 1999
increased $0.6 million, to $4.7 million from $4.1 million for the corresponding
period in 1998.  The Company's operating costs as a percentage of revenues
decreased to 29.6% for the three month period ended June 30, 1999 from 41.9% for
the corresponding period in 1998.  The increase in operating costs was primarily
due to an increase in network operations associated with a higher level of
telecommunications activity.  We made significant investments in our telephone
infrastructure during the second half of 1998 and the first half of 1999 to
accommodate future growth of our communications services.  As a result of
increased utilization of our newly installed switching equipment and the use of
higher capacity transmission facilities, our operating costs decreased as a
percentage of revenues.

     Our selling, general and administrative expenses for the three month period
ended June 30, 1999 increased $3.1 million to $5.3 million from $2.2 million for
the corresponding period in 1998. As a percentage of revenues, our selling,
general and administrative expenses increased to 33.2% for the three month
period ended June 30, 1999 from 22.9% in the corresponding period in 1998. The
increase in selling, general and administrative expenses was primarily due to
the addition of 36 employees in sales and marketing; an increase in network
operational, development and administration costs including 21 additional
network employees; an increase of 20 service technicians; and 11 additional
employees in other administration, customer service and information technology
functions. Total number of employees increased from 99 at June 30, 1998 to 187
at June 30, 1999.

     Our depreciation and amortization expense for the three month period ended
June 30, 1999 increased $1.0 million to $1.8 million from $0.8 million for the
corresponding period in 1998. Depreciation and amortization as a percentage of
revenues increased to 11.6% for the three month period ended June 30, 1999 from
8.9% in the corresponding period in 1998. The increase in depreciation and
amortization expense was primarily due to the additional depreciation on the
portion of the $42.5 million of equipment acquired during 1998 which has been
placed in service. As the equipment acquired in 1999 is placed in service,
depreciation expense as a percentage of revenues is expected to increase in
subsequent quarters.

     Our interest expense for the three month period ended June 30, 1999
increased $4.1 million to $4.5 million from $0.4 million in the corresponding
period in 1998. The increase in interest expense was primarily due to the
financing of a significant portion of the $42.5 million of equipment acquired
during 1998 and interest on the $150 million Senior Notes offering consummated
January 29, 1999 including amortization over 10 years of the related deferred
financing costs associated with the $150 million Senior Notes issuance. In
addition the 13.5% Senior Notes interest rate since January 29, 1999 is a higher
interest rate than the rates paid on the equipment financings outstanding in the
second quarter of 1998.

     The effective tax rate (federal and state) was 40% for the second quarters
in both 1999 and 1998.

                                       14
<PAGE>

Liquidity and Capital Resources

     Net cash provided by operating activities was $20.7 million for the six
month period ended June 30, 1999 compared to $7.4 million for the six month
period ended June 30, 1998. This increase primarily reflects an increase in
accounts payable for new switching equipment received in late June 1999 plus
$8.5 million of accrued interest on the Senior Notes.

     Net cash used in investing activities was $41.6 million for the six month
period ended June 30, 1999 compared to $7.4 million for the six month period
ended June 30, 1998.  During the six month period ended June 30, 1999, the
Company invested $21.9 million in new switching and related equipment as
compared to $7.9 million during the comparable 1998 period. Further, in the
first half of 1999, $19.7 million of the proceeds from the Senior Note offering
was used to purchase short-term investments to fund the interest reserve trust
account for the Notes.

     Net cash provided by financing activities was $44.5 million for the six
month period ended June 30, 1999 compared to $3.0 million for the six month
period ended June 30, 1998.  The net cash provided in the six month period ended
June 30, 1999 was primarily attributable to proceeds from the $150 million
Senior Notes issuance reduced by the payoff of $100 million of senior secured
borrowings.

     The local telecommunications services business is capital intensive.  Our
operations have required and will continue to require substantial capital
investment for the design, acquisition, construction and implementation of our
network.  Capital expenditures (including amounts financed under capital leases)
were $21.9 million for the first half of 1999, and $42.5 million for the year
ended December 31, 1998.  Of the $42.5 million of capital expenditures during
1998, $25.6 million was included in projects-in-progress at December 31, 1998
and therefore are not being depreciated until placed in service in 1999.  We
expect to make additional capital expenditures between $20.0 and $30.0 million
during the balance of 1999.  Actual and planned capital expenditure projects
during 1999 include: completion of an upgraded and expanded switch at the
existing Oakland, California facility; construction of switching facilities in
Las Vegas, Nevada and Seattle, Washington; addition of a second switch in Los
Angeles, California; and implementation of a new billing and operations support
system. The actual cost of our planned expansion will depend on a variety of
factors, including the cost of the development of our network in each of our new
markets, the extent of competition and pricing of the telecommunications
services in such markets and the acceptance of our services. Accordingly, there
can be no assurance that our actual capital requirements will not exceed the
amounts described above.

     We have entered into a new senior credit facility. This facility provides
for initial maximum borrowings of $20.0 million and future borrowings of up to
$20.0 million for working capital and other general corporate purposes, and
bears interest, at our option, at:

     1)  the base rate, as defined in the new senior credit facility; or
     2)  the LIBOR rate, plus between 2.25% and 3.5 %

As of June 30, 1999, there were no amounts outstanding under this facility and
the borrowing rate would have been approximately 8.0%. Our borrowings under the
new senior credit facility will be secured by all of our assets. The new senior
credit facility has a three year term. See Note 8 to Condensed Financial
Statements included elsewhere in this report.

     Our principal sources of funds for the balance of 1999 are anticipated to
be current unrestricted cash balances, cash flows from operating activities and
borrowings under the new senior credit facility. In addition, we have purchased
and pledged to the Trustee for the benefit of the holders of the Senior Notes
approximately $19.7 million of U.S. government securities (classified as
restricted cash) to provide for the payment of the first two scheduled interest
payments under the Senior Notes. We believe that these funds will provide us
with sufficient liquidity and capital resources for us to meet our financial
obligations for the balance of 1999, including the payment of principal and
interest under the Senior Notes, as well as to provide funds for our working
capital, capital expenditures and other needs. No assurance can be given,
however, that this will be the case. Depending upon our rate of growth and
profitability, we may require additional equity or debt financing to meet our
working capital requirements or capital equipment needs. There can be no
assurance that additional financing will be available when required or, if
available, will be on terms

                                       15
<PAGE>


satisfactory to us. Our future operating performance and ability to service or
refinance the Senior Notes and to repay, extend or refinance the new senior
credit facility will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond our control.

     Instruments governing our indebtedness, including the new senior credit
facility and the Senior Notes Indenture, contain financial and other covenants
that restrict, among other things, our ability to incur additional indebtedness,
incur liens, pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates, merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of substantially all of our assets. Such limitations, together
with our highly leveraged nature, could limit corporate and operating
activities, including our ability to respond to market conditions to provide for
unanticipated capital investments or to take advantage of business
opportunities.

Year 2000 Issues

     Year 2000 Compliance Issues. The information in this section is a "Year
2000 Readiness Disclosure" as defined in the Year 2000 Information and Readiness
Disclosure Act of 1998 and contains forward-looking statements. These statements
include, but are not limited to, anticipated costs and the date by which we
expect to complete actions and are based on management's current estimates,
which are in turn based on assumptions about future events, including, but not
limited to, the availability of resources, representations received from third
parties and other factors. There can be no guarantee that these estimates will
be achieved, and actual results could differ materially from those anticipated.
Specific factors that might cause material differences include, but are not
limited to, our ability to identify and remediate all relevant systems, results
of Year 2000 testing, adequate resolution of Year 2000 issues by business and
other third parties that are service providers, suppliers and customers of ours,
unanticipated system costs, the adequacy of and ability to implement contingency
plans and similar uncertainties.

     The forward-looking statements made in this Year 2000 discussion speak only
as of the date on which these statements are made.

     Impact of the Year 2000 computer problem. The Year 2000 computer problem
refers to the potential for system and processing failures of date-related data
as a results of computer-controlled systems using two digits rather than four to
define the applicable year. For example, computer programs that have time-
sensitive software may recognize a date represented as "00" as the year 1900
rather than the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities. To date, we have not experienced any Year
2000 issues with any internal systems or our products, and we do not expect to
experience any of them.

     Assessment. The Year 2000 problem affects the computers, software and other
equipment that we use, operate or maintain for our operations. Accordingly, we
have organized a program team responsible for monitoring the assessment and
remediation status of our Year 2000 issues and reporting to our management. This
project team is currently assessing the potential effect and costs of
remediating Year 2000 issues for our internal systems. To date, we have not
obtained independent verification or validation to assure the reliability of our
risk and cost estimates because we do not feel that the scope of our program
warrants this time and expense.

     Internal Infrastructure. We believe that we have identified all major
computers, software applications and related equipment used in connection with
our internal operations that will need to be evaluated to determine if they must
be modified, upgraded, or replaced to minimize the possibility of a material
disruption to our business. We have completed assessing the potential impact of
Year 2000 issues on these computers, equipment and applications and are
currently modifying, upgrading and replacing major systems that we believe have
Year 2000 issues. Our long distance billing system and our accounting system are
not yet Year 2000 compliant. We are in process of replacing our billing system
to accommodate future anticipated growth with a new Year 2000 compliant system.
The manufacturer of the noncompliant accounting system has provided software
that is represented to be Year 2000 compliant.

                                       16
<PAGE>


     Systems other than information technology systems. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, security systems and other common devices may have Year 2000
issues. We are currently assessing the potential effect on and the costs of
remediating these issues, if any, for our office equipment and our facilities in
Stockton, Los Angeles, and Oakland, California and Las Vegas, Nevada.

     Products. We have designed our products to be Year 2000 compliant and
believe that using our products as documented should not cause any Year 2000-
related issues. We have tested and intend to continue to test all of our
products for Year 2000 issues. While we believe our products are Year 2000
compliant, it is impractical for us to test our products in every
telecommunications systems environment or with all available combinations of our
products with components supplied by our customers or other third party
suppliers. As a result, there may be situations where the combinations of our
products working with components supplied by other third parties could result in
Year 2000 issues.

     Costs of remediation. We currently anticipate that our total cost of
addressing our Year 2000 issues will be $150,000, of which approximately
$110,000 has been incurred and expensed through June 30, 1999. We do not have a
separate information technology or a similar budget. The cost of addressing Year
2000 issues will be reported as a general and administrative expense. We have
not deferred any material information technology projects due to our Year 2000
efforts. Since we have been working on a Year 2000 resolution for over one year,
all major decisions regarding replacements of equipment and software was done
with Year 2000 compliance as major purchase criteria. Costs of software upgrades
and additions, as well as hardware upgrades which were required for
compatibility, enhancement, capability/capacity, or efficiency were not
considered as a Year 2000 cost.

     Suppliers. We are contacting third-party suppliers of components and our
key subcontractors used in the manufacturing of our products to identify, and to
the extent possible, resolve issues relating to the Year 2000 issue. While we
expect that we will be able to resolve any significant Year 2000 issue
identified with these third parties, because we have no control over the actions
of these parties, these third parties may not remediate any or all of Year 2000
issues identified. Any failure of any these third parties to timely resolve Year
2000 issues with either their products sold to us, or their systems could have a
material adverse effect on our business, operating results and financial
condition. We believe that many incumbent local exchange carriers and long
distance carriers are also impacted by Year 2000 issue, which in turn could
affect us.

     Most reasonably likely worst case consequence of Year 2000 issues. We
expect to identify and resolve all Year 2000 issues that could materially
adversely affect our business operations. However, for reasons discussed above,
we believe that it is not possible to determine with complete certainty that all
Year 2000 issues affecting us have been identified or corrected. As a result, we
believe that the following consequences are possible:

     .  operational inconveniences and inefficiencies for us, our contract
        manufacturers and our customers that will divert our management's time
        and attention and our financial and human resources from ordinary
        business activities;

     .  business disputes and claims for pricing adjustments or penalties by our
        customers due to Year 2000 issues, which we believe will be resolved in
        the ordinary course of business; and

     .  business disputes alleging that we failed to comply with the terms and
        conditions of contracts or industry standards or performance that result
        in litigation on contract termination.


                                       17
<PAGE>


     Contingency Plans. We are currently developing contingency plans to be
implemented if our efforts to identify and correct Year 2000 issues affecting
our internal systems are not effective. We expect to complete our contingency
plans by the end of October 1999. Depending on the systems affected, these plans
could include:

     .  accelerated replacement of affected equipment software;

     .  short to medium-term use of backup equipment and software;

     .  increased work hours for our personnel; and

     .  use of contract personnel to correct on an accelerated schedule any Year
        2000 issues that arise or to provide manual workarounds for information
        systems.

     Our implementation of any of these contingency plans could have a material
adverse effect on our business, operating results and financial conditions.


Inflation

     We do not believe that inflation has had any material effect on our
business during the six month periods ended June 30, 1999 and June 30, 1998.

                                       18
<PAGE>

ITEM 3. Quantitative and Qualitative Disclosures About Market Risks


     The SEC's rule related to market risk disclosure requires that we describe
and quantify our potential losses from market risk sensitive instruments
attributable to reasonably possible market changes. Market risk sensitive
instruments include all financial or commodity instruments and other financial
instruments that are sensitive to future changes in interest rates, currency
exchange rates, commodity prices or other market factors. We are not exposed to
market risks from changes in foreign currency exchange rates or commodity
prices. We do not hold derivative financial instruments nor do we hold
securities for trading or speculative purposes. At December 31, 1998, we had
$100 million of long-term debt and other long-term obligations subject to
variable interest rates. However, all of this $100 million was replaced by the
issuance of $150 million of fixed rate notes in January 1999, and consequently
we currently have no risk exposure associated with changing interest rates on
debt.  We are exposed to changes in interest rates on our investments in cash
equivalents. All of our investments in cash equivalents are in money market
funds that hold short-term investment grade commercial paper, treasury bills or
other U.S. government obligations. Therefore this investment policy reduces our
exposure to long-term interest rate changes. Under our current policies, we do
not use interest rate derivative instruments to manage our exposure to interest
rate changes. A hypothetical 100 basis point decline in short-term interest
rates would reduce the annualized earnings on our $38.9 million of cash
equivalent investments at June 30, 1999 by approximately $389,000. We do,
however, have market risk exposure associated with the market price on the $150
million of notes outstanding. These notes are recorded at book value which could
vary from current market prices in the future, especially if interest rates
decline. As of June 30, 1999, the market value of the notes approximated their
book value.


                                       19
<PAGE>
                                   PART II
                              OTHER INFORMATION

ITEM 1. Legal Proceedings

     See Note 14 to the unaudited condensed financial statements included
elsewhere in this Form 10-Q and "Management's Discussion and Analysis of
Financial Condition nd Results of operations--Factors Affecting Operations--
Revenues" for a description of certain legal procedings involving Pac-West.

     On October 12, 198, we filed at te Public Utilities Commission of Nevada a
petition for arbitration of the interconectionagreement with Nevada Bel in
accordance with section 252(b) of the Teecommunications Act of 196. the issues
in this arbitration are whether reciprocal compensation is payable for calls
placed to the Internet sertvie providers and whether reciprical compensation is
payable for local-rated call placed by a dialing party in one lcal caling area
that is routed to a second local caling area for completion. on April 8, 1999,
the Public utiltiite Cmission of Nevada held that casa placed to Internet
service providers are subjectto reciprical compendsatioon in the same manner as
other cals, but held that, under current Nevada regulatory policy, calls routed
from one local calling area to another local calling area for completion
should not be deemed local cals. Due to the geographic centralization of nevada
populations within large local calling areas, we do not believe that Public
Utilities Commission of Nevada''a ruling on the clasificationof local calls will
have a material effect on our planned operations in Nevada. On September 2,
1999, Nevada Bell apealed the decsion of te Public Utilities ommission of Nevada
to te U.S. DistrictCourt in evada. We intend to defend the validity f te decsion

ITEM 2. Changes in Securitie3s and Use of Proceeds

(b)  On September 22, 1999, all of our unregistered Series a Senior Notes due
2009 were exchanged for our Series B Senior Notes due 2009 registered under the
Securities Act of 1933.

ITEM 6. Exhibit and Reports on Form 8-K
<TABLE>
<CAPTION>

(a)  Exhibits
<S>      <C>
</TABLE>
     The following exhibits are filed in connectin with Item 601 of Regulation
     S-K:
<TABLE>
<CAPTION>
  Exhibit
  Number                          Description
  -------                         -----------
  <S>       <C>
    3.1     Amended and Restated Articles of Incorporation of Pac-West
            Telecomm, Inc. (incorporated by reference to Exhibit 3.1 to Pac-
            West's Registration Statement (Reg. No. 333-76779)).

    3.2     Amended and Restated By-Laws of Pac-West Telecomm, Inc.
            (incorporated by reference to Exhibit 3.2 to Pac-West's
            Registration Statement (Reg. No. 333-76779)).

  27        Financial Data Schedule
</TABLE>

(b)  Reports on Form 8-K

     The Comapny did not file any current reports on Form 8-K during the
     quarter ended June 30, 1999.

before the Court.


<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on September 27, 1999.



                                    PAC-WEST TELECOMM, INC.



                                    By: /s/ Richard E. Bryson
                                        ----------------------------------
                                        Richard E. Bryson
                                        Chief Financial Officer
                                        (Principal Financial Officer)



                                    By: /s/ Dennis V. Meyer
                                        ---------------------------------
                                        Dennis V. Meyer
                                        Vice President - Finance
                                        (Principal Accounting Officer)
<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit
Number                             Description
-------                            ------------
<S>      <C>
 3.1     Amended and Restated Articles of Incorporation of Pac-West Telecomm, Inc.
         (incorporated by reference to Exhibit 3.1 to Pac-West's Registration Statement (Reg.
         No. 333-76779)).

 3.2     Amended and Restated By-Laws of Pac-West Telecomm, Inc. (incorporated by
         reference to Exhibit 3.2 to Pac-West's Registration Statement (Reg. No. 333-76779)).

 27      Financial Data Schedule
</TABLE>

                                      22