UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington. D.C. 20549

                                   FORM 10-KSB

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the yearended September 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 1-12835

                               WORLD CALLNET, INC.

             (Exact name of registrant as specified in its charter)

                  Delaware                              75-2468002
         (State or other jurisdiction of             (I.R.S. Employer
         incorporation or organization)               Identification No.)

           Brecon House, Meridian Gate, 207 Marsh Wall, London E14 9YT

               (Address of principal executive offices) (Zip Code)


       (Registrants' telephone number, including area code) 0171 335 8300


      Securities registered under Section 12 (b) of the Exchange Act: None


         Securities registered under Section 12 (g) of the Exchange Act:

                          Common Stock, Par Value $.001
      --------------------------------------------------------------------
                                (Title of Class)

         Check whether the registrant (1) 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
   -----     ---


<PAGE>


         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained, to the best of registrant's knowledge, in definitive proxy statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. ____

         The  registrant  had revenues of $697,243 for the year ended  September
30, 1999.

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant,  computed by using the closing price of  registrant's  common
stock, at December 31, 1999, was $44,407,000.

         As  of  December  31, 1999,  there  were  13,471,324   shares  of   the
Registrant's Common Stock, par value $.001 per share, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

The  registrant's  proxy  statement  dated January 13, 2000 is  incorporated  by
reference herein into Part III of this Annual Report on Form 10-KSB.

         Transitional Small Business Disclosure Format:

Yes      No   X
   ----     ----

















                                       2

<PAGE>

<TABLE>
<CAPTION>

                          T A B L E  O F  C O N T E N T S
                          -------------------------------

PART I                                                                           Page
<S>                                                                               <C>


Item     1.       Description of Business                                          4

Item     2.       Description of Properties                                       10

Item     3.       Legal Proceedings                                               10

Item     4.       Submission of Matters to a Vote of  Security Holders            10


PART II

Item     5.       Market for Common Equity and Related Stockholder Matters        12

Item     6.       Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                       12

Item     7.       Financial Statements                                            15

Item     8.       Changes in and Disagreements with Accountants on Accounting
                        and Financial Disclosure                                  28


PART III

Item     9.       Directors, Executive Officers, Promoters and Control Persons;
                        Compliance with Section 16 (a) of the Exchange Act        34

Item       10.    Executive Compensation                                          34

Item       11.    Security Ownership of Certain Beneficial Owners and
                  Management                                                      34

Item       12.    Certain Relationships and Related Transactions                  34

Item       13.    Exhibits and Reports on Form 8-K                                34

Signature Page                                                                    36


</TABLE>





<PAGE>



         The  statements  in this  Report on Form  10-KSB  that are not based on
historical  information  are considered  forward-looking  statements  within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities Exchange Act of 1934,  including  statements  regarding the Company's
hopes, intentions,  beliefs or strategies regarding the future.  Forward-looking
statements  include,  but are not limited to,  Description of Business regarding
(i) its plans to  market  its  proprietary  MailTV  products  in  Europe,  North
America,  South  America and Asia  Pacific,  (ii) its belief that  offering free
Internet access will capture customers for CallNet Plc, (iii) its statement that
other companies engaged in Internet related businesses may be acquired, (iv) its
belief that the majority of its future  revenues will be derived from MailTV and
its  ownership of CallNet Plc,  which earns a share of telephone  toll  revenues
from companies that provide  telephone  service to their customers,  and (v) the
belief that its products and  services  will appeal to the many  segments of the
Internet  market;  its  statement in Legal  Proceedings  that the outcome of any
legal  proceedings  and  claims  against  the  Company  will not have a material
adverse  effect on the  Company's  business,  operating  results,  and financial
condition;  and statements in Liquidity and Capital Resources  regarding (i) the
projection that its working capital will be adequate until the end of 2000, (ii)
the projection  that  additional  capital the sale of debt or equity  securities
will be  necessary  after the year  2000,  (iii) the  expectation  that  product
development  and  manufacturing  costs will be borne by the Company and business
partners,  (iv) the estimate of property and/or  significant  capital  equipment
expenditures  for the next twelve  months,  (v) the  expectation  that  Internet
related revenues  derived from its proprietary  MailTV products and ownership of
CallNet  Plc will be the  primary  source  of  internal  liquidity  and sales of
products that are designed to facilitate new Internet access will be a secondary
source of internal liquidity,  and (vi) the anticipation that the year 2000 will
not have a material impact on the Company.

DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT
--------------------

         World  CallNet,   Inc.  (the  "Company")  is  a  Delaware   corporation
incorporated  on December  28, 1992 as Hermes  Capital  Management,  Inc. It was
inactive  until  October  1995,  when it changed  its name to  General  American
Royalty, Inc. and became active in the oil and gas royalty business in Texas and
New Mexico.  In 1998, the Company sold all of its oil and gas royalty  interests
and on October 9, 1998,  acquired  World  Wide  Communications  (Holdings)  Ltd.
("WWCH"),  a privately held United Kingdom development stage  telecommunications
company  based  in  London,  England.  At  the  date  of the  acquisition,  WWCH
shareholders  were issued 75% of the  Company's  outstanding  capital  stock and
given three of the four board of directors positions.

         For financial reporting purposes the transaction was accounted for as a
reverse  acquisition.  WWCH was treated as the  acquirer and will be the ongoing
reporting entity. This report includes only the WWCH financial  statements since
its  inception  on January  23,  1998.  The  Company  changed  its name to World
CallNet, Inc. in January 1999.


                                       4

<PAGE>


         On  September  2,  1999,  the  Company   entered  into  stock  purchase
agreements with the shareholders of CallNet Plc. ("PLC"), a company incorporated
in the United Kingdom,  pursuant to which the Company acquired all of the issued
shares of  capital  stock  (the "PLC  Stock") of  CallNet  Plc,  and  options to
purchase  CallNet Stock (the "PLC  Options"),  from the holders of the shares of
the PLC Stock and PLC  Options,  in exchange for the issuance of an aggregate of
2,544,560  shares of common stock,  par value $0.001 per share,  of the Company.
Prior to the completion of the exchange,  the Company owned approximately 15% of
the  issuedshares  of the capital stock of PLC which were acquired as of October
1998 in exchange  for 500,000  shares of the  Company's  $0.001 par value common
stock.

         On  September  30,  1999,  the Company  entered  into a stock  purchase
agreement with MailTV Pty Ltd.  ("MailTV  Pty"), a company  incorporated  in New
South Wales,  Australia,  and Paul  Goodman-Simpson  the Company's President and
Chief Executive Officer.  Pursuant to the Agreement the Company was to issue to,
and MailTV Pty was to acquire, 14,500,000 shares of common stock of the Company,
which  represents  approximately  50% of the  Company's  issued and  outstanding
shares on a fully diluted basis, for an aggregate  purchase price of $13,593,750
plus 2,265,625 shares of the issued and outstanding common stock of KeyClub.net,
Inc.  (the  "KeyClub  Shares").  KeyClub.net,  Inc.  ("KeyClub")  is  a  Florida
corporation  and  its  common  stock  trades  publicly  on the  Over-the-Counter
Electronic  Bulletin  Board  under the  symbol  "KEYK."  KeyClub.net  Inc is the
majority owner of MailTV Pty.

         The parties  agreed  that at the first  closing of the  Agreement,  the
Company was to issue to MailTV Pty 2,900,000 Shares (the "First Tranche Shares")
and at the second  closing,  which was to take place on or before  December  31,
1999,  the Company  was to issue to MailTV Pty  11,600,000  Shares (the  "Second
Tranche Shares").  The purchase price for the First Tranche Shares was to be the
payment  by MailTV  Pty to the  Company  of  $2,718,750,  less  certain  amounts
previously  received by it from MailTV Pty,  and  453,125  KeyClub  Shares.  The
purchase price for the Second Tranche Shares was to be the payment by MailTV Pty
to the Company of $10,875,000 and 1,812,500 KeyClub Shares.

         MailTV Pty did not fully fund all of the  amounts required  pursuant to
the terms of the  Agreement.  As a result,  the Company and MailTV Pty agreed to
amend the terms of the Agreement to provide for a multi tier Agreement  pursuant
to which MailTV Pty has been granted  additional time to complete its payment of
consideration  totaling  $13.6 million in cash and 2,265,625  million  shares of
KeyClub.net.

         As amended, the Agreement provides for the final closing to be deferred
to January 31,  2000.  The Company may also agree to grant  MailTV Pty a further
extension  to allow for a  settlement  on  February  29,  2000,  should  this be
required.  Such extension shall be conditioned upon receipt of a further partial
payment of $2,000,000 in cleared funds and 333,333  KeyClub Shares no later than
January 31, 2000.


                                       5

<PAGE>


         The  Agreement  has also been  amended as  follows:  (i) MailTV Pty has
waived  any and all  rights  that it had,  or may  have,  to match  any offer of
funding that the Company wishes to engage in; (ii) any  anti-dilution  rights or
other rights to subscribe to purchase any additional Shares that MailTV Pty has,
or may have  had,  have  been  terminated;  (iii) in the  event  that any of the
payments  required to be made by MailTV Pty are not fully satisfied on or before
any of the dates  provided  for such  payments,  such  event  shall be deemed to
constitute  an  intentional  breach  of  the  covenants,   representations   and
warranties made by MailTV Pty contained in the Agreement,  as amended, and shall
be grounds for immediate and final termination of the Agreement, as amended; and
(iv) in the event that MailTV Pty fails to satisfy any of the  conditions in the
Agreement,  as amended,  and the Company elects to terminate the  Agreement,  as
amended,  the Company  agrees to release  MailTV Pty from any damages  resulting
from MailTV  Pty's  default in  consideration  for MailTV Pty's  agreement  that
neither the Company nor Paul  Goodman  Simpson  shall,  in any way, be liable to
MailTV  Pty  for  any  damages  whatsoever  resulting  from  termination  of the
Agreement, as amended.

BUSINESS OF ISSUER
------------------

         The Company  offers  products and  services  that  facilitate  consumer
access to the  Internet  and provide  business  users with  electronic  commerce
("e-commerce")  solutions.  By offering  free  Internet  access to its users the
Company  has been able to  generate a  significant  amount of  Internet  traffic
through its network.  As a result,  agreements and alliances have been developed
with telecommunications  companies and retailers of consumers products that give
the Company an economic  interest in revenues  resulting  from  Internet  usage.
Products that are marketed include mediums not usually  associated with Internet
access such as MailTV enabled  television sets and specially  engineered  MailTV
retrofit  devices that enable Internet access through a television set without a
personal  computer.  The  Company  has  concentrated  its  efforts on  expanding
Internet access to customers in Europe,  but plans to market its products in the
United States and other regions of the world including Asia Pacific.

         Most companies that offer Internet access are currently  focused on the
subscription or monthly fee based personal computer market. The Company believes
that a  significant  opportunity  exists  to  capture  business  from  providing
Internet connectivity without charging users any registration or monthly fees or
requiring a computer. This approach is based on the concept that virtually every
household or business in the world is a potential customer if Internet access is
free and a computer is not required.  The Company's  proprietary MailTV products
provide  Internet  access  using  an  existing  local  telephone  service  and a
television set.

         Calls made by users to connect to the Internet,  either from a personal
computer or a MailTV enabled  television set are directed to an Internet Service
Provider ("ISP") designated by the Company with no registration or monthly fees.
The Company has entered  into an  agreement  with  CallNet Plc , a wholly  owned
subsidiary of the Company, in which the Company will license its UK ISP business
through CallNet Plc.


                                       6

<PAGE>


         The ownership of CallNet Plc is a key  ingredient in the Company's plan
of  operation  in the UK.  CallNet Plc has entered  into  revenue  participation
agreements with certain telephone carriers, which offer basic telephone and long
distance access to the public.  Under the terms of the agreements CallNet Plc is
entitled  to receive a  percentage  of toll  charges  earned by the carrier or a
fixed rebate amount for calls  connecting to the Internet  through  CallNet Plc.
CallNet Plc's revenue participation agreements with telephone carriers and joint
ventures  with  entities  that market  goods and  services on the  Internet  are
expected to be a primary source of revenue for the Company.

PRINCIPAL PRODUCTS AND MARKETS
------------------------------

         In the United States,  local telephone service is offered for a monthly
fee with either  unlimited  local calls allowed or for a small surcharge after a
certain  number of free minutes each month.  In Europe  however,  and many other
territories  worldwide,  local  telephone calls are metered and are charged at a
per  minute  rate.   Telephone   service   providers   have   structured   their
telecommunications  networks to derive income from system usage rather than from
fixed  access  charges.  These  charges  vary  depending on the time of day, but
include all local calls used for Internet connectivity.

         The Company believes that this makes monthly fee based Internet service
unaffordable  for most  European  businesses  or  households.  It has  developed
affordable  MailTV products and services that offer free Internet access through
existing  telecommunications  networks and television sets using CallNet Plc for
user  connection  in  the  UK.  CallNet  Plc  offers  its  subscribers  Internet
connections  without  any  monthly  fees or charges.  The  Company's  goal is to
capture a high volume of traffic  from  customers  that  connect to the Internet
through  CallNet Plc and MailTV.  The  participation  in profits from  telephone
usage and e-commerce generated from MailTV and CallNet Plc's Internet traffic is
the  Company's  principal  profit  center and the basis of design for all of its
products and services.

         The Company offers Internet  connectivity  as its main product,  either
through  regular  personal  computer  access or through its  proprietary  MailTV
products. In response to the tremendous growth in e-commerce and Internet access
in general,  the Company  offers its  proprietary  MailTV and ISP  products  and
services to businesses and organizations such as banks, supermarkets,  retailers
and other affinity  marketing  groups.  The Company  provides the technology and
infrastructure for these business partners, enabling them to add value to market
their own Internet based products and services.  By creating these alliances the
Company  participates  in profits  generated from  e-commerce and  e-advertising
activities developed by such organizations.

         In  October  1999,  Call  Net Plc  launched  CallNet  0800 in the UK, a
completely free Internet service that provides free ISP access and no per minute
charges for  telephone  usage.  The cost of telephone  usage for connect time is
100%  rebated in  consideration  for  CallNet  0800  customers  agreeing  to use
CallNet's designated telephone carrier as their local and long distance carrier.
As of December 31, 1999, approximately 100,000 new subscribers had signed up for
the CallNet 0800 service.  Affinity  marketing programs have been completed with


                                       7

<PAGE>

F1 (Formula  One)  Racing,  Phones 4 U and Evesham  Micros who market  goods and
services  through  websites  hosted and operated by CallNet Plc.  These affinity
programs  provide  for profit  participation  by the Company  from all  revenues
generated from the websites.

         The Company also creates  opportunities  to generate  Internet  traffic
through its proprietary  MailTV products,  which provide dial-up  connections to
the  Internet  through  CallNet  Plc.  MailTV is an  affordable  alternative  to
purchasing a computer and is marketed using the concept of free Internet  access
with no registration or monthly fees. A connection to a local telephone  service
and a television set are the only requirement.

         MailTV is either  embedded into new  television  sets or available as a
retrofit  device for existing  televisions  sets and is intended to be available
for a price  significantly  lower than rival "Web TV" units.  All MailTV enabled
television  sets and  retro-fit  devices  are units that are  pre-configured  to
connect  to  CallNet  Plc and  feature  text based  services  for home  banking,
shopping,  stock price tracking and email. MailTV is an online system with calls
charged at the normal local telephone  rates. In addition,  a host of text based
services  and  applications  will provide  e-commerce  revenues  through  normal
televisions sets.

         MailTV silicon chips are manufactured by ZiLOG, Inc. ("ZiLOG"), a major
silicon chip  manufacturer  based in the United States,  under a joint marketing
and  distribution  agreement.  Zilog  has  been  promoting  the  MailTV  chip to
television  manufacturers  throughout the world.  The most recent  agreement was
with  Vestel,  an OEM TV  manufacturer.  Under the  agreement  Zilog will supply
Vestel with MailTV modules,  which will be  incorporated  into the production of
Vestel's  television  sets.  Television  sets will be distributed  under various
brand names in the United Kingdom and throughout Europe in 2000.

         The Company plans to expand its operation and MailTV  distribution into
mainland  Europe  through  operating   subsidiaries  and  venture  partners.  If
opportunities  become  available,  the Company may acquire  other  businesses or
entities to facilitate the process of  establishing  the Company's  products and
services.  Future plans call for expansion to Asia Pacific, North America, South
America, and Eastern Europe.

COMPETITIVE BUSINESS CONDITIONS
-------------------------------

         The market for Internet products and services is highly competitive and
the Company expects that  competition  will continue to intensify.  There are no
substantial  barriers to entry in these markets and technology is advancing at a
very rapid pace.  Although the Company  believes its products and services  will
appeal to the many segments of the Internet market, it is possible that a single
supplier of products and  services  similar to those of the Company may dominate
one or more market segments.

         The Company  competes with many other  providers of Internet access and
online navigation such as America Online, Compuserve, Prodigy, Dixon's Freeserve


                                       8

<PAGE>

and Microsoft.  Many of these  competitors  are larger than the Company and have
substantially  greater  access to capital and technical  resources than does the
Company and may, therefore,  have a significant  competitive advantage.  Many of
the Company's  competitors are capable of making larger  expenditures to develop
and market their products and services.

         Competitive conditions in the telecommunications  industry could have a
significant  influence on the success of CallNet Plc's ability to earn telephone
toll revenues.  Arrangements that earn CallNet Plc a percentage of metered tolls
are  dependent  upon the  telephone  carrier's  ability to maintain its network.
Market  conditions and other factors that affect  telephone  carriers are beyond
the  scope or  control  of the  Company.  If  satisfactory  agreements  to share
revenues  with  telephone  carriers  cannot be  maintained  by CallNet  Plc, the
Company would have to purchase its own telecommunications facilities.

MAJOR CUSTOMERS
---------------

         The Company's  products are generally  sold to the public and no single
customer is significant  enough to adversely  impact income if lost. The Company
will continue to develop  affinity-marketing  programs to generate customers for
both its  proprietary  MailTV and ISP  products  eliminating  any  reliance on a
single customer.

REGULATORY MATTERS
------------------

         Deregulation  of the  telecommunications  industry  has  just  begun in
Europe. As a result of deregulation, European telephone companies are engaged in
intense  competition  for local  call  traffic  and to gain  market  share.  The
Company's  business  plan is designed to take  advantage of these factors in the
European  telephone  industry by  participation  in the toll  charges  earned by
telephone carriers from telephone connections to the Internet.  CallNet Plc must
negotiate with telephone companies that own the telecommunication  networks that
handle  customer  traffic and connection to the Internet.  It is not possible to
predict  the impact  that  deregulation  will have on the  Company's  ability to
maintain satisfactory margins on contracts with network carriers.

EMPLOYEES
---------

         The Company has 23 full-time  employees  in the United  Kingdom and has
retained the services of a full-time  consultant to oversee business  activities
in the United  States.  The  Company  utilizes  the  services  from third  party
organizations  wherever  possible in order to maintain a competitive  edge.  The
Company's management believes it has satisfactory relations with its employees.

DESCRIPTION OF PROPERTIES

         The Company leases its administrative  offices located at Brecon House,
Meridian Gate, 207 Marsh Wall, in London,  and a research and  development  site


                                       9

<PAGE>

located in Newport  Pagnell,  north of London.  The Company owns the patents and
intellectual  property  rights  for  MailTV  and  plans to  commercialize  these
technologies via joint venture agreements worldwide.

TRADE SECRETS AND INTELLECTUAL PROPERTY
---------------------------------------

         The Company regards its trade secrets and intellectual  property rights
as  critical to its success and will rely upon  applicable  laws,  trade  secret
protection and  confidentiality  and/or license  agreements  with its employees,
customers,  partners and others to protect its proprietary rights.  There can be
no  assurance  that  the  steps  taken  by the  Company  to  protect  any of its
proprietary  rights will be adequate or that third  parties will not infringe or
misappropriate the Company's proprietary rights.  Additionally,  there can be no
assurance  that other parties will not assert  infringement  claims  against the
Company.

LEGAL PROCEEDINGS

         During the  ordinary  course of business  the Company may be subject to
various legal proceedings and claims,  either asserted or unasserted.  While the
outcome of these claims cannot be predicted with certainty, the Company does not
believe that the outcome of any such legal matters will have a material  adverse
effect on the Company's business, operating results, and financial condition.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year covered by this report.

EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------

         The executive officers of the Company and their ages as of December 31,
1999 are as follows:

Name                        Age       Position(s)
----                        ---       -----------

Paul Goodman-Simpson        42        President and Chief Executive Officer

Aaron Goodman-Simpson       38        Vice President and Chief Financial Officer

Keith Goodyer               32        Vice-President

Richard Ibbotson            44        Secretary

         The  Company's  executive  officers are  appointed by, and serve at the
discretion  of,  the  Board  of  Directors.  Each  executive  officer,  with the
exception  of  Mr.  Ibbotson,  is a  full-time  employee  of the  Company.  Paul
Goodman-Simpson and Aaron Goodman-Simpson are brothers.


                                       10

<PAGE>


BUSINESS EXPERIENCE
-------------------

         Paul  Goodman-Simpson.  Mr. Goodman-Simpson has been a director and the
president  of the Company  since  October 9, 1998 and a managing  director and a
co-founder  in 1997 of  WWCH,  which  became a wholly  owned  subsidiary  of the
Company on October 9, 1998.  From 1993 to 1997 he was the  managing  director of
KORE Ltd., a computer software  distribution  company.  From 1992 to 1993 he was
Director of Sales (Far East Asia) of  International  Software  Systems,  Inc., a
software  company.  From 1985 to 1992 he was a salesman  for two other  software
companies.

         Aaron Goodman-Simpson.  Mr. Goodman-Simpson has been a director and the
vice  president for  operations  and sales of the Company since October 9, 1998,
when the Company  acquired all the capital stock of WWCH. He joined WWCH in 1997
as its sales director and vice president for operations.  He served as the sales
director of KORE Ltd.,  a computer  software  distribution  company from 1994 to
1997. From 1992 until October 1994 he was the business  development  manager for
Computer 2000 Datech Ltd.,  Europe's  largest computer  peripheral  distributor.
From  1986  until  1992  he  was  a  director  of  A & B  Developments  Ltd.,  a
construction  company  to which Mr.  Goodman-Simpson  introduced  computer-aided
design to its practice.

         Keith  Goodyer.  Mr.  Goodyer is a director  and vice  president of the
Company  since  October 9, 1998 and the  technical  director and a co-founder in
1997 of WWCH,  which became a wholly owned  subsidiary of the Company on October
9, 1998. He manages WWCH's research and development facility in Newport Pagnell,
England.  From 1989  until  co-founding  WWCH,  he was an  independent  Internet
consultant  and developer.  He developed  several new consumer  electronics  and
Internet tools including the Company's  TelEmail and MailTV products.  From 1992
to April  1997  Mr.  Goodyer  was  Internet  Appliance  Product  Manager  of MSU
Corporation,  a public  company  that  designs  Internet  appliances,  and led a
development team that produced the first  Set-Top-Box for connecting  television
sets to the Internet.

         Richard  Ibbotson.  Mr. Ibbotson  has been the  Company secretary since
October 1998. He became a qualified solicitor in 1980. From 1981 to 1996, he was
a partner in private practice with Ashington  Denton.  From 1996 to date, he has
been a consultant in private practice.


MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

         The Company's  common stock is listed on the OTC Bulletin Board (symbol
WOWW).  The first  trading  in the stock  occurred  on  February  4,  1997.  The
following  table sets forth the high and low bid prices of the Company's  common
stock,  as reported by NASDAQ System  Statistics  furnished by NASD,  during the
periods indicated.  The quotations reflect inter-dealer  prices,  without retail
mark-up, mark-down or commission and may not represent actual transactions:

                                       11

<PAGE>


MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

         The Company's common stock is listed on the OTC Bulletin  Board (symbol
woww).  The first  trading  in the stock  occurred  on  February  4,  1997.  The
following  table sets forth the high and low bid prices of the  Company's common
stock,  as reported by NASDAQ System  Statistics  furnished by NASD,  during the
periods indicated.  The quotations reflect inter-dealer  prices,  without retail
mark-up, mark-down or commission and may not represent actual transactions:



               Quarter Ended                       HIGH              LOW
               -------------                       ----              ---

               March 31, 1998                       3.00              1.13
               June 30, 1998                        1.63               .38
               September 30, 1998                   1.28               .39
               December 31, 1998                    8.25               .88
               March 31, 1999                       9.00              3.13
               June 30, 1999                        5.38              1.13
               September 30, 1999                   3.06              1.06
               December 31, 1999                    7.31              1.28
               -----------------------------------------------------------------

         As of December  31,  1999,  the Company  had  approximately  140 common
shareholders  of record.  Securities  Transfer  Corporation,  located in Dallas,
Texas, serves as the Company's stock transfer agent.

         During the last two years no cash  dividends  have been declared on the
Company's  common  stock.  There are no  restrictions  that limit the  Company's
ability to pay  dividends on common  equity stock or that are likely to do so in
the future.

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

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

         During  1998  the  Company  sold  all of its  interests  in oil and gas
royalty  properties for cash and, after repayment of debt and accounts  payable,
became a publicly  traded  shell.  In October  1998,  the Company  completed the
acquisition  of  World  Wide  Communication   (Holdings)  Ltd.  ("WWCH"),  in  a
transaction  accounted for as a reverse  acquisition.  As a result,  the Company
became the successor to the business and financial operations of WWCH, including
its fiscal  yearend of September  30. WWCH began  operations in January 1998 and
this report  includes  historical  data since that date.  In January  1999,  the
Company changed its name to World CallNet, Inc.

         Since  incorporation  in January  1998,  the Company has been  involved
primarily in capital formation  activities,  refinement of its business strategy
and development of relationships with industry partners. The Company's principal
external  source of capital for  developing  its  products and services has been
proceeds from bridge debt  financing and the private  placement of common stock.
Additional  placements of bridge notes or the sale of equity  securities to fund
operating expenses will be necessary until the Company becomes profitable.

         In December  1998 and April 1999,  the  Company  completed  the private
placement  of  $1,150,000  and  $550,000,  respectively,  in  bridge  notes.  In
September 1999, the Company completed a private placement of 2,900,000 shares of
its common stock to Australian-based  MailTV Pty. The agreement obligates MailTV
Pty to purchase an additional  11,600,000  shares of common stock under the same


                                       12

<PAGE>

terms.  In January  2000,  the Company  completed a private  placement of common
stock   totaling   $2,362,500  at  $1.75  per  share.   The  proceeds  from  the
aforementioned  placements  of common stock were used to repay notes payable and
for working capital.

         The Company's plan of operation for the next twelve months includes the
ongoing  operation of its Internet  service and the  continued  development  and
marketing of its proprietary  Internet products such as MailTV. The Company will
require  substantial  capital to implement its business plan, which is discussed
further in Note 2 to the  Financial  Statements.  It is  expected  that costs of
product  development  and  manufacturing  these  products  will be  borne by the
Company and business  partners such as Zilog, OEM television  manufacturers  and
other third parties seeking to generate new technologies and MailTV applications
developed by the Company.

         The Company has  incurred net losses  since  inception  of  $4,587,408,
which  raises  substantial  doubt about the  Company's  ability to continue as a
going concern. However, with present working capital of approximately $3,000,000
and an additional  $8,900,000,  which is contracted to be closed by February 29,
2000, the Company estimates it can satisfy its obligations and cash requirements
until the end of 2000. To meet its working capital obligations plus research and
development  cost  requirements  after the end of 2000, the Company will have to
raise additional capital from external sources if cash generated from operations
is not sufficient.

         The  Company  has  estimated   that   expenditures   for  plant  and/or
significant  capital equipment will be approximately  $1,500,000 during the next
twelve months.

         If  necessary,  the Company will issue  shares of its capital  stock to
acquire  assets,  customers and other entities that appear to be viable business
opportunities.

         The Company expects that its primary sources of internal liquidity will
be fees,  toll  charges and rebates  earned under the terms of  agreements  with
telecommunications companies doing business with CallNet Plc Internet and MailTV
customers. In addition the Company will earn revenues from e-commerce activities
from both CallNet ISP and MailTV. The fundamental business strategy is to direct
telephone  usage to the CallNet  telecommunications  network by  increasing  the
CallNet Plc  customer  base and through  sales and usage of MailTV.  The Company
also has  agreements  to earn a percentage of sales from  companies  that market
products and services  through web sites hosted by CallNet Plc. The Company also
offers  products that are designed to facilitate new Internet  access.  Sales of
such products and services are expected to be a secondary source of revenues for
the Company.

         The Company has  implemented  certain  changes,  as  necessary,  to its
information  systems and accordingly  does not anticipate any material year 2000
issues from its own systems, programs or from any of its products. The impact of
such issues on the Company's suppliers, customers, vendors and financial service
organizations could have an adverse effect on the Company.


         If the additional  financing is not  successfully  completed and if the
Company  is not able to  obtain  additional  financing  arrangements,  it may be
unable to meet its continuing operational obligations, pursue its basic business
strategy,  take  advantage  of new  opportunities,  develop or enhance  existing
products,  or  respond to  competitive  pressures  and  financial  or  marketing
hurdles.  Such inability could have a materially adverse effect on the business,
operating results and financial condition.  Moreover,  the estimated cost of the
proposed  expansion of our  production  and  marketing  activities is subject to
numerous  uncertainties,   including  the  problems,   expenses,   difficulties,
complications  and  delays,  many of which are  beyond our  control,  frequently
encountered in connection with the establishment and development of new business
activities,  and may be affected by the competitive  environment in which we are
operating. Accordingly, there can be no assurance that the Company will complete
the proposed expansion of production and marketing activities described herein.

                                       13

<PAGE>


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

         For the period from  January 23, 1998  through  September  30, 1998 the
Company incurred salaries and other  administrative  expenses related to capital
formation and development of its business plan.  These expenses are reflected on
the  statement  of  operations   for  the  period  as  charges  to  general  and
administrative expense.

         For the year ended  September 30, 1999, the Company earned  revenues of
approximately  $697,000 from licensing fees and telephone toll charges under the
terms of CallNet Plc's agreements with telecommunications companies. No revenues
were earned for the period from  January  23, 1998 (date of  inception)  through
September 30, 1998 .

         General and administrative  expenses  increased  from $383,568 for  the
period  from  January  23,  1998  (inception)  through  September  30,  1998  to
$4,866,951 for the year ended  September 30, 1999.  Such amount  increaseddue to
the cost of additional personnel, infrastructure and facilities required for the
Company to become operational.  The number of fulltime employees and consultants
increased more than 100% since  September 30, 1998, as the Company  emerged from
being in the  development  stage.  Also  included in general and  administrative
expenses for the year ended  September  30, 1999 was  approximately  $756,000 in
non-cash charges related to the issuance of stock options and warrants.

         Interest expense for the year ended September 30, 1999, was incurred on
$1,700,000 of bridge debt that was completed in November 1998, December 1998 and
April  1999.   Amortization  of  the  discount  related  to  such  debt  totaled
approximately $1,249,742 for the year ended September 30, 1999.











                                       14


<PAGE>



FINANCIAL STATEMENTS
                                                                           Page

                  Independent Auditor's Report                               16

                  Consolidated Balance Sheet as of
                  September 30, 1999 and 1998                                17

                  Consolidated Statements of Operations for
                  the Year Ended September 30, 1999 and
                  the Period from January 23, 1998 to
                  September 30, 1998                                         18

                  Consolidated Statement of Stockholders'
                  Equity for the Period from January 23, 1998
                  to September 30, 1999                                      19

                  Consolidated Statements of Cash Flows for
                  the Year Ended September 30, 1999 and the
                  Period from January 23, 1998 to September 30, 1998         21

                  Notes To Consolidated Financial Statements                 23








                                       15




<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

The Board of Directors
World CallNet, Inc.
London, England

We have audited the  accompanying  consolidated  balance sheet of World CallNet,
Inc. as of  September  30,  1999,  and the related  consolidated  statements  of
operations,  stockholders'  equity  (deficit)  and cash  flows for the year then
ended and the period from January 23, 1998 (date of  inception) to September 30,
1998.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes  examining on a test basis evidence  supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management as well as evaluating the overall financial  statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of World CallNet, Inc.
as of September 30, 1999,  and the results of its  operations and its cash flows
for the year then ended and the period from January 23, 1998 (date of inception)
to  September  30,  1998  in  conformity  with  generally  accepted   accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial  statements,  the  Company has  incurred  significant  losses  through
September 30, 1999, which raise  substantial doubt about its ability to continue
as a going  concern.  Management's  plans in  regard to these  matters  are also
described in Note 2. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.

HEIN + ASSOCIATES LLP

Dallas,  Texas  October 29, 1999,  except for Notes 2, 4 and 11, which are Dated
January 10, 2000



                                       16

<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET, INC.

                           CONSOLIDATED BALANCE SHEET

                           (Expressed in U.S. Dollars)
                            AS OF SEPTEMBER 30, 1999

                                     ASSETS
<S>                                                                      <C>

CURRENT ASSETS:
   Cash                                                                  $    214,243
   Trade accounts receivable, no allowance for doubtful accounts              147,557
   Prepaid expenses                                                            99,159
   Stock subscription receivable                                            1,765,530
                                                                         ------------
          Total current assets                                              2,226,489
                                                                         ------------

   Investment in marketable equity securities                                 565,406
   Furniture and fixtures, at cost                                            185,706
   Goodwill, net of accumulated amortization of $82,150                     4,846,917
   Other intangible assets, net of accumulated amortization of $66,586        212,193
   Bonds, deposits and other assets                                           218,819
                                                                         ------------
           Total other assets                                               6,029,041
                                                                         ------------

                 Total assets                                            $  8,255,530
                                                                         ============

                             LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Notes payable, net of unamortized discount                               1,504,951
   Accounts payable and accrued expenses                                    1,166,071
   Accrued compensation due officers                                          327,516
                                                                         ------------
           Total current liabilities                                        2,998,538
                                                                         ------------

COMMITMENTS (Note 10)

STOCKHOLDERS' EQUITY:
   Preferred stock,  $0.001 par value;  10,000,000 shares
    authorized, no shares issued or outstanding                                  --
   Common stock, $0.001 par value; 30,000,000 shares
    authorized; 13,441,893 shares issued and 12,941,893
    shares outstanding                                                         13,442
   Additional paid-in capital                                              10,737,002
   Accumulated deficit                                                     (4,970,976)
   Treasury stock, 500,000 shares, at cost                                   (522,476)
                                                                         ------------
            Total stockholders' equity                                      5,256,992
                                                                         ------------

            Total liabilities and stockholders' equity                   $  8,255,530
                                                                         ============
</TABLE>




             See accompanying notes to these financial statements.


                                       17


<PAGE>


                               WORLD CALLNET, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                           (Expressed in U.S. Dollars)

            FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND THE PERIOD FROM
                     JANUARY 23, 1998 TO SEPTEMBER 30, 1998


                                                       1999         1998
                                                   -----------    -----------

REVENUES                                           $   697,243    $      --

COSTS AND EXPENSES:
   Production and development                          355,586           --
   General and administrative                        4,879,799        383,568
   Interest                                            114,268           --
   Depreciation and amortization                       180,929           --
   Amortization of debt discount                     1,249,742           --
                                                   -----------    -----------
                                                     6,780,324        383,568
                                                   -----------    -----------

LOSS BEFORE MINORITY INTEREST                       (6,083,081)      (383,568)

MINORITY INTEREST IN LOSS OF SUBSIDIARY              1,495,673           --
                                                   -----------    -----------


NET LOSS                                           $(4,587,408)   $  (383,568)
                                                   ===========    ===========

NET LOSS PER SHARE (basic and diluted)             $      (.57)   $      (.07)
                                                   ===========    ===========

WEIGHTED AVERAGE SHARES                              8,110,636      5,500,000
                                                   ===========    ===========




             See accompanying notes to these financial statements.

                                       18


<PAGE>

<TABLE>
<CAPTION>

                              WORLD CALLNET, INC.

       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                           (Expressed in U.S. Dollars)

           FOR THE PERIOD FROM JANUARY 23, 1998 TO SEPTEMBER 30, 1999





                                                     Common Stock             Treasury Stock    Additional
                                                    -------------             --------------     Paid-In    Accumulated
                                                 Shares     Amount        Shares    Amount       Capital     Deficit      Total
                                                 ------    -------        ------    ------      --------    ----------  ---------
<S>                                            <C>         <C>          <C>        <C>         <C>        <C>           <C>

Issuance of shares to founders upon
incorporation                                     11,000   $      11          --   $    --     $    --     $    --      $      11

Issuance of shares for cash at par value and
intangible asset                                 550,000         550          --        --        19,117        --         19,667


Issuance of shares for cash at par value
and funding of expenses                        4,939,000       4,939          --        --       171,543        --        176,482

Net loss for the period                             --          --            --        --          --      (383,568)    (383,568)
                                               ---------   ---------   ---------   ---------   ---------    ---------   ---------

Balance as of September 30, 1998               5,500,000       5,500          --        --       190,660    (383,568)    (187,408)

Issuance of shares in reverse acquisition      1,829,333       1,829          --        --        18,708         --        20,537

Issuance of shares for 15% of
CallNet Plc                                      500,000         500          --        --       499,500        --        500,000

Issuance of shares for cash                      168,000         168          --        --       184,042        --        184,210


</TABLE>



                                   (Continued)


             See accompanying notes to these financial statements.

                                       19

<PAGE>

<TABLE>
<CAPTION>

                              WORLD CALLNET, INC.

               CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
                                EQUITY (DEFICIT)

                           (Expressed in U.S. Dollars)

           FOR THE PERIOD FROM JANUARY 23, 1998 TO SEPTEMBER 30, 1999
                                   (Continued)



                                          Common Stock                 Treasury Stock        Additional
                                         --------------                --------------          Paid-In     Accumulated
                                     Shares         Amount         Shares        Amount        Capital       Deficit        Total
                                   -----------   -----------   -----------    -----------   -----------   -----------   -----------
<S>                                 <C>            <C>           <C>            <C>         <C>           <C>           <C>

Issuance of warrants in connection
  with bridge loans                       --            --            --             --       1,374,791          --       1,374,791

Issuance of options and warrants
  for services                            --            --            --             --         393,406          --         393,406

Issuance of shares to acquire
  remaining 85% of CallNet Plc       2,544,560         2,545       500,000      (522,476)    4,450,436          --       3,930,505

Issuance of shares for cash and
  marketable securities              2,900,000         2,900          --             --       3,262,506          --       3,265,406

Assumption of options to directors
  in connection with acquisition
   of CallNet Plc                         --            --            --             --         362,953          --         362,953

Net loss for the year                     --            --            --             --            --      (4,587,408)   (4,587,408)
                                   -----------   -----------   -----------    -----------   -----------   -----------   -----------
Balance as of September 30, 1999    13,441,893   $    13,442       500,000    $  (522,476)  $10,737,002   $(4,970,976)  $ 5,256,992
                                   ===========   ===========   ===========    ===========   ===========   ===========   ===========

</TABLE>






             See accompanying notes to these financial statements.

                                       20





<PAGE>

<TABLE>

<CAPTION>

                               WORLD CALLNET, INC.


                      CONSOLIDATED STATEMENT OF CASH FLOWS

                           (Expressed in U.S. Dollars)

              FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND THE PERIOD

                     JANUARY 23, 1998 TO SEPTEMBER 30, 1998

                                                                              1999           1998
                                                                          -----------    -----------
<S>                                                                       <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                               $(4,587,408)   $  (383,568)
   Stock compensation                                                         756,359           --
   Amortization of debt issuance costs                                      1,249,742           --
   Depreciation and amortization                                              180,929           --
   Expenses paid by stockholders                                                 --          175,000
   Minority interest in losses from CallNet Plc prior to consolidation        261,707           --
   Increase in receivables                                                 (1,809,346)          --
   Increase in prepaid expenses                                                (8,846)          --
   Increase in other assets                                                    (3,209)          --
   Increase in accounts payable and accrued expenses                          678,445        208,606
   Cash advances from and expenses paid by affiliate                          (10,486)           297
   Increase in compensation due officers                                       29,462           --
   Other                                                                     (115,794)
                                                                          -----------    -----------
                    Net cash provided by (used in) operating activities    (3,378,445)           335

   Purchase of property and equipment                                        (236,639)          --
   Operating advances to CallNet Plc prior to acquisition                    (701,584)          --
   Cash balance acquired from PLC                                              14,606           --
                                                                          -----------    -----------
                    Net cash used in investing activities                    (923,617)          --

   Proceeds from notes payable                                              1,700,000           --
   Commissions paid on notes payable                                          (70,000)          --
   Cash received in common stock issuances                                  2,884,310
                                                                          -----------    -----------
                       Net cash provided by financing activities            4,514,310          1,660
                                                                          -----------    -----------
                                                                              212,248          1,995
NET INCREASE IN CASH
   CASH, beginning of period
                                                                                1,995           --
                                                                          -----------    -----------
   CASH, end of period                                                    $   214,243    $     1,995
                                                                          ===========    ===========

</TABLE>


                                   (Continued)


             See accompanying notes to these financial statements.

                                       21


<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET,INC.

                 CONSOLIDATED STATEMENT OF CASH FLOWS, Continued

                           (Expressed in U.S. Dollars)

              FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND THE PERIOD
                     JANUARY 23, 1998 TO SEPTEMBER 30, 1998

                                   (Continued)

                                                                                 1999             1998
                                                                              -----------       ----------
<S>                                                                           <C>               <C>

NON CASH TRANSACTIONS:
   Investment in marketable securities obtained for obligation to
     provide services and for cash payment by affiliate                       $        --       $  203,772
                                                                              ===========       ==========
   Acquisition of intangible asset for common stock                           $        --       $   19,500
                                                                              ===========       ==========
   Net assets acquired in reverse acquisition                                 $    20,537       $       --
                                                                              ===========       ==========
   Acquisitions of CallNet Plc for common stock                               $ 4,930,505       $       --
                                                                              ===========       ==========
   Acquisitions of Keyclub.net equity securities for common stock             $   565,406       $       --
                                                                              ===========       ==========


</TABLE>


















             See accompanying notes to these financial statements.

                                       22



<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)


1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------------

     Organization and Nature of Operations
     -------------------------------------

     World CallNet,  Inc. (the "Company") is incorporated in the United Kingdom.
     The Company is primarily engaged in developing proprietary Internet devices
     and software  applications,  developing  commercial  Internet  websites and
     operating a pay-as-you-go  Internet service provider.  Primarily all of the
     Company's  operations and customers are located in the United Kingdom as of
     September 30, 1999.

     The accompanying  financial  statements include the accounts of the Company
     and its two wholly owned  subsidiaries,  CallNet Plc and Overleaf  Systems,
     Limited  ("Overleaf").  CallNet Plc became a wholly owned subsidiary of the
     Company in September  1999 (see Note 3) and  Overleaf has been  inactive to
     date. All  significant  balances and  transactions  have been eliminated in
     consolidation.

     The  Company  began  operations  as World Wide  Communications  (Holdings),
     Limited  ("WWCH") on January 23, 1998. On October 9, 1998, the stockholders
     of WWCH  exchanged  all  their  shares  for  approximately  75% of  General
     American  Royalty,  Inc.,  ("GAR"),  a public company,  and became a wholly
     owned  subsidiary of GAR. The  management of WWCH became the  management of
     the  combined  company.  Although  GAR was the  acquiring  entity for legal
     purposes, WWCH was considered the acquirer for accounting purposes, and the
     financial statements of the combined company reflect historical accounts of
     WWCH and include the operations of GAR beginning October 9, 1998.  However,
     because GAR was the acquiring entity for legal purposes,  all stockholders'
     equity information in the accompanying  financial  statements and footnotes
     has been  restated  to  conform to GAR's  capital  structure.  The  Company
     changed its name to World CallNet, Inc. in January 1999.

     Investment in Marketable Securities
     -----------------------------------

     The Company's marketable securities at September 30, 1999 consist of equity
     securities classified as available-for-sale.  Available-for-sale securities
     are carried at estimated  market  value and  unrealized  holding  gains and
     losses are reported in other  comprehensive  income. At September 30, 1999,
     there was no unrealized gain or loss in these securities.

     Foreign Currency Translation
     ----------------------------

     The Company  conducts  its  operations  and  maintains  its accounts in its
     functional   currency  of  British  pounds.   The  accompanying   financial
     statements are converted into U.S. dollars for the convenience of the users
     at the prevailing  exchange rate of (pound)1.00 to $1.6458 at September 30,
     1999.


                                       23

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)


     Loss Per Share
     --------------

     Basic loss per share is computed  based on the weighted  average  number of
     shares outstanding  during the period.  Diluted loss per share takes common
     stock  equivalent  shares  (such  as  options,   warrants  and  convertible
     securities) into consideration. However, common stock equivalent shares are
     not considered when their effect would be  anti-dilutive.  At September 30,
     1999, the Company had  outstanding  options for 2,000,000  shares of common
     stock and outstanding  warrants for 2,145,000 shares of common stock, which
     are not  included  in the  dilutive  calculation  as the  effect  would  be
     anti-dilutive.

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

     The  preparation of the Company's  financial  statements in conformity with
     generally accepted accounting  principles requires the Company's management
     to make estimates and assumptions that affect the amounts reported in these
     financial  statements and accompanying  notes.  Actual results could differ
     from those estimates.

     Income Taxes
     ------------

     The Company  accounts for income taxes under the  liability  method,  which
     requires  recognition  of  deferred  tax  assets  and  liabilities  for the
     expected  future tax  consequences of events that have been included in the
     financial statements or tax returns. Under this method, deferred tax assets
     and  liabilities  are  determined  based  on  the  difference  between  the
     financial  statements and tax bases of assets and liabilities using enacted
     tax rates in effect for the year in which the  differences  are expected to
     reverse.  The Company has a tax loss  carryforward at September 30, 1999 of
     approximately  $2,600,000  that will  expire if unused in 2019,  for United
     States tax purposes;  and $2,200,000  for United Kingdom tax purposes;  and
     the Company has a deferred tax asset at September 30, 1999,  which is fully
     reserved, of approximately $1,560,000.

     Property and Equipment
     ----------------------

     Property and equipment are stated at cost, less  accumulated  depreciation.
     Depreciation  has been  provided  using the  straight-line  method over the
     estimated  useful lives of the assets of four years.  The Company  recorded
     depreciation  expense of $32,193  and $0 for the year ended  September  30,
     1999  and  the  period  from  January  23,  1998  to  September  30,  1998,
     respectively.

     Long-Lived Assets
     -----------------

     The Company's policy is to periodically  review the net realizable value of
     its long-lived  assets,  including  goodwill,  through an assessment of the
     estimated  future  cash  flows  related to such  assets.  In the event that


                                       24

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



     assets  are  found  to  be  carried  at  amounts  in  excess  of  estimated
     undiscounted  future  cash  flows,  then the assets  will be  adjusted  for
     impairment to a level  commensurate  with the  estimated  fair value of the
     underlying  assets.  Based  upon  its most  recent  analysis,  the  Company
     believes no impairment of long-lived assets exists at September 30, 1999.

     Goodwill
     --------

     Goodwill  represents  the cost of  acquired  businesses  in excess of their
     identifiable net assets and is amortized by the  straight-line  method over
     five years. The Company recorded amortization of goodwill of $82,150 and $0
     for the year ended  September 30, 1999 and the period from January 23, 1998
     to September 30, 1998, respectively.

     Other Intangible Assets
     -----------------------

     Other intangible  assets consist of intellectual  property,  which is being
     amortized by the straight-line method over five years. The Company recorded
     amortization  of other  intangible  assets of  $66,586  and $0 for the year
     ended  September 30, 1999 and the period from January 23, 1998 to September
     30, 1998, respectively.

     Statement of Cash Flows
     -----------------------

     For purposes of the  statements  of cash flows,  the Company  considers all
     highly liquid debt instruments purchased with an original maturity of three
     months or less to be cash equivalents.

     Stock-Based Compensation
     ------------------------

     In January  1998,  the Company  adopted  Statement of Financial  Accounting
     Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation",  which
     requires  recognition  of the value of stock  options and warrants  granted
     based on an option  pricing model.  However,  as permitted by SFAS 123, the
     Company  continues  to account for stock  options and  warrants  granted to
     directors and employees pursuant to Accounting Principles Board Opinion No.
     25,   "Accounting   for   Stock   Issued   to   Employees",   and   related
     interpretations. See Note 5.

     Fair Value of Financial Instruments
     -----------------------------------

     The carrying value of the Company's financial  instruments,  including cash
     equivalents,   accounts  receivable,  short-term  borrowings  and  accounts
     payable, approximate fair value due to their short maturities.

2.   CONTINUED OPERATIONS
     --------------------

     The Company has incurred  significant losses through September 30, 1999. In
     addition,  the Company will require significant additional capital to fully
     implement its business plan.  These factors raise  substantial  doubt about


                                       25

<PAGE>



     the  Company's  ability to continue as a going  concern.  Since January 23,
     1998 (date of inception), the Company completed various debt placements and
     private  placements  of  common  stock,  in which it  raised  net  proceeds
     totaling  approximately  $6,700,000;   including  a  private  placement  of
     securities  in  January  2000 of  $2,362,000.  Management  also  intends to
     attempt to raise additional capital in the near term.  Management  believes
     these  actions will permit the Company to implement  its business  plan and
     attain  profitable  operations  to allow the Company to continue as a going
     concern.

3.   ACQUISITION
     -----------

     Acquisition of CallNet Plc
     --------------------------
     On October 9, 1998,  the Company  acquired a 15% interest in CallNet Plc in
     exchange  for  500,000  newly  issued  shares of common  stock,  which were
     recorded at their  estimated  value of $500,000.  On September 2, 1999, the
     Company acquired the remaining 85% interest in exchange for 2,544,560 newly
     issued shares of common stock, which were recorded at their estimated value
     of $4,450,436.  The Company  accounted for its investment  under the equity
     method  until  September  2,  1999 and  applied  the  purchase  method  and
     consolidated   CallNet  Plc  thereafter.   Due  to  the  transaction  being
     accomplished  in two steps,  the  accompanying  consolidated  statement  of
     operations  for the year ended  September 30, 1999  includes  operations of
     CallNet Plc for the entire year,  offset by a reduction for the 85% outside
     interests'  share of CallNet  Plc's  operations  until  consolidation.  The
     following  unaudited  proforma  information  is  presented as if the entire
     acquisition had been completed at the beginning of the respective periods:

                                                                Period From
                                       Year Ended            January 23, 1998 to
                                     September 30, 1999      September 30, 1998
                                     ------------------      -------------------
     Revenues                          $   697,000               $   21,000
     Net Loss                          $ 6,083,000               $ (115,000)
     Net loss per share                $     (0.58)              $    (0.13)


     Certain  officers  and  directors  of the Company  were also  officers  and
     directors  of CallNet Plc and certain  stockholders  of the Company  held a
     minority interest in CallNet Plc prior to the transactions described above.

     In  connection  with the  acquisition  of CallNet Plc, the Company  assumed
     stock options entitling three directors to purchase an aggregate of 440,000
     shares of its common stock at $1.65 per share (Note 7).


                                       26

<PAGE>

                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



4.   TRANSACTION WITH MAILTV
     -----------------------

     In September  1999,  the Company  entered into an agreement with MailTV Pty
     Ltd.  ("MailTV"),  an  Australian  company,  in which  MailTV is to acquire
     approximately  50% of the Company's  common stock in two phases.  The first
     phase involved the Company exchanging  2,900,000 shares of its common stock
     for $2,718,750 in cash and 453,125 shares of KeyClub.net, a publicly traded
     company  affiliated  with MailTV.  This phase closed on September 30, 1999,
     although  $1,765,530 of the cash was received after closing and recorded as
     stock subscription  receivable in the accompanying balance sheet. The stock
     of KeyClub.net was recorded by the Company at its estimated market value of
     $565,406.  The second phase is to involve the Company exchanging 11,600,000
     shares of its common stock for $10,875,000 in cash and 1,812,500  shares of
     KeyClub.net.  This phase was set to close on  December  31,  1999,  but was
     extended in December 1999 to February 29, 2000.

5.   NOTES PAYABLE
     -------------

     In December 1998 and April 1999, the Company completed  private  placements
     of notes payable totaling $1,150,000 and $550,000,  respectively. The notes
     bear  interest at 10% and $850,000 of the notes are  collateralized  by the
     Company's  shares of Cherokee  Leisure Plc.,  which is a bankrupt entity at
     September 30, 1999. Interest is due monthly and principal is due in full on
     December  1, 1999 and  October 9,  1999,  respectively,  or  earlier  under
     certain circumstances, including the raising by the Company of $3.5 million
     or more of additional capital.

     The holders of the notes were also issued stock purchase warrants entitling
     them to purchase an aggregate of 1,675,000  shares of the Company's  common
     stock between March 1, 1999 and April 9, 2003 at prices  ranging from $1.00
     per share to $10.00 per share.  The holders of these  warrants have certain
     demand and  piggyback  registration  rights.  The Company  paid  $70,000 in
     consulting  fees and  issued  stock  purchase  warrants,  on the same terms
     described  above, to purchase  220,000 shares of common stock in connection
     with the offering.

     The Company has valued the aforementioned stock purchase warrants using the
     Black  Scholes   options   pricing   model  and  allocated   $1,374,791  to
     stockholders'  equity  based on the  relative  fair  market  values  of the
     warrants and the notes payable.  The value of the stock  purchase  warrants
     has been treated as a discount to notes payable.  Amortization  of discount
     was $1,249,742 for the year ended September 30, 1999.




                                       27

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



     The remaining discount of $195,049 at September 30, 1999 is being amortized
     on the  interest  method  over the  remaining  lives of the  related  notes
     payable.

6.   STOCK PURCHASE WARRANTS
     -----------------------

     In March 1999, the Company granted  warrants to purchase  100,000 shares of
     common stock to a public relations consultant. The warrants are exercisable
     at $5.00 per share until  expiration in March 2001. The Company recorded an
     expense of $196,110  based on the  estimated  fair value of the warrants at
     the date of grant as determined by the Black Scholes pricing model.

     In May 1999, a former director converted the 100,000 options granted to him
     in November 1998 under the  Company's  1998 Stock Option Plan into warrants
     to purchase 150,000 shares of common stock. The warrants are exercisable at
     $1.50 per share until  expiration in December 2000. The Company recorded an
     expense of $151,207  based on the difference in the estimated fair value at
     the date of grant  between the options  granted under the Stock Option Plan
     and the warrants as determined by the Black Scholes pricing model.

7.   STOCK-BASED COMPENSATION
     ------------------------

     1998 Stock Option Plan
     ----------------------
     In January 1999, the 1998 Stock Option Plan (the "Plan") was adopted by the
     Company's  shareholders.  Under the Plan, the Company's  board of directors
     may grant options to acquire up to a total of 1,000,000  shares of stock to
     officers,  directors,  employees,  advisors or  consultants of the Company.
     Generally,  options granted under the Plan carry an exercise price equal to
     fair market value at the date of the grant and are exercisable for a period
     of three  years  from  the date of the  grant.  The Plan  provides  for the
     exercise of options for a period of ninety  days after  termination,  if an
     employee or director granted options leaves the Company.

     In November 1998,  March 1999 and June 1999, the Company granted options to
     its key directors to purchase  shares of common stock pursuant to the Plan.
     The options were granted at exercise prices ranging from $1.25 per share to
     $3.50 per share and expire three years from the date of the grant.

     In  connection  with the  acquisition  of CallNet Plc, the Company  assumed
     stock options entitling three directors to purchase an aggregate of 440,000
     shares of its common stock at $1.65 per share.  The options were  converted
     under the terms of the existing stock option plan.  Compensation expense of



                                       28

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



     $362,953 was recognized for these  converted  options during the year ended
     September  30,  1999,  based on the excess of the fair market  value of the
     stock over the option exercise price.

     The Company  also  recognized  compensation  expense of $46,089 for options
     granted  under  the  Plan  to  a  consulting  director  in  November  1998.
     Compensation  expense  was  estimated  at the date of grant using the Black
     Scholes pricing model.

     The following is a summary of activity for the stock options granted during
the year ended September 30, 1999:

                                                                        Weighted
                                                                        Average
                                                        Number          Exercise
                                                       of Shares         Price
                                                      ----------       ---------
         Outstanding, September 30, 1998                   --          $     --
              Cancelled or expired                     (200,000)            2.50
              Granted                                 2,200,000             1.50
              Exercised                                    --                --
                                                      ----------       ---------
         Outstanding, September 30, 1999              2,000,000        $    1.40
                                                      ==========       =========

     All of the  above  outstanding  options  at  September  30,  1999 are fully
     exercisable.

     If not previously exercised, options outstanding at September 30, 1999 will
     expire as follows:



                                                                        Weighted
                                                                        Average
                                                        Number          Exercise
                                                       of Shares         Price
                                                      ----------       ---------

         November 2001                                  500,000        $    1.50
         June 2002                                    1,060,000             1.25
         September 2002                                 440,000             1.65

     Presented below is a comparison of the weighted average exercise prices and
     fair values on the  measurement  date for the stock options  granted during
     the year ended September 30, 1999:


                                                   Number of   Exercise    Fair
                                                     Shares      Price     Value
                                                   ---------   --------  -------
         Exercise price greater than market price    600,000   $  1.50   $  0.92
         Exercise price equal to market price      1,160,000      1.33      0.94
         Exercise less than market price             440,000      1.65      1.92



                                       29

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



     Pro Forma Stock-Based Compensation Disclosures
     ----------------------------------------------

     As discussed in Note 1, the Company  applies APB Opinion No. 25 and related
     interpretations   in  accounting  for  its  stock   options.   Accordingly,
     compensation  cost of $362,953 has been recognized for grants of options to
     directors during the year ended September 30, 1999. Had  compensation  been
     determined based on the fair value at the measurement dates for the options
     granted  consistent  with methods  required by SFAS No. 123, the  Company's
     September  30, 1999 net loss and net loss per share would have been changed
     to the pro forma amounts indicated below. There was no pro forma effect for
     September 30, 1998.

     Net loss:
         As reported                                  $ (4,587,408)
         Pro forma                                    $ (6,602,902)

     Net loss per common Share

         As reported                                  $      (0.57)
         Pro forma                                    $      (0.81)

     The estimated fair value of each director option and warrant granted during
     the year ended September 30, 1999 was estimated on the grant date using the
     Black Scholes  option  pricing model with the  following  weighted  average
     assumptions:

         Expected volatility                             184%
         Risk free interest rate                         6.0%
         Expected dividends                               --
         Expected terms (in years)

8.   STOCKHOLDER MATTERS
     -------------------

     In January  1999,  the Company's  stockholders  approved an increase in the
     authorized  shares to  30,000,000  shares of  common  stock and  10,000,000
     shares of preferred stock. The preferred stock may be issued in series with
     rights and preferences as designated by the Board of Directors.

9.   RELATED PARTY TRANSACTIONS
     --------------------------

     Certain  directors and  stockholders  of the Company are  directors  and/or
     stockholders in other companies with which the Company had the transactions
     set forth below. Also, see Note 3.


                                       30

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)


o        CallNet Plc paid salaries of officers/directors  and employees and paid
         certain  other  administrative  costs of the Company  during the period
         ended September 30, 1998. Such amounts,  which totaled  $185,486,  have
         been recorded as general and administrative expense.

o        Certain  intellectual  property rights related to e-mail  functionality
         were  assigned  to the  Company  in 1998 by  Telemail  Europe  (via the
         Company's newly formed subsidiary, Overleaf) in exchange for 100 shares
         of stock.  The parties that  received the stock also paid the Company a
         total of $166 for the shares.

o        The Company entered into an agreement with CallNet Plc in 1998 in which
         the  Company  was to license  its system for the  business  of Internet
         service  provider  in  the  United  Kingdom  and  CallNet  Plc  was  to
         sub-license such system to other parties.

o        The Company acquired CallNet Plc in  two steps in  fiscal year 1999  as
         described in Note 3.

10.  COMMITMENTS
     -----------

     The Company has  employment  agreements  with three  officers  who are also
     directors.  Each of these employment  agreements  requires an annual salary
     through September 2001 of approximately  $210,000, and provides that if the
     agreement is terminated  by either party during the term of the  agreement,
     the full salary and benefits  are required to be paid to the officer  until
     the end of the term of the agreement.

     The  Company  leases  equipment  and office  facilities  under the terms of
     various  non-cancelable  rental agreements.  Rental expenses from operating
     leases for the year ended  September 30, 1999 and the period from inception
     through September 30, 1998 was $73,404 and $0, respectively.

     Minimum future lease payments for  non-cancelable  operating leases for the
     next five years and thereafter are as follows:

         Years ending September 30,

         2000                                          $    399,000
         2001                                               287,000
         2002                                               122,000
         2003                                                87,000
         2004 and thereafter                                151,000
                                                      -------------
                                                       $  1,046,000
                                                      =============


                                       31

<PAGE>


                               WORLD CALLNET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



11.  SUBSEQUENT EVENTS
     -----------------

     In January  2000,  the Company  completed a private  placement of 1,350,000
     shares of its common stock for proceeds of $ 2,362,500.




















                                       32



<PAGE>



CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND  FINANCIAL
DISCLOSURE

         None.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         For the  information  required by Part III,  Item 10, see the  sections
entitled  "Proposal One - Election of Directors"  and  "Compliance  with Section
16(a) of the  Exchange  Act" in the  Company's  Proxy  Statement  for its Annual
Meeting of Stockholders to be filed with the Commission  contemporaneously  with
this Form 10-KSB, which is incorporated herein by reference.

EXECUTIVE COMPENSATION

         See the information set forth in the sections entitled  "Proposal One -
Election  of  Directors  -  Director   Compensation"   and  "Executive   Officer
Compensation"  in the  Company's  Proxy  Statement  for its  Annual  Meeting  of
Stockholders, which is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         See the information set forth in the sections entitled "Share Ownership
of Certain  Beneficial  Owners and  Management" in the Company's Proxy Statement
for its  Annual  Meeting  of  Stockholders,  which  is  incorporated  herein  by
reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         See  the  information  set  forth  in the  sections  entitled  "Certain
Transactions  with  Management" in the Company's  Proxy Statement for its Annual
Meeting of Stockholders, which is incorporated herein by reference.

EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         2.1      The  Plan of Acquisition  with  WWCH,  which  is  incorporated
                  herein by reference  as filed  as  exhibit  to Form 8-K  dated
                  October 23, 1998.

         3.1      Certificate  of  Incorporation  of the Company and  amendments
                  thereto,  which is incorporated herein by reference as Exhibit
                  3(i) to Form 10 filed on March 26, 1997.



                                       33

<PAGE>

         3.2      Amendment   to   Certificate   of   Incorporation,   which  is
                  incorporated by reference  herein as Exhibit 3(i) to Form 8-K,
                  dated October 23, 1998.

         3.3      By-laws of the Company,  which are  incorporated by  reference
                  herein as Exhibit 3(ii) to Form 10 filed on March 26, 1997.

         10.1     Stock  Exchange  Agreement,  dated  as of June  16,  1999  and
                  consummated  on September 2, 1999, by and among World CallNet,
                  Inc., Paul  Goodman-Simpson,  Aaron  Goodman-Simpson and Keith
                  Goodyer,  which  is  incorporated  by  reference  herein  from
                  Exhibit 3.1 to the  Company's  Form 8-K,  dated  September  2,
                  1999.

         10.2     Stock  Exchange  Agreement,  dated  as of June  16,  1999  and
                  consummated  on September 2, 1999, by and among World CallNet,
                  Inc.  and the  parties  listed on Exhibit A attached  thereto,
                  which is incorporated by reference  herein from Exhibit 3.2 to
                  the Company's Form 8-K, dated September 2, 1999.

         10.3     Stock Purchase  Agreement,  dated as of September 30, 1999, by
                  and  among  World  CallNet,  Inc.,  MailTV  Pty Ltd.  and Paul
                  Goodman-Simpson,  which includes form of  Registration  Rights
                  Agreement to be issued to MailTV Pty, which is incorporated by
                  reference  herein from Exhibit 10.1 to the Company's Form 8-K,
                  dated October 15, 1999.

         10.4     Agreements,  dated  December 15, 1999  and  December 22, 1999,
                  between    World   CallNet,   Inc.,   MailTV  Pty  Ltd.   and
                  Paul Goodman-Simpson, to amend the  Stock  Purchase Agreement,
                  dated as of  September  30, 1999, by and  among World CallNet,
                  Inc.,  MailTV Pty Ltd.  and  Paul  Goodman-Simpson  which   is
                  incorporated  by  reference  herein  from  Exhibit 10.2 to the
                  Company's Form 8-K, dated December 22, 1999.

           21     List of all the  Company's  subsidiaries,  the  state or other
                  jurisdiction of incorporation,  and the names under which such
                  subsidiaries do business.

           27     Financial data schedule.

(b)      Reports on Form 8-K.

         1.    A Current Report on Form 8-K was filed with the Commission by the
               Company on September 17, 1999, to report the  acquisition of 100%
               of CallNet Plc.



                                       34

<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                            WORLD CALLNET, INC.
                                            -------------------
                                                (Registrant)


                                            /s/ Paul Goodman Simpson
                                            -------------------------------
                                            Paul Goodman-Simpson, Director,
                                            President and Chief Executive
                                            Officer

                                            Date   January 12, 2000
                                                   ----------------

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

 /s/ Aaron Goodman-Simpson                  /s/ Paul Goodman-Simpson
--------------------------------            ------------------------------------
Aaron Goodman-Simpson, Principal            Paul Goodman-Simpson, President,
Financial and Accounting Officer            Chief Executive Officer and Director
And Director

Date   January 12, 2000                     Date   January 12, 2000
       ----------------                            ----------------



 /s/ Keith Goodyer
---------------------------------
Keith Goodyer, Vice President and
Director

Date   January 12, 2000
       ----------------




                                       35