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

                                    FORM 10-Q

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

                   For the three months ended March 31, 1999.

                                       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 0-29782

                               WORLD ACCESS, INC.
             (Exact name of Registrant as specified in its Charter)

            Delaware                                    58-2398004
    (State of Incorporation)                (I.R.S. Employer Identification No.)

  945 E. Paces Ferry Road, Suite 2200,  
           Atlanta, Georgia                               30326 
(Address of principal executive offices)                (Zip Code)

                                 (404) 231-2025
                         (Registrant's telephone number)

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share

    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 |_|

    The number of shares outstanding of the Registrant's common stock, par value
$.01 per share, at May 20, 1999 was 44,802,809.

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements


WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

                                    March 31      December 31
                                      1999            1998
                                   -----------    -----------
                                   (Unaudited)
ASSETS

Current Assets
  Cash and equivalents             $  41,112      $  55,176
  Accounts receivable                 74,687         70,485
  Inventories                         53,711         48,591
  Deferred income taxes               33,022         37,185
  Other current assets                20,452         21,381
                                   ---------      ---------
    Total Current Assets             222,984        232,818
Property and equipment                59,886         63,602
Goodwill and other intangibles       297,552        298,780
Other assets                          25,552         18,612
                                   ---------      ---------
    Total  Assets                  $ 605,974      $ 613,812
                                   =========      =========
LIABILITIES AND
STOCKHOLDERS' EQUITY

Current Liabilities
  Short-term debt                  $  20,643      $  17,989
  Accounts payable                    42,714         36,418
  Other accrued liabilities           31,940         52,825
                                   ---------      ---------
    Total Current Liabilities         95,297        107,232
Long-term debt                       135,631        137,864
Noncurrent liabilities                 9,405          8,133
                                   ---------      ---------
    Total Liabilities                240,333        253,229
                                   ---------      ---------
Stockholders' Equity
  Preferred stock                      ---            ---
  Common stock                           448            441
  Capital in excess of par value     475,843        472,945
  Accumulated deficit               (110,650)      (112,803)
                                   ---------      ---------
    Total Stockholders' Equity       365,641        360,583
                                   ---------      ---------
    Total Liabilities and
      Stockholders' Equity         $ 605,974      $ 613,812
                                   =========      =========


                See notes to consolidated financial statements.

                                       1

<PAGE> 

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


                                      Three Months Ended March 31
                                      ---------------------------
                                          1999           1998
                                      -----------     -----------
                                              (Unaudited)

Carrier service revenues              $  85,612       $     545
Equipment sales                          57,867          22,860
                                      ---------       ---------
  Total Sales                           143,479          23,405

Cost of carrier services                 75,658             454
Cost of services network                  5,569              38
Cost of equipment sold                   31,942          12,182
Amortization of acquired technology       1,200            ---
                                      ---------       ---------
  Total Cost of Sales                   114,369          12,674
                                      ---------       ---------
  Gross Profit                           29,110          10,731
Research and development                  4,354             732
Selling, general and administrative      13,907           2,785
Amortization of goodwill                  3,118             642
In-process research and development        ---           35,400
Restructuring and other charges            ---              590
                                      ---------       ---------
  Operating Income (Loss)                 7,731         (29,418)
Interest and other income                   423           1,271
Interest expense                         (2,628)         (1,443)
                                      ---------       ---------
  Income (Loss) From Continuing
    Operations Before Income Taxes
    and Minority Interests                5,526         (29,590)
Income taxes                              3,405           2,185
                                      ---------       ---------
  Income (Loss) From Continuing
   Operations Before
   Minority Interests                     2,121         (31,775)
Minority interests in earnings
  of subsidiary                            ---              684
                                      ---------       ---------

  Income (Loss) From
    Continuing Operations                 2,121         (32,459)
Net income (loss)from
    discontinued operations                  32          (1,742)
                                      ---------       ---------
  Net Income (Loss)                   $   2,153       $ (34,201)
                                      =========       =========

Income (Loss) Per Common Share:
  Basic:
    Continuing Operations             $    0.06       $   (1.68)
    Discontinued Operations                ---            (0.09)
                                      ---------       ---------
    Net Income (Loss)                 $    0.06       $   (1.77)
                                      =========       =========

  Diluted:
    Continuing Operations             $    0.06       $   (1.68)
    Discontinued Operations                ---            (0.09)
                                      ---------       ---------
    Net Income (Loss)                 $    0.06       $   (1.77)
                                      =========       =========

Weighted Average
Shares Outstanding:
  Basic                                  36,089          19,343
                                      =========       =========
  Diluted                                36,595          19,343
                                      =========       =========


                See notes to consolidated financial statements.

                                        2
<PAGE>

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands)



                                          Capital in
                               Common      Excess of    Accumulated
                               Stock       Par Value      Deficit        Total
                               --------   ----------    -----------   ----------
                                                 (Unaudited)

Balance at January 1, 1999     $    441   $  472,945    $  (112,803)  $  360,583

Net and comprehensive 
 net income                                                   2,153        2,153

Issuance of shares
 for acquisition of business          4        1,450                       1,454

Release of escrowed
 shares for acquisition               1          999                       1,000

Issuance of shares
 for technology license               1          255                         256

Issuance of shares
 for options and warrants             1          104                         105

Tax benefit from option
 and warrant exercises                            13                          13

Issuance of shares
 to 401K plan                                     77                          77
                               --------   ----------    -----------   ----------
Balance at March 31, 1999      $    448   $  475,843    $  (110,650)  $  365,641
                               ========   ==========    ===========   ==========




                See notes to consolidated financial statements.

                                       3

<PAGE>

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

                                             Three Months Ended March 31
                                                1999             1998
                                             ----------       ----------
                                                     (Unaudited)
Cash  Flows From Operating Activities:
Net income (loss)                            $    2,153       $  (34,201)
Adjustments to reconcile net income
 (loss) to net cash from
 (used by) operating activities:
   Depreciation and amortization                  7,537            1,545
   Income tax benefit from stock 
    warrants and options                             13            2,662 
   Special charges                                 ---            41,393
   Minority interests in 
    earnings of subsidiary                         ---               684
   Provision for inventory reserves                 365               78
   Provision for bad debts                        1,022               (8)
   Stock contributed to 
    employee benefit plan                            77               37
   Changes in operating assets and 
    liabilities, net of effects
    from businesses acquired:
       Accounts receivable                       (6,022)          (9,993)
       Inventories                              (10,918)          (3,101)
       Accounts payable                           6,296            3,606
       Other assets and liabilities              (9,482)            (238)
                                             ----------       ----------
   Net Cash From (Used By) 
    Operating Activities                         (8,959)           2,464
                                             ----------       ----------
Cash Flows From Investing Activities:
Acquisitions of businesses                       (2,486)         (57,407)
Capitalization of software development costs     (1,204)            (425)
Expenditures for property and equipment          (1,895)          (1,919)
                                             ----------       ----------
   Net Cash Used By  Investing Activities        (5,585)         (59,751)
                                             ----------       ----------

Cash Flows From  Financing Activities:
Short-term debt borrowings                        1,200            1,772
Principal payments under capital
 lease obligations                                 (779)            ---
Proceeds from exercise of 
 stock warrants and options                         105            1,695 
Long-term debt repayments                          ---              (967)
Debt issuance costs                                 (46)            ---
                                             ----------       ----------
   Net Cash From Financing Activities               480            2,500 
                                             ----------       ----------
   Decrease in Cash and Equivalents             (14,064)         (54,787)
   Cash and Equivalents at 
    Beginning of Period                          55,176          118,065
                                             ----------       ----------
   Cash and Equivalents at 
    End of Period                            $   41,112       $   63,278 
                                             ==========       ==========

Supplemental Schedule of Noncash
  Financing and Investing Activities:
Issuance of common stock
  for businesses acquired                    $    2,454       $   33,397 
Issuance of stock options 
  for businesses acquired                          ---             8,360
Conversion of note receivable 
  to investment in ATI                             ---             4,485



                See notes to consolidated financial statements.

                                       4
<PAGE>
                       WORLD ACCESS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             

NOTE 1.  BASIS OF PRESENTATION

    The accompanying  unaudited  consolidated  financial  statements include the
accounts  of  World  Access,  Inc.  and its  majority  owned  subsidiaries  (the
"Company") from their effective dates of acquisition. These financial statements
have been prepared in accordance  with the  instructions to Form 10-Q and do not
include  all the  information  and  footnotes  required  by  generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair  presentation of the results of the interim periods covered
have been included.

    The  preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

    The estimated fair value of financial instruments has been determined by the
Company  using  available   market   information   and   appropriate   valuation
methodologies.  However,  considerable judgment is required in interpreting data
to develop the estimates of fair value.  Accordingly,  the  estimates  presented
herein are not  necessarily  indicative  of the amounts  that the Company  could
realize in a current market exchange.  The fair value estimates presented herein
are based on pertinent  information available to management as of the respective
balance sheet dates.  Although management is not aware of any factors that would
significantly  affect the estimated  fair value  amounts,  such amounts have not
been  comprehensively  revalued for purposes of these financial statements since
that date and current estimates of fair value may differ  significantly from the
amounts presented herein.

    The fair values of cash equivalents,  accounts receivable,  accounts payable
and accrued  expenses  approximate the carrying  values due to their  short-term
nature.  The fair values of long-term debt are estimated based on current market
rates and  instruments  with the same risk and  maturities and  approximate  the
carrying value.

    The results of operations  for the three months ended March 31, 1999 are not
necessarily  indicative  of the  results  expected  for the full  year.  Certain
reclassifications  have been made to the prior period's financial information to
conform with the presentations used in 1999.


NOTE 2.  DISCONTINUED OPERATIONS

    In December 1998,  the Company  formalized its plan to offer for sale all of
its  non-core  businesses,  which  consist  of the  resale of  Nortel  and other
original  equipment  manufacturers'  wireline switching  equipment,  third party
repair of telecom  equipment  and pay  telephone  refurbishment.  In  connection
therewith,  goodwill  recorded for these  businesses  was  written-down  by $3.5
million to reflect the estimated net realizable  value.  On January 5, 1999, the
Company  formally  announced  its intention to sell these businesses. Management
expects that the sale will be completed in 1999.

    These businesses have been accounted  for as  discontinued  operations  and,
accordingly,  the  results of  operations  have been  excluded  from  continuing
operations  in  the  Consolidated  Statements  of  Operations  for  all  periods
presented.

                                       5
<PAGE>
    The assets and liabilities of the  discontinued  operations  included in the
Consolidated  Balance  Sheet at March 31, 1999  consisted of the  following  (in
thousands):


          Current Assets
             Accounts receivable........   $  7,456
             Inventories................     13,071
             Other current assets.......        630
                                           --------
                                           $ 21,157
                                           ========

          Noncurrent Assets
             Property and equipment.....   $  1,908
             Goodwill and other              
               intangibles..............      5,281
             Other assets...............      1,075
                                           --------
                                           $  8,264
                                           ========

          Current Liabilities
             Accounts payable...........   $  2,769
             Other accrued liabilities..      3,308
                                           --------
                                           $  6,077
                                           ========


NOTE 3.  PRO FORMA RESULTS OF OPERATIONS

     During 1998, the Company acquired four businesses:  Advanced TechCom,  Inc.
("ATI")   effective   January   29,   1998;   a   majority   interest   in  NACT
Telecommunications,  Inc. ("NACT") (the "NACT  Acquisition")  effective February
27,  1998 and the  remaining  minority  interest  in NACT  (the  `NACT  Merger")
effective October 28, 1998; Telco Systems,  Inc.  ("Telco" ) effective  November
30, 1999; and Cherry Communications Incorporated, d/b/a Resurgens Communications
Group ("RCG"),  and Cherry  Communications  U.K.  Limited  ("Cherry  U.K.",  and
together  with RCG,  "Resurgens")  effective  December  14,  1998,  collectively
refered to herein as (the "Acquisitions").

    On a pro forma,  unaudited  basis, as if the Acquisitions had occurred as of
January 1, 1998, total revenues, operating loss from continuing operations, loss
from continuing  operations and net loss from continuing  operations per diluted
common  share  for the  three  months  ended  March  31,  1998  would  have been
approximately   $55.2  million,   $12.0   million,   $15.4  million  and  $0.51,
respectively.

    These  unaudited  pro forma  results  have  been  prepared  for  comparative
purposes  only and are not  necessarily  indicative of the results of operations
which would  actually have occurred had the  Acquisitions  been in effect on the
date indicated.  Purchased  in-process research and development ("R&D") expensed
in connection with the Acquisitions has been excluded from the pro forma results
due to its nonrecurring nature.

NOTE 4:  PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT

Overview

    During  the  first  quarter  of 1998,  $5.4  million  and $44.6  million  of
purchased  in-process R&D was expensed in connection with the acquisition of ATI
and the NACT Acquisition,  respectively.  The $44.6 million of in-process R&D at
NACT consisted of 67.3% of the value of NACT products in the  development  stage
that were not  considered to have reached  technological  feasibility  as of the
date of the NACT  Acquisition.  In connection with the NACT Merger,  the Company
revalued  purchased  in-process  R&D to reflect the current status of in-process
NACT technology and related business forecasts and to ensure compliance with the
additional  guidance  provided by the Securities and Exchange  Commission in its
September  15,  1998  letter  to the  American  Institute  of  Certified  Public
Accountants.  The revalued  amount  approximated  the $44.6 million  expensed in
connection  with  the NACT  Acquisition,  therefore  no  additional  charge  was
recorded for purchased  in-process R&D.  However,  the effect of the revaluation
required the Company to reduce the first quarter charge related to the purchased
in-process R&D by $14.6 million and record an additional charge of $14.6 million
in the fourth quarter as of the date of the NACT Merger. Consequently,  net loss

                                       6
<PAGE>

and net loss per diluted  common  share for the quarter  ended March 31, 1998 of
$48.8 million and $2.52,  respectively,  as reported in the Company's  Report on
Form 10-Q for the three  months  ended March 31,  1998 is now  reported as $34.2
million and $1.77, respectively, in this Form 10-Q Report.

    These  amounts  were  expensed as  non-recurring  charges on the  respective
acquisition   dates.  These  write-offs  were  necessary  because  the  acquired
technology  had not yet  reached  technological  feasibility  and had no  future
alternate use.

    The value of the purchased in-process  technology from ATI was determined by
estimating  the  projected  net cash flows  related to  in-process  research and
development  projects,  including  costs  to  complete  the  development  of the
technology.  These cash flows were  discounted  back to their net present value.
The  projected  net cash flows  from such  projects  were based on  management's
estimates of revenues and  operating  profits  related to such  projects.  These
estimates were based on several assumptions, including those summarized below.

    The value of the purchased in-process technology from NACT was determined by
estimating  the  projected  net cash flows  related to  in-process  research and
development  projects,  excluding  costs  to  complete  the  development  of the
technology.  These cash flows were  discounted  back to their net present value.
The  projected  net cash flows  from such  projects  were based on  management's
estimates of revenues and  operating  profits  related to such  projects.  These
estimates were based on several  assumptions,  including those  summarized below
for each respective acquisition. The resultant net present value amount was then
reduced by a stage of completion factor. This factor more specifically  captures
the development  risk of an in-process  technology  (i.e.,  market risk is still
incorporated in the estimated rate of return).

    The nature of the  efforts  required  to develop  the  purchased  in-process
technology  into  commercially   viable  products   principally  relate  to  the
completion  of all  planning,  designing,  prototyping,  verification,  and test
activities  that are necessary to establish  that the product can be produced to
meet its design  specifications,  including functions,  features,  and technical
performance requirements.

    If these  projects  to develop  commercially  viable  products  based on the
purchased in-process  technology are not successfully  completed,  the sales and
profitability  of the  Company  may be  adversely  affected  in future  periods.
Additionally, the value of other intangible assets may become impaired.

ATI Merger

    ATI develops and manufactures a series of high-performance digital microwave
and  millimeterwave  radio equipment.  Their products reach across all frequency
bands and data rates and offer numerous  features.  The nature of the in-process
research and  development was such that  technological  feasibility had not been
attained.  Failure  to attain  technological  feasibility  would  have  rendered
partially designed equipment useless for other applications.  ATI's products are
designed for specific  frequency  bandwidths and, as such, are highly customized
to those  bandwidths  and the needs of  customers  wishing  to  operate in them.
Products only partially completed for certain bandwidths cannot be used in other
bandwidths.

    Between each product line,  various stages of development  had been reached.
Additionally,  within each product  line,  different  units had reached  various
stages of development.  Of the products management considered  in-process,  none
had attained  technological  feasibility.  The purchased  in-process  technology
acquired in the ATI acquisition was comprised of three primary  projects related
to high-performance,  digital microwave and millimeterwave radio equipment. Each
project  consists of multiple  products.  These projects were at multiple stages
along ATI's typical development  timeline.  Some projects were beginning testing
in ATI labs;  others  were at earlier  stages of  planning  and  designing.  The
majority of the products  were  scheduled to be released  during 1998,  1999 and
early 2000. Revenue  projections for the in-process  technologies  reflected the
anticipated release dates of each project.

                                       7
<PAGE>

    Revenue  attributable  to  in-process  technology  was estimated to increase
within  the first  three  years of the  seven-year  projection  at annual  rates
ranging from a high of 240.7% to a low of 2.3%,  decreasing within the remaining
years at annual rates ranging from 30.9% to 60.9% as other products are released
in  the  marketplace.   Projected  annual  revenue  attributable  to  in-process
technology  ranged from  approximately a low of $11.8 million to a high of $71.1
million  within the term of the  projections.  These  projections  were based on
assumed penetration of the existing customer base and movement into new markets.
Projected  revenues from in-process  technology were assumed to peak in 2001 and
decline  from 2002  through 2004 as other new products are expected to enter the
market.

    In-process  technology's   contribution  to  the  operating  profit  of  ATI
(earnings  before  interest,   taxes  and  depreciation  and  amortization)  was
estimated to grow within the  projection  period at annual rates  ranging from a
high of 665.9% to a low of 43.9% during the first four years,  decreasing during
the  remaining  years of the  projection  period  similar to the revenue  growth
projections   described  above.   Projected   in-process   technology's   annual
contribution  to operating  profit  (loss)  ranged from  approximately  a low of
$(900,000) to a high of $9.1 million within the term of the projections.

    The discount rate used to value the in-process  technology of ATI was 26.0%.
This discount rate was estimated  relative to the overall business discount rate
of 25.0% based on (1) the incomplete  status of the products expected to utilize
the in-process technology (i.e., development risk), (2) the expected market risk
of the planned products relative to the existing  products,  (3) the emphasis on
different  markets  than those  currently  pursued by ATI, and (4) the nature of
remaining development tasks relative to previous development efforts.

    Management  estimated  that the costs to develop the  in-process  technology
acquired in the ATI  acquisition  would be  approximately  $24.3  million in the
aggregate  through the year 2002. The expected sources of funding were scheduled
R&D expenses from the operating budget of ATI.

NACT Merger

    NACT  provides   advanced   telecommunications   switching   platforms  with
integrated applications software and network telemanagement  capabilities.  NACT
designs,   develops,  and  manufacturers  all  hardware  and  software  elements
necessary for a fully integrated, turnkey telecommunications switching solution.
The  nature  of  the  in-process   research  and   development   was  such  that
technological feasibility had not been attained. Failure to attain technological
feasibility,  especially  given the high degree of  customization  required  for
complete  integration  into the NACT  solution,  would have  rendered  partially
designed hardware and software useless for other applications. Incomplete design
of hardware  and  software  coding  would  create a  non-connective,  inoperable
product that would have no alternative use.

    NACT's business plan called for a shift in market focus to large  customers,
both  domestic  and  international;  therefore,  NACT had  numerous  projects in
development at the time of the acquisition. Additionally, the pending completion
of a major release of NACT's billing  system  required  significant  development
efforts to ensure continued integration with NACT's product suite. The purchased
in-process  technology  acquired in the NACT  acquisition  was  comprised  of 13
projects related to switching and billing systems. These projects were scheduled
to be released  between  February 1998 and April 2000.  These  projects  include
planned additions of new products, based on undeveloped technologies,  to NACT's
suite of STX and NTS  products.  The  projects  also  include  the  creation  of
products for new product suites.  The research and development  projects were at
various stages of development. None of the in-process projects considered in the
write-off had attained technological feasibility. The in-process projects do not
build on existing core technology;  such existing  technologies were valued as a
separate asset.

    A brief summary of the  significant  technologies  NACT was  developing  for
their STX and NTS products at the time of the acquisition is as follows:

                                       8
<PAGE>

    STX Application Switching Platform ("STX") -- STX was introduced in May 1996
as an integrated  digital tandem switching system which allows  scalability from
24 ports to a capacity of 1,024 ports per switch.  The STX can be combined  with
three additional STXs to provide a total capacity of 4,096 ports per system. The
current  STX is not  sufficiently  developed  to  address  NACT's  objective  of
targeting larger, more diverse  telecommunications  companies. To move into this
expanded customer base, NACT has multiple  development tasks planned for the STX
product.   NACT  plans  to  incorporate   into  the  STX  certain  features  and
enhancements such as SS7 and E1 (discussed below), R-2 signaling, and Integrated
Services  Digital  Network,  which are  critical  to the  Company's  strategy to
broaden its customer  base.  The SS7 and E1 features are considered new products
within the STX family of products.

    Master  Control  Unit  ("MCU") -- MCU is a database hub which can link up to
four switches,  creating a larger capacity tandem switch.  NACT is developing an
updated MCU, called the "redundant MCU", which allows for intelligent peripheral
or  recognition  of  pre-paid  caller  numbers.  Redundant  MCU is an  important
extension to the MCU system because it will allow a  telecommunications  company
to create an entire  switching  network  outside of the public  network owned by
major telecommunications firms.

    NTS  Telemanagement  and Billing System ("NTS") -- NTS performs call rating,
accounting,  switch management,  invoicing, and traffic engineering for multiple
NACT switches. NACT recently finished development of an improved billing system,
the NTS 2000,  which is  designed  for  real-time  transaction  processing  with
graphical user  interface and improved call reports.  The NTS 2000 is compatible
with non-NACT  switches.  The NTS 2000 also allows for customization of invoices
and reports.

    E1 to T1 Conversion -- The T1 is the  switchboard  hardware used in the STX.
The T1 product has been in existence for several  years.  The E1 is the standard
switchboard  used in Europe.  NACT is creating a  technology  which  facilitates
compatibility  between the T1 and the  switchboard  hardware  currently  used in
Europe. In addition,  NACT is currently developing enhanced switchboard hardware
called the T3, which will allow for more calls to pass  through the  switchboard
at one time. Both development efforts,  the T3 and compatibility  between E1 and
T1, are necessary as NACT moves into international markets.

    Transmission Control  Protocol/Internet  Protocol ("TCP/IP") Connectivity --
TCP/IP is the most common method of connecting personal computers,  workstations
and servers. Other historically dominant networking protocols, such as the local
area network ("LAN") protocol and international packet  exchange/sequence packet
exchange,  are losing ground to TCP/IP. The addition of TCP/IP is vital relative
to NACT's strategic objective of offering voice-over-Internet.

    68060 -- The Company is  incorporating  the Motorola  68060 board in the STX
application  platform  to enable  the STX to support  2,048  ports per switch or
8,192  ports  per  integrated  MCU  system.  With this  enhancement,  the STX is
expected to process significantly more call minutes per month.

    Signaling  System 7 ("SS7") -- SS7 is  software  that  allows a call,  which
normally  would  have to go  through  a series  of  switchboards  to  reach  its
destination,  to instead skip from the first  switchboard to the last.  With the
addition of this  enhancement,  the STX switch can interface  with carriers more
quickly and  efficiently.  In addition,  NACT is developing the C7, which is the
European version of the SS7.

    NACT  had 13  projects  in  development  at the time of  acquisition.  These
projects  were at  multiple  stages  along  NACT's  development  timeline.  Some
projects were beginning  testing in NACT labs;  others were at earlier stages of
planning and  designing.  These  projects  were  scheduled  for release  between
December  1998  and  December  2000.  Revenue  projections  for  the  in-process
technologies reflected the anticipated release dates of each project.

                                       9
<PAGE>

    Revenue attributable to in-process technology was assumed to increase in the
first five years of the 12-year projection at annual rates ranging from 61.4% to
2.81%, decreasing over the remaining years at annual rates ranging from 16.0% to
48.5% as other  products  are  released  in the  marketplace.  Projected  annual
revenue attributable to in-process technology ranged from approximately a low of
$8.0  million to a high of $101.1  million  within the term of the  projections.
These  projections  were based on assumed  penetration of the existing  customer
base  and  movement  into  new  markets.   Projected  revenues  from  in-process
technology  were  assumed to peak in 2003 and decline  from 2004 through 2009 as
other new products are expected to enter the market.

    In-process  technology's  contribution  to  the  operating  profit  of  NACT
(earnings  before  interest,   taxes  and  depreciation  and  amortization)  was
projected to grow within the  projection  period at annual rates  ranging from a
high of 67.2% to a low of 2.8%  during the first five years,  decreasing  during
the  remaining  years of the  projection  period  similar to the revenue  growth
projections   described  above.   Projected   in-process   technology's   annual
contribution to operating profit ranged from approximately $2.1 million to $29.3
million within the term of the projections.

    The discount  rate used to value the existing  technology of NACT was 14.0%.
This discount rate was estimated  relative to the overall business discount rate
of 15.0% based on (1) the completed  status of the products  utilizing  existing
technology  (i.e.,  the lack of  development  risk),  and (2) the  potential for
obsolescence of current products in the marketplace.

    The discount rate used to value the in-process technology of NACT was 15.0%.
This discount rate was estimated  relative to the overall business discount rate
of 15.0% based on (1) the incomplete  status of the products expected to utilize
the in-process technology (i.e., development risk), (2) the expected market risk
of the planned products relative to the existing  products,  (3) the emphasis on
targeting larger customers for the planned products, (4) the expected demand for
the products from current and prospective  NACT  customers,  (5) the anticipated
increase in NACT's  sales  force,  and (6) the nature of  remaining  development
tasks relative to previous development efforts.

    Management  estimates  that the costs to develop the  in-process  technology
acquired  in the NACT  acquisition  will be  approximately  $5.0  million in the
aggregate  through the year 1999. The expected sources of funding were scheduled
research and development expenses from the operating budget of NACT.



NOTE 5. RESTRUCTURING AND OTHER CHARGES

Summary

    During 1998, the Company approved and began  implementing two  restructuring
programs   designed  to  reduce   operating   costs,   outsource   manufacturing
requirements  and focus Company  resources on recently  acquired  business units
containing proprietary technology or services.

    In the first quarter of 1998, the Company approved and began  implementing a
restructuring  program to consolidate  several  operations and exit the contract
manufacturing  business.  In  connection  with  these  activities,  the  Company
recorded  restructuring and other charges of approximately $6.6 million of which
$1.1 million was charged to continuing  operations  and $5.5 million was charged
to  discontinued  operations.  This  restructuring  activity  was  substantially
completed as of June 30, 1998.

                                       10
<PAGE>

    In  the fourth quarter of 1998, in connection with  the (i) NACT,  Telco and
Resurgens  Mergers;  (ii)  election  of several  new  outside  directors  to the
Company's Board;  and (iii)  appointment of a new Chief Executive  Officer,  the
Company  approved  and  began  implementing  a major  restructuring  program  to
reorganize its operating  structure,  consolidate several facilities,  outsource
its  manufacturing  requirements,  rationalize its product offerings and related
development  efforts,  and  pursue  other  potential  synergies  expected  to be
realized as a result of the  integration  of recently  acquired  businesses.  In
connection with these activities,  the Company recorded  restructuring and other
charges of  approximately  $43.0  million of which $36.2  million was charged to
continuing  operations and $6.8 million was charged to discontinued  operations.
As of the date of this Report,  the Company has  substantially  completed  these
restructuring activities.

    The following  details  the  charges during the first quarter of 1999 to the
reserve for the fourth quarter 1998  restructuring  activities:


                                             Reserve                 Reserve
                                             Balance       1999      Balance
                                            At 12/31/98  Activity   At 3/31/99
                                            -----------  --------   ----------
                                                       (In thousands)

Reorganize Operating Structure
  Employee termination benefits..........     $   449     $    125     $  324
  Idle facility costs....................         258           62        196
  Other..................................         304          176        128
                                              -------     --------     ------
                                                1,011          363        648
Consolidation of ATI and Telco
  Employee termination benefits..........       1,175          369        806
  Idle facility costs....................         577          102        475
  Other..................................         300           --        300
                                              -------     --------     ------
                                                2,052          471      1,581
Outsource Manufacturing
  Employee termination benefits..........         310           98        212
  Idle facility costs....................         365          239        126
  Other..................................         332          332         --
                                              -------     --------   --------
                                                1,007          669        338
Product Line Rationalization.............         568          228        340
                                              -------     --------     ------
          Total..........................     $ 4,638     $  1,731     $2,907
                                              =======     ========     ======

    Costs associated with the reorganized  operating structure consist primarily
of termination benefits payable to the Company's former President, which will be
paid throughout 1999, and remaining lease obligations on the Company's Equipment
Group  headquarters facility in Alpharetta, Georgia. In February 1999, Equipment
Group  personnel  relocated  to  the Company's  headquarters  in Atlanta and the
facility was closed.

    Restructuring costs also included amounts associated with  the consolidation
of the  Company's  ATI  operations  in  Wilmington,  Massachusetts  into Telco's
facility in Norwood,  Massachusetts.  Manufacturing of ATI's wireless radios has
been  out-sourced  to a  contact  manufacturer  and all other  aspects  of ATI's
operations are being integrated into Telco's existing operating  infrastructure.
Severance and other termination benefits of approximately $1.2 million are to be
paid to approximately 60 ATI employees as the consolidation program is completed
during the first half of 1999.  A provision  of $577,000  was  recorded  for the
costs  associated  with the idle portion of the  Wilmington  facility,  which is
leased through November 2000.

     An integral part of the restructuring program was the Company's decision to
outsource all its electrical manufacturing requirements and sell its Alpharetta,
Georgia  manufacturing   facility  to  an  established  contract   manufacturer.
Severance  and other  termination  benefits of  $426,000  were  provided  for in
December 1998 to approximately 25 personnel.  The Company  completed the sale of
its  manufacturing  operations  in March  1999.  The  actual  loss  incurred  in
connection with the sale did not differ  materially from the amounts recorded in
the restructuring charges. As part of this sale agreement, the Company committed
to  purchase  a minimum of $15.0  million  of  products  and  services  from the
contract  manufacturer in each of three  consecutive 12 month periods  beginning
April 1, 1999.

                                       11
<PAGE>

    Costs related to product line rationalization  related  to  the phase out of
the Company's  Compact Digital  Exchange  ("CDX")  switch.  In January 1999, the
Company elected to reallocate  development resources targeted for the CDX switch
as a stand-alone  product to the integration of the central office  functionally
of the CDX switch and the  long-distance  functionality  of NACT's switch into a
common, next generation technology platform. Costs incurred in the first quarter
of 1999 related primarily to engineering  efforts  incurred  related to 1998 and
prior CDX contracts.

NOTE 6.  INVENTORIES

    Inventories consisted of the following:

                                                  March 31,    December 31,
                                                    1999           1998
                                                  --------       --------
      Transport and access products..........     $  9,445       $  8,723
      Switching products.....................        1,339            986
      Cellular equipment.....................       16,178          9,421
      Work in progress.......................        5,266          4,953
      Raw materials..........................        8,414         12,425
                                                  --------       --------
              Continuing operations                 40,642         36,508
      Discontinued operations                       13,069         12,083
                                                  --------       --------
              Total inventories                   $ 53,711       $ 48,591
                                                  ========       ========

    During  the  first  quarter  of  1999,  in  connection  with the sale of the
Company's  Alpharetta,  Georgia  manufacturing  facility and the  outsourcing of
manufacturing   for  ATI's  wireless  radios,  the  Company  sold  approximately
$3.3 million and $2.1 million of inventories, respectively.

NOTE 7:  REPORTABLE SEGMENT DATA

    The Company has two reportable segments: telecommunications carrier services
("World  Access  Telecommunications  Group")  and  telecommunications  equipment
("World Access  Equipment  Group").  The World Access  Telecommunications  Group
provides wholesale  international long distance service through a combination of
its own international  network  facilities,  various  international  termination
relationships  and resale  arrangements with other  international  long distance
service providers.  The World Access Equipment Group develops,  manufactures and
markets digital switches,  billing and network telemanagement systems,  cellular
base  stations,  fixed wireless  local loop systems,  intelligent  multiplexers,
digital microwave radio systems and other telecommunications network products.

    The World Access Telecommunications Group consists of the Resurgens business
which was acquired in December 1998 and a portion of the NACT business which was
acquired in February and October 1998.

    The Company evaluates performance and allocates resources based on operating
income or loss before  interest and other  income,  interest  expense and income
taxes. The accounting  policies of the reportable segments are the same as those
described in the summary of significant accounting policies.  Intersegment sales
and  transfers  are  recorded at cost plus a markup that equals  current  market
prices.  There were no  intersegment  sales  during the three months ended March
31, 1999 and the year ended December 31, 1998.

                                       12
<PAGE>

    The Company's  reportable  segments are business units that offer  different
products and services.  The reportable  segments are each managed separately due
to the unique nature of each segment (i.e., selling telecommunications equipment
versus providing  international  long distance  services).  The following tables
present revenues and other financial information by business segment:

<TABLE>
<CAPTION>

                                                              For the Three Months Ended March 31,

                                            Equipment     Telecom              Continuing    Discontinued
                                              Group        Group       Other   Operations     Operations       Total
                                            ---------    --------     -------  ----------    ------------    ---------  
                                                                         (In thousands)
      <S>                                  <C>           <C>          <C>      <C>             <C>           <C>
      Revenues from external customers
             1999                          $ 57,867      $ 85,612     $  --    $ 143,479       $  8,208      $ 151,687
             1998                            22,860           545        --       23,405         12,326         35,731
      In-process research and development
             1999                              --            --          --         --             --             --
             1998                            35,400          --          --       35,400           --           35,400
      Restructuring and other charges
             1999                              --            --          --         --             --             --
             1998                             1,055          --          --        1,055          5,545          6,600
      Segment income or loss
             1999                             6,453           (56)     (4,276)     2,121             32          2,153
             1998                           (24,864)           54      (7,649)   (32,459)        (1,742)       (34,201)

                                            Equipment     Telecom              Continuing    Discontinued
                                              Group        Group       Other   Operations     Operations       Total
                                            ---------    --------     -------  ----------    ------------    --------- 
                                                                         (In thousands)
      Segment assets
             As of March 31, 1999           387,648       160,473      28,432    576,553         29,421        605,974
             As of December 31, 1998        380,721       161,137      40,823    582,681         31,131        613,812
      
</TABLE>

NOTE 8:  LITIGATION

    Following  the Company's  announcement  in January 1999  regarding  earnings
expectations for the quarter and year ended December 31, 1998 and the subsequent
decline in the price of the  Company's  common stock,  22 putative  class action
complaints  were filed against the Company.  The Company and certain of its then
current officers and directors were named as defendants. A second decline in the
Company's  stock price occurred  shortly after actual earnings were announced in
February  1999, and a few of these cases were amended,  and  additional  similar
complaints were filed. The 22 cases were consolidated  pursuant to a court order
entered on April 28,  1999.  The Company  expects  that an amended  consolidated
complaint will be filed in May 1999. The court has deferred  ruling on a pending
motion regarding the appointment of lead plaintiffs and lead counsel.

    Although  the  22  complaints  differ  in  some  respects,  the  plaintiffs,
generally,  have alleged  violations of the federal securities laws arising from
misstatements   of  material   information  in  and/or   omissions  of  material
information  from certain of the Company's  securities  filings and other public
disclosures,  principally  related to inventory and sales activities  during the
fourth  quarter of 1998. In general,  the complaints are filed on behalf of: (a)
persons who purchased  shares of the Company's  common stock between  October 7,
1998 and February 11, 1999;  (b)  shareholders  of Telco who received  shares of
common stock of the Company as a result of the  Company's  acquisition  of Telco
that closed on November  30,  1998;  and (c)  shareholders  of NACT who received
shares of common stock of the Company as a result of the  Company's  acquisition
of NACT that closed on October 28, 1998. Plaintiffs have requested damages in an
unspecified amount in their complaints. Although the Company and the individuals
named as  defendants  deny that they have  violated any of the  requirements  or
obligations  of the  federal  securities  laws,  there can be no  assurance  the
Company will not sustain  material  liability as a result of or related to these
shareholder suits.

                                       13
<PAGE>

    In  addition  to  the  proceedings  described  above,  on  March  18,  1999,
plaintiffs  Craig  Illausky,  John Ufkes and Steven R. Mason filed an additional
putative  class action  complaint in the United  States  District  Court for the
Northern District of Georgia. The Company and certain of its officers, directors
and former  directors were named as defendants.  The complaint is similar to the
complaints  filed in the proceedings  described  above,  alleging  violations of
federal  securities laws arising from  misstatements of material  information in
and/or  omissions  of  material   information  from  certain  of  the  Company's
securities filings and other public  disclosures.  The Company expects to file a
motion requesting that this action be consolidated with the other pending cases.


NOTE 9:  INCOME TAXES

    The  Company's   provision  for  income  taxes  attributable  to  continuing
operations  for the three  months  ended  March  31,  1999 was $3.5  million  or
approximately  61.6% of income from continuing  operations  before income taxes.
The provision for income taxes differs from the amount  computed by applying the
statutory  federal and state  income tax rates due to  non-deductible  expenses,
primarily goodwill amortization.


NOTE 10:  SUBSEQUENT EVENTS

    In April 1999, the Company  issued  50,000 shares of 4.25% Cumulative Senior
Perpetual  Convertible  Preferred Stock, Series A (the "Preferred Stock") to The
1818 Fund III,  L.P.  ("The  1818 Fund  III") for an  aggregate  amount of $50.0
million.  The General Partner of the 1818 Fund III is Brown Brothers  Harriman &
Co.  ("BBH"),  America's  largest  private  bank  and the  oldest  owner-managed
business partnership in the country.

    Each share of  Preferred  Stock is  convertible  at the option of the holder
into the Company's common stock in accordance with a conversion formula equal to
the liquidation preference per share divided by a conversion price of $11.50 per
share,  subject to  adjustment.  If the closing  trading  price of the Company's
common stock as quoted by The Nasdaq  Stock Market  exceeds $30 per share for 45
consecutive  trading days, the Preferred Stock will be  automatically  converted
into the  Company's  common  stock.  The  Preferred  Stock may be voted with the
Company's  common stock on an as converted basis. The holders of Preferred Stock
also have the right to  designate  one  member  to the Board of  Directors.  The
holders of Preferred Stock have certain supermajority voting rights upon certain
circumstances,  such as the authorization of a class of securities having senior
or parity rights with the Preferred  Stock, a  reorganization  or liquidation of
the Company,  or a consolidation or merger of the Company into a third party. As
part of the above sale, The 1818 Fund III also received an option to purchase an
additional  $20 million in  Preferred  Stock from the Company  prior to June 30,
2000 at the original purchase price per share.

    Upon the closing of the  transaction,  Lawrence C. Tucker,  a partner at BBH
and co-manager of The 1818 Fund III,  became a member of the Company's  Board of
Directors.

                                       14
<PAGE>



                               WORLD ACCESS, INC.
                            SUPPLEMENTARY INFORMATION
                        SUMMARIZED FINANCIAL INFORMATION
                                       OF
                          WA TELCOM PRODUCTS CO., INC.

    On October 28, 1998,  World Access,  Inc.  reorganized its operations into a
holding  company  structure and changed its name to WA Telcom Products Co., Inc.
("WA  Telcom").  As  a  result  of  the  reorganization,   WA  Telcom  became  a
wholly-owned  subsidiary  of WAXS INC.,  which changed its name to World Access,
Inc. and is the Company filing this Report. Pursuant to the reorganization,  the
Company  exchanged each  outstanding  share of common stock of WA Telcom for one
share of common  stock of the  Company,  converted  each  option and  warrant to
purchase  shares of common  stock of WA Telcom  into  options  and  warrants  to
purchase a like number of shares of common stock of the  Company,  and fully and
unconditionally guaranteed the payment of the $115.0 million aggregate principal
amount 4.5%  convertible  subordinated  notes  dated  October 1, 1997 (due 2002)
previously issued by WA Telcom.

    Set forth  below is summarized financial  information of WA Telcom presented
for the information of its  debtholders.  The summarized  financial  information
presented below includes the results of operations for the following  businesses
from their  respective dates of acquisitions:  Cellular  Infrastructure  Supply,
Inc. -- January 1997;  Galaxy  Personal  Communications  Services,  Inc. -- July
1997; Advanced TechCom, Inc. -- January 1998; NACT  Telecommunications,  Inc. --
February 1998; and Cherry Communications  Incorporated and Cherry Communications
U.K. Limited -- December 1998.

                            BALANCE SHEET INFORMATION

                                 (In thousands)

                                                       March 31,   December 31,
                                                         1999         1998
                                                       --------    ------------
                                              
      Current assets...............................   $ 158,315     $ 162,554
      Non-current assets...........................     311,134       300,139
      Total assets.................................     469,449       462,693
      Current liabilities..........................      61,984        70,976
      Non-current liabilities......................     137,969       138,529
      Stockholders equity..........................     269,496       253,188
      Total liabilities and stockholders equity....     469,449       462,693

                         OPERATING STATEMENT INFORMATION

                                 (In thousands)

      Three Months Ended March 31, 1999(1)
      
      Total sales....................................   $ 121,077
      Gross profit...................................      18,132
      Income (loss) from continuing operations.......       2,691
      Income (loss) from discontinued operations(2)..          32
      Net income ....................................       2,723


----------
 (1) No operating statement information is presented for the three  months ended
March 31, 1998 as the holding company reorganization  was  not  completed  until
October 28, 1998.

 (2) Reflects the Company's plan to sell all of its non-core  businesses,  which
consist  of the  resale of Nortel and other  original  equipment  manufacturers'
wireline  switching  equipment,  third party repair of telcom  equipment and pay
telephone  refurbishment.  The discontinued operations had total assets of $29.4
million  and  $31.1  million  as of  March  31,  1999  and  December  31,  1998,
respectively, and total liabilities of $6.1 million and $7.8 million as of March
31, 1999 and December 31, 1998, respectively.

                                       15
<PAGE>

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

Forward Looking Statements

    This Form 10-Q Report contains certain  "forward-looking  statements" within
the  meaning of  Section  27A of the  Securities  Act of 1993,  as amended  (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended,  which are intended to be covered by the safe harbors created  thereby.
Forward-looking  statements are statements other than historical  information or
statements  of  current  condition.  Some  forward  looking  statements  may  be
identified  by use of such terms as  "believes",  "anticipates",  "intends",  or
"expects".  These forward-looking statements relate to the plans, objectives and
expectations  of the  Company for future  operations.  In light of the risks and
uncertainties  inherent in all such projected operational matters, 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  or  that  any of  the  Company's  operating
expectations will be realized.

    Factors that could cause actual results to differ from the results discussed
in the forward-looking statements include, but are not limited to, the Company's
dependence on (i) recently  introduced  products and products under development;
(ii)  successful   integration  of  new   acquisitions;   (iii)  the  impact  of
technological  change on the Company's products;  (iv) changes in customer rates
per minute;  (v) termination of certain service agreements or inability to enter
into  additional  service  agreements;  (vi)  changes in or  developments  under
domestic   or   foreign   laws,    regulations,    licensing   requirements   or
telecommunications  standards; (vii) changes in the availability of transmission
facilities; (viii) loss of the services of key officers; (ix) loss of a customer
which  provides  significant  revenues to the  Company;  (x) highly  competitive
market  conditions in the industry;  and (xi)  concentration of credit risk. The
foregoing  review  of  the  important   factors  should  not  be  considered  as
exhaustive. 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.

Overview

    The Company provides international long distance voice and data services and
proprietary  network  equipment to the global  telecommunications  markets.  The
World  Access  Telecommunications   Group,  (the  "Telecommunications   Group"),
provides wholesale  international long distance service through a combination of
its own international  network  facilities,  various  international  termination
relationships  and resale  arrangements with other  international  long distance
service  providers.  The World Access Equipment Group, (the "Equipment  Group"),
develops,  manufactures  and  markets  digital  switches,  billing  and  network
telemanagement  systems,  cellular  base  stations,  fixed  wireless  local loop
systems,  intelligent  multiplexers,  digital  microwave radio systems and other
telecommunications  network  products.  To support  and  complement  its product
sales,  the Company also  provides its  customers  with a broad range of network
design, engineering, testing, installation and other value-added services.

    During 1998,  the Company  continued to execute its Total Network  Solutions
strategy of  broadening  its offering of  proprietary  equipment and services by
acquiring four  businesses.  In the first quarter of 1998, the Company  acquired
Advanced TechCom, Inc. ("ATI"), a designer and manufacturer of digital microwave
and millimeterwave radio systems for voice, data and/or video applications and a
majority  stake  in NACT  Telecommunications,  Inc.  ("NACT"),  a  single-source
provider of advanced  telecommunications  switching  platforms  with  integrated
telephony  software  applications and network  telemanagement  capabilities.  In
October 1998, the Company acquired the remaining  minority  interest in NACT. In
November 1998, the Company acquired Telco Systems,  Inc.  ("Telco"),  a designer
and  manufacturer  of  broadband  transmission,  network  access  and  bandwidth
optimization products.

    During 1998,  Telco built a core product  portfolio  that  incorporates  new
technologies  and  strategically  positions  it for the  impending  evolution of
telecommunications  markets.  Telco made two strategic acquisitions in 1998 that
expanded its product offerings from circuit switched into packet switched, frame
relay and ATM markets.

                                       16
<PAGE>

    In December 1998, the Company acquired Cherry  Communications  Incorporated,
d/b/a Resurgens  Communications  Group ("RCG"),  and Cherry  Communications U.K.
Limited  ("Cherry  U.K.",  and together  with RCG,  "Resurgens").  Resurgens,  a
provider of  wholesale  international  long  distance  services.  Resurgens  now
conducts its business as the World Access  Telecommunications Group. As a result
of the Resurgens  acquisition,  MCI WorldCom,  Inc.  ("MCI  Worldcom"),  a major
customer and vendor of Resurgens,  now owns approximately 14% of the outstanding
common stock of the Company.

    Through its completed  acquisitions in 1998, the Company  believes it is now
positioned to offer its customers complete telecommunications network solutions,
including  access to international  long distance,  proprietary  equipment,  and
network planning and engineering  services.  The Company's  management  believes
that  numerous  synergies  exist as a result  of these  acquisitions,  including
cross-selling opportunities, technology development and cost savings.

    In December 1998,  John D. ("Jack") Phillips was appointed the Company's new
President and Chief Executive  Officer.  Mr. Phillips was formerly the President
and Chief Executive Officer of Resurgens. Also in December 1998, two new outside
directors joined the Company's Board.

    In connection with the recently completed acquisitions, the appointment of a
new Chief  Executive  Officer  and the  election of new  directors,  the Company
approved and began implementing a major restructuring  program to reorganize its
operating structure, consolidate several facilities, outsource its manufacturing
requirements, rationalize its product offerings and related development efforts,
and pursue other potential  synergies expected to be realized as a result of the
integration of recently acquired businesses.  As of the date of this Report, the
restructuring activities are substantially complete.

    In December 1998,  the Company  formalized its plan to offer for sale all of
its  non-core  businesses,  which  consist  of the  resale of  Nortel  and other
original  equipment  manufacturers'  wireline switching  equipment,  third party
repair of telecom  equipment and pay telephone  refurbishment.  These businesses
have been  accounted for as  discontinued  operations  and,  accordingly,  their
results of  operations  have been  excluded  from  continuing  operations in the
Consolidated Statements of Operations.

    In April 1999, the Company raised approximately $47.7 million in equity, net
of expenses,  through the sale of 50,000 newly issued shares of 4.25% Cumulative
Senior Perpetual Convertible Preferred Stock to The 1818 Fund III, L.P. The 1818
Fund  III is one of a  family  of  private  equity  partnerships  (the  "Funds")
organized to acquire substantial, non-controlling, long-term ownership positions
in growing,  strongly positioned companies. The Funds have provided active early
support  and  capital to a number of highly  successful  telecommunications  and
media companies, including MCI WorldCom and Frontier Vision. The General Partner
of the Funds is Brown Brothers Harriman & Co. ("BBH"), America's largest private
bank and the oldest owner-managed  business partnership in the country. Upon the
closing of the transaction,  Lawrence C. Tucker, a partner at BBH and co-manager
of The 1818 Fund III, became a member of the Company's  Board of Directors.  Mr.
Tucker has been a partner of BBH since 1979 and  currently  serves as a director
of  MCI  WorldCom,  National  HealthCare  Corporation,  Riverwood  International
Corporation and the MCI WorldCom Venture Fund.

    During the past few years,  the Company has  significantly  strengthened its
balance sheet through improved operating results, the recently completed sale of
$50.0  million  of  preferred  stock,  a  $115.0  million  sale  of  convertible
subordinated notes, a $26.2 million secondary public equity offering and a $75.0
million credit facility.  The Company has used this capital for acquisitions and
to support  the  working  capital  requirements  associated  with the  Company's
growth.

Quarterly Operating Results

    The Company's quarterly operating results are difficult to forecast with any
degree  of  accuracy  because a number  of  factors  subject  these  results  to
significant   fluctuations.   As   a   result,   the   Company   believes   that
period-to-period  comparisons  of its  operating  results  are  not  necessarily
meaningful and should not be relied upon as indications of future performance.

                                       17
<PAGE>

    The Company's  Telecommunications  Group carrier service revenues, costs and
expenses have fluctuated significantly in the past and are likely to continue to
fluctuate  significantly  in the  future as a result of  numerous  factors.  The
Company's  revenues  in any given  period can vary due to  factors  such as call
volume  fluctuations,  particularly  in regions with  relatively high per-minute
rates;  the addition or loss of major  customers,  whether through  competition,
merger,  consolidation or otherwise; the loss of economically beneficial routing
options for the termination of the Company's traffic;  financial difficulties of
major customers;  pricing  pressure  resulting from increased  competition;  and
technical  difficulties  with or failures of portions of the  Company's  network
that impact the Company's  ability to provide  service to or bill its customers.
The  Company's  operating  expenses in any given  period can vary due to factors
such as  fluctuations  in  rates  charged  by  carriers  to  terminate  traffic;
increases in bad debt expense and reserves;  the timing of capital expenditures,
and other costs associated with acquiring or obtaining other rights to switching
and other transmission facilities; and costs associated with changes in staffing
levels of sales, marketing,  technical support and administrative  personnel. In
addition,  the  Company's  operating  results  can vary due to  factors  such as
changes in  routing  due to  variations  in the  quality of vendor  transmission
capability; loss of favorable routing options; the amount of, and the accounting
policy for,  return traffic under operating  agreements;  actions by domestic or
foreign  regulatory  entities;  the  level,  timing  and  pace of the  Company's
expansion in  international  and commercial  markets;  and general  domestic and
international economic and political conditions.  Further, a substantial portion
of  transmission  capacity  used by the Company is  obtained on a variable,  per
minute and  short-term  basis,  subjecting  the  Company to the  possibility  of
unanticipated price increases and service cancellations.  Since the Company does
not generally  have  long-term  arrangements  for the purchase or resale of long
distance services, and since rates fluctuate significantly over short periods of
time, the Company's operating results may vary significantly.

    As the Company's Equipment Group increases its number of  telecommunications
product offerings, its future operating results may vary significantly depending
on factors such as the timing and shipment of  significant  orders,  new product
offerings  by the  Company and its  competitors,  market  acceptance  of new and
enhanced versions of the Company's products,  changes in pricing policies by the
Company and its competitors,  the availability of new  technologies,  the mix of
distribution  channels  through  which the  Company's  products  are  sold,  the
inability to obtain sufficient supplies of sole or limited source components for
the Company's products,  gains or losses of significant customers, the timing of
customers'  upgrade and  expansion  programs,  changes in the level of operating
expenses,   the  timing  of  acquisitions,   seasonality  and  general  economic
conditions.

Results of Continuing Operations

    The  following  table sets  forth  certain  financial  data  expressed  as a
percentage of total sales from continuing operations:
                                                  Three Months Ended March 31
                                                       1999         1998
                                                     --------      --------
Carrier service revenues..........................     59.7%          2.3%
Equipment sales...................................     40.3          97.7
                                                     --------      --------
   Total sales....................................    100.0         100.0
Cost of carrier services..........................     52.7           1.9
Cost of services network..........................      3.9            .2
Cost of equipment sold............................     22.3          52.1
Amortization of acquired technology...............       .8           --
                                                     --------      --------
   Total cost of sales............................     79.7          54.2
                                                     --------      --------
   Gross profit...................................     20.3          45.8
Research and development..........................      3.0           3.1
Selling, general and administrative...............      9.7          11.9
Amortization of goodwill..........................      2.2           2.7
In-process research and development...............      --          151.3
Restructuring and other charges...................      --            2.5
                                                     --------      --------
   Operating income (loss)........................      5.4        (125.7)
Interest and other income.........................       .3           5.5
Interest expense..................................     (1.8)         (6.2)
                                                     --------      --------
   Income (loss) from continuing operations
   before income taxes and minority interests.....      3.9        (126.4)
Income taxes......................................      2.4           9.4
                                                     --------      --------
   Income (loss) from continuing operations 
   before minority interests......................      1.5        (135.8)

Minority interests in earnings of subsidiary......      --            2.9
                                                     --------      --------
   Income (loss) from continuing operations.......      1.5%       (138.7)%
                                                     ========      ========


                                       18
<PAGE>

Three Months Ended March 31, 1999 Continuing Operations Compared to Three Months
Ended March 31, 1998 Continuing Operations

    Sales.  Total sales increased $120.1 million,  or 513.0%,  to $143.5 million
in the first quarter of 1999 from $23.4 million in the first quarter of 1998.

    Carrier service  revenues were $85.6 million in the first quarter of 1999 as
compared to $545,000, in the first quarter of 1998 which consisted of facilities
management  services at NACT.  This increase is due to revenues  from  Resurgens
which  was  acquired  on  December  15,  1998 and  represented  an  increase  of
approximately  $9.3 million,  or 12.2%,  over revenues  realized by Resurgens in
its fourth quarter of 1998.

    Equipment sales  increased $35.0 million,  or 153.1% to $57.9 million in the
first  quarter of 1999 from  $22.9  million  in the first  quarter of 1998.  The
increase  in  equipment  sales  related  to an  increase  in sales  of  cellular
equipment sold by CIS, and the Company's  newly acquired  businesses,  including
transmission  and access  products sold by Telco,  which was acquired  effective
November 30, 1998, switching products sold by NACT, which was acquired effective
February 28, 1998,  and digital  radio  systems sold by ATI,  which was acquired
effective January 29, 1998.

    Gross Profit.  Gross profit  increased  $18.4 million,  or 171.3%,  to $29.1
million in the first  quarter of 1999 from $10.7 million in the first quarter of
1998.  Gross profit  margin  decreased to 20.3% in the first  quarter of 1999 as
compared to 45.8% in the first quarter of 1998.

    Carrier service gross profit  increased to $4.4 million in the first quarter
of 1999 from $53,000 in the first quarter of 1998.  Gross profit margin was 5.1%
in the first  quarter of 1999 as compared to 9.7% in the first  quarter of 1998,
which  consisted  of  facilities  management  services at NACT.  Variable  gross
margins on these  revenues,  which excludes the fixed costs  associated with the
services network, increased to 11.6% in the first quarter of 1999 from the 11.0%
that Resurgens  realized in its fourth quarter of 1998. The increase in variable
margins is due to  increased  economies  of scale  associated  with the internal
services network and an increase in the number of direct and transit agreements.

    Equipment Group gross profit  increased $14.0 million,  or 131.6%,  to $24.7
million in the first  quarter of 1999 from $10.7 million in the first quarter of
1998.  Gross profit margin  decreased to 42.7% in the first quarter of 1999 from
46.7% in the first quarter of 1998.  The  decreased  margin  performance  of the
Equipment  Group  relates  to the  $1.2  million  of  amortization  of  acquired
technology  costs in the first quarter 1999 relating to the technology  acquired
in the Telco and NACT  acquisitions,  digital radio  systems sold by ATI,  which
included  sales of the new WavePLEX  radio  system which  carries a lower profit
margin than the Equipment Group's other proprietary products,  and lower margins
on sales of  cellular  equipment  sold by CIS over the  first  quarter  of 1998,
resulting  from large contract  price  negotiations  which enabled CIS to obtain
significant sales growth of 84.2% over the first quarter of 1998.

    Research and  Development.  Research and  development  expenses which relate
exclusively to the Equipment  Group increased $3.6 million,  or 494.8%,  to $4.4
million in the first quarter of 1999 from $732,000 in the first quarter of 1998.
The increase in expenses was attributable to the acquisitions of Telco, NACT and
ATI.  Research and  development  expenses  increased to 7.5% of total  equipment
sales in the first  quarter  of 1999 from 3.2% of total  equipment  sales in the
first quarter of 1998.

    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased $11.1 million, or 399.4%, to $13.9 million in
the first  quarter of 1999 from $2.8 million in the first  quarter of 1998.  The
increase  primarily related to expenses  associated with the operations of NACT,
which was acquired in late February 1998 and expenses  related to the operations
of Resurgens and Telco,  which were acquired in the fourth quarter of 1998. As a
percentage  of  total  sales,  selling,   general  and  administrative  expenses
decreased to 9.7% in the first  quarter of 1999 from 11.9% in the first  quarter
of 1998.

                                       19
<PAGE>

    Amortization of Goodwill. Amortization of goodwill increased $2.5 million to
$3.1 million in the first  quarter of 1999 from $642,000 in the first quarter of
1998,  primarily as a result of the goodwill  generated in  connection  with the
Resurgens, Telco and NACT acquisitions.

    Operating  Income (Loss).  Operating  income increased $37.1 million to $7.7
million in the first  quarter of 1999 as compared to a loss of $29.4  million in
the first quarter of 1998 due to the significant special charges recorded during
the first quarter of 1998 related to acquisitions  and  restructuring  programs.
Operating  income was 5.4% in the first  quarter of 1999 as compared to (125.7%)
in the first quarter of 1998.  Operating income increased $694,000,  or 9.9%, in
the first quarter of 1999 from $7.0 million before special  charges in the first
quarter of 1998. Operating income margin, decreased to 5.4% in the first quarter
of 1999 from 30.1%  before  special  charges in the first  quarter of 1998.  The
reduction in operating  income  margin is due to the margins of the newly formed
Telecommunications  Group  which  are  substantially  less  than  those  of  the
Equipment  Group and the increased  charges to operations  for  amortization  of
goodwill and acquired technology.

    Earning Before  Interest,  Taxes,  Depreciation and Amortization ("EBITDA").
EBITDA increased $9.1 million, or 158.5 %, to $14.9 million in the first quarter
of 1999 from $5.8 million in the first quarter of 1998.

    Interest and Other Income.  Interest and other income decreased $848,000, or
66.7%,  to $423,000 in the first  quarter of 1999 from $1.3 million in the first
quarter of 1998 due to the reduction in invested cash balances of the Company.

    Interest Expense. Interest expense increased $1.2 million to $2.6 million in
the first  quarter of 1999 from $1.4 million in the first  quarter of 1998.  The
increase is primarily  related to the  interest  costs  attributable  to capital
lease  obligations at Resurgens and  amortization of debt issue costs related to
the $75.0 million line of credit received in December 1998.

Purchased In-Process Research and Development

    Overview.  During the first quarter of 1998,  $5.4 million and $44.6 million
of purchased  in-process R&D was expensed in connection  with the acquisition of
ATI and the NACT Acquisition,  respectively. The $44.6 million of in-process R&D
at NACT  consisted  of 67.3% of the value of NACT  products  in the  development
stage that were not considered to have reached  technological  feasibility as of
the date of the NACT  Acquisition.  In  connection  with  the NACT  Merger,  the
Company  revalued  purchased  in-process  R&D to reflect the  current  status of
in-process  NACT  technology  and  related  business  forecasts  and  to  ensure
compliance with the additional  guidance provided by the Securities and Exchange
Commission  in its  September  15,  1998  letter to the  American  Institute  of
Certified Public Accountants. The revalued amount approximated the $44.6 million
expensed in connection with the NACT Acquisition, therefore no additional charge
was  recorded  for  purchased   in-process  R&D.  However,  the  effect  of  the
revaluation  required the Company to reduce the first quarter  charge related to
the purchased in-process R&D by $14.6 million and record an additional charge of
$14.6  million  in the  fourth  quarter  as of the  date  of  the  NACT  Merger.
Consequently,  net loss for the quarter ended March 31, 1998 of $48.8 million as
reported in the  Company's  Report on Form 10-Q for the three months ended March
31, 1998 is now reported as $34.2 million in this Form 10-Q Report.

    The value of the purchased in-process  technology from ATI was determined by
estimating  the  projected  net cash flows  related to  in-process  research and
development  projects,  including  costs  to  complete  the  development  of the
technology.  These cash flows were  discounted  back to their net present value.
The  projected  net cash flows  from such  projects  were based on  management's
estimates of revenues and  operating  profits  related to such  projects.  These
estimates were based on several assumptions, including those summarized below.

                                       20
<PAGE>

    The value of the purchased in-process technology from NACT was determined by
estimating  the  projected  net cash flows  related to  in-process  research and
development  projects,  excluding  costs  to  complete  the  development  of the
technology.  These cash flows were  discounted  back to their net present value.
The  projected  net cash flows  from such  projects  were based on  management's
estimates of revenues and  operating  profits  related to such  projects.  These
estimates were based on several  assumptions,  including those  summarized below
for each respective acquisition. The resultant net present value amount was then
reduced by a stage of completion factor. This factor more specifically  captures
the development  risk of an in-process  technology  (i.e.,  market risk is still
incorporated in the estimated rate of return).

    The nature of the  efforts  required  to develop  the  purchased  in-process
technology  into  commercially   viable  products   principally  relate  to  the
completion  of all  planning,  designing,  prototyping,  verification,  and test
activities  that are necessary to establish  that the product can be produced to
meet its design  specifications,  including functions,  features,  and technical
performance requirements.

    If these  projects  to develop  commercially  viable  products  based on the
purchased in-process  technology are not successfully  completed,  the sales and
profitability  of the  Company  may be  adversely  affected  in future  periods.
Additionally, the value of other intangible assets may become impaired.

    See Note 4 to the Consolidated  Financial  Statements for further discussion
of the valuation of the in-process R&D.

Restructuring and Other Charges

    Summary.  During  1998,  the Company  approved  and began  implementing  two
restructuring   programs   designed  to  reduce   operating   costs,   outsource
manufacturing  requirements  and focus  Company  resources on recently  acquired
business  units  containing  proprietary  technology  or  services.   Management
carefully  reviewed the  provisions  of EITF 94-3,  "Liability  Recognition  for
Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity" in
determining which costs related to the various actions should be included in the
special  charges.  No costs were included in the charge that would derive future
economic  benefit  to the  Company,  e.g.,  relocation  of  existing  employees,
recruiting and training of new employees and facility start-up costs.

    In the first quarter of 1998, the Company approved and began  implementing a
restructuring  program to consolidate  several  operations and exit the contract
manufacturing business. In connection with these activities the Company recorded
restructuring  and other  charges of  approximately  $6.6  million of which $1.1
million was charged to  continuing  operations  and $5.5  million was charged to
discontinued operations. This restructuring activity was substantially completed
as of June 30, 1998.

    In the fourth quarter of 1998, in connection with the (i) mergers with NACT,
Telco and Resurgens  completed in the fourth  quarter of 1998;  (ii) election of
several new outside directors to the Company's Board; and (iii) appointment of a
new Chief Executive Officer, the Company approved and began implementing a major
restructuring program to reorganize its operative structure, consolidate several
facilities,  outsource its manufacturing  requirements,  rationalize its product
offerings and related development  efforts, and pursue other potential synergies
expected  to be  realized as a result of the  integration  of recently  acquired
businesses.   In  connection  with  these   activities,   the  Company  recorded
restructuring  and other charges of  approximately  $43.0 million of which $36.2
million was charged to  continuing  operations  and $6.8  million was charged to
discontinued  operations.  As of the  date  of  this  Report,  the  Company  has
substantially completed these restructuring activities.

                                       21
<PAGE>

    The following  details the activity charged to the  accrual  for  the fourth
quarter 1998  restructuring  activities  during the first quarter of 1999:

                                          Reserve                     Reserve
                                          Balance         1999        Balance
                                         At 12/31/98    Activity     At 3/31/99
                                         -----------    --------     ----------
                                                     (In thousands)

Reorganize Operating Structure
  Employee termination benefits.......     $   449      $    125      $   324
  Idle facility costs.................         258            62          196
  Other...............................         304           176          128
                                           -------      --------       ------
                                             1,011           363          648
Consolidation of ATI and Telco
  Employee termination benefits.......       1,175           369          806
  Idle facility costs.................         577           102          475
  Other...............................         300            --          300
                                           -------      --------       ------
                                             2,052           471        1,581
Outsource Manufacturing
  Employee termination benefits.......         310            98          212
  Idle facility costs.................         365           239          126
  Other...............................         332           332           --
                                           -------      --------       ------
                                             1,007           669          338
Product Line Rationalization..........         568           228          340
                                           -------      --------       ------
          Total.......................     $ 4,638      $  1,731       $2,907
                                           =======      ========       ======

    Costs associated with the reorganized  operating structure consist primarily
of termination benefits payable to the Company's former President, which will be
paid throughout 1999, and remaining lease obligations on the Company's Equipment
Group headquarters facility in Alpharetta,  Georgia. In February 1999, Equipment
Group  personnel  relocated  to the  Company's  headquarters  in Atlanta and the
facility was closed.

    Restructuring  costs were recorded  associated with the consolidation of the
Company's ATI operations in Wilmington,  Massachusetts  into Telco's facility in
Norwood,  Massachusetts.   Manufacturing  of  ATI's  wireless  radios  is  being
out-sourced to a contact  manufacturer and all other aspects of ATI's operations
are being integrated into Telco's existing operating  infrastructure.  Severance
and other termination  benefits of approximately  $1.2 million are being paid to
approximately  60 ATI  employees  who  lost  their  jobs.  Severance  and  other
termination  benefits were determined  consistent  with the Company's  severance
policy. An accrual associated with the idle portion of the Wilmington  facility,
which is leased through November 2000, is being charged each period for the idle
facility lease cost.

    An integral part of the restructuring  program was the Company's decision to
outsource all its electrical manufacturing requirements and sell its Alpharetta,
Georgia  manufacturing   facility  to  an  established  contract   manufacturer.
Severance  and other  termination  benefits of  $426,000  were  provided  for in
December 1998 to approximately 25 personnel.  The Company  completed the sale of
its  manufacturing  operations  in March  1999.  The  actual  loss  incurred  in
connection with the sale did not differ  materially from the amounts recorded in
the restructuring charges. As part of this sale agreement, the Company committed
to  purchase  a minimum of $15.0  million  of  products  and  services  from the
contract  manufacturer in each of three  consecutive 12 month periods  beginning
April 1, 1999.

    Costs  related to product line  rationalization  related to the phase out of
the Company's  Compact Digital  Exchange  ("CDX")  switch.  In January 1999, the
Company elected to reallocate  development resources targeted for the CDX switch
as a stand-alone  product to the integration of the central office  functionally
of the CDX switch and the  long-distance  functionality  of NACT's switch into a
common, next generation technology platform. Costs incurred in the first quarter
of 1999 relating  mainly to  engineering  efforts  incurred  related to 1998 and
prior CDX contracts were charged to the restructuring accrual.

                                       22
<PAGE>

Discontinued Operations

    Overview.  During 1998,  the Company  broadened its offering of  proprietary
equipment by acquiring three equipment  businesses.  The Company acquired ATI, a
designer and manufacturer of digital microwave and millimeterwave  radio systems
for voice,  data and/or video  applications;  NACT, a single-source  provider of
advanced  telecommunications   switching  platforms  with  integrated  telephony
software  applications  and network  telemanagement  capabilities  and Telco,  a
designer  and  manufacturer  of  broadband  transmission,   network  access  and
bandwidth optimization products.

    In connection  with the completion of the  acquisitions  above,  the Company
decided  that  certain  of  the  Company's   non-proprietary   businesses   were
non-strategic.  In December 1998,  the Company  formalized its plan to offer for
sale all of its non-core  businesses,  which consist of the resale of Nortel and
other original  equipment  manufacturers'  wireline switching  equipment,  third
party repair of telecom equipment and pay telephone refurbishment. On January 5,
1999,  the Company  formally  announced its intention to sell these  businesses.
Management  expects that the sales will be completed in 1999.  These  businesses
have been accounted for as discontinued operations and, accordingly, the results
of operations have been excluded from continuing  operations in the Consolidated
Statements of Operations for all periods presented.

    Three  Months  Ended March 31, 1999  Compared  to Three  Months  Ended March
31,1998.  Sales  decreased $4.1 million,  or 32.0%, to $8.2 million in the first
quarter of 1999 from $12.3 million in the first  quarter of 1998.  This decrease
was  primarily  due to a weakness  in the  resale of Nortel  and other  original
equipment  manufacturers'  wireline  switching  equipment at the  Company's  AIT
business  and a decline in pay  telephone  refurbishment.  Gross  profit  margin
before special charges  declined to 4.3% in the first quarter of 1999 from 27.8%
in the first quarter of 1998. The Company's resale of Nortel equipment  business
achieved a  substantially  lower  gross  margin in the first  quarter of 1999 as
compared  to the gross  margin in the first  quarter of 1998  because of pricing
pressures in its market and reduced sales levels.  The Company also  experienced
margin  declines  in the  telephone  refurbishment  business  in 1999  primarily
resulting  from the  reduced  economies  of scale  related to the decline in its
refurbishment revenues.

    During the first quarter of 1998, the Company  recorded  special  charges of
approximately  $5.5  million  relating  to  the  non-core  businesses  (see  "--
Restructuring and Other Charges").

Liquidity and Capital Resources

    Overview.  Cash  management  is a key  element  of the  Company's  operating
philosophy and strategic  plans.  Acquisitions  to date have been  structured to
minimize  the cash  element of the  purchase  price and ensure that  appropriate
levels of cash are  available  to support  the  increased  product  development,
marketing  programs  and working  capital  normally  associated  with the growth
initiatives of acquired businesses.  As of March 31, 1999, the Company had $41.1
million of cash and equivalents and $61.7 million in borrowings  available under
its  credit  line to  support  its  current  working  capital  requirements  and
strategic growth initiatives.

    Operating Activities.  Cash used by operating activities was $9.0 million in
the first quarter of 1999 as compared to cash  provided from  operations of $2.5
million in the first  quarter of 1998.  The  increased  use of cash in the first
quarter of 1999 resulted from the Company's need to finance  increased  accounts
receivable and inventories to support its growth.

    Accounts  receivable  increased  $4.2 million,  or 6.0%, to $74.7 million at
March 31, 1999 from $70.5  million at December 31, 1998.  This was mainly due to
increased  sales  activity at the Company  (first  quarter 1999 total sales were
$151.7 million as compared to fourth quarter 1998 total sales of $73.6 million).
Average days sales  outstanding at March 31, 1999 were  approximately 45 days as
compared to 88 days at December 31, 1998. The Company's average days outstanding
has declined primarily as a result of the Resurgens  acquisition,  as Resurgens'
customers  generally  pay for  services in 30 days or less.  MCI  WorldCom,  the
Telecommunications  Group's largest customer,  prepays the services it purchases
twice a month.  Equipment Group sales typically have terms of 30-60 days, except
for sales to  international  customers,  which  generally  have payment terms in
excess of 90 days.  The  Company  also has begun to enter into  long-term  notes
receivable with selected customers. To maximize cash flow, the Company sells the

                                       23
<PAGE>

notes where possible on either a non-recourse or recourse basis to a third party
financing  institution.  As of March 31,  1999,  the  Company  has a  contingent
liability of  approximately  $17.4 million  related to notes sold with recourse.
The Company  believes it has  recorded  sufficient  reserves  to  recognize  the
current risk associated with these recourse sales.

    Inventories  increased $5.1 million, or 10.5%, to $53.7 million at March 31,
1999 from $48.6 million at December 31, 1998. This increase was primarily due to
the increase in CIS  inventories as a result of the timing of a large  equipment
purchase in the first  quarter.  The increase was partially  offset by the first
quarter sale of $5.4 million of inventories related to the sale of the Company's
Alpharetta, Georgia manufacturing facility and the outsourcing of ATI's wireless
radios.

    Investing  Activities.  Cash used by investing  activities  was $5.6 million
and $59.8 million for the first quarter 1999 and 1998, respectively.

    In connection with the acquisition of CIS, the Company paid $3.5 million and
issued  440,874  shares of  common  stock up front to the CIS  stockholders.  In
addition,  the  stockholders  of CIS were issued  845,010  restricted  shares of
common stock.  These shares were  immediately  placed into escrow and,  together
with $6.5 million in additional purchase price, will be released and paid to the
stockholders of CIS contingent upon the realization of certain predefined levels
of pre-tax income from CIS's operations  during three one-year periods beginning
January 1, 1997.

    The first measurement  period for purposes of releasing  escrowed shares and
paying  contingent cash  consideration was January 1, 1997 to December 31, 1997.
In reviewing CIS's pre-tax income  performance as of April 30, 1997, the Company
determined  that it was highly  probable  that the  conditions  for  release and
payment for this first period would be met. Accordingly, 317,427 escrowed shares
were  accounted for as if released and $3.5 million in contingent  cash payments
were  accounted  for as if paid as of April  30,  1997.  The net  effect of this
accounting was to increase  goodwill and  stockholders'  equity by approximately
$6.5 million at April 30, 1997.  These shares were released and payment was made
to the former stockholders of CIS on February 15, 1998.

    The second  measurement period for purposes of releasing escrowed shares and
paying CIS Additional Consideration was January 1, 1998 to December 31, 1998. In
reviewing  CIS's pre-tax  income  performance as of August 31, 1998, the Company
determined  that it was highly  probable  that the  conditions  for  release and
payment for the first period would be met. Accordingly,  244,929 escrowed shares
were   accounted  for  as  if  released  and  $2.0  million  of  CIS  Additional
Consideration was accounted for as if paid as of August 31, 1998. The net effect
of  this  accounting  was to  increase  goodwill  and  stockholders'  equity  by
approximately  $5.1  million and $3.1  million,  respectively,  as of August 31,
1998. These escrowed shares were released and CIS Additional  Consideration  was
paid to the former stockholders of CIS on February 15, 1999.

    In the fourth quarter of 1997, the Company began its three phase acquisition
of NACT. During November and December 1997, the Company purchased 355,000 shares
of NACT common stock in the open market for approximately $5.0 million.

    On December 31, 1997, the Company  entered into a stock  purchase  agreement
with GST  Telecommunications,  Inc.  ("GST")  and GST USA,  Inc.  ("GST USA") to
acquire  5,113,712  shares of NACT common  stock owned by GST USA,  representing
approximately  63% of the  outstanding  shares of NACT  common  stock (the "NACT
Acquisition").  On February 27, 1998 the NACT Acquisition was completed with GST
USA  receiving  $59.7  million in cash and  1,429,907  restricted  shares of the
Company's common stock valued at approximately $26.9 million.

    On February 24, 1998 the Company  entered into a merger  agreement with NACT
pursuant to which the Company agreed to acquire all of the shares of NACT common
stock not already then owned by the Company or GST USA. On October 28, 1998, the
NACT Merger was completed  whereby the Company  issued  2,790,182  shares of the
Company's common stock valued at  approximately  $67.8 million for the remaining
minority interest of NACT.

                                       24
<PAGE>

    On December 24, 1997, the Company  entered into an agreement to acquire ATI.
On January 29, 1998, the transaction was completed in its final form whereby ATI
was merged  with and into CIS (the "ATI  Merger").  In  connection  with the ATI
Merger,  the  stockholders  of ATI received  approximately  $300,000 and 424,932
restricted  shares of the Company's  common  stock.  These shares had an initial
fair value of approximately $6.3 million.

    In addition to the 424,932 shares noted above,  the stockholders of ATI were
issued 209,050  restricted  shares of the Company's  common stock.  These shares
were immediately  placed into escrow and will be released to the stockholders of
ATI contingent upon the  realization of predefined  levels of pre-tax net income
from ATI's operations during calendar years 1998 and 1999. The pre-tax income of
ATI for 1998 fell below the level required to release escrowed shares in 1998.

    During  each of the first  quarters of 1999 and 1998,  the Company  invested
$1.9 million in capital expenditures.  These expenditures in 1999 were primarily
for computer network and related communications equipment designed to facilitate
the integration of the recent acquisitions and facility improvements required in
connection with the Company's growth.

    The Company  began  capitalizing  software  development  costs in the fourth
quarter of 1997 in connection with its increased focus on developing proprietary
technology and products.  Software  development  costs are capitalized  upon the
establishment  of  technological  feasibility  of the product.  During the first
quarter of 1999 and 1998, the Company capitalized approximately $1.2 million and
$425,000 of software development costs, respectively.  The increase is primarily
related to the increased  development  activities  associated with the Company's
wireless local loop product and development activities at Telco and ATI.

    Financing Activities. Cash provided from financing  activities  was $480,000
and $2.5 million for the first quarter of 1999 and 1998, respectively.

    In December 1998, the Company entered into a $75.0 million revolving line of
credit facility (the "Facility"),  with a banking syndicate group led by Bank of
America,  Fleet National Bank and Bank Austria  Creditanstalt.  The new facility
consists  of a 364-day  revolving  line of credit  which may be  extended  under
certain  conditions  and  provides  the Company  the option to convert  existing
borrowings to a three year term loan. Borrowings under the line are secured by a
first lien on substantially all the assets of the Company.  The Facility,  which
expires  in  December  2001,   contains  standard  lending  covenants  including
financial  ratios,  restrictions on dividends and limitations on additional debt
and the  disposition  of Company  assets.  Interest is paid at the rate of prime
plus 1 1/4% or LIBOR plus 2 1/4%, at the option of the Company.  As of March 31,
1999, borrowings of $5.9 million were outstanding under the Facility.

    The  Facility  restricts   distributions  from  the  Company's  consolidated
subsidiaries.  Accordingly,  the  assets  and cash  flows of such  subsidiaries,
including WA Telcom,  the primary  obligor on the Notes,  may not be used to pay
any dividends to World Access, Inc.

    In April 1999, the Company raised approximately $47.7 million in equity, net
of expenses,  through the sale of 50,000 newly issued shares of 4.25% Cumulative
Senior Perpetual  Convertible  Preferred  Stock,  Series A to The 1818 Fund III,
L.P. The 1818 Fund III is one of a family of private  equity  partnerships  (the
"Funds") organized to acquire substantial, non-controlling,  long-term ownership
positions in growing,  strongly  positioned  companies.  The Funds have provided
active   early   support   and   capital  to  a  number  of  highly   successful
telecommunications  and media  companies,  including  MCI  WorldCom and Frontier
Vision.  The  General  Partner of the Funds is  Brown  Brothers  Harriman & Co.,
America's largest private bank and the oldest owner-managed business partnership
in the country.

    Income Taxes.  As a result of the exercises of  non-qualified  stock options
and warrants by the Company's  directors  and  employees,  the Company  realized
federal income tax benefits during 1998 and 1997 of approximately $19.5 million.
Although  these tax benefits do not have any effect on the  Company's  provision
for income  tax  expense,  they  represent  a  significant  cash  benefit to the
Company. This tax benefit is accounted for as a decrease in current income taxes
payable and an increase in capital in excess of par value.  Due to the Company's

                                       25
<PAGE>

net  operating  losses  during 1998,  approximately  $10.5  million of these tax
benefits have not yet been  utilized and are available to reduce future  taxable
income of the Company.  These benefits are included in Deferred  income taxes on
the Company's balance sheet at March 31, 1999.

    The  Company's   provision  for  income  taxes  attributable  to  continuing
operations  for the three  months  ended  March  31,  1999 was $3.5  million  or
approximately  61.6% of income from continuing  operations  before income taxes.
The provision for income taxes differs from the amount  computed by applying the
statutory  federal and state  income tax rates due to  non-deductible  expenses,
primarily goodwill amortization.

    Summary.  The completion of the sale of $50.0 million of preferred  stock in
April 1999,  the sale of $115.0  million of Notes in October  1997 and the $75.0
million line of credit received in December 1998 have significantly enhanced the
financial  strength of the  Company  and  improved  its  liquidity.  The Company
believes that existing cash balances,  available  borrowings under the Company's
line of credit and cash projected to be generated from  operations  will provide
the Company with  sufficient  capital  resources to support its current  working
capital requirements and business plans for at least the next 12 months.

Year 2000 Issue

    The  turn  of  the  century,  Year  2000,  poses  a  serious  challenge  for
Information  Technology  ("IT") used by virtually every  corporation  around the
world.  The problem  arises as a result of past standard  industry  practices to
store year date data in a 2-digit (YY) field, instead of a 4-digit (CCYY) format
where the first 2 digits (CC)  represent  the century and the last 2 digits (YY)
represent the year.  Thus,  in the two digit format,  1999 is stored as 99. This
causes programs that perform arithmetic operations,  comparisons,  or date sorts
to possibly  generate  erroneous results when the program is required to process
dates from both  centuries.  The  absence  of the  century  information  adds an
ambiguity to the date information is stored  or processed by the program, and it
may also cause  problems  with data entry and  display  screens.  The problem is
further complicated because many applications are not stand-alone, but interface
with one or more applications.

    State of  Readiness.  The  Company  is  addressing  the Year  2000  issue by
implementing its  comprehensive  Year 2000 Readiness Plan (the "Y2K Plan").  The
Y2K Plan involves the following phases: (1) developing an inventory of products,
systems and  equipment  that may be affected by the Year 2000 date  change,  (2)
assessment  and  (3)   remediation.   Efforts  have  been  underway  in  certain
subsidiaries of the Company since 1997, and a formal Year 2000 Readiness Program
was developed in the first quarter of 1998. All of the Company's  business units
are now engaged in identifying  and remediating  Year 2000 issues.  In addition,
the  Company  has  retained  one of the  nation's  largest  and  most  reputable
providers  of Year 2000  remediation  and  compliance  services to assist in the
execution of the Y2K Plan.

    The Y2K Plan consists of several  phases that overlap in areas and may be in
progress simultaneously. The first phase involves developing an inventory of all
products, IT and non-IT systems,  software, and business  infrastructure systems
and  equipment  that may be  affected  by the Year  2000 date  change.  External
parties,  including customers,  suppliers and service providers,  with which the
Company  interacts,  and  which may have Year  2000  readiness  issues  are also
identified.  This phase was completed in May 1999.  Inventory  listings  include
computers,  computer network  equipment,  routers,  servers,  computer software,
telephony systems,  telecommunications  equipment,  facilities  equipment,  test
equipment, business tools, as well as all suppliers and all Company products.

    The  second  phase  involves  risk  and  impact  assessment,   selection  of
appropriate  remediation methods,  and resource/cost  assessment for compliance.
Each  inventory  item  identified  in the first phase is  assigned a  compliance
status risk level of critical,  moderate,  low or no risk. Items associated with
critical or moderate risk are addressed with highest priority. Similarly, a risk
assessment  is  made  for  the  customers,   suppliers  and  service   providers
identified.  This phase  includes  contacting  suppliers  or  manufacturers  for
information  regarding their Year 2000 readiness,  technical  review of products
and systems,  and compliance  testing.  The necessary actions to bring each item
into compliance are determined,  and remediation costs are estimated. To address
potential problems, contingency plans are developed as necessary. This phase has
been  completed  in most areas of the Company  and is  expected to be  completed
before  the  end of June  1999.  Information  received  from  manufacturers  and
suppliers  is  maintained  in  databases  to  monitor   compliance  status,  and
compliance testing has been completed for most Company products.

                                       26
<PAGE>

    The third phase involves the remediation for items found to be non-Year 2000
compliant.  This involves  replacement  of equipment or upgrading of software or
hardware.  This phase includes  communications  with the Company's customers and
suppliers to determine Year 2000 issues as appropriate.  Verification testing is
done to ensure the  effectiveness  of the  remediation  efforts.  Capital assets
found to be  non-compliant  have been, or will be replaced or remediated in this
phase.  This phase is expected to be completed before the end of June 1999. Most
of  the  Company's  internally  controlled  software  has  been  remediated  and
verified. Integrated testing (also known as "end-to-end" testing) is planned and
should expose unforeseen  compliance  problems associated with system interfaces
and dependencies.

    Organizationally,  the  Company  established  a  Program  Management  Office
("PMO") and support teams, including the Year 2000 Steering Committee,  the Year
2000 Management Team and the Year 2000  Implementation  Teams. A  representative
from the Company's senior management has been appointed as the overall Year 2000
Program Director, who works closely with the support teams and manages the PMO.

    The Year 2000 Steering  Committee  consists of the Company's senior managers
for Information  Technology and Quality,  the Company's Chief Financial Officer,
and the Company's President and Chief Executive Officer.  The committee provides
high-level  direction  for the Y2K  Plan and  approves  requests  for Year  2000
resources.

    The Year 2000  Management  Team  consists of the business unit managers from
each internal department of the Company.  Each such manager monitors progress of
the program in his or her  respective  department  and  allocates  resources  to
remediate Year 2000 issues.

    The Year 2000  Implementation  Teams are directly  responsible  for ensuring
Year  2000  compliance  for  the  Company's  products  and  information  systems
infrastructure.  This includes efforts to ensure suppliers and service providers
are able to provide uninterrupted product or services through the Year 2000. The
Year 2000  Implementation  Teams consist of personnel from each of the Company's
internal departments,  including:  Information Technology,  Quality, Operations,
Materials, Product Development,  Human Resources, Finance and Contracts. Members
of the Year  2000  Implementation  Teams  are  responsible  for  developing  the
inventory  listings and assessing the  inventory for  compliance,  assuring that
each Company product is assessed for compliance,  handling customer requests for
compliance information, auditing Year 2000 test plans and results, and reporting
status  and  progress  of  team  activities  to the  Company's  management  on a
divisional level and to the PMO.

    The PMO provides  planning and project  management  support to the teams, as
well as assisting in each phase of the Y2K Plan. The Company's Year 2000 outside
consultant  furnishes expert Year 2000  professionals  for the PMO,  including a
Service Delivery  Manager,  a Project Manager,  Senior Analysts,  Analysts and a
Project  Administrator.  The PMO meets with the Company's  management  weekly to
review Y2K Plan status and costs,  plan activities and schedule  resources,  and
report progress, status, risks, issues and costs.

    To aid in communication with the Company's customers, suppliers and business
partners,  the Company is making  Year 2000  readiness  and  product  compliance
information available on the internet.  This information is updated periodically
to include the most current information on products and services.

    All  Transport  and Access  products  have been  determined  to be Year 2000
compliant,  or may be upgraded at no charge.  Software  required for upgrades is
presently available and may be downloaded from the internet.  Switching products
have also been  determined to be Year 2000  compliant,  or may be upgraded at no
charge,  with the  exception of the obsolete LCX  (superseded  by the STX).  LCX
customers  have been  contacted to advise them that this product may  experience
minor  data-logging  failures  associated with the Year 2000, and that the fully
compliant STX provides direct  replacement.  NTS-2000 Billing System software is
fully Year 2000 compliant,  and compliant  NTS-1000  Billing System software was
released in April 1999.

                                       27
<PAGE>

    The  Telecommunications  Group has  assessed  their  switching  and  billing
systems and identified the required  upgrades for Year 2000 compliance,  as well
as estimated costs.  These upgrades are expected to be implemented by the end of
the  third  quarter  of 1999 and will  enable  ongoing,  uninterrupted  business
operations  through  the Year 2000.  The  Telecommunications  Group  continually
updates and maintains its switching and billing systems to the state of the art,
and to comply with FCC and  international  regulations,  which include Year 2000
specific requirements.

    Costs.  The total cost associated  with the Company's Year 2000  remediation
initiative is not expected to be material to the Company's  financial  condition
or results of  operations.  During the first quarter of 1999,  the Company spent
approximately  $340,000 in connection  with Year 2000 issues and the Company has
spent a total of  approximately  $1.1 million since 1997 in connection with Year
2000 issues. The Telecommunications Group estimates $800,000 will be required in
1999 for upgrades to switching  equipment  and billing  systems.  The  Equipment
Group estimates $1,000,000 will be required in 1999 for upgrades and remediation
efforts.  The estimated  total cost of the Company's Year 2000 initiative is not
expected to exceed $3.0 million and is being funded through operating cash flows
of the Company.

    Risks. The Company believes, based on currently available information,  that
it will be able to properly manage its total Year 2000 exposure. There can be no
assurance,  however, that the Company will be successful in its efforts, or that
the  computer  systems of other  companies  on which the Company  relies will be
modified in a timely  manner.  Additionally,  there can be no  assurance  that a
failure to modify such systems by another  company,  or  modifications  that are
incompatible  with the  Company's  systems,  would not have a  material  adverse
effect on the Company's business, financial condition or results of operations.

    Contingency Plans. All of the Company's  inventory items that are identified
as having a  compliance  status risk level of critical in the first phase of the
Y2K Plan are expected to be Year 2000  compliant  within the timeframe  planned,
and the Y2K Plan is  currently on  schedule.  However,  the Company will develop
business  continuation or "contingency" plans for potential areas of exposure as
they are identified.

Recent Accounting Pronouncements

    In June 1998, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standard  ("SFAS") No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities." This statement is effective for all fiscal
quarters of all fiscal years  beginning after June 15, 1999. The future adoption
of  SFAS  133  is not  expected  to  have a  material  effect  on the  Company's
consolidated financial position or results of operations.

Item 3.  Quantitative and Qualitative Disclosures about Market Risks

    At March 31, 1999, the Company was not invested in any market risk sensitive
instruments held for either trading purposes or for purposes other than trading.
As a result,  the Company is not subject to interest rate risk, foreign currency
exchange rate risk,  commodity price risk, or other relevant market risks,  such
as equity price risk.

    The Company  invests cash  balances in excess of operating  requirements  in
short-term  securities,  generally  with  maturities  of 90  days  or  less.  In
addition,  the  Company's  revolving  line  of  credit  agreement  provides  for
borrowings  which bear interest at variable rates based on either the prime rate
or two percent over the London  Interbank  Offered  Rates.  The Company had $5.9
million outstanding  pursuant to its revolving line of credit agreement at March
31, 1999. The Company believes that the effect,  if any, of reasonably  possible
near-term changes in interest rates on the Company's financial position, results
of operations and cash flows should not be material.

                                       28
<PAGE>

PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

    Following  the Company's  announcement  in January 1999  regarding  earnings
expectations for the quarter and year ended December 31, 1998 and the subsequent
decline in the price of the  Company's  common stock,  22 putative  class action
complaints  were filed against the Company.  The Company and certain of its then
current officers and directors were named as defendants. A second decline in the
Company's  stock price occurred  shortly after actual earnings were announced in
February  1999, and a few of these cases were amended,  and  additional  similar
complaints were filed. The 22 cases were consolidated  pursuant to a court order
entered on April 28,  1999.  The Company  expects  that an amended  consolidated
complaint will be filed in May 1999. The court has deferred  ruling on a pending
motion regarding the appointment of lead plaintiffs and lead counsel.

    Although  the  22  complaints  differ  in  some  respects,  the  plaintiffs,
generally,  have alleged  violations of the federal securities laws arising from
misstatements   of  material   information  in  and/or   omissions  of  material
information  from certain of the Company's  securities  filings and other public
disclosures,  principally  related to inventory and sales activities  during the
fourth  quarter of 1998. In general,  the complaints are filed on behalf of: (a)
persons who purchased  shares of the Company's  common stock between  October 7,
1998 and February 11, 1999;  (b)  shareholders  of Telco who received  shares of
common stock of the Company as a result of the  Company's  acquisition  of Telco
that closed on November  30,  1998;  and (c)  shareholders  of NACT who received
shares of common stock of the Company as a result of the  Company's  acquisition
of NACT that closed on October 28, 1998. Plaintiffs have requested damages in an
unspecified amount in their complaints. Although the Company and the individuals
named as  defendants  deny that they have  violated any of the  requirements  or
obligations  of the  federal  securities  laws,  there can be no  assurance  the
Company will not sustain  material  liability as a result of or related to these
shareholder suits.

    In addition to the proceedings described above, on March 18, 1999 plaintiffs
Craig  Illausky,  John Ufkes and Steven R. Mason  filed an  additional  putative
class action  complaint  in the United  States  District  Court for the Northern
District of Georgia.  The Company  and certain of its  officers,  directors  and
former  directors  were named as  defendants.  The  complaint  is similar to the
complaints  filed in the proceedings  described  above,  alleging  violations of
federal  securities laws arising from  misstatements of material  information in
and/or  omissions  of  material   information  from  certain  of  the  Company's
securities filings and other public  disclosures.  The Company expects to file a
motion requesting that this action be consolidated with the other pending cases.

Item 2.  Changes in Securities and Use of Proceeds

      On April 21, 1999,  the Company  sold 50,000 newly issued  shares of 4.25%
Cumulative  Senior  Perpetual   Convertible   Preferred  Stock,  Series  A  (the
"Preferred  Stock") to The 1818 Fund III, L.P. The Preferred  Stock ranks senior
to the  Company's  Common  Stock with  respect to dividend  rights and rights on
liquidation, dissolution or winding up.

                                       29
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(A)  Exhibits

    27.1 -- Financial Data Schedule (for SEC use only).

(B) Report on Form 8-K

    There were no such Reports  filed during the period  covered by this Report.
The  Company  filed a Report  on Form 8-K on May 3, 1999  reporting  the sale of
50,000 shares of 4.25% Cumulative Senior Perpetual  Convertible Preferred Stock,
Series A to The 1818 Fund III, L.P.


                                   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.

                                              WORLD ACCESS, INC.


                                          By: /s/ MARTIN D. KIDDER
                                              -----------------------------
                                              Martin D. Kidder
                                              Vice President and Controller

Dated: May 20, 1999


                                       30