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 June 30, 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 August 16, 1999 was 44,920,342.


<PAGE> 1
<TABLE>

PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements


WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands)

<CAPTION>
                                              June 30     December 31
                                               1999          1998
                                            -----------   -----------
                                            (Unaudited)
<S>                                         <C>           <C>
ASSETS
Current Assets
  Cash and equivalents                       $  98,996     $  55,176
  Accounts receivable                           97,342        70,485
  Inventories                                   45,216        48,591
  Deferred income taxes                         33,022        37,185
  Other current assets                          21,907        21,381
                                             ---------     ---------
    Total Current Assets                       296,483       232,818
Property and equipment                          62,325        63,602
Goodwill and other intangibles                 309,540       298,780
Other assets                                    24,798        18,612
                                             ---------     ---------
    Total  Assets                            $ 693,146     $ 613,812
                                             =========     =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Short-term debt                            $  12,285     $  17,989
  Accounts payable                              58,393        36,418
  Other accrued liabilities                     45,744        52,825
                                             ---------     ---------
    Total Current Liabilities                  116,422       107,232
Long-term debt                                 140,728       137,864
Noncurrent liabilities                          10,204         8,133
                                             ---------     ---------
    Total Liabilities                          267,354       253,229
                                             ---------     ---------
Stockholders' Equity
  Preferred stock                                    1         ---
  Common stock                                     448           441
  Capital in excess of par value               544,481       472,945
  Accumulated deficit                         (119,138)     (112,803)
                                             ---------     ---------
    Total Stockholders' Equity                 425,792       360,583
                                             ---------     ---------
    Total Liabilities and
     Stockholders' Equity                    $ 693,146     $ 613,812
                                             =========     =========




See notes to consolidated financial statements.

                                       1

</TABLE>


<PAGE> 2
<TABLE>

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

<CAPTION>
                                                   Three Months              Six Months
                                                   Ended June 30            Ended June 30
                                               ---------------------    ---------------------
                                                  1999        1998         1999        1998
                                               ---------    --------    ---------    --------
                                                                 (Unaudited)
<S>                                            <C>          <C>         <C>          <C>
Carrier service revenues                       $ 113,279    $    718    $ 198,891    $  1,263
Equipment sales                                   64,493      33,824      122,360      56,684
                                               ---------    --------    ---------    --------
   Total Sales                                   177,772      34,542      321,251      57,947

Cost of carrier services                          99,611         587      175,269       1,041
Cost of services network                           4,394          38        9,963          76
Cost of equipment sold                            36,748      17,171       68,690      29,353
Amortization of acquired technology                1,200        ---         2,400        ---
                                               ---------    --------    ---------    --------
   Total Cost of Sales                           141,953      17,796      256,322      30,470
                                               ---------    --------    ---------    --------
   Gross Profit                                   35,819      16,746       64,929      27,477
Research and development                           4,419       1,746        8,773       2,478
Selling, general and administrative               15,032       4,013       28,939       6,798
Amortization of goodwill                           3,251         833        6,369       1,475
In-process research and development                 ---          ---         ---       35,400
Restructuring and other charges                     ---          ---         ---          590
                                               ---------    --------    ---------    --------
   Operating Income (Loss)                        13,117      10,154       20,848     (19,264)
Interest and other income                          1,083         699        1,506       1,970
Interest expense                                  (1,976)     (1,515)      (4,604)     (2,958)
   Income (Loss) From Continuing               ---------    --------    ---------    --------
    Operations Before Income Taxes
    and Minority Interests                        12,224       9,338       17,750     (20,252)
Income taxes                                       5,952       3,721        9,357       5,906
   Income (Loss) From Continuing               ---------    --------    ---------    --------
    Operations Before Minority Interests           6,272       5,617        8,393     (26,158)
Minority interests in earnings of subsidiary        ---          848         ---        1,532
                                               ---------    --------    ---------    --------
   Income (Loss) From Continuing Operations        6,272       4,769        8,393     (27,690)
Net income (loss) from discontinued operations      (685)      1,702         (653)        (40)
Write-down of discontinued operations
 to net realizable value                         (13,662)       ---       (13,662)       ---
                                               ---------    --------    ---------    --------
   Net Income (Loss)                              (8,075)      6,471       (5,922)    (27,730)
Preferred stock dividends                            413        ---           413        ---
   Net Income (Loss) Available                 ---------    --------    ---------    --------
    to Common Stockholders                     $  (8,488)   $  6,471    $  (6,335)   $(27,730)
                                               =========    ========    =========    ========

Income (Loss) Per Common Share:
   Basic:
     Continuing Operations                     $    0.16    $  0.23     $    0.22    $  (1.39)
     Discontinued Operations                       (0.39)      0.08         (0.40)       ---
                                               ---------    --------    ---------    --------
     Net Income (Loss)                         $   (0.23)   $  0.31     $   (0.18)   $  (1.39)
                                               =========    ========    =========    ========
   Diluted:
     Continuing Operations                     $    0.16    $  0.22     $    0.22    $  (1.39)
     Discontinued Operations                       (0.36)      0.08         (0.37)       ---
                                               ---------    --------    ---------    --------
     Net Income (Loss)                         $   (0.20)   $  0.30     $   (0.15)   $  (1.39)
                                               =========    ========    =========    ========
Weighted Average Shares Outstanding:
   Basic                                          36,375     20,576        36,232      19,960
                                               =========    ========    =========    ========
   Diluted                                        40,296     21,822        38,446      19,960
                                               =========    ========    =========    ========



See notes to consolidated financial statements.

                                        2


</TABLE>


<PAGE> 3
<TABLE>

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands)

<CAPTION>

                                                                Capital in
                                      Preferred     Common       Excess of    Accumulated
                                        Stock        Stock       Par Value      Deficit        Total
                                     -----------  -----------   -----------   -----------   -----------
                                                                      (Unaudited)
<S>                                  <C>          <C>           <C>           <C>           <C>
Balance at January 1, 1999           $    ---     $      441    $  472,945    $ (112,803)   $  360,583

Net and comprehensive net loss                                                    (5,922)       (5,922)

Issuance of preferred shares
  in private offering                         1                     47,750                      47,751

Issuance of preferred shares
  for acquisition of business                                       18,539                      18,539

Dividends on preferred stock                                                        (413)         (413)

Release of escrowed shares
  for acquisitions                                         1         2,824                       2,825

Issuance of shares for
  technology licenses                                      5         1,705                       1,710

Issuance of shares for
  options and warrants                                     1           479                         480

Tax benefit from option
  and warrant exercises                                                 54                          54

Issuance of shares
  to 401K plan                                                         185                         185
                                     -----------  -----------   -----------   -----------   -----------
Balance at June 30, 1999             $        1   $      448    $  544,481    $ (119,138)   $  425,792
                                     ===========  ===========   ===========   ===========   ===========




See notes to consolidated financial statements.

                                       3
</TABLE>


<PAGE> 4
<TABLE>

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

<CAPTION>
                                                    Six Months Ended June 30
                                                      1999            1998
                                                   --------------------------
                                                           (Unaudited)
<S>                                                <C>            <C>
Cash  Flows From Operating Activities:
Net loss                                           $   (5,922)    $  (27,731)
Adjustments to reconcile net
  loss to net cash from
  operating activities:
    Depreciation and amortization                      15,123          3,194
    Write-down of discontinued
      operations to net realizable value               13,662           ---
    Income tax benefit from stock
      warrants and options                                 54          4,222
    Special charges                                      ---          40,434
    Minority interests in earnings
      of subsidiary                                      ---           1,532
    Provision for inventory reserves                      680            144
    Provision for bad debts                             1,453            316
    Stock contributed to employee
      benefit plan                                        185             92
    Changes in operating assets and
      liabilities, net of effects
      from businesses acquired:
        Accounts receivable                           (23,121)       (13,088)
        Inventories                                   (10,236)        (9,294)
        Accounts payable                               13,909          9,101
        Other assets and liabilities                   (1,499)        (5,970)
                                                   ----------     ----------
    Net Cash From Operating Activities                  4,288          2,952
                                                   ----------     ----------
Cash Flows From Investing Activities:
Acquisitions of businesses, net
  of cash acquired                                     (2,241)       (62,084)
Proceeds from sales of assets                           4,754           ---
Capitalization of software
  development costs                                    (2,452)        (1,831)
Expenditures for property and equipment                (4,163)        (5,859)
                                                   ----------     ----------
    Net Cash Used By Investing Activities              (4,102)       (69,774)
                                                   ----------     ----------
Cash Flows From  Financing Activities:
Net proceeds from sale
  of preferred stock                                   47,788           ---
Short-term borrowings                                   1,200          4,297
Principal payments under
  capital lease obligations                            (1,626)          ---
Repayment of industrial revenue bond                   (4,072)          ---
Proceeds from exercise of stock
  warrants and options                                    480          3,080
Long-term debt repayments                                ---            (967)
Debt issuance costs                                      (136)          ---
                                                   ----------     ----------
    Net Cash From Financing Activities                 43,634          6,410
                                                   ----------     ----------
    Decrease in Cash and Equivalents                   43,820        (60,412)
    Cash and Equivalents at Beginning of Period        55,176        118,065
                                                   ----------     ----------
    Cash and Equivalents at End of Period          $   98,996     $   57,653
                                                   ==========     ==========
Supplemental Schedule of Noncash Financing and
  Investing Activities:
Issuance of common stock for
  businesses acquired                              $    2,825     $   33,397
Issuance of preferred stock for
  business acquired                                    18,539           ---
Issuance of common stock for
  technology license agreements                         1,710           ---
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.

</TABLE>

<PAGE> 5





                       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 and six months ended June 30, 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:  ACQUISITIONS

         In  May  1999,   the   Company   concluded   negotiations   to  acquire
substantially all the assets and assume certain  liabilities of Comm/Net Holding
Corporation  and  its  wholly  owned   subsidiaries,   Enhanced   Communications
Corporation,   Comm/Net   Services   Corporation  and  Long  Distance   Exchange
Corporation   (Comm/Net   Holdings  and  its  wholly  owned   subsidiaries   are
collectively  referred to herein as "Comm/Net") and assumed effective control of
Comm/Net's operations at that time. Comm/Net,  headquartered in Plano, Texas, is
a  facilities-based  provider  of  wholesale  international  long  distance  and
wholesale   prepaid   calling   card   services,   primarily   to  the   Mexican
telecommunications markets.

         In connection with the acquisition, the Company issued 23,174 shares of
4.25% Cumulative Junior  Convertible  Preferred Stock,  Series B ( the "Series B
Preferred Stock") to the stockholders of Comm/Net valued at approximately  $18.5
million and paid  approximately  $3.5 million to retire  certain  notes  payable
outstanding  at the  time of  acquisition.  The  Series  B  Preferred  Stock  is
convertible  into shares of World Access  common  stock at a conversion  rate of

<PAGE> 6

$16.00 per common share, subject to standard anti-dilution  adjustments.  If the
closing  trading price of World Access common stock exceeds $16.00 per share for
45 consecutive trading days, the Preferred Stock will automatically convert into
common stock. Preferred dividends begin accruing effective July 1, 1999.

         The  acquisition  of Comm/Net has been accounted for under the purchase
method of accounting.  The purchase price  allocation to the assets acquired and
liabilities  assumed was based on information  currently available to management
as follows (in thousands):

         Purchase price:
         Preferred stock issued                $ 18,539
         Debt paid                                3,502
         Fees and expenses                          500
                                               --------
              Total purchase price             $ 22,541

         Allocation to fair values of
           assets and liabilities:
         Current assets                        $ (8,420)
         Property and equipment                  (3,351)
         Current liabilities                      8,697
         Other assets and liabilities, net        1,182
                                               --------
         Unallocated purchase price            $ 20,649
                                               ========


     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 and in  May 1999,
the Company acquired Comm/Net,  these  transactions are 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  income  (loss)  from  continuing
operations,  income  (loss) from  continuing  operations  and income (loss) from
continuing operations per diluted common share for the six months ended June 30,
1999 and 1998 would have been  approximately  $335.1million  and $179.3 million,
$21.6 million and $(18.9)  million,  $8.6 million and $(19.1)  million and $0.20
and $(0.57), 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 3:  SALE OF PREFERRED STOCK

    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,  L.P.  is Brown  Brothers
Harriman  &  Co.  ("BBH"),   America's  largest  private  bank  and  the  oldest
owner-managed  business  partnership in the country.  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. The Company allocated  approximately  $44.8 million to
the  Preferred  Stock and $5.2  million to the option to purchase an  additional
$20.0 million in Preferred Stock.


<PAGE> 7

    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.

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.

NOTE 4.  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. On January 5, 1999,
the Company  formally  announced  its  intention  to sell these  businesses.  In
connection therewith, goodwill recorded for these businesses was written-down by
$3.5 million to reflect the estimated loss on disposal.

    As a result of  deteriorating  operations  experienced  in the first half of
1999,  management decided to terminate the resale and repair businesses.  In the
second quarter of 1999 an additional  charge of approximately  $13.7 million was
recorded to reflect the  estimated  loss on disposal  under the new  liquidation
program.  The  liquidation  program  should be completed in 1999. The Company is
currently  marketing the payphone  refurbishment  business to several interested
parties, and 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.

     The assets and liabilities of the discontinued  operations  included in the
Consolidated  Balance  Sheets consisted  of the  following  (in thousands):


                                           June 30      December 31
                                             1999           1998
                                           --------     -----------
Current Assets
  Accounts receivable..............        $  3,284      $ 11,453
  Inventories......................           6,347        12,083
  Other current assets.............             109           252
                                           --------      --------
                                           $  9,740      $ 23,788
                                           ========      ========
Noncurrent Assets
  Property and equipment...........        $    773      $  2,028
  Goodwill and other intangibles...            ---          5,335
  Other assets.....................               6          ---
                                           --------      --------
                                           $    779      $  7,363
                                           ========      ========
Current Liabilities
  Accounts payable.................        $  2,776      $  4,083
  Other accrued liabilities........           1,768         3,741
                                           --------      --------
                                           $  4,544      $  7,824
                                           ========      ========


<PAGE> 8




NOTE 5:  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 initially  expensed in connection with the acquisition of ATI
and the NACT Acquisition,  respectively. 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 of 1998  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 of 1998, the period in
which the NACT Merger was consummated. Consequently, net loss for the six months
ended June 30, 1998 of $42.3 million as reported in the Company's Report on Form
10-Q for the three months  ended June 30, 1998 is now reported as $27.7  million
in this Form 10-Q Report.  During the fourth quarter of 1998,  $14.6 million and
$50.3 million of purchased  in-process  R&D was expensed in connection  with the
NACT Merger and the Telco Merger, respectively.

    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 and Telco 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  percentage  of  completion  factor.  The
percentage of completion for a particular project was determined by dividing the
development  spending from the  inception of the project  until the  measurement
date by the total estimated  development  spending for the project.  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.

<PAGE> 9

    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.

    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  included
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.

<PAGE> 10

    Eleven of the 13 NACT development projects utilize the following significant
technologies that NACT was developing for their STX and NTS products at the time
of the acquisition:

    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 has now  completed  the  incorporation  of the Motorola
68060  processing  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 development, the STX can process significantly more call minutes per month,
with enhanced processing speed.

    Signaling  System 7 ("SS7/C7") -- 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.

<PAGE> 11

    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.

    Set forth in the table below are details relating to the in-process research
and development charge for the seven key NACT technologies, which account for 11
of the 13 development projects:

<TABLE>

<CAPTION>

                                       Costs            Percentage of
                        Percentage   Incurred          Completion as of        Estimated Costs to Completion
                            of         as of      ---------------------------- as of the Acquisition Date for
                        NACT IPR&D  Acquisition   Acquisition                  ------------------------------
Development Project       Charge        Date         Date      June 30, 1999     1998       1999       2000
---------------------  -------------------------- ---------------------------- ------------------------------
                                       (000)                                                (000)
<S>                       <C>         <C>           <C>          <C>            <C>        <C>        <C>
STX Hardware & Software    43%        $     1347      80%           93%         $   56     $  285       ---
TCPIP                       7%        $      227      90%           95%         $    8     $   17       ---
SS7/C7                     14%        $    1,280      72%           84%         $   54     $  324     $  116
NTS2000                    26%        $    1,425      91%          100%         $   54     $   82       ---
E1/T1 conversion            6%        $      125      48%           77%         $   20     $  117       ---
MCU                         1%        $      123      24%           74%         $   66     $  334       ---
68060                       2%        $      218      48%          100%         $   60     $  178       ---

</TABLE>

Telco Merger

    Telco develops and  manufactures  products  focused on providing  integrated
access for  network  services.  Telco's  products  can be  separated  into three
categories:  (1) broadband  transmission  products, (2) network access products,
and (3) bandwidth  optimization  products.  Telco's products are deployed at the
edge  of  the  service  provider's  networks  to  provide  organizations  with a
flexible,  cost-effective  means of transmitting  voice,  data,  video and image
traffic over public or private networks.

<PAGE> 12

    At  the  time  of  acquisition,   Telco  had  several  primary  projects  in
development  relating  to  next-generation  telecommunication  and data  network
hardware. These projects were at various stages in the development process. Some
were about to enter the testing phase of the initial hardware  prototype,  while
others were still in the early concept and design  specification  stages.  These
projects were  scheduled for  commercial  release at various points in time from
December 1998 through early 2000.

    Telco's in-process research and development  projects are being developed to
run on new communications protocols and technologies not employed in its current
products. These include HDSL, SONET, Voice over IP and ATM inverse multiplexing.
Additionally, the products to be commercialized from Telco's in process research
and development are expected to include interface support not in Telco's current
product line, including E1, DS3 and OC3.

    A brief  description  of the  significant  in-process  projects is set forth
below:

    Access  45/60  Release  1  --  Access  45/60  Release  1  product   provides
essentially  the same  functional  service as the existing  Access 45/60 network
access servers by providing  highly reliable  digital access to public,  private
and  hybrid  networks,   integrating  multiple  business   applications  through
cost-effective  connections to dedicated,  switched and packet network services.
However,  unlike the current versions,  the technology  underlying the Release 1
(R1)  version  is  based  on  high-bit-rate   digital   subscriber  line  (HDSL)
technology.  This  HDSL  technology  will  enable  high-density  voice  and data
applications to travel  simultaneously  over one to ten HDSL lines from a single
platform,  which  will  launch the R1  product  into a whole new loop  market by
eliminating the need for service providers to have separate  platforms for voice
and  data  at the  customer's  premises  or at the  provider's  central  office.
Although the Access 45/60 R1 product is designed to provide a service similar to
the current Access 45/60 product,  the core functional  technology of the new R1
is very  different,  and the target market of the R1 product is different.  This
project has been completed.

    EdgeLink300  and  300 E1 -- The  EdgeLink300  is an  intelligent  integrated
access  device which was  commercially  introduced in the first quarter of 1999.
The  EdgeLink  300 E1 version  is an  addition  to the 300 family  which will be
marketed  internationally.  Conforming to all applicable ETSI and ITU standards,
this product will provide a cornerstone to the next generation of  international
product  offerings.  Software  code  generation  was  completed  in  June  1999.
Prototype builds for initial units were completed in July 1999, and initial beta
field tests are expected to begin in October 1999.

    SONET Edge Device -- The SONET Edge Device is a next-generation  edge device
expected  to  provide  access to SONET  networks.  This  access  device  will be
designed to take a T1 voice input from a PBX or an Access60 and convert to SONET
formatted tributaries and send it out via a traditional STS1 interface.

    This project is not expected to reach commercial viability until early 2000.
Documentation of the hardware and software design is expected to be completed in
July 1999;  software  code  generation  is expected to be  completed in November
1999; prototype builds for initial units are expected to be completed in October
1999; and initial beta field tests are expected to begin in January 2000.

    EdgeLink650 -- The EdgeLink650 ATM device will be designed to be a multislot
version of the Edgelink600  with DS3 and NxDS1 interface  support.  This product
will incorporate an ATM Inverse  Multiplexer  (IMA). This product is expected to
reach  commercial  viability  in late 2000.  Documentation  of the  hardware and
software design is expected to be completed in March 2000;  prototype builds for
initial  units are expected to be completed in February  2000;  and initial beta
field tests are expected to begin in September 2000.

    Voice-Over-Packet  Engines  --  Voice-over-packet  refers to  sending  voice
transmissions  over  packet-based  communication  protocols,  such  as  internet
protocols (IP  telephony),  Frame Relay, or ATM. Telco is currently in the early
stages of  developing  the software  and  hardware for a generic  "engine" to be
integrated  into the EdgeLink  family of products to enable this  functionality.
This  is  expected  to be  commercially  viable  in  late  1999.  Software  code
generation was completed in June 1999;  prototype  builds for initial units were
completed  in July 1999;  and initial  beta field tests are expected to begin in
August 1999.

<PAGE> 13

    If these projects are not completed as planned,  the in-process research and
development will have no alternative use. Failure of the in-process technologies
to  achieve   technological   feasibility   may  adversely   affect  the  future
profitability of World Access.

    Revenue attributable to Telco's aggregate in-process  technology was assumed
to increase  over the first six years of the  projection  period at annual rates
ranging from a high of 103.6% to a low of 3.8%, reflecting both the displacement
of Telco's old products by these new products as well as the expected  growth in
the overall market in which Telco's products compete.  Thereafter,  revenues are
projected  to  decline  over the  remaining  projection  period at annual  rates
ranging  from 15.2% to 42.6%,  as the  acquired in process  technologies  become
obsolete and are replaced by newer technologies.

    Management's   projected  annual  revenues  attributable  to  the  aggregate
acquired  in-process  technologies,  which  assume  that all  such  technologies
achieve  technological  feasibility,  ranged from a low of  approximately  $39.0
million  to a high  of  approximately  $276  million.  Projected  revenues  were
projected  to peak in 2004 and  decline  thereafter  through  2009 as other  new
products enter the market.

    The acquired  in-process  technology's  contribution to the operating income
was  projected  to grow over the first  five years of the  projection  period at
annual  rates  ranging  from  a  high  of  240.9%  to a low of  22.2%  with  one
intermediate  year of marginally  declining  operating income.  Thereafter,  the
contribution to operating income was projected to decline through the projection
period. The acquired  in-process  technology's  contribution to operating income
ranged from a low of approximately $4.4 million to a high of approximately $70.5
million.

    The discount  rate used to value the  existing  technology  was 20.0%.  This
discount rate was selected  because of the asset's  intangible  characteristics,
the risk  associated  with the economic life  expectations of the technology and
potential  obsolescence  of legacy  products,  and the risk  associated with the
financial assumptions with respect to the projections used in the analysis.

    The discount rates used to value the in-process  technologies were 18.0% and
20.0%, depending on the stage of development. These discount rates were selected
due to several incremental inherent risks. First the actual useful economic life
of such technologies may differ from the estimates used in the analysis. Second,
risks  associated with the financial  projections on the specific  products that
comprise the acquired in-process  research and development.  The third factor is
the  incomplete  and  unproven  nature  of  the  technologies.  Finally,  future
technological  advances that are  currently  unknown may  negatively  impact the
economic and functional viability of the in-process R&D.

    Set forth in the table below are details relating to the in-process research
and development charge for the significant Telco development projects:


<TABLE>

<CAPTION>
                                       Costs            Percentage of
                        Percentage   Incurred          Completion as of        Estimated Costs to Completion
                            of         as of      ---------------------------- as of the Acquisition Date for
                        NACT IPR&D  Acquisition   Acquisition                  ------------------------------
Development Project       Charge        Date         Date      June 30, 1999     1998       1999       2000
---------------------  -------------------------- ---------------------------- ------------------------------
                                       (000)                                                (000)
<S>                       <C>         <C>           <C>          <C>            <C>       <C>        <C>
Access 45/60 R1             6%       $   2,610        72%           87%         $   77    $   923       ---
EdgeLink 300& 300 E1       41%       $     880        47%           75%         $   76    $   914       ---
Sonet IAD                   5%       $   1,090        24%           54%         $  195    $ 2,345    $ 1,000
EdgeLink 650/IMA           18%       $   1,830        39%           50%         $  227    $ 2,723       ---
Voice over Packet          12%       $   1,730        45%           75%         $  162    $ 1,948       ---

</TABLE>

     The discount rates used to value  in-process  research and  development are
different in each of the three  mergers due to the  following  factors:  i.) The
nature of the markets for the products under development, including factors such
as market size, ability to enter the markets, competitive landscape, possibility
of technological obsolescence,  and target customer base; and ii.) The nature of
the  acquired   businesses,   including  the  historical  success  with  product
introductions, ability to meet development milestones, strength of the sales and
marketing  organizations,  access to market  channels  and strength of the brand
names.

<PAGE> 14

NOTE 6. 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.

    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 six months of 1999 to
the reserve for the fourth quarter 1998 restructuring activities:


                                          Reserve                      Reserve
                                          Balance          1999        Balance
                                         At 12/31/98     Activity     At 6/30/99
                                         -----------     ---------    ----------
                                                      (In thousands)

Reorganize Operating Structure
  Employee termination benefits.....       $   449        $    250       $  199
  Idle facility costs...............           258              73          185
  Other.............................           304             251           53
                                           -------        --------       ------
                                             1,011             574          437
Consolidation of ATI and Telco
  Employee termination benefits.....         1,175             866          309
  Idle facility costs...............           577             102          475
  Other.............................           300             118          182
                                           -------        --------       ------
                                             2,052           1,086          966
Outsource Manufacturing
  Employee termination benefits.....           310             195          115
  Idle facility costs...............           365             286           79
  Other.............................           332             332          --
                                           -------        --------       ------
                                             1,007             813          194
Product Line Rationalization........           568             338          230
                                           -------        --------       ------
          Total.....................       $ 4,638        $  2,811       $1,827
                                           =======        ========       ======




    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.

<PAGE> 15

    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.

    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 7.  INVENTORIES

    Inventories consisted of the following:

                                                   June  30,    December 31,
                                                     1999           1998
                                                   ---------    -----------
      Transport and access products..............  $   6,402    $     8,723
      Switching products.........................      2,026            986
      Cellular equipment.........................     18,700          9,421
      Work in progress...........................      2,629          4,953
      Raw materials.............................       9,112         12,425
                                                   ---------    -----------
              Continuing operations                   38,869         36,508
      Discontinued operations                          6,347         12,083
                                                   ---------    -----------
              Total inventories                    $  45,216    $    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. In the second quarter of
1999, the Company wrote down inventories of the discontinued  operations by $6.5
million to adjust the carrying cost to net realizable value.

<PAGE> 16

NOTE 8:  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 significant intersegment sales during the six months ended
June 30, 1999 and the year ended December 31, 1998.

    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 Six Months Ended June 30,
                                                                ---------------------------------
                                            Equipment     Telecom                 Continuing  Discontinued
                                              Group        Group        Other     Operations   Operations      Total
                                           ----------    ---------     --------   ----------  ------------   ----------
                                                                            (In thousands)
      <S>                                  <C>           <C>           <C>        <C>          <C>           <C>
      Revenues from external customers
          1999                             $  122,360    $ 198,891     $    --    $  321,251   $  13,767     $  335,018
          1998                                 57,402          545          --        57,947      25,291         83,238
      In-process research and development
          1999                                     --          --           --            --          --             --
          1998                                 35,400          --           --        35,400          --         35,400
      Restructuring and other charges
          1999                                     --          --           --            --      13,662         13,662
          1998                                  1,055          --           --         1,055       5,545          6,600
      Segment income or loss
          1999                                 10,126       1,734       (3,467)        8,393     (14,315)        (5,922)
          1998                                (25,334)         53       (2,409)      (27,690)        (40)       (27,730)



                                            Equipment     Telecom                 Continuing  Discontinued
                                              Group        Group        Other     Operations   Operations      Total
                                           ----------    ---------     --------   ----------  ------------   ----------
                                                                            (In thousands)
      Segment assets
          As of June 30, 1999                 385,584     206,332       99,813       691,729      10,519        702,248
          As of December 31, 1998             380,721     161,137       40,823       582,681      31,131        613,812



</TABLE>
<PAGE> 17

NOTE 9:  LITIGATION

         Following  the  Company's  announcement  on January 5, 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 in the United States District
Court for the Northern District of Georgia,  Atlanta Division (the "Court"). 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 on February 11, 1999,  and a few of these cases
were amended,  and additional,  similar complaints were filed. The pending cases
were  consolidated  pursuant to an order entered by the Court on April 28, 1999.
The Court has deferred  ruling on a pending motion  regarding the appointment of
lead plaintiffs and lead counsel.

         The plaintiffs filed a Consolidated Amended Class Action Complaint (the
"Amended  Complaint") on May 28, 1999, naming as defendants the Company,  Steven
A. Odom, Mark A. Gergel, Hensley  E.  West,  Martin D.  Kidder,  and  Stephen J.
Clearman.  In the Amended  Complaint,  the plaintiffs  have asserted  claims for
violations of the federal securities laws arising from alleged  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  alleged  performance  problems  with the  Company's  CDX switch and
alleged  customer and sales problems  arising  therefrom.  Although the issue of
class  certification has not yet been addressed,  the Amended Complaint is filed
on behalf of: (a) persons who  purchased  shares of the  Company's  common stock
during  the  period  from  April  29,  1997  through   February  11,  1999;  (b)
shareholders  of Telco who received  shares of the  Company's  common stock 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 the Company's  common stock
as a result of the  Company's  acquisition  of NACT that  closed on October  28,
1998.  The  plaintiffs  have  requested  damages  in an  unspecified  amount and
litigation expenses in their Amended Complaint.

         On June 28, 1999, the defendants moved to dismiss the Amended Complaint
on both  substantive  and procedural  grounds.  The motion is currently  pending
before the Court.  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  that the Company will not
sustain material liability as a result of or related to this shareholder suit.

NOTE 10:  INCOME TAXES

    The  Company's   provision  for  income  taxes  attributable  to  continuing
operations  for the  six  months  ended  June  30,  1999  was  $9.4  million  or
approximately  52.7% 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 11:  SUBSEQUENT EVENTS

Pending Merger

     On August 17, 1999, the Company entered into a definitive  merger agreement
with FaciliCom International,  Inc. ("FaciliCom").  FaciliCom, a privately owned
company  headquartered  in  Washington,  D.C.,  is  a  leading  facilities-based
provider of European and U.S. originated international long-distance voice, data
and Internet services.

<PAGE> 18

     Pursuant to the terms of the agreement,  the shareholders of FaciliCom will
receive  approximately  $436 million in consideration,  primarily in the form of
the Company's  Convertible  Preferred  Stock,  Series C (the "Series C Preferred
Stock").  The Series C Preferred Stock bears no dividend and is convertible into
shares of the Company's  common stock at a conversion  rate of $20.38 per common
share,  subject to potential  adjustment  under  certain  circumstances.  If the
closing trading price of the Company's common stock exceeds $20.38 per share for
60  consecutive  trading days, the Series C Preferred  Stock will  automatically
convert  into  common  stock.  Initially,  the holders of the Series C Preferred
Stock will be entitled to elect four new  directors  to the  Company's  Board of
Directors. Except for certain other specified matters, the holders of the Series
C  Preferred  Stock will vote on an  as-converted  basis with the holders of the
Company's  common  stock.  In addition,  the Company will assume $300 million of
FaciliCom's 10.5% Senior Notes due 2008 (the "FaciliCom Senior Notes").

     The transaction is conditioned  upon a majority of the holders of FaciliCom
Senior Notes  allowing the Company to assume the FaciliCom  Senior Notes,  waive
any put rights triggered by the merger and make certain amendments thereto.  The
merger is also subject to the approval of the Company's shareholders and certain
regulatory  agencies.   Certain  shareholders  of  the  Company  (including  MCI
WorldCom,  Brown Brothers  Harriman and senior  members of  management)  and the
Armstrong Group of Companies,  FaciliCom's  majority  shareholder,  have entered
into a Voting  Agreement  whereby  they have  committed  to vote in favor of the
merger.  The merger is expected to close in the fourth  quarter of 1999 and will
be accounted for as a purchase transaction.

Investment in Marketable Equity Securities

        In connection  with the  acquisition of Telco,  the Company  acquired an
investment  in the common  stock of Omnia  Communications,  Inc.  ("Omnia")  and
warrants to purchase  additional  common  stock of Omnia.  The fair value of the
investment in Omnia at the time of the  acquisition  of Telco was  approximately
$3.0 million.

        In March 1999,  Omnia announced that it had entered into an agreement to
be acquired by Ciena Corp.  ("Ciena").  In June 1999, the Company  exercised the
outstanding warrants to purchase additional common stock in Omnia. In July 1999,
Ciena's   acquisition   of  Omnia  was  completed   and  the  Company   received
approximately  445,000 shares of Ciena common stock in exchange for its holdings
of Omnia common stock of which approximately 45,000 shares or 10% are being held
in escrow  for a period  of one year  related  to  certain  representations  and
warranties  made by Omnia.  The Company will account for its investment in Ciena
in accordance  with Statement of Financial  Accounting  Standards No. 115 ("SFAS
No. 115)",  "Accounting for Certain  Investment in Debt and Equity  Securities".
The Company's investment in Ciena will qualify as available-for-sale  securities
under  SFAS  No.115.  Such  securities  will  be  recorded  at fair  value,  and
unrealized holding gains and losses, net of the related tax effect,  will not be
reflected  in  earnings  but  will  be  reported  as  a  separate  component  of
stockholders' equity (accumulated deficit) until realized.

       Since the  acquisition  transaction  did not close  until July 1999,  the
Company has not reflected the unrealized  gain on its investment in Ciena on the
Company's  June 30, 1999 balance  sheet.  Based upon the trading  price of Ciena
common stock as of June 30, 1999, the Company would have an unrealized gain, net
of tax, of approximately $5.6 million.




<PAGE> 19


                               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)

                                                     June 30,      December 31,
                                                       1999            1998
                                                     --------      ------------

      Current assets..............................   $146,283       $ 162,554
      Non-current assets..........................    315,499         300,139
      Total assets................................    461,782         462,693
      Current liabilities.........................     92,362          70,976
      Non-current liabilities.....................    144,228         138,529
      Stockholders equity.........................    225,192         253,188
      Total liabilities and stockholders equity...    461,782         462,693

                         OPERATING STATEMENT INFORMATION
                                 (In thousands)

               Six Months Ended June 30, 1999(1)

               Total sales....................................      $ 262,469
               Gross profit...................................         38,405
               Income (loss) from continuing operations.......          6,785
               Income (loss) from discontinued operations(2)..        (14,315)
               Net income ....................................         (7,530)


----------

(1) No operating  statement  information is presented for the three months ended
June 30, 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 telecom equipment and pay
telephone  refurbishment.  The discontinued operations had total assets of $10.0
million  and  $31.1  million  as  of  June  30,  1999  and  December  31,  1998,
respectively,  and total liabilities of $6.2 million and $7.8 million as of June
30, 1999 and December 31, 1998, respectively.


<PAGE> 20

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.

<PAGE> 21

    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.

    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 $47.8 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.

       In May 1999, the Company concluded  negotiations to acquire substantially
all the assets and assume certain  liabilities of Comm/Net  Holding  Corporation
and its wholly owned subsidiaries, Enhanced Communications Corporation, Comm/Net
Services Corporation and Long Distance Exchange  Corporation  (Comm/Net Holdings
and its  wholly  owned  subsidiaries  are  collectively  referred  to  herein as
"Comm/Net") and assumed effective control of Comm/Net's operations at that time.
Comm/Net  headquartered  in Plano,  Texas,  is  a  facilities-based  provider of
wholesale  international  long  distance  and  wholesale  prepaid  calling  card
services, primarily to the Mexican telecommunications  Comm/Net's facilities and
dedicated bandwidth agreements expand the  Telecommunications  Group's dedicated
network  facilities  into  Mexico and will  serve as a  foundation  for  network
development in other Latin American countries.

     On August 17, 1999, the Company entered into a definitive  merger agreement
with FaciliCom International,  Inc. ("FaciliCom").  FaciliCom, a privately owned
company  headquartered  in  Washington,  D.C.,  is  a  leading  facilities-based
provider of European and U.S. originated international long-distance voice, data
and Internet services.  FaciliCom has invested over $200 million during the past
two years to establish an extensive  and high quality  switching  and  transport
network in Europe.

        Pursuant to the terms of the agreement,  the  shareholders  of FaciliCom
will receive approximately $436 million in consideration,  primarily in the form
of the Company's  Convertible Preferred Stock, Series C (the "Series C Preferred
Stock").  The Series C Preferred Stock bears no dividend and is convertible into

<PAGE> 22

shares of the Company's  common stock at a conversion  rate of $20.38 per common
share,  subject to potential  adjustment  under  certain  circumstances.  If the
closing trading price of the Company's common stock exceeds $20.38 per share for
60  consecutive  trading days, the Series C Preferred  Stock will  automatically
convert  into  common  stock.  Initially,  the holders of the Series C Preferred
Stock will be entitled to elect four new  directors  to the  Company's  Board of
Directors. Except for certain other specified matters, the holders of the Series
C  Preferred  Stock will vote on an  as-converted  basis with the holders of the
Company's  common  stock.  In addition,  the Company will assume $300 million of
FaciliCom's 10.5% Senior Notes due 2008 (the "FaciliCom Senior Notes").

       The  transaction  is  conditioned  upon  a  majority  of the  holders  of
FaciliCom  Senior  Notes  allowing  the Company to assume the  FaciliCom  Senior
Notes,  waive any put rights triggered by the merger and make certain amendments
thereto.   The  merger  is  also  subject  to  the  approval  of  the  Company's
shareholders  and  certain  regulatory  agencies.  Certain  shareholders  of the
Company  (including MCI WorldCom,  Brown Brothers Harriman and senior members of
management)  and  the  Armstrong  Group  of  Companies,   FaciliCom's   majority
shareholder, have entered into a Voting Agreement whereby they have committed to
vote in favor of the  merger.  The  merger is  expected  to close in the  fourth
quarter of 1999 and will be accounted for as a purchase transaction.

    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.

    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.

<PAGE> 23


Results of Continuing Operations

    The  following  table sets  forth  certain  financial  data  expressed  as a
percentage of total sales from continuing operations:

<TABLE>
<CAPTION>
                                                         Three Months Ended            Six Months Ended
                                                               June 30                     June 30
                                                          1999          1998         1999           1998
                                                     ------------------------------------------------------
<S>                                                       <C>           <C>          <C>           <C>
Carrier service revenues..........................        63.7%          2.1%        61.9%          2.2%
Equipment sales...................................        36.3          97.9         38.1          97.8
                                                         -----         -----        -----         -----
        Total sales...............................       100.0         100.0        100.0         100.0
Cost of carrier services..........................        56.0           1.7         54.6           1.8
Cost of services network..........................         2.5           0.1          3.1           0.1
Cost of equipment sold............................        20.7          49.7         21.4          50.7
Amortization of acquired technology...............         0.7           0.0          0.7           0.0
                                                         -----         -----        -----         -----
        Total cost of sales.......................        79.9          51.5         79.8          52.6
                                                         -----         -----        -----         -----
        Gross profit..............................        20.1          48.5         20.2          47.4
Research and development..........................         2.5           5.1          2.7           4.3
Selling, general and administrative...............         8.4          11.6          9.0          11.7
Amortization of goodwill..........................         1.8           2.4          2.0           2.5
In-process research and development...............         0.0           0.0          0.0          61.1
Restructuring and other charges...................         0.0           0.0          0.0           1.0
                                                         -----         -----        -----         -----
        Operating income (loss)...................         7.4          29.4          6.5         (33.2)
Interest and other income.........................         0.6           2.0          0.4           3.4
Interest expense..................................        (1.1)         (4.4)        (1.4)         (5.1)
                                                         -----         -----        -----         -----
        Income (loss) from continuing
        operations before income taxes and
        minority interests........................         6.9          27.0          5.5         (34.9)
Income taxes......................................         3.4          10.7          2.9          10.2
                                                         -----         -----        -----         -----
Income (loss) from continuing operations
  before minority Interests.......................         3.5          16.3          2.6         (45.1)
Minority interests in earnings of subsidiary......         0.0           2.5          0.0           2.7
                                                         -----         -----        -----         -----
        Income (loss) from continuing operations..         3.5          13.8          2.6         (47.8)
                                                         =====         =====        =====         =====


</TABLE>


Three Months Ended June 30, 1999 Continuing  Operations Compared to Three Months
Ended June 30, 1998 Continuing Operations

     Sales.  Total sales increased $143.2 million,  or 414.7%, to $177.7 million
in the second quarter of 1999 from $35.4 million in the second quarter of 1998.

    Carrier  service  revenues were $113.3 million in the second quarter of 1999
as  compared  to  $718,000,  in the second  quarter of 1998 which  consisted  of
facilities  management  services at NACT.  This increase is due to revenues from
Resurgens  which was acquired in December  1998 and Comm/Net  which was acquired
effective May 1999 and represented an increase of  approximately  $27.7 million,
or 32.3%,  over carrier  service  revenues  realized by the Company in the first
quarter of 1999.

<PAGE> 24

    Equipment sales  increased  $30.7 million,  or 90.7% to $64.5 million in the
second  quarter of 1999 from $33.8  million in the second  quarter of 1998.  The
increase in equipment sales related to increases in sales of switching  products
by  NACT,   cellular   equipment  by  CIS,  and  the  Company's  newly  acquired
transmission and access products  business,  Telco, which was acquired effective
November 30, 1998.

    Gross Profit.  Gross profit  increased  $19.1 million,  or 113.9%,  to $35.8
million in the second  quarter of 1999 from $16.7 million in the second  quarter
of 1998. Gross profit margin decreased to 20.1% in the second quarter of 1999 as
compared to 48.5% in the second quarter of 1998.

    Carrier service gross profit increased to $9.3 million in the second quarter
of 1999 from $93,000 in the second quarter of 1998. Gross profit margin was 8.2%
in the second  quarter of 1999 as compared to 5.1% in the first quarter of 1999.
Gross profit margin was 12.9% in the second 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 12.1% in the second quarter of 1999 from the 11.6% that the Company
realized in the first quarter of 1999.  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  $9.8 million,  or 58.7%,  to $26.5
million in the second  quarter of 1999 from $16.7 million in the second  quarter
of 1998.  Gross profit margin  decreased to 41.2% in the second  quarter of 1999
from 49.2% in the second  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 second 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  second  quarter of 1998,
resulting  from large contract  price  negotiations  which enabled CIS to obtain
sales growth of 22.0% over the second quarter of 1998.

    Research and  Development.  Research and  development  expenses which relate
exclusively to the Equipment  Group increased $2.7 million,  or 153.1%,  to $4.4
million in the second quarter of 1999 from $1.7 million in the second quarter of
1998. The increase in expenses was  attributable  to the  acquisitions of Telco,
NACT and ATI due to the proprietary  nature of their existing products requiring
sustaining  engineering expenses and their on-going product development efforts.
Research and development  expenses increased to 6.9% of total equipment sales in
the  second  quarter  of 1999 from 5.2% of total  equipment  sales in the second
quarter of 1998.

    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased $11.0 million, or 274.6%, to $15.0 million in
the second  quarter of 1999 from $4.0 million in the second quarter of 1998. The
increase  primarily  related  to  expenses  associated  with the  operations  of
Resurgens  and  Telco , which  were  acquired  in the  fourth  quarter  of 1998.
Economies of scale have resulted in selling, general and administrative expenses
decreasing as a percentage of total sales to 8.5% in the second  quarter of 1999
from 11.6% in the second quarter of 1998.

    Amortization of Goodwill. Amortization of goodwill increased $2.4 million to
$3.2 million in the second  quarter of 1999 from $833,000 in the second  quarter
of 1998,  primarily as a result of the goodwill generated in connection with the
fourth quarter 1999 Resurgens and Telco acquisitions.

    Operating  Income (Loss).  Operating  income increased $3.0 million to $13.1
million in the second quarter of 1999 as compared to $10.1 million in the second
quarter  of 1998.  Operating  income  margin,  decreased  to 7.4% in the  second
quarter of 1999 from  29.4% in the second  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 $9.9 million, or 97.0 %, to $20.1 million in the second quarter
of 1999 from $10.2 million before special charges in the first quarter of 1998.

    Interest and Other Income.  Interest and other income increased $384,000, or
54.9%, to $1.1 million in the second quarter of 1999 from $700,000 in the second
quarter of 1998 due to the  increase  in invested  cash  balances of the Company
resulting from the sale of $50.0 million of Convertible  Preferred  Stock in the
second quarter of 1999.

<PAGE> 25

    Interest Expense. Interest expense increased $500,000 to $2.0 million in the
second  quarter of 1999 from $1.5  million in the  second  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.

     Six Months Ended June 30, 1999 Continuing Operations Compared to Six Months
Ended June 30, 1998 Continuing Operations

     Sales.  Total sales increased $263.3 million,  or 454.4%, to $321.2 million
in the first six  months of 1999 from  $57.9  million in the first six months of
1998.

    Carrier service revenues were $198.9 million in the first six months of 1999
as compared to $1.3  million in the first six months of 1998 which  consisted of
facilities  management  services at NACT.  This increase is due to revenues from
Resurgens  which was acquired in December  1998 and Comm/Net  which was acquired
effective May 1999.

    Equipment sales increased $65.7 million, or 115.9 % to $122.4 million in the
first six months of 1999 from $56.7 million in the first six months 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  $37.4 million,  or 136.3%,  to $64.9
million  in the first six  months of 1999 from  $27.5  million  in the first six
months of 1998.  Gross profit margin  decreased to 20.2% in the first six months
of 1999 as compared to 47.4 % in the first six months of 1998.

    Carrier  service  gross profit  increased to $13.7  million in the first six
months of 1999 from  $146,000  in the first  six  months of 1998.  Gross  profit
margin  was 6.9% in the first six  months  of 1999 as  compared  to 11.6% in the
first six months 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,  was approximately  11.9% in the first six
months of 1999 from  approximately  8.0% that Resurgens realized in the last six
months of 1998. The change 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  $24.0 million,  or 87.9%, to $51.3
million  in the first six  months of 1999 from  $27.3  million  in the first six
months of 1998.  Gross profit margin  decreased to 41.9% in the first six months
of 1999 from  48.2% in the  first  six  months  of 1998.  The  decreased  margin
performance of the Equipment  Group relates to the $2.4 million of  amortization
of  acquired  technology  costs in the first six months of 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 six
months of 1998,  resulting from large contract price  negotiations which enabled
CIS to obtain  significant  sales  growth of 52.1%  over the first six months of
1998.

    Research and  Development.  Research and  development  expenses which relate
exclusively to the Equipment  Group increased $6.3 million,  or 254.0%,  to $8.8
million  in the first six  months  of 1999  from $2.5  million  in the first six
months of 1998. The increase in expenses was attributable to the acquisitions of
Telco,  NACT and ATI due to the  proprietary  nature of their existing  products
requiring sustaining engineering expenses and their on-going product development
efforts.  Research and development expenses increased to 7.2% of total equipment
sales in the first six months of 1999 from 4.4% of total  equipment sales in the
first six months of 1998.

<PAGE> 26

    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased $22.1 million, or 325.7%, to $28.9 million in
the first six months of 1999 from $6.8  million in the first six months 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.  Economies of scale have resulted in selling,  general and  administrative
expenses  decreasing  as a  percentage  of total  sales to 9.0% in the first six
months of 1999 from 11.7% in the first six months of 1998.

    Amortization of Goodwill. Amortization of goodwill increased $4.9 million to
$6.4  million in the first six months of 1999 from $1.5 million in the first six
months of 1998,  primarily as a result of the goodwill  generated in  connection
with  the  Resurgens,  Telco  and  NACT  acquisitions  and  additional  goodwill
amortization recorded relating to the earnouts of CIS and Galaxy.

    Operating  Income (Loss).  Operating income increased $40.1 million to $20.8
million in the first six months of 1999 as compared  to a loss of $19.3  million
in the first six months of 1998 due to the significant  special charges recorded
during the first  quarter  of 1998  related to  acquisitions  and  restructuring
programs.  Operating  income  margin was 6.5% in the first six months of 1999 as
compared to (33.2%) in the first six months of 1998.  Operating income increased
$3.7  million , or 21.7%,  in the first six  months of 1999 from  $17.1  million
before special charges in the first six months of 1998. Operating income margin,
decreased  to 6.5% in the first six  months of 1999 from  29.5%  before  special
charges in the first six  months 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  $17.9 million,  or 105.3 %, to $34.9 million in the first six
months of 1999 from $17.0 million before special charges in the first six months
of 1998.

    Interest and Other Income.  Interest and other income decreased $500,000, or
25.0%,  to $1.5 million in the first six months of 1999 from $2.0 million in the
first six months of 1998 due to the  reduction in invested  cash balances of the
Company.

    Interest Expense. Interest expense increased $1.6 million to $4.6 million in
the first six months of 1999 from $3.0  million in the first six months 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 of 1998  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 of 1998, the period in
which the NACT Merger was consummated. Consequently, net loss for the six months
ended June 30, 1998 of $42.3 million as reported in the Company's Report on Form
10-Q for the three months  ended June 30, 1998 is now reported as $27.7  million
in this Form 10-Q Report.

<PAGE> 27

    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.

    See Note 5 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.

<PAGE> 28
     The  following  details the activity  charged to the accrual for the fourth
quarter 1998 restructuring activities during the first six months of 1999:

<TABLE>
<CAPTION>

                                                               ReserveBalance       1999     Reserve Balance
                                                                At 12/31/98       Activity      At 6/30/99
                                                               --------------    ---------   ---------------
                                                                              (In thousands)
      <S>                                                          <C>            <C>            <C>
      Reorganize Operating Structure
        Employee termination benefits.......................       $   449        $    250       $  199
        Idle facility costs.................................           258              73          185
        Other...............................................           304             251           53
                                                                   -------        --------       ------
                                                                     1,011             574          437
      Consolidation of ATI and Telco
        Employee termination benefits.......................         1,175             866          309
        Idle facility costs.................................           577             102          475
        Other...............................................           300             118          182
                                                                   -------        --------       ------
                                                                     2,052           1,086          966
      Outsource Manufacturing
        Employee termination benefits.......................           310             195          115
        Idle facility costs.................................           365             286           79
        Other...............................................           332             332          --
                                                                   -------        --------       ------
                                                                     1,007             813          194
      Product Line Rationalization..........................           568             338          230
                                                                   -------        --------       ------
                Total.......................................       $ 4,638        $  2,811       $1,827
                                                                   =======        ========       ======

</TABLE>

    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.



<PAGE> 29

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.  In
connection therewith, in the fourth quarter of 1998, goodwill recorded for these
businesses  was  written-down  by $3.5 million to reflect the estimated  loss on
disposal.

    As a result of  deteriorating  operations  experienced  in the first half of
1999,  management decided to terminate the resale and repair businesses.  In the
second quarter of 1999 an additional  charge of approximately  $13.7 million was
recorded to reflect the  estimated  loss on disposal  under the new  liquidation
program.  The  liquidation  program  should be completed in 1999. The Company is
currently  marketing the payphone  refurbishment  business to several interested
parties, and 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.

    Three  Months  Ended  June 30,  1999  Compared  to Three  Months  Ended June
30,1998.  Sales  decreased  $7.4  million,  or 57.1%,  to $5.6 million in second
quarter of 1999 from $13.0 million in the second 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 (6.7%) in the second  quarter of 1999 from
29.0% in the second  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.

    Six Months Ended June 30, 1999  Compared to Six Months  Ended June  30,1998.
Sales decreased  $11.5 million,  or 45.6%, to $13.8 million in the six months of
1999 from  $25.3  million  in the first six months 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 2.5% in the first months of 1999 from 29.5% in the first six
months 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 six months of 1998, the Company recorded special charges of
approximately  $5.5  million  relating  to  the  non-core  businesses  (see  "--
Restructuring and Other Charges").

<PAGE> 30

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 June 30, 1999, the Company had $99.0
million of cash and  equivalents and  approximately  $69.1 million in borrowings
available  under  its  credit  line  to  support  its  current  working  capital
requirements and strategic growth initiatives.

     Operating   Activities.   Cash  provided  from  operating   activities  was
approximately  $4.3 million and $3.0 million in the first six months of 1999 and
1998, respectively.

    Accounts  receivable  increased $26.9 million, or 38.1%, to $97.3 million at
June 30, 1999 from $70.5  million at December 31,  1998.  This was mainly due to
increased  sales activity at the Company  (second  quarter 1999 total sales were
$183.3 million as compared to fourth quarter 1998 total sales of $73.6 million).
Average days sales  outstanding at June 30, 1999 were  approximately  48 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
notes where possible on either a non-recourse or recourse basis to a third party
financing  institution.  As of June  30,  1999,  the  Company  has a  contingent
liability of  approximately  $22.0 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  decreased  $3.4 million,  or 6.9%, to $45.2 million at June 30,
1999 from $48.6  million at December 31, 1998.  The decrease was due to the sale
of $5.2 million of inventories related to the sale of the Company's  Alpharetta,
Georgia manufacturing  facility and the outsourcing of ATI's wireless radios and
$6.5 million  write-down to  inventories of the  discontinued  operations to the
Company's evaluation of the estimated loss on sale . This decrease was partially
offset by an  increase  in CIS  inventories  as a result of the  timing of large
equipment purchases in the first half of 1999.

     Investing  Activities.  Cash used by investing  activities was $4.1 million
and $69.8 million for the first six months of 1999 and 1998, respectively.

     In May 1999, the Company  concluded  negotiations to acquire  substantially
all the assets and assume certain  liabilities of Comm/Net  Holding  Corporation
and its wholly owned subsidiaries, Enhanced Communications Corporation, Comm/Net
Services Corporation and Long Distance Exchange  Corporation  (Comm/Net Holdings
and its  wholly  owned  subsidiaries  are  collectively  referred  to  herein as
"Comm/Net") and assumed effective control of Comm/Net's operations at that time.
Comm/Net  headquartered  in Plano,  Texas,  is  a  facilities-based  provider of
wholesale  international  long  distance  and  wholesale  prepaid  calling  card
services, primarily to the Mexican telecommunications markets.

      In connection  with the  acquisition,  the Company issued 23,174 shares of
4.25% Cumulative Junior  Convertible  Preferred Stock,  Series B ( the "Series B
Preferred Stock") to the stockholders of Comm/Net valued at approximately  $18.5
million and paid  approximately  $3.5 million to retire  certain  notes  payable
outstanding  at the  time of  acquisition.  The  Series  B  Preferred  Stock  is
convertible  into shares of World Access  common  stock at a conversion  rate of
$16.00 per common share, subject to standard anti-dilution  adjustments.  If the
closing  trading price of World Access common stock exceeds $16.00 per share for
45 consecutive trading days, the Preferred Stock will automatically convert into
common  stock. Preferred stock dividends begin accruing effective  July 1, 1999.
The  acquisition  of Comm/Net has been  accounted  for under the purchase method
of accounting.

<PAGE> 31

    In connection with the acquisition of Cellular  Infrastructure  Supply, Inc.
("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  determinable  beyond  a  reasonable  doubt  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  determinable  beyond  a  reasonable  doubt  that  the
conditions  for  release  and  payment  for  the  second  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.

    The third measurement  period for purposes of releasing  escrowed shares and
paying CIS Additional  Consideration is January 1, 1999 to December 31, 1999. In
reviewing  CIS's  pre-tax  income  performance  as of May 31, 1999,  the Company
determined  that  it  was  determinable  beyond  a  reasonable  doubt  that  the
conditions  for  release  and  payment  for  the  third  period  would  be  met.
Accordingly,  122,426 escrowed shares were accounted for as if released and $1.0
million of CIS Additional  Consideration  was accounted for as if paid as of May
31,  1999.  The net  effect of this  accounting  was to  increase  goodwill  and
stockholders'   equity  by   approximately   $2.4  million  and  $1.3   million,
respectively, as of May 31, 1999. These escrowed shares will be released and the
CIS Additional  Consideration will be paid to the former  stockholders of CIS on
February 15, 2000.

    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.

    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.

<PAGE> 32

    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.

    In  connection   with  the  Company's  sale  of  its   Alpharetta,   Georgia
manufacturing  facility  and the  outsourcing  of the ATI  wireless  radios  the
Company  sold  certain   inventories  to  established   contract   manufacturing
suppliers.  During the second quarter the Company  received  approximately  $4.8
million from these inventory sales.

    During each of the first six months of 1999 and 1998,  the Company  invested
$4.2  million  and  $5.9  million  capital  expenditures,   respectively.  These
expenditures  in  1999  were  primarily  for  enhancing  and  standardizing  the
Company's  research and  development  operating  platforms,  new test  equipment
relating   to  newly   introduced   products,   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 six
months of 1999 and 1998, the Company capitalized  approximately $2.5 million and
$1.8  million 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 $43.6
million  and  $6.4   million  for  the  first  six  months  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 June 30,
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 $47.8 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.

    In September 1998, the Company entered into a loan agreement with the Public
Development  Authority  of  Forsyth  County,  Georgia  ( the  "Issuer"),  in the
principal  amount of  $7,365,000.  The issuer  issued its tax exempt  industrial
revenue  bonds (the  "Bonds") for the sole purpose of financing a portion of the
cost  of  the  acquisition,  construction  and  installation  of  the  Company's
Alpharetta,  Georgia  telecommunications  equipment and printed  circuit  boards
manufacturing  plant.  In March 1999, the Company sold the  Alpharetta,  Georgia
based  manufacturing  operation.  At the  time  of the  sale,  the  Company  had
qualifying  expenditures  under the Bonds of  approximately  $4.1  million.  The
remaining $3.3 million of the proceeds were  restricted  for  qualifying  future
expenditures  The Bonds were  completely  repaid in April 1999 as required under
the terms and conditions of the Bonds.

<PAGE> 33

    During the first six months of 1999,  the Company  made  principal  payments
under capital lease obligations of approximately $1.6 million. The capital lease
obligations  relate  mainly to leases of the  Telecommunications  Group  network
equipment.

    During  the  first  six  months  of 1999  and  1998,  the  Company  received
approximately $535,000 and 7.3 million, respectively, in cash, including related
income tax benefits,  from the exercises of incentive  and  non-qualified  stock
options and warrants by the Company's directors and employees.

    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
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 June 30, 1999.

     The  Company's  provision  for  income  taxes  attributable  to  continuing
operations  for the  six  months  ended  June  30,  1999  was  $9.4  million  or
approximately  52.7% 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.  With the inventory and  assessment
phases completed for the Company's core businesses, the Company's business units
are now focused on 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.

<PAGE> 34

    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 was
completed in July 1999. Information received from manufacturers and suppliers is
maintained in databases to monitor compliance status, and compliance testing has
been completed for Company products.

    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 September 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.

<PAGE> 35

    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.  Software  required  for  upgrades is presently
available.  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.

    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 six months of 1999, the Company spent
approximately  $600,000 in connection  with Year 2000 issues and the Company has
spent a total of  approximately  $1.9 million since 1997 in connection with Year
2000  issues.  The  Telecommunications  Group  estimates  $2.0  million  will be
required in 1999 for upgrades to switching  equipment and billing  systems.  The
Equipment Group estimates $800,000 million 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 $4.7  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.

<PAGE> 36

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 June 30, 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 June
30, 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.


<PAGE> 37


PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

        Following  the  Company's  announcement  on January  5, 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 in the United States District
Court for the Northern District of Georgia,  Atlanta Division (the "Court"). 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 on February 11, 1999,  and a few of these cases
were amended,  and additional,  similar complaints were filed. The pending cases
were  consolidated  pursuant to an order entered by the Court on April 28, 1999.
The Court has deferred  ruling on a pending motion  regarding the appointment of
lead plaintiffs and lead counsel.

       The plaintiffs  filed a Consolidated  Amended Class Action Complaint (the
"Amended  Complaint") on May 28, 1999, naming as defendants the Company,  Steven
A. Odom,  Mark A.  Gergel,  Hensley E. West,  Martin D.  Kidder,  and Stephen J.
Clearman.  In the Amended  Complaint,  the plaintiffs  have asserted  claims for
violations of the federal securities laws arising from alleged  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  alleged  performance  problems  with the  Company's  CDX switch and
alleged  customer and sales problems  arising  therefrom.  Although the issue of
class  certification has not yet been addressed,  the Amended Complaint is filed
on behalf of: (a) persons who  purchased  shares of the  Company's  common stock
during  the  period  from  April  29,  1997  through   February  11,  1999;  (b)
shareholders  of Telco who received  shares of the  Company's  common stock 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 the Company's  common stock
as a result of the  Company's  acquisition  of NACT that  closed on October  28,
1998.  The  plaintiffs  have  requested  damages  in an  unspecified  amount and
litigation expenses in their Amended Complaint.

       On June 28, 1999, the defendants  moved to dismiss the Amended  Complaint
on both  substantive  and procedural  grounds.  The motion is currently  pending
before the Court.  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  that the Company will not
sustain material liability as a result of or related to this shareholder suit.

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 "Series A
Preferred  Stock") to The 1818 Fund III,  L.P.  Each share of Series A 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 ("Nasdaq") exceeds $30 per share for 45 consecutive  trading
days,  the Series A Preferred  Stock will be  automatically  converted  into the
Company's common stock. Pursuant to an amendment to the Company's Certificate of
Incorporation,   the   holders  of  Series  A  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  Series A
Preferred  Stock,  a   reorganization   or  liquidation  of  the  Company  or  a
consolidation  or merger of the Company  with a third party.  In  addition,  the
Series A Preferred Stock ranks senior to the Company's Common Stock with respect
to dividend  rights and rights on  liquidation,  dissolution  or winding up. The
Series A Preferred Stock was issued  pursuant to an exemption from  registration
under the  Securities  Act of 1933,  as amended (the  "Securities  Act"),  under
Section  4(2)  of  the   Securities   Act,  which  provides  an  exemption  from
registration for transactions by an issuer not involving a public filing, as the
securities were issued to only one party.

<PAGE> 38

       In June 1999, in connection with the acquisition of substantially all the
assets of and assumption of certain  liabilities of Comm/Net Holding Corporation
and its wholly owned subsidiaries, Enhanced Communications Corporation, Comm/Net
Services Corporation and Long Distance Exchange  Corporation  (Comm/Net Holdings
and  its  wholly  owned  subsidiaries   (collectively   referred  to  herein  as
"Comm/Net"),  the  Company  issued  an  aggregate  of  23,174  shares  of  4.25%
Cumulative  Junior  Convertible  Preferred  Stock,  Series  B (  the  "Series  B
Preferred Stock") to Comm/Net.  The Series B Preferred Stock is convertible into
shares of World Access  common  stock at a conversion  rate of $16.00 per common
share,  subject to standard  anti-dilution  adjustments.  If the closing trading
price of the  Company's  common stock as quoted on Nasdaq  exceeds $16 per share
for  45  consecutive  trading  days,  the  Series  B  Preferred  Stock  will  be
automatically  converted  into  the  Company's  common  stock.  Pursuant  to  an
amendment to the Company's Certificate of Incorporation,  the Series B Preferred
Stock  ranks  senior to the  Company's  Common  Stock and junior to the Series A
Preferred  Stock with  respect  to  dividend  rights and rights on  liquidation,
dissolution or winding up. The Series B referred Stock was issued pursuant to an
exemption  from  registration  under Section 4(2) of the  Securities  Act, which
provides  an  exemption  from  registration  for  transactions  by an issuer not
involving a public filing, as the securities were issued to only one party.

Item 3.  Defaults Upon Senior Securities

        None

 Item 4.  Submission of Matters to a Vote of Security Holders

       The 1999 Annual  Meeting of the  stockholders  of World Access,  Inc. was
held on June 15, 1999 at the Resurgens Plaza building in Atlanta, Georgia. There
were 44,885,893 shares of Common Stock of issued and outstanding and entitled to
vote the meeting,  of which  39,442,238  were present in person or by proxy.  In
addition,  there  were  50,000  shares of Series A  Preferred  Stock  issued and
outstanding and entitled to vote at the meeting with the Company's  Common Stock
on an as converted basis into 4,347,826 common shares, all of which were present
in person or by proxy. At the meeting, the following matters were voted on:

<TABLE>
<CAPTION>

                                                                                       For       Withheld
                                                                                   ----------    --------
    <S>                                                                            <C>           <C>        <C>        <C>
    To approve the election of Lawrence C. Tucker
    to the Board of Directors.                                                     43,202,065     587,999


                                                                                                                         Broker
                                                                                       For       Against     Abstain    Non Votes
                                                                                   ----------    ---------   -------    ----------

    To approve the proposal to amend the Company's Outside Director Warrant Plan
    to increase the number of warrants issuable under the Plan
    from 1.2 million to 2.4 million.                                               23,689,525   2,090,500    290,873    17,719,166

    To approve the proposal to amend the Company's 1998 Incentive Equity Plan to
    increase the number of stock options issuable under the Plan
    from 5.0 million to 7.5 million.                                               22,870,296   2,500,739    199,523    18,219,506

    To approve the proposal to adopt the Company's
    Short-Term Incentive Plan for Senior Executives.                               23,215,292   2,155,552    199,714    18,219,506

</TABLE>

Item 5.  Other Information

      None

Item 6.  Exhibits and Reports on Form 8-K

(A)  Exhibits

2.1      Agreement and Plan of Reorganization,  dated May 27, 1999, by and among
         WA Telcom  Products Co., Inc.,  World Access,  Inc.,  Comm/Net  Holding
         Corporation,  Enhanced  Communications  Corporation,  Comm/Net Services
         Corporation,  Long Distance  Exchange  Corporation,  Gregory A. Somers,
         Kelli J. Somers, R. Scott Birdwell, Teleplus Telecommunications,  Inc.,
         Jeff  Becker,  Michael  Billingsly,  Chris  Johns and  Denny D.  Somers
         (incorporated  herein by reference to Exhibit 2 to the  Company's  Form
         8-K, filed with the Commission on July 14, 1999).

3.1      Certificate  of   Incorporation   of  the  Company  and  Amendments  to
         Certificate  of  Incorporation  (incorporated  by  reference  herein to
         Exhibit 3.1 to the  Company's  Form S-4,  filed with the  Commission on
         October 6, 1998,  Registration No. 333-65386;  Amendment to Certificate
         of  Incorporation  incorporated  by reference  herein to Exhibit 3.2 to
         Form 8-K of the Company's  predecessor,  World Access, Inc., filed with
         the Commission on October 28, 1998).

<PAGE> 39

3.2      Certificate  of  Designation  of  4.25%  Cumulative   Senior  Perpetual
         Convertible Preferred Stock, Series A (incorporated by reference herein
         to Exhibit 4 to the Company's  Form 8-K,  filed with the  Commission on
         May 3, 1999).

3.3      Certificate  of  Designation  of 4.25%  Cumulative  Junior  Convertible
         Preferred Stock,  Series B (incorporated by reference herein to Exhibit
         4.1 to the Company's  Form 8-K,  filed with the  Commission on July 14,
         1999).

3.4      Bylaws of the Company  (incorporated  by reference  herein  to  Exhibit
         3.2 to the Company's Form S-4, filed with the Commission  on October 6,
         1998, Registration No. 333-65389).

4.1      Certificate  of  Designation  of  4.25%  Cumulative   Senior  Perpetual
         Convertible Preferred Stock, Series A (incorporated by reference herein
         to Exhibit 4 to the Company's  Form 8-K,  filed with the  Commission on
         May 3, 1999).

4.2      Certificate  of  Designation  of 4.25%  Cumulative  Junior  Convertible
         Preferred Stock,  Series B (incorporated by reference herein to Exhibit
         4.1 to the Company's  Form 8-K,  filed with the  Commission on July 14,
         1999).

27.1     Financial Data Schedule (for SEC use only).

(B) Reports on Form 8-K

     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.

    On July 14, 1999, the Company filed a Report on Form 8-K announcing  that WA
Telcom  Products Co., Inc., a wholly owned  subsidiary of the Company,  acquired
substantially all the assets and assumed certain liabilities of Comm/Net Holding
Corporation  and  its  wholly  owned   subsidiaries,   Enhanced   Communications
Corporation,   Comm/Net   Services   Corporation  and  Long  Distance   Exchange
Corporation.



                                   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: August 16, 1999



<PAGE> 40