U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


(X)   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

      For the quarterly period ended               September 30, 1998
                                                   ------------------

(  )  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

      For the transition period from ______________ to ______________


                         Commission file number 1-13478

                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


           Delaware                                   13-3698386
-------------------------------              -------------------------------
(State or other jurisdiction of             (IRS Employer Identification No.)
 incorporation or organization)


                     10 Stow Road, Marlton, New Jersey 08053
                     ---------------------------------------
                    (Address of principal executive offices)

                                 (609) 797-3434
                  ---------------------------------------------
                 (Issuer's telephone number including area code)

            5697 Rising Sun Avenue, Philadelphia, Pennsylvania 19120
            --------------------------------------------------------   
             (Former name, former address and former fiscal year, if
                           changed since last report)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable date. As of November 20, 1998, the issuer
had outstanding 7,959,938 shares of common stock, par value $.01 per share.


<PAGE>




            GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES


                                                                       Page


Part I.  Financial Information

         Consolidated Financial Statements

         Consolidated Balance Sheets - September 30, 1998 
          (pro forma - unaudited), September 30, 1998 
          (unaudited) and December 31, 1997............................3

         Consolidated Statements of Operations - Three 
          and nine months ended September 30, 1998 and 1997 
          (unaudited)..................................................4

         Consolidated Statements of Cash Flows - Nine months ended
         September 30, 1998 and 1997 (unaudited).......................5

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

Item 2.  Management's Discussion and Analysis of Financial 
          Condition and Results of Operations..........................14

Part II. Other Information

         Item 1.  Legal Proceedings....................................20

         Item 2.  Changes in Securities and Use of Proceeds............20

         Item 5.  Other Information....................................20

         Item 6.  Exhibits and Reports on Form 8-K.....................20

         Signatures....................................................21


                                        2

<PAGE>

            GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                            Pro forma 
                                                                             Note 15 
                                                                           (Unaudited)         (Unaudited)
                                                                           September 30,       September 30,       December 31,
                                                                         -------------         -----------         -----------
                                                                              1998               1998                 1997
                                                                         -------------         -----------         -----------
<S>                                                                      <C>                <C>                 <C> 
                                     Assets
Current assets:
    Cash and cash equivalents                                           $   1,784,028        $   1,211,593      $   7,867,566
    Accounts receivable, net of reserve 
     for doubtful accounts of $348,577, 
     $348,577 and $570,000                                                  4,460,623            4,460,623          2,636,878
    Inventories                                                               476,649              476,649            174,112
    Other assets                                                              215,827              215,827            193,699
                                                                         -------------         -----------         -----------
         Total current assets                                               6,937,127            6,364,692         10,872,255
                                                                         -------------         -----------         -----------

Goodwill, net                                                              14,579,042           14,579,042          3,516,344
Property and equipment, net                                                 1,763,274            1,763,274          1,485,348
Other assets, net                                                             959,128            1,318,496            378,911
                                                                         -------------         -----------         -----------   
         Total assets                                                    $ 24,238,571          $24,025,504       $ 16,252,858
                                                                         ============          ============       ============
           Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
    Accounts payable                                                    $   4,731,111        $   4,731,111      $   2,199,134
    Accrued expenses                                                        5,806,342            5,890,657          2,165,986
    Deferred revenues                                                       3,757,012            3,757,012          1,677,615
    Estimated sales and excise tax liability (Note 7)                       4,877,553            4,877,553          3,663,285
    Convertible notes payable, current                                      2,562,250            2,562,250                 -
    Notes payable, net current (Note 15)                                    2,915,248            4,165,248            450,000
    Notes payable to related parties, current (Note 4)                        750,000            1,500,000                 -
    Capital lease obligation, current                                          13,397               13,397             95,298
                                                                         -------------         -----------         -----------
          Total current liabilities                                        25,412,913           27,497,228         10,251,318
                                                                         -------------         -----------         -----------
Notes payable, net                                                                  -                   -           1,886,982
Notes payable to related parties (Note 4)                                     250,000             500,000                   -
Convertible notes payable                                                           -                   -           2,599,750

                                                                         -------------         -----------         -----------
          Total liabilities                                                25,662,913           27,997,228         14,738,050
                                                                         -------------         -----------         -----------
Commitments and Contingencies (Notes 7, 8,13 and 14)

Stockholders' Equity (Deficit)
    Preferred stock - $.01 par value, authorized 1,000,000 shares;
        none issued and outstanding                                                                     -                  -
    Common stock, $.01 par value, authorized 35,000,000 shares;
         issued and outstanding 7,959,938, 5,996,821 and 5,084,870             79,600              59,967             50,848
    Additional paid in capital                                             48,991,836          46,174,586         39,689,698
    Accumulated deficit                                                   (50,448,129)        (50,158,628)       (37,942,443)
    Deferred compensation                                                     (74,057)            (74,057)          (294,650)
    Accumulated other comprehensive income                                     26,408              26,408             11,355
                                                                         -------------         -----------         -----------
            Total stockholders' equity (deficit)                           (1,424,342)         (3,971,274)         1,514,808
                                                                         -------------         -----------         -----------
            Total liabilities and stockholders' equity (deficit)         $ 24,238,571        $ 24,025,504       $ 16,252,858
                                                                         =============       =============       =============
</TABLE>
         The accompanying notes are an integral part of these statements
 
                                      3
<PAGE>

            GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                    Three months ended                     Nine months ended
                                                                       September 30,                         September 30,
                                                           --------------------------------         -----------------------------
                                                                1998                1997                  1998           1997
                                                           ---------          -------------         ------------     ------------
<S>                                                    <C>                      <C>                 <C>               <C>        
Net sales                                              $   9,359,063            $ 5,412,586         $ 22,523,731      $14,017,001
Cost of sales                                              8,647,063              4,701,152           21,385,405       11,480,760
Estimated costs of carrier default (Note 4)                        -                      -              550,000                -
                                                           ---------          -------------         ------------     ------------
          Gross profit                                       712,000                711,434              588,326        2,536,241
                                                           ---------          -------------         ------------     ------------

Selling, general and adminisitrative expenses              2,857,360              2,154,245            8,249,375        6,613,909
Restructuring charge (Note 5)                                891,436                      -              891,436                -
Depreciation and amortization                                513,073                493,741            1,463,402        1,367,717
                                                           ---------          -------------         ------------     ------------

          Operating loss                                  (3,549,869)            (1,936,552)         (10,015,887)      (5,445,385)
                                                           ---------          -------------         ------------     ------------

Interest income                                               16,864                123,983               77,335          138,503
Interest expense                                             964,686                346,214            2,277,633          998,717
                                                           ---------          -------------         ------------     -------------

          Loss before income taxes                        (4,497,691)            (2,158,783)         (12,216,185)      (6,305,599)

Income taxes                                                       -                      -                    -                -
                                                           ---------          -------------         ------------     -------------
Net loss                                                 $(4,497,691)           $(2,158,783)        $(12,216,185)      (6,305,599)
                                                           =========          =============         ============     =============

Basic and diluted loss per share                         $     (0.75)           $     (0.47)        $      (2.08)       $   (2.20)
                                                           =========          =============         ============     =============

Weighted average shares outstanding - basic and            5,993,916              4,604,832            5,873,128        2,860,616
diluted                                                    =========          =============         ============     =============
</TABLE>




         The accompanying notes are an integral part of these statements

                                       4

<PAGE>

            GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                            Nine months ended
                                                                                               September 30,
                                                                                         -------------------------------
                                                                                           1998                 1997
                                                                                         ---------        --------------
<S>                                                                                     <C>               <C>   
Operating activities:
Net loss                                                                                                  
                                                                                       (12,216,185)        $  (6,305,599)
Adjustment to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                        1,463,403             1,367,717
    Provision for bad debts                                                                334,655                82,902
    Amortization of deferred compensation                                                  419,193               133,705
    Amortization of unearned discount                                                      578,266               578,266
    Amortization of deferred financing charges                                           1,134,779               124,311
    Issuance of stock as compensation                                                            -                50,000
    Loss on disposal of fixed assets                                                       269,382                73,902
Changes in operating assets and liabilities, net of effect of acquisitions:
    Accounts receivable                                                                 (2,158,400)           (1,046,913)
    Inventories                                                                           (302,537)             (155,991)
    Deferred costs                                                                          32,764               320,084
    Other assets                                                                           (43,278)             (294,687)
    Accounts payable                                                                     2,531,977              (427,445)
    Accrued expenses                                                                     3,242,689               350,681
    Deferred revenues                                                                    2,079,397            (1,511,752)
    Sales and excise taxes payable                                                       1,214,268               954,050
                                                                                       -----------            ----------
        Net cash used by operating activities                                           (1,419,627)           (5,706,769)
                                                                                       -----------             ---------

Investing activities:
    Purchases of property and equipment                                                 (1,233,939)             (598,817)
    Acquisitions and related costs                                                      (5,070,959)                    -
                                                                                       -----------            ----------
            Net cash used in investing activities                                       (6,304,898)             (598,817)
                                                                                       -----------            ----------

Financing Activities:
    Proceeds from issuance of common stock                                                       -            13,526,586
    Proceeds from bridge loan                                                            1,250,000                     -
    Proceeds from exercise of options                                                          400                 8,228
    Payments to affiliates                                                                       -            (1,073,921)
    Payments on capital lease obligations                                                  (81,901)              (39,336)
    Proceeds from the exercise of warrants                                                       -             2,500,000
    Payments of deferred finance fees                                                     (115,000)              (70,044)
                                                                                       -----------            ----------
            Net cash provided by financing activities                                    1,053,499            14,851,513
                                                                                        ----------            ----------

            Effects of exchange rates on cash                                               15,053                (6,896)
                                                                                        ----------            ----------
               Net decrease in cash                                                     (6,655,973)            8,539,031
Cash and cash equivalents, beginning of period                                           7,867,566             1,352,322
                                                                                       -----------            ----------
Cash and cash equivalents, end of period                                               $ 1,211,593           $ 9,891,353
                                                                                       ===========            ==========

Supplemental disclosures:

    Cash paid for interest                                                             $   172,078           $   105,165
                                                                                       ===========           ===========
    Deferred finance fees relating to options and warrants                             $ 1,450,927           $         -
                                                                                       ===========           ===========
    Deferred compensation relating to options and warrants                             $   198,600           $   151,648
                                                                                       ===========           ===========
    Conversion of convertible notes payable into common stock                          $    37,500           $   187,750
                                                                                       ===========           ===========
    Issuance of common stock in connection with acquisition                            $ 4,806,580           $         -
                                                                                       ===========           ===========
    Capital leases                                                                     $        -            $    61,005
                                                                                       ===========           ===========
    Issuance of notes payable in connection with acquisition                           $ 2,000,000           $         -
                                                                                       ===========           ===========
</TABLE>
         The accompanying notes are an integral part of these statements
                                       5
<PAGE>

            GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                               September 30, 1998


(1)      Business and Basis of Presentation

         Business

         Global   Telecommunication   Solutions,   Inc.  (the   "Company")   was
         incorporated  on December 23, 1992 and is engaged in the  marketing and
         distribution of prepaid phone cards.  The Company's phone cards provide
         consumers  access  to  long  distance  service  through  its  switching
         facilities and long distance network arrangements.

         The  majority of the  Company's  customers  are retail  establishments,
         distributors  and  businesses  which sell phone  cards to the  ultimate
         user,  or which  acquire the  Company's  phone  cards to promote  their
         business or products.

         Basis of Presentation

         The accompanying  unaudited consolidated financial statements have been
         prepared in accordance with generally  accepted  accounting  principles
         for interim  financial  information  and with the  instructions to Form
         10-QSB and Item  310(b) of  Regulation  S-B.  Accordingly,  they do not
         include all of 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 have
         been  included.  Operating  results for the three and nine months ended
         September 30, 1998 are not  necessarily  indicative of the results that
         may be expected for the year ending December 31, 1998.

(2)      Loss Per Share

         Weighted  average  shares of common stock for the three and nine months
         ended  September  30,  1998 and  1997  does not  include  common  stock
         equivalents as their effect would be anti-dilutive.

(3)      Reclassifications

         Certain  reclassifications  have  been  made to the  1997  consolidated
         financial statements to conform to the 1998 presentation.

(4)      Acquisitions

         On February 6, 1998 ("Merger Date"),  the  Company acquired,  through a
         merger,  all of  the  outstanding  capital stock of Networks Around the
         World,  Inc. ("NATW") for a  purchase price comprised of (i) $2,000,000
         in cash, (ii) an aggregate  of 505,618 shares of common stock and (iii)
         $1,000,000  aggregate   principal  amount of  promissory  notes  ("NATW
         Notes"),  secured by  substantially all of the assets of NATW. The NATW
         Notes  accrue  interest at the rate of 6% per annum and were originally
         payable as  follows:  (i)  one-half of principal  and interest  accrued
         thereon on  November 1, 1998 and (ii) four equal  payments of $125,000,
         plus interest  accrued thereon, on April 1, 1999, July 1, 1999, October
         1, 1999 and January 1, 2000.  In addition,  the Company  is required to
         pay up to $2,000,000 (the "Earn Out") in  additional  consideration  if
         certain sales and  financial  objectives  are  achieved.  For  the nine
         months ended  September  30,  1998,  $409,630 of  the Earn Out has been
         recorded  as  additional  consideration.   In April  1998,  the  former
         shareholders  agreed to defer  payment of an aggregate of $1,000,000 of
         NATW Notes and Earn Out from 1998 to January 1999.


                                        6

<PAGE>



         Also on the Merger Date, the  Company acquired,  through a merger,  all
         of the outstanding capital  stock of Centerpiece  Communications,  Inc.
         ("CCI") for a purchase price  comprised of (i) $1,500,000 in cash, (ii)
         401,284   shares  of  common   stock,   of  which  47,891  shares  were
         subsequently  contributed  back  to the Company (see below) and (iii) a
         $1,000,000  aggregate  principal  amount  promissory note ("CCI Note"),
         secured  by  substantially  all  of the  assets  of CCI.  The CCI  Note
         accrues  interest  at  the  rate of 8% per  annum  and  was  originally
         payable  as follows:  (i) $250,000  plus  interest  accrued  thereon on
         October  31, 1998,  (ii)  $250,000  plus  interest  accrued  thereon on
         January  1, 1999  and (iii)  four  equal  payments  of  $125,000,  plus
         interest  accrued thereon,  on April 1, 1999, July 1, 1999,  October 1,
         1999 and  January 1, 2000. In April 1998, the former shareholder of CCI
         agreed  to defer payment of $250,000 of CCI Notes, plus interest,  from
         October 31, 1998 to January 1999 (see Note 15).

         Each of the mergers was accounted for as a purchase.  Accordingly,  the
         assets and  liabilities  were recorded at their estimated fair value at
         the date of the mergers and the operating  results of NATW and CCI were
         included in the  consolidated  statement of operations  from the Merger
         Date. The following is a preliminary allocation of the purchase price:



<TABLE>
<CAPTION>
                                                                    CCI                 NATW             TOTAL
<S>                                                             <C>                  <C>               <C>    
Shares of common stock issued                                   401,284              505,618           906,902
Estimated average price per share of                              $5.30                $5.30             $5.30
restricted common stock 20 days prior to
the closing date (using a 15% discount to
market price)
Common stock                                                  2,126,805            2,679,775         4,806,580
Notes payable to related parties, current                       750,000              750,000         1,500,000
Notes payable to related parties, long term                     250,000              250,000           500,000
Cash consideration                                            1,500,000            2,000,000         3,500,000
Earn out payable                                                     --              409,630           409,630
Balance sheet adjustment                                         45,949               91,852           137,801
Estimated carrier obligation in connection                      285,124              726,424         1,011,548
with mergers, net
Estimated accrued acquisition costs                              50,000               50,000           100,000
                                                                 ------               ------           -------
Total consideration                                           5,007,878            6,957,681        11,965,559
Estimated fair value of assets acquired                          70,949              116,852           187,801
Goodwill                                                     $4,936,929           $6,840,829       $11,777,758
</TABLE>

         Pursuant to the merger  agreement with NATW, the Company is required to
         pay the Earn Out (up to  $2,000,000  in  additional  consideration)  if
         certain sales and financial objectives are achieved.  Accordingly, upon
         occurrence of such events,  the additional  consideration will increase
         goodwill. For the nine months ended September 30, 1998, $409,630 of the
         Earn Out has been recorded as additional consideration.


                                        7

<PAGE>



         The  Company  has not  allocated  any of the  purchase  price  to other
         intangible  assets, such as the  value  of  non-compete  agreements  or
         customer lists, as such valuations are not currently  available. In the
         event such other  intangible  assets are identified in the future,  the
         useful life of such assets may differ  from the  goodwill  amortization
         period  of 15  years  currently  reflected  in the pro  forma  combined
         statement of operations  and  appropriate  adjustments to the financial
         statements will be made.

         Pursuant  to the  respective  merger  agreements,  the  Company and the
         former  shareholders  of NATW and CCI  agreed  to share  certain  costs
         related   to   any    underlying    carrier's    failure   to   provide
         telecommunications  services to phone cards  purchased  by NATW and CCI
         prior  to  the  mergers.   In  February  1998,  Access  Telecom,   Inc.
         ("Access"),  a primary provider of telecommunications  services to NATW
         and CCI prior to and after the  respective  mergers,  ceased  providing
         such  services to the  prepaid  phone cards that it had sold to each of
         NATW and CCI, despite  receiving  payment for  substantially all of the
         phone  cards.   The  Company   estimates   that  the  cost  to  provide
         telecommunications  services  related  to  such  cards  will  aggregate
         $1,761,097.  For purposes of the financial statements contained herein,
         $451,185 and  $298,364 of the estimated costs has been allocated to the
         former shareholders pursuant to indemnification arrangements.

         In November 1998, the Company and the former shareholder of CCI reached
         a  settlement  on the  amount  due to the  Company  related  to Access.
         Pursuant to the terms of the merger agreement,  the former  shareholder
         contributed back to the Company 47,891 shares of common stock issued as
         part of the merger consideration with a fair market value of $69,867 in
         consideration of $298,364 that he owed to the Company.  The reserve for
         the  loss  on  the  settlement  of  $229,497  was  provided  for in the
         financial statements for  the nine months ended September 30, 1998 (see
         Note 15).

         The  Company  and the former  shareholders  of NATW have not  reached a
         settlement on the amounts due to the Company  related to Access.  It is
         possible that the actual  settlement could  materially  differ from the
         $451,185 currently reflected as a deferred charge in other assets.

         In addition to the $1,761,097  indicated above, the Company paid Access
         $350,000 for cards purchased subsequent to the Merger Date for which it
         received no services.  Additionally,  the Company  spent  approximately
         $200,000 to print  cards which could only be used on Access's  platform
         and, therefore,  are of no use to the Company.  Accordingly,  the total
         estimated aggregate carrier default of $550,000 was recorded in cost of
         goods sold during the nine months ended September 30, 1998.

         Pursuant to the respective  merger  agreements,  the purchase price was
         adjusted  subsequent  to the Merger Date by an amount  equal to cash of
         the  acquired  company  plus  the  net  realizable  value  of  accounts
         receivable of the acquired  company minus  current  liabilities  of the
         acquired   company  as  of  the  Merger   Date  (the   "Balance   Sheet
         Adjustment").

         The following  unaudited  combined pro forma  information  reflects the
         results  of  operations  assuming  the CCI and  NATW  mergers  had been
         consummated on January 1, 1998.

                                          Nine Months Ended
                                             September 30,
                                       1998                   1997
                                   -----------            -----------
         Net sales                $ 24,838,250            $29,408,212
         Net loss                 $(12,747,204)           $(5,760,376)
         Net loss per share             $(2.13)                $(1.53)


                                        8

<PAGE>



         Pro  forma  adjustments  include  recording   amortization  expense  on
         goodwill, interest expense on the notes payable to former shareholders,
         and the elimination of inter-company sales and income taxes.

         The pro forma results of operations are not  necessarily  indicative of
         the actual  results of  operations  that  would have  occurred  had the
         purchase  been made at the  beginning of the year,  or of results which
         may occur in the future.

(5)      Restructuring

         During  the third  quarter  of 1998,  the  Company  recorded a $891,436
         restructuring charge related to the closing of its Canadian subsidiary,
         costs associated with  consolidating  the Company's  operations and the
         modification  of  employment  agreements  with  two  of  the  Company's
         executive officers. The Company closed its Canadian subsidiary to focus
         on selling its  products  domestically.  The Company  consolidated  its
         operations  from five to two  locations  with the  intent  of  reducing
         operating  expenses,  including  salaries and benefits,  by eliminating
         duplicate  positions  at  the  various  locations.   As  part  of  this
         consolidation,  two  executives'  employment  agreements  were amended,
         which included the termination of their  employment.  The components of
         the  charge,  which  is  classified  as a  separate  line  item  in the
         accompanying statement of operations, are as follows:



         Canadian subsidiary closing costs                          $ 65,111
         Consolidation costs                                        $445,111
         Compensation related to amendments to
         executive employment agreements                            $381,214
                                                                    --------
                                                                    $891,436

         Costs associated with the closure of the Canadian subsidiary  primarily
         related to severance costs associated with employees  terminated during
         the third  quarter of 1998.  Total  revenues and net income  associated
         with the  Canadian  subsidiary  were not  material  to the  results  of
         operations.   Costs   associated  with   consolidating   the  Company's
         operations   included   severance  costs  of  $26,878  associated  with
         employees  terminated  during the third  quarter  of 1998,  incremental
         operating  costs of $95,000  associated with closing the Company's call
         center and lease  termination  costs of $97,236  associated with moving
         the  Company's  corporate  offices.  In  addition,  fixed assets net of
         salvage  costs of $225,995  were  disposed of in  conjunction  with the
         Company's   consolidation.   The   activities   incorporated   in   the
         restructuring  were  substantially  completed  by  September  30, 1998.
         Approximately   $599,960   remains   accrued  at  September  30,  1998,
         consisting  primarily of accrued  severance costs and lease termination
         costs.

(6)      New Accounting Pronouncements

         In June 1997, the Financial  Accounting Standards Board ("FASB") issued
         Statement  of  Financial   Accounting  Standards  No.  130,  "Reporting
         Comprehensive  Income"  ("SFAS 130").  SFAS 130 requires that all items
         that are  required  to be  recognized  under  accounting  standards  as
         components of comprehensive income be reported in a financial statement
         that  is  displayed  with  the  same   prominence  as  other  financial
         statements. The Company has adopted this statement effective January 1,
         1998. The Company's only component of other comprehensive income is the
         foreign currency translation  adjustment.  The total comprehensive loss
         is $12,201,132  and $6,312,495 for the nine months ended  September 30,
         1998 and 1997, respectively.




                                        9

<PAGE>

(7)      Estimated Sales and Excise Tax Liability

         In  November  1997,  Congress  enacted  legislation  that  specifically
         addressed the  application of federal excise tax to the sale of prepaid
         phone cards. Accordingly,  the Company began to file federal excise tax
         returns.  However,  the taxation of prepaid phone cards is evolving and
         is not specifically  addressed in certain state  jurisdictions in which
         the Company  does  business.  The Company has not filed any state sales
         and use tax returns nor has it remitted  any such taxes to state taxing
         authorities.  While the Company believes it has adequately provided for
         any such  taxes and  related  compliance  costs,  it is  possible  that
         certain  states may enact  legislation  or interpret  current laws in a
         manner which could result in additional tax liabilities  which could be
         material.

(8)      Deferred Compensation

         In  January  1998,  the  Company  entered  into a  one-year  consulting
         agreement with JEB Partners,  pursuant to which JEB Partners  agreed to
         provide  investor  relations  consulting  services to the  Company.  In
         consideration for providing such services,  the Company agreed to issue
         JEB Partners  warrants to purchase  60,000 shares of common stock at an
         exercise  price  of  $6.125  per  share.  Such  options  are  currently
         exercisable  and  will  remain  exercisable  until  January  2003.  The
         estimated  fair  value of  these  options  of  $198,600  was  initially
         recorded as deferred  compensation  and is being  amortized  to expense
         over the term of the agreement.

(9)      Stock Option Re-pricing

         In January  1998,  the Company  reduced the  exercise  price of 196,683
         outstanding  options to  purchase  common  stock from  exercise  prices
         ranging  from $7.88 to  $18.38,  to the then fair  market  value of the
         common stock of $6.56.

(10)     April 1998 Private Placement

         In April 1998,  the Company  completed a private  placement (the "April
         1998 Private Placement"),  pursuant to which it derived net proceeds of
         approximately  $1,135,000  through the sale of  $1,250,000  convertible
         subordinated  promissory  notes  ("April  1998  Notes") and warrants to
         purchase  178,571 shares of common stock ("April 1998  Warrants").  The
         April 1998 Warrants are  exercisable  at a price  ("Conversion  Price")
         equal to the lesser of (i) $7.00 or (ii) the  offering  price per share
         in a "Qualified  Private  Placement,"  i.e., a private  placement which
         raises an  aggregate  of $4 million of gross  proceeds for the Company.
         The April 1998 Warrants are exercisable until April 2001. The estimated
         fair market value of these  warrants of $658,927,  along with  expenses
         associated  with the April 1998  Private  Placement  of  $115,000, were
         recorded  as  deferred  financing  costs  and are  being  amortized  to
         interest  expense over the term of the April 1998 Notes. The April 1998
         Notes  accrue  interest at the rate of 10% per annum and are payable on
         the  earlier  of  January  15,  1999 or the  date of the  closing  of a
         Qualified Private Placement.  The holders have the right at any time to
         convert  all or any  portion of the April 1998 Notes into the number of
         shares of common  stock  determined  by dividing  the unpaid  principal
         amount of the April 1998 Notes by the Conversion Price (see Note 15).

(11)     Financing Commitment and Loan Deferrals

         In April 1998,  the Company  entered into an agreement with an investor
         pursuant to which the investor  has agreed to acquire up to  $2,000,000
         of the Company's  common stock or other securities at a discount to the
         market price of such  securities.  The Company can require the investor
         to acquire the securities on thirty days' written notice until December
         31, 1998. In consideration  thereof, the Company issued warrants to the
         investor  to  purchase  100,000  shares of common  stock at an exercise
         price of $7.50 per share. The warrants are exercisable  until April 13,
         2001. In connection with introducing this investor to the Company,  the
         Company  granted  to each of  Messrs.  Barry  Rubenstein,  a  principal
         stockholder of the Company, and Eli Oxenhorn options to purchase 50,000
         shares of common  stock at an exercise  price of $7.125 per share.  The
         options   became   exercisable   in  September  1998  and  will  remain
         exercisable  until  April  2003.   The   fair  market  value  of  these

                                       10

<PAGE>



         warrants and  options  of $792,000 were recorded as deferred  financing
         fees and are  being  amortized to interest expense over the term of the
         commitment.

         In April 1998,  certain holders of promissory notes issued in a private
         placement  consummated  by the Company in December 1996 agreed to allow
         the Company to defer  repayment of an aggregate of  $2,400,000  of such
         notes from November 1998 to January 1999.

(12)     Regulatory Charges

         On May 8, 1997, the Federal Communications Commission ("FCC") issued an
         order to implement the provisions of the Telecommunications Act of 1996
         relating to the  preservation  and  advancement of universal  telephone
         service (the "Universal  Service Order").  The Universal  Service Order
         requires   all   telecommunications   carriers   providing   interstate
         telecommunications  services  to  contribute  to  universal  service by
         contributing  to a  fund  (the  "Universal  Service  Fund").  Universal
         Service  Fund  contributions  will be assessed  based upon  intrastate,
         interstate  and  international   "end-user"  gross   telecommunications
         revenue effective January 1, 1998. Although the FCC has not yet finally
         determined the contribution  assessment rate, the Company estimates the
         assessment could be as much as 4% of such revenue for the calendar year
         1998,  and could  increase or decrease in subsequent  years.  While the
         Company believes it has adequately provided for its contribution to the
         Universal  Service  Fund,  it  is  possible  that  the  FCC  may  enact
         regulation  concerning  the  Universal  Service  Fund in a manner which
         could result in additional material liabilities.

         Pursuant to the  Telecommunications  Act, the FCC, in  September  1996,
         adopted new rules  governing the pay  telephone  industry  that,  among
         other things,  established  a means by which all pay telephone  service
         providers are  compensated  for every  interstate and  intrastate  call
         completed  from their pay  telephones,  including  calls  that  utilize
         toll-free access and access codes ("Dial Around Compensation"). On July
         1,  1997,  the  United  States  Court of Appeals  for the  District  of
         Columbia  Circuit ("Court of Appeals")  remanded to the FCC for further
         consideration  certain rules which could have a material adverse effect
         on the Company. The Court of Appeals found that the FCC's determination
         setting   the   per-call   compensation   at  $0.35  was   unjustified.
         Additionally, the Court of Appeals found that the FCC acted arbitrarily
         and  capriciously in establishing  an interim  compensation  plan which
         required  that,  during the first  year,  only  interexchange  carriers
         generating  $100 million or more in annual revenues must pay a pro rata
         portion of $45.85 per month per pay telephone  (based upon the pro rata
         share of the total annual revenues for carriers generating $100 million
         or more).  The Court of  Appeals  upheld the FCC's  determination  that
         interexchange  carriers should track  compensable  calls and compensate
         pay   telephone   providers  for  toll  free  and  access  code  calls.
         Additionally,  the  Court of  Appeals  upheld  interexchange  carriers'
         rights to charge long  distance  resellers or  customers  that own toll
         free access  numbers or access codes (such as the Company) for any such
         compensable calls. In October 1997, the FCC adopted new rules governing
         Dial Around Compensation, pursuant to which each pay telephone owner is
         entitled to be compensated $0.284 for each dial around call originating
         from a pay telephone.  On May 15, 1998, the Court of Appeals found that
         the  FCC's  explanation  of the  derivation  of  the  $0.284  was  rate
         inadequate   and  remanded  the  rule  back  to  the  FCC  for  further
         explanation.  Also, in October 1997,  the FCC issued an order  waiving,
         until March 9, 1998, the local exchange carriers' obligation to deliver
         an info-coding digit to the interexchange  carriers indicating that the
         telephone call originated from a pay telephone. The Company, along with
         other phone card companies and the International  Telecard Association,
         filed a petition  requesting  that the FCC  reconsider  its decision to
         grant the waiver.  On delegated  authority,  the FCC's  common  carrier
         bureau denied the request and extended the waiver through  October 1998
         for most local exchange carriers.  The resolution of this matter by the
         FCC and, if  applicable,  the  federal  courts is uncertain.  While the
         Company  believes  that it  has  adequately  provided  for Dial  Around
         Compensation,  it  is  possible  that  the  FCC may  enact  regulations
         concerning Dial  Around  Compensation in a manner which could result in
         additional material liabilities.

(13)     Liquidity and Recoverability of Goodwill

         The Company  incurred  significant  net losses and negative  cash flow
         from operations during 1996 and  1997. Due in part to the NATW and  CCI

                                       11

<PAGE>



         mergers,  and a  continuation  of negative  cash  flow from  operations
         through September 30, 1998, the Company's cash  balance has declined to
         approximately  $1,300,000 at November 20, 1998.  Further,  management's
         current   projections  indicate  that  the  Company  will  continue  to
         generate  operating  losses  and  negative  cash flow  from  operations
         through the remainder of 1998,  making it  necessary for the Company to
         raise capital to satisfy its  obligations  as  they become due. To that
         end, the Company  completed  the  April 1998 Private  Placement,  which
         generated  net  proceeds  of  approximately  $1,135,000  (see Note 10),
         obtained a $2,000,000 financing  commitment (see Note 11) and completed
         a  private  placement  in  October  1998  (the  "October  1998  Private
         Placement")  which  generated net proceeds of $1,846,750 (see Note 15).
         In addition, the  Company converted the $1,000,000 CCI Note into common
         stock during the fourth  quarter of 1998 (see Note 15) and has obtained
         deferrals  of  certain  other  promissory  notes  payable   aggregating
         $3,400,000  from the  fourth  quarter  of 1998 to the first  quarter of
         1999 (see Notes 4 and 11). The Company believes that the proceeds  from
         the April 1998 Private Placement,  the deferrals of certain promissory
         notes  and  the  proceeds  from the  October  1998  Private  Placement,
         together  with the  conversion of the CCI Note into common stock,  will
         enable  the Company to continue its operations through the end of 1998.
         However,  the  Company has  significant  loan payments due in the first
         quarter  of  1999,  which  it  will not be able to  satisfy  unless  it
         obtains additional  financing  or further loan payment  deferrals.  The
         Company  does  not have any  other  arrangements  with  respect  to, or
         sources of,  additional  financing and  there can be no assurance  that
         additional  financing will be available  to the Company on commercially
         reasonable  terms,  or at all.  The failure  to obtain  such  financing
         could have a material adverse effect on the Company.

         The assessment of goodwill  recoverability,  which is heavily dependent
         on  projected  financial  information  and  the  goodwill  amortization
         period,  are  significant  accounting  estimates as contemplated by the
         American  Institute  of  Certified  Public  Accountants'  Statement  of
         Position   94-6,   "Disclosure   of  Certain   Significant   Risks  and
         Uncertainties."  Further,  the Company operates in an industry which is
         rapidly  evolving and extremely  competitive  and continues to generate
         significant  net  losses  and  negative  cash  flow.  It is  reasonably
         possible that the Company's  accounting  estimates  with respect to the
         useful life and ultimate recoverability of goodwill could change in the
         near  term  and  that  the  effect  of such  changes  on the  financial
         statements could be material.  While management currently believes that
         the recorded  amount of goodwill is  appropriate at September 30, 1998,
         there  can be no  assurance  that the  Company's  future  results  will
         confirm this  assessment or that an additional  write-down or write-off
         of goodwill will not be required in the future.

(14)     Litigation

         In June 1998, IDB WorldCom  Services,  Inc.  ("Worldcom")  commenced an
         action   against  the   Company  in  the  Court  of  Common   Pleas  of
         Philadelphia,  Pennsylvania. The complaint alleges that from March 1995
         through March 1997,  Worldcom  provided certain long distance and other
         telecommunications services for which it was not paid. Worldcom alleges
         that the Company owes  Worldcom  $698,419,  inclusive of interest,  for
         such services. The Company has retained counsel in this matter and will
         vigorously  defend  this  action.  The  Company  believes  that  it has
         adequately  accrued  for this  liability,  after  giving  effect to the
         Company's offsets and counterclaims.

(15)     Subsequent Events

         The following  transactions are reflected in the accompanying unaudited
         September 30, 1998 pro forma balance sheet:

         October 1998 Private Placement

         In  October  1998,  the Company  consummated  the October  1998 Private
         Placement from  which it derived net proceeds of $1,846,750 through the
         sale of  1,198,000  shares  of common  stock  for a  purchase  price of
         $1.625 per  share. The  Company used a portion of the proceeds to repay

                                       12

<PAGE>



         $1,250,000  aggregate  principal  amount of  the April  1998  Notes and
         accrued  interest  of $24,315.  In  addition,  in lieu of  compensating
         Pennsylvania  Merchant  Group ("PMG") for serving as placement agent of
         the  October 1998 Private  Placement,  the Company reduced the exercise
         price  of  warrants to purchase  100,000  shares  issued to PMG in July
         1997 in  connection with the provision of financial consulting services
         from  $7.00 per  share to  $1.625  per  share.  In  addition,  deferred
         finance charges  of $289,501,  which are included in other assets, will
         be  amortized  to  financing  costs in the fourth  quarter of 1998 (see
         Note 10).

         November 1998 Debt Restructuring

         In November 1998, J. Mark Rubenstein resigned as a director and officer
         of the Company.  Mr.  Rubenstein was the former  shareholder of CCI who
         joined the Company in February  1998 when CCI merged with the  Company.
         In connection with his departure from the Company,  Mr. Rubenstein sold
         to certain investors, including Shelly Finkel, Chairman of the Board of
         the Company,  Michael Hoppman,  Chief Financial  Officer of the Company
         and Barry  Rubenstein,  a principal  stockholder  (the  "Investors") an
         aggregate of 353,393 shares of common stock and the $1,000,000 CCI Note
         for an  aggregate  purchase  price of  $575,000.  Mr.  Rubenstein  also
         contributed back to the Company 47,891 shares of common stock issued as
         part of the merger consideration with a fair market value of $69,867 in
         consideration of the $298,364 that he owed the Company. The reserve for
         the loss on the settlement of $229,497 was recorded in the accompanying
         consolidated   statement  of  operations  for  the  nine  months  ended
         September 30, 1998 (see Note 4).

         In November 1998, the Company  offered the Investors the opportunity to
         convert  the  $1,000,000  CCI Note into  shares  of  common  stock at a
         conversion  rate of $1.23  per share  (such  price  being  equal to the
         average  closing price of a share of common stock during October 1998).
         The Investors  accepted the conversion offer and converted the CCI Note
         into an aggregate  813,008 shares common stock.  The Investors  forgave
         interest  of  $60,000  due on the CCI  Note.  There was no gain or loss
         recognized on the conversion of the CCI Note.


                                       13
<PAGE>




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

     When used in this Form 10-QSB and in future filings by the Company with the
Securities and Exchange  Commission ("SEC"), in the Company's press releases and
in oral statements made with the approval of an authorized  executive officer of
the Company,  the words or phrases "will likely result," "management expects" or
"the Company expects," "will continue," "is anticipated," "estimated" or similar
expressions  (including  confirmations by an authorized executive officer of the
Company  of any such  expressions  made by a third  party  with  respect  to the
Company)  are  intended  to  identify  "forward-looking  statements"  within the
meaning of the Private  Securities  Litigation  Reform Act of 1995.  Readers are
cautioned not to place undue  reliance on any such  forward-looking  statements,
each of which  speak only as of the date made.  Such  statements  are subject to
certain  risks and  uncertainties  that  could  cause  actual  results to differ
materially  from  historical   earnings  and  those  presently   anticipated  or
projected.  The Company has no obligation to publicly release the results of any
revisions  which  may be  made  to any  forward-looking  statements  to  reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.

Results of Operations

     Three  Months  Ended  September  30, 1998  Compared to Three  Months  Ended
September 30, 1997

     Net  sales for the  third  quarter  of 1998  were  $9,359,063  compared  to
$5,412,586 for the third quarter of 1997. The primary reason for the increase in
net sales was due to the acquisitions,  through mergers,  of Networks Around the
World,  Inc. ("NATW") and Centerpiece  Communications,  Inc. ("CCI") in February
1998. Net sales of promotional  cards  decreased to less than 1% of net sales in
the third quarter of 1998 from 6% of net sales in the third quarter of 1997. The
change in the sales mix resulted from the Company's aggressive pursuit of retail
programs  that offer  greater  discounts  and  commissions  to retailers  and/or
reduced per-minute charges to consumers.

     The  Company's  gross  margins  decreased  to 8% of net sales for the third
quarter of 1998,  from 13% of net sales for the  comparable  period in the prior
year.  The primary  reason for the  decrease in the gross  margins was due to an
increase in the sale of cards with reduced  per-minute  rates to consumers and a
reduction in revenues  recognized  from  promotional  phone card  programs  that
historically  sell at higher margins.  The gross margins were further  decreased
due to certain  regulatory fees and surcharges,  such as Universal  Service Fees
and Dial Around Compensation, imposed on the Company which, due to the nature of
the  Company's  business,  cannot be fully  collected  from the end users of the
Company's products and services.

     Selling,  general and administrative  expenses increased to $2,857,360 (30%
of net sales) for the third quarter of 1998,  compared to $2,154,245 (40% of net
sales) for the third  quarter of 1997.  The primary  reason for the increase was
due to increases in sales and  marketing  personnel  salaries and benefits  that
increased  as a result  of  higher  sales  volumes.  In  addition,  general  and
administrative costs were further increased due to (i) increased expenditures on
professional fees, primarily financial public relations fees, investment banking
fees and other consulting services, (ii) increased operating expenses due to the
NATW and CCI mergers and (iii) the $229,497 loss related to the settlement of an
indemnification arrangement with a related party.

     During  the  third  quarter  of  1998,  the  Company  recorded  a  $891,436
restructuring  charge related to the closing of its Canadian  subsidiary,  costs
associated with  consolidating the Company's  operations and the modification of
employment agreements with two of the Company's executive officers.  The Company
closed its Canadian  subsidiary  to focus on selling its products  domestically.
The Company  consolidated  its  operations  from five to two locations  with the
intent of reducing  operating  expenses,  including  salaries and  benefits,  by
eliminating  duplicate  positions  at the  various  locations.  As  part of this


                                       14

<PAGE>


consolidation,   two  executives'  employment  agreements  were  amended,  which
included the  termination of their  employment. Approximately  $599,960  remains
accrued at September 30, 1998,  consisting  primarily of accrued severance costs
and lease termination costs.

     Depreciation and amortization  expense  increased to $513,073 for the third
quarter of 1998 from  $493,741 for the third  quarter of 1997.  The increase was
primarily   due   to   increased    depreciation   costs   of   newly   acquired
telecommunications and computer equipment.  The increase was partially offset by
a decrease in the amortization expense related to the impairment of goodwill for
the year ended December 31, 1997.

     Investment  and interest  income was $16,864 for the third quarter of 1998,
compared to $123,983 for the third  quarter of 1997.  The decrease was primarily
due to interest earned on the net proceeds from the Company's  secondary  public
offering of Common Stock which was consummated in July 1997.

     Interest  expense and related  financing  expenses for the third quarter of
1998  increased  to  $964,686  from  $346,214  for the  third  quarter  of 1997,
primarily  due to the  cost  of the  $2,000,000  financing  commitment  (defined
below),  the interest  expense and financing  costs  associated with the private
placement  consummated  by the  Company  in  April  1998  ("April  1998  Private
Placement") and the interest on the NATW Notes and the CCI Note (defined below).

     For the foregoing  reasons,  the Company  incurred a net loss of $4,497,691
for the third quarter of 1998 compared to a net loss of $2,158,783 for the third
quarter of 1997.

     Nine  Months  Ended  September  30,  1998  Compared  to Nine  Months  Ended
September 30, 1997

     Net sales for the nine months  ended  September  30, 1998 were  $22,523,731
compared to $14,017,001  for the same period during 1997. The primary reason for
the increase in net sales was due to the NATW and CCI mergers in February  1998.
Net sales of promotional cards decreased to less than 1% of net sales during the
nine months  ended  September  30, 1998 from 13% of net sales in the nine months
ended  September  30,  1997.  The  change  in the sales  mix  resulted  from the
Company's aggressive pursuit of retail programs that offer greater discounts and
commissions to retailers and/or reduced per-minute charges to consumers.

     The  Company's  gross  margins  decreased  to 3% of net  sales for the nine
months ended September 30, 1998, from 18% of net sales for the comparable period
in the prior year.  The primary reason for the decrease in the gross margins was
due to carrier default costs aggregating $550,000 associated with the default by
Access Telecom, Inc. ("Access").  The margins were further reduced due to (i) an
increase in the sale of cards with reduced per-minute rates to consumers; (ii) a
reduction in revenues  recognized  from  promotional  phone card  programs  that
historically  sell at higher  margins;  and (iii)  certain  regulatory  fees and
surcharges,  such  as  Universal  Service  Fees  and Dial  Around  Compensation,
imposed  on the  Company  which,  due to the nature of the  Company's  business,
cannot be fully  collected  from the end  users of the  Company's  products  and
services.

     Selling,  general and administrative  expenses increased to $8,249,375 (37%
of net  sales)  for the nine  months  ended  September  30,  1998,  compared  to
$6,613,909 (47% of net sales) for the comparable period during 1997. The primary
reason for the increase was due to  increases in sales and  marketing  personnel
salaries and benefits as a result of higher sales volumes. In addition,  general
and administrative costs were further increased due to (i) increased expenditure
on professional  fees,  primarily  financial public  relations fees,  investment
banking fees and other consulting  services,  (ii) increased  operating expenses
due to the NATW and CCI  mergers  and (iii) the  $229,497  loss  related  to the
settlement  of an  indemnification  arrangement  with a related  party.

     Depreciation and amortization  expense increased to $1,463,402 for the nine
months  ended  September  30, 1998 from  $1,367,717  for the nine  months  ended
September 30, 1997.  The increase was  primarily  due to increased  depreciation
costs of newly acquired  telecommunications and computer equipment. The increase
was partially  offset by a decrease in the  amortization  expense related to the

                                       15

<PAGE>



impairment of goodwill for the year ended December 31, 1997.

     Investment  and  interest  income was  $77,335  for the nine  months  ended
September 30, 1998, compared to $138,503 for the nine months ended September 30,
1997. The decrease was primarily due to interest earned on the net proceeds from
the Company's secondary public offering of Common Stock which was consummated in
July 1997.

     Interest expense and related  financing  expenses for the nine months ended
September  30, 1998  increased to  $2,277,633  from $998,717 for the same period
during 1997,  primarily due to the $2,000,000  Commitment,  the interest expense
and financing  costs  associated  with the April 1998 Private  Placement and the
interest on the NATW Notes and the CCI Note.

     For the foregoing  reasons,  the Company incurred a net loss of $12,216,185
for the  nine  months  ended  September  30,  1998,  compared  to a net  loss of
$6,305,599 for the nine months ended September 30, 1997.

Liquidity and Capital Resources

     At  September  30,  1998,  the  Company  had cash and cash  equivalents  of
$1,211,593 and a working capital deficit of $21,132,536,  compared to $7,867,566
and $620,937, respectively, at December 31, 1997.

     Net cash used in operating  activities for the nine months ended  September
30, 1998 of $1,419,627 was primarily due to the Company's net loss and increases
in accounts  receivable  and inventory  which  increased due to the higher sales
volumes.  The net cash used was partially  offset by non-cash items  aggregating
$4,199,678,  such as depreciation and amortization,  provision for bad debts and
financing costs, and was further offset by increases in accounts payable,  which
increased  due  to  the  Company's  more   favorable   payment  terms  with  its
telecommunications  carriers and  increases in deferred  revenues as a result of
increased  sales  volumes.  Net cash used in investing  activities  for the nine
months ended September 30, 1998 consisted of $1,233,939 of capital  expenditures
and $5,070,959 related to the NATW and CCI mergers.

     In  February  1998,  the  Company  acquired,  through a merger,  all of the
outstanding  capital  stock  of  NATW  for a  purchase  price  comprised  of (i)
$2,000,000  in cash,  (ii) an  aggregate  of 505,618  shares of common stock and
(iii) $1,000,000  aggregate principal amount of promissory notes ("NATW Notes"),
secured  by  substantially  all of the  assets of NATW.  The NATW  Notes  accrue
interest at the rate of 6% per annum and were originally payable as follows: (i)
one-half of principal and interest  accrued thereon on November 1, 1998 and (ii)
four equal  payments of $125,000,  plus interest  accrued  thereon,  on April 1,
1999,  July 1, 1999,  October 1, 1999 and  January 1,  2000.  In  addition,  the
Company is required to pay up to $2,000,000  (the "Earn Out") to one of the NATW
stockholders  if certain sales and financial  objectives  are achieved.  For the
nine months ended  September 30, 1998,  $409,630 was accrued for with respect to
the Earn Out. In April  1998,  the former  shareholders  of NATW agreed to defer
payment of an  aggregate of  $1,000,000  of NATW Notes and Earn Out from 1998 to
January 1999.

     Also in February 1998, the Company acquired,  through a merger,  all of the
outstanding  capital  stock  of  CCI  for a  purchase  price  comprised  of  (i)
$1,500,000 in cash,  (ii) 401,284 shares of common stock, of which 47,891 shares
were  subsequently  contributed  back to the  Company  (see  below)  and (iii) a
$1,000,000  aggregate principal amount promissory note ("CCI Note"),  secured by
substantially  all of the assets of CCI.  The CCI Note  accrues  interest at the
rate of 8% per annum and was  originally  payable as follows:  (i) $250,000 plus
interest  accrued  thereon on October 31,  1998,  (ii)  $250,000  plus  interest
accrued  thereon on January 1, 1999 and (iii) four equal  payments of  $125,000,
plus interest accrued thereon,  on April 1, 1999, July 1, 1999,  October 1, 1999
and January 1, 2000.  In April  1998,  the former  shareholder  of CCI agreed to
defer payment of $250,000 of the CCI Note, plus interest,  from October 31, 1998
to January 1999. In November  1998, the CCI Note was converted into common stock
(see below).

     
                                       16

<PAGE>


     Pursuant to the respective  merger  agreements,  the Company and the former
shareholders  of NATW and CCI  agreed  to share  certain  costs  related  to any
underlying  carrier's  failure to provide  telecommunications  services to phone
cards purchased by NATW and CCI prior to the mergers.  In February 1998,  Access
Telecom, Inc. ("Access"),  a primary provider of telecommunications  services to
NATW and CCI prior to and after the respective  mergers,  ceased  providing such
services  to the  prepaid  phone cards that it had sold to each of NATW and CCI,
despite  receiving payment for substantially all of the phone cards. The Company
estimates that the cost to provide  telecommunications  services related to such
cards will  aggregate  $1,761,097.  For  purposes  of the  financial  statements
contained  herein,  $451,185  and  $298,364  of the  estimated  costs  has  been
allocated to the former shareholders pursuant to indemnification arrangements.

     In November 1998,  the Company and the former  shareholder of CCI reached a
settlement on the amount due to the Company  related to Access.  Pursuant to the
terms of the merger agreement,  the former  shareholder  contributed back to the
Company 47,891 shares of common stock issued as part of the merger consideration
with a fair market value of $69,867 in consideration of $298,364 that he owed to
the Company. The reserve for the loss on the settlement of $229,497 was provided
for in the  financial  statements  for the nine months ended  September 30, 1998
(see below).

     The  Company  and the  former  shareholders  of NATW  have  not  reached  a
settlement on the amounts due to the Company  related to Access.  It is possible
that the actual settlement could materially  differ from the $451,185  currently
reflected as a deferred charge in other assets.

     In addition to the  $1,761,097  indicated  above,  the Company  paid Access
$350,000 for cards purchased subsequent to the Merger Date for which it received
no services.  Additionally,  the Company spent  approximately  $200,000 to print
cards which could only be used on Access's  platform and,  therefore,  are of no
use to the Company.  Accordingly,  the total estimated aggregate carrier default
of $550,000  was  recorded  in cost of goods sold  during the nine months  ended
September 30, 1998.

     In April 1998,  the Company  completed  the April 1998  Private  Placement,
pursuant to which it derived net proceeds of  approximately  $1,135,000  through
the sale of $1,250,000  convertible  subordinated  promissory notes ("April 1998
Notes") and  warrants  ("April 1998  Warrants")  to purchase  178,571  shares of
Common Stock.  The April 1998 Warrants are  exercisable at a price  ("Conversion
Price") equal to the lesser of (i) $7.00 or (ii) the offering price per share in
a  "Qualified  Private  Placement,"  i.e., a private  placement  which raises an
aggregate  of $4  million  of gross  proceeds  for the  Company.  The April 1998
Warrants are exercisable  until April 2001. The April 1998 Notes accrue interest
at the rate of 10% per annum and are  payable on the earlier of January 15, 1999
or the date of the closing of a Qualified  Private  Placement.  The holders have
the right at any time to convert all or any portion of the April 1998 Notes into
the number of shares of common stock determined by dividing the unpaid principal
amount of the April 1998 Notes by the Conversion Price.

     In April 1998,  certain  holders of  promissory  notes  issued in a private
placement  consummated  by the  Company  in  December  1996  agreed to allow the
Company to defer  repayment  of an aggregate  of  $2,400,000  of such notes from
November 1998 to January 1999.

     In April 1998,  the Company  entered  into an  agreement  with an investor,
pursuant to which the investor has agreed to acquire up to  $2,000,000 of common
stock or other securities ("$2,000,000  Commitment") at a discount to the market
price of such  securities.  The Company can require the  investor to acquire the
securities  on  thirty  days'  written   notice  until  December  31,  1998.  In
consideration  thereof,  the Company  issued the  investor  warrants to purchase
100,000  shares of common  stock at an  exercise  price of $7.50 per share.  The
warrants are immediately exercisable and will remain exercisable until April 13,
2001. In connection with introducing  this investor to the Company,  the Company
granted to each of Messrs.  Barry  Rubenstein,  a principal  stockholder  of the
Company,  and Eli Oxenhorn  options to purchase 50,000 shares of common stock at
an  exercise  price of $7.125 per  share.  The  options  became  exercisable  in
September 1998 and will remain exercisable until April 2003.

     

                                       17

<PAGE>


     In October 1998, the Company consummated a private placement ("October 1998
Private Placement") from which it derived net proceeds of $1,846,750 through the
sale of  1,198,000  shares of common  stock for a  purchase  price of $1.625 per
share. The Company used a portion of the proceeds to repay $1,250,000  aggregate
principal  amount of April  1998  Notes and  accrued  interest  of  $24,315.  In
addition,  in lieu of  compensating  Pennsylvania  Merchant  Group  ("PMG")  for
serving as placement  agent of the October 1998 Private  Placement,  the Company
reduced the exercise price of warrants to purchase  100,000 shares issued to PMG
in July 1997 in connection with the provision of financial  consulting  services
from $7.00 per share to $1.625 per share.

     In November 1998, J. Mark Rubenstein  resigned as a director and officer of
the Company.  Mr.  Rubenstein  was the former  shareholder of CCI who joined the
Company in February 1998 when CCI merged with the Company.  In  connection  with
his  departure  from the  Company,  Mr.  Rubenstein  sold to certain  investors,
including Shelly Finkel, Chairman of the Board of the Company,  Michael Hoppman,
Chief  Financial  Officer  of the  Company  and Barry  Rubenstein,  a  principal
stockholder (the "Investors") an aggregate of 353,393 shares of common stock and
the  $1,000,000  CCI Note for an  aggregate  purchase  price  of  $575,000.  Mr.
Rubenstein also contributed back to the Company 47,891 shares of common stock in
consideration of the $298,364 that he owed to the Company relating to Access.

     In November  1998,  the Company  offered the Investors the  opportunity  to
convert the $1,000,000 CCI Note into shares of common stock at a conversion rate
of $1.23 per share (such price  being  equal to the average  closing  price of a
share  of  common  stock  during  October  1998).  The  Investors  accepted  the
conversion  offer and  converted the CCI Note into an aggregate  813,008  shares
common  stock.  The Investors  forgave  interest of $60,000 due on the CCI Note.
There was no gain or loss recognized on the conversion of the CCI Note.

     The Company  incurred  significant  net losses and negative  cash flow from
operations during 1996 and 1997. Due in part to the NATW and CCI mergers,  and a
continuation of negative cash flow from operations  through  September 30, 1998,
the Company's cash balance has declined to approximately  $1,300,000 at November
20, 1998. Further,  management's  current projections  indicate that the Company
will  continue  to  generate  operating  losses  and  negative  cash  flow  from
operations through the remainder of 1998, making it necessary for the Company to
raise  capital to satisfy its  obligations  as they become due. To that end, the
Company completed the April 1998 Private Placement, which generated net proceeds
of approximately  $1,135,000,  obtained the $2,000,000  Commitment and completed
the October 1998 Private  Placement  which generated net proceeds of $1,846,750.
In addition,  the Company  converted the  $1,000,000  CCI Note into common stock
during the fourth  quarter of 1998 and has obtained  deferrals of certain  other
promissory notes payable aggregating  $3,400,000 from the fourth quarter of 1998
to the first  quarter of 1999.  The Company  believes that the proceeds from the
April 1998 Private Placement,  the deferrals of certain promissory notes and the
proceeds from the October 1998 Private  Placement,  together with the conversion
of the CCI Note into common  stock,  will  enable the  Company to  continue  its
operations  through the end of 1998.  However,  the Company has significant loan
payments due in the first quarter of 1999,  which it will not be able to satisfy
unless it obtains additional  financing or further loan payment  deferrals.  The
Company  does not have any other  arrangements  with  respect to, or sources of,
additional  financing and there can be no assurance  that  additional  financing
will be available to the Company on  commercially  reasonable  terms, or at all.
The failure to obtain such financing could have a material adverse effect on the
Company.

     The assessment of goodwill  recoverability,  which is heavily  dependent on
projected  financial  information  and the  goodwill  amortization  period,  are
significant  accounting  estimates as contemplated by the American  Institute of
Certified Public Accountants' Statement of Position 94-6, "Disclosure of Certain
Significant  Risks and  Uncertainties."  Further,  the  Company  operates  in an
industry which is rapidly  evolving and extremely  competitive  and continues to
generate  significant  net  losses and  negative  cash  flow.  It is  reasonably
possible that the Company's accounting estimates with respect to the useful life
and ultimate  recoverability  of goodwill could change in the near term and that
the effect of such changes on the financial statements could be material.  While
management   currently   believes  that  the  recorded  amount  of  goodwill  is
appropriate at September 30, 1998,  there can be no assurance that the Company's
future results will confirm this assessment or that an additional  write-down or
write-off of goodwill will not be required in the future.

                                       18

<PAGE>



     At September  30, 1998,  the Company had net operating  loss  carryforwards
("NOLs")  aggregating  approximately  $30,000,000  available  to  offset  future
taxable  income.  Under  Section 382 of the Internal  Revenue  Code of 1986,  as
amended (the  "Code"),  utilization  of prior NOLs is limited after an ownership
change, as defined in this section,  to an amount equal to the value of the loss
corporation's  outstanding  stock  immediately  before the date of the ownership
change, multiplied by the federal long-term tax-exempt rate in effect during the
month that the ownership change occurred.  The Company is subject to limitations
on the use of its NOLs as provided pursuant to Section 382.  Accordingly,  there
can be no assurance that a significant  amount of existing NOLs will be utilized
by the Company.

Year 2000 Compliance

     The  Company  has  reviewed  its  critical   computer   systems  and  other
computer-based operational equipment to identify how the Company may be impacted
by the Year 2000  problem.  The Year 2000 problem  arises  because many computer
systems may not recognize the correct date at the rollover of the two-digit year
value  to  00.  This  could  cause  systems  to  fail  or  process  transactions
incorrectly,  thus  causing  disruptions  to  operations  or an inability of the
Company to provide  services to its  customers.  The Company has  contacted  the
suppliers of its  computer-based  systems and has received written  confirmation
from its suppliers that its critical computer software and hardware is Year 2000
compliant.  The Company  estimates the costs of its Year 2000 compliance  issues
will  be less  than  $100,000,  which  is not  expected  to be  material  to the
Company's financial position, cash flow or results of operations.

     As part of the Company's Year 2000 compliance review, the Company is in the
process of contacting its primary  vendors and customers to determine the extent
to which the Company is vulnerable to those third parties'  failure to remediate
their Year 2000  compliance  issues.  The Company is in the early stages of this
phase of its Year 2000  review  and will  continue  to contact  its  significant
vendors and customers as part of its Year 2000 compliance review. However, there
can be no guarantee  that the systems of the  companies  on which the  Company's
business  relies will be timely  converted or that failure to convert by another
company  will  not  have a  material  adverse  effect  on the  Company  and  its
operations.

     The Company  believes that the risks  associated  with the Year 2000 issues
primarily  relate to the failure of its  suppliers  and key  customers to timely
address  their  Year 2000  issues.  Such  failure  could  result in  significant
disruption to the Company's daily  operations.  While the Company  believes that
its Year 2000 compliance review procedures will adequately address the Company's
internal  Year  2000  issues,  until the  Company  receives  responses  from its
significant  vendors and customers,  the overall risks  associated with the Year
2000 issue remain difficult to accurately  describe and quantify,  and there can
be no guarantee the Year 2000 issue will not have a material  adverse  effect on
the Company's business, operating results and financial position.

     The Company currently has not implemented a Year 2000 contingency plan. The
Company  intends  to devote the  resources  necessary  to assure  that Year 2000
compliance  issues are  resolved.  The Company  plans to develop and implement a
contingency  plan by the end of April 1999 in the event the Company's  Year 2000
compliance  initiatives,  particularly those that relate to third parties,  fall
behind schedule.

                                       19

<PAGE>



PART II. OTHER INFORMATION
Item 1.  Legal Proceedings

     In June 1998, IDB WorldCom Services,  Inc. ("Worldcom") commenced an action
against the Company in the Court of Common Pleas of Philadelphia,  Pennsylvania.
The complaint alleges that from March 1995 through March 1997, Worldcom provided
certain long distance and other telecommunications services for which it was not
paid. Worldcom alleges that the Company owes $698,419.36, inclusive of interest,
for such  services.  The  Company has  retained  counsel in this matter and will
vigorously  defend this  action.  The Company  believes  that it has  adequately
accrued for this  liability,  after giving effect to the  Company's  offsets and
counterclaims.

Item 2.  Changes in Securities and Use of Proceeds

(c)      Recent Sales of Unregistered Securities

         During the three months ended  September 30, 1998, the Company made the
following sales of unregistered securities:
<TABLE>
<CAPTION>
                                                                Consideration
                                                                 Received and
                                                                Description of                          If Option, Warrant
                                                               Underwriting or                            or Convertible
                                                              Other Discounts to     Exemption from     Security, Terms of
                                                            Market Price Afforded     Registration         Exercise or
Date of Sale            Title of Security   Number Sold         to Purchasers            Claimed            Conversion
-------------           -----------------   -----------     ----------------------   --------------     -------------------
<S>                     <C>                   <C>          <C>                          <C>                <C>    
9/4/98                  Common Stock           4,049        conversion of 6%              4(2)                 N/A
                                                            Senior Secured
                                                            Convertible Promissory
                                                            Notes
     
</TABLE>
                                    
Item 5.  Other Information

     On September 16, 1998,  the Company was notified by the Nasdaq Stock Market
that its securities  were delisted from the Nasdaq  SmallCap Market at the close
of  business  on such date for  failure to meet the Nasdaq  listing  maintenance
requirements.

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     10.45    Amendment to Employment Agreement between the Company and David 
              Tobin

     10.46    Amendment to Merger Agreement by and among the Company, CCI and
              J. Mark Rubenstein

     10.47    Agreement between the Company and J. Mark Rubenstein

     10.48    Termination of Employment Agreement between the Company and J. 
              Mark Rubenstein

     27       Financial Data Schedule (9/30/98)

(b)      Current Reports on Form 8-K

         None.

                                       20
<PAGE>



                                   SIGNATURES


     In accordance with  requirements of the Exchange Act, the Registrant caused
this  Report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

Dated:   November 20, 1998
                                   GLOBAL TELECOMMUNICATION SOLUTIONS, INC.


                                        /s/ Michael Hoppman
                                   By:______________________________________
                                         Michael Hoppman, Vice President
                                     and Chief Financial Officer (and principal
                                            accounting officer)


                                       21

<PAGE>



                                  EXHIBIT INDEX



Exhibit 
Number    Description

10.45    Amendment to Employment Agreement between the Company and David Tobin

10.46    Amendment to Merger Agreement by and among the Company, CCI and J. Mark
         Rubenstein

10.47    Agreement between the Company and J. Mark Rubenstein

10.48    Termination of Employment Agreement between the Company and J. Mark
         Rubenstein

27       Financial Data Schedule (9/30/98)








                                       22

<PAGE>