SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                ----------------

                                  FORM 10-K/A-1
(Mark One)


/X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 1997
                          ------------------

                                       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 000-22017
                                               ---------

                          NACT TELECOMMUNICATIONS, INC.
--------------------------------------------------------------------------------

             (Exact Name of Registrant as Specified in its Charter)


           Delaware                                         87-0378662
-------------------------------                   ------------------------------
(State or other jurisdiction of                   (IRS Employer Identification
 incorporation or organization                                Number)


 191 West 5200 North, Provo, Utah                             84604
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                    (Zip Code)

         Registrant's telephone number, including area code: (801) 802-3000
                                                             --------------

         Securities registered pursuant to Section 12(b) of the Act:    NONE

                                                     Name of each exchange
         Title of each class                         on which registered
         -------------------                         -------------------


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

                          Common Stock, $0.01 par value


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                Yes   X    No
                                                    -----     ----


<PAGE>



Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]
                             -----

The  aggregate  market  value at December  23, 1997 of the  Registrant's  Common
Stock, $0.01 par value (based upon the closing price of $15.00 per share of such
Shares on the Nasdaq Stock Market),  held by  non-affiliates  of the Company was
approximately  $45,226,275.00.  Solely  for the  purposes  of this  calculation,
shares held by directors and officers of the Registrant have been excluded. Such
exclusion should not be deemed a determination or an admission by the registrant
that such individuals are, in fact, affiliates of the Registrant.

At  December  23,  1997,  there  were   outstanding   8,128,797  shares  of  the
registrant's Common Stock, $0.01 par value.



<PAGE>



FORWARD-LOOKING STATEMENTS
This Form 10K contains certain forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby.  Although NACT  Telecommunications,  Inc. (the
"Company")   believes  that  the  assumptions   underlying  the  forward-looking
statements  contained  herein are reasonable,  any of the  assumptions  could be
inaccurate,  and therefore,  there can be no assurance that the  forward-looking
statements  included in this Form 10-K will prove to be  accurate.  Factors that
could cause actual results to differ from the results  discussed in the forward-
looking statements include,  but are not limited to, the Company's dependence on
recently introduced products and products under development, competition and the
impact  of  technological  change  on the  Company's  products.  In light of the
significant  uncertainties  inherent in the forward-looking  statements included
herein,  the  inclusion  of  such  information  should  not  be  regarded  as  a
representation  by the Company or any other person that the objectives and plans
of the Company will be achieved.


                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------

The executive officers,  directors and key employees of the Company,  their ages
and present positions with the Company are as follows:


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

A. Lindsay Wallace      48     President, Chief Executive Officer and Director

Eric F. Gurr            38     Chief Financial Officer, Treasurer and Secretary

W. Gordon Blankstein    47     Director

Stephen Irwin           56     Director

Robert L. Olson         47     Director

Clifford V. Sander      60     Director

Ronald S. Eliason       63     Director

Thomas E. Sawyer        65     Director

Gary D. Brown           43     Vice President of Research and Development

Geoffrey Shupe          42     Vice President of Sales and Marketing



A. Lindsay  Wallace has been the  President  and a director of the Company since
January 1996 and Chief  Executive  Officer of the Company since April 1996. From
January 1994 to January  1996, he was the Director of Sales and Marketing of the
Company and was the Executive Vice President of the Company from October 1995 to
January 1996.  From 1988 to December 1993,  Mr.  Wallace was a National  Account
Manager of Sprint and opened the  Sprint/Telnet  data  office in Salt Lake City,
Utah. From 1984 to 1988, he was President and Chief Executive  Officer of Hybrid
Micrographics, Inc.

Eric F. Gurr has been the Company's Vice President of Finance and Administration
and Chief Financial  Officer since August 1995 and Treasurer and Secretary since
June 1989.  Between June 1989 and August 1995, Mr. Gurr served as Controller and
Director of  Administration  and  Finance.  Mr.  Gurr served as Chief  Financial
Officer and Treasurer of Wins, now a subsidiary of GST USA, from January 1995 to
September



<PAGE>



1996.  From 1985 to 1989,  Mr.  Gurr  served  as a Senior  Auditor  for  Deseret
Management  Corporation,  a  diversified  conglomerate.  Mr. Gurr is a Certified
Public Accountant.

W. Gordon  Blankstein  has been a director of the Company since April 1994.  Mr.
Blankstein  has been Chairman of the Board of GST  Telecommunications,  Inc., an
indirect  parent of the Company  ("GST") since  February  1995. He is a founder,
past   President  and  Chairman  of  the  Board  and  former   director  of  ICG
Communications,  Inc. Mr.  Blankstein was the founder and a director of GST from
November 1992 to January 1993 and has been a director since January 1994. He was
elected Vice Chairman of the Board of GST in February 1994.

Stephen Irwin has been a director of the Company since  November 1996. Mr. Irwin
has been Vice Chairman of the Board and a director of GST since  September  1995
and has been the Secretary of GST since  November 1992. Mr. Irwin is an attorney
specializing in corporate  matters,  and has been of counsel to the New York law
firm of Olshan  Grundman  Frome &  Rosenzweig  LLP since 1990.  Mr.  Irwin was a
senior  partner  in  Greenberg,  Irwin  and  Weisinger,  a  New  York  law  firm
specializing in securities, business and corporate matters, from 1968 to 1990.

Robert L. Olson has been a director  of the Company  since  November  1996.  Mr.
Olson has been the Vice  President and General  Manager of Exchange and Wireless
Services  of GST  Telecom  Inc.,  a  wholly-owned  subsidiary  of GST USA  ("GST
Telecom"),  since  March 1995.  From 1986 to January  1995,  Mr.  Olson was Vice
President of Metroplex Communications Corporation.

Clifford V. Sander has been a director of the Company since  November  1996. Mr.
Sander has been Senior Vice  President and Treasurer of GST since March 1995. He
has also been the Executive  Vice President and Chief  Financial  Officer of GST
Telecom since June 1994. From 1962 to 1994, Mr. Sander was in private accounting
practice in Portland,  Oregon. He was acting Chief Financial Officer of Electric
Lightwave,  Inc.  ("ELI")  during its formation in 1988 and continued to provide
accounting and financial  consulting services to ELI through 1993. Mr. Sander is
a Certified Public Accountant.

Ronald S.  Eliason  has been a director of the  Company  since  March 1997.  Mr.
Eliason has been the  President  and Chief  Executive  Officer of Campus  Credit
Union, a financial institution based in Provo, Utah, since June 1991. He was the
Vice  President-Administration  and Chief Financial Officer of Novell, Inc. from
August 1985 to April 1990.

Thomas E. Sawyer has been a director of the Company  since May 1997.  Dr. Sawyer
was Chairman of the Board Emeritus from November 1996 to May 1997, a director of
the Company from 1982 to November  1996,  the Chairman of the Board of Directors
of the  Company  from  October  1985 to  November  1996 and was Chief  Executive
Officer of the Company from October 1988 to March 1996. In December 1993, he was
appointed Chief Technology Officer of GST and was appointed a director of GST in
August  1995.  Dr.  Sawyer  has  over 35  years  of  experience  in  information
technology  industries  and 23 years of experience in senior  management of four
publicly-traded information technology firms.

Gary D. Brown has been the Company's Vice President of Research and  Development
since  June 1996.  Prior to being  named  Vice  President,  he had served as the
Director of Research and Development since July 1990. In these positions, he has
helped conceive and direct all development  activities of the Company. From July
1985 until July 1990, Mr. Brown served as a Senior Software  Engineer.  Prior to
joining the Company in July 1985,  Mr. Brown was a Lead Software  Engineer for a
proprietary operating system at WICAT Systems, Inc. for over five years.

Geoffrey  Shupe has been the  Company's  Vice  President of Sales and  Marketing
since October 1996. Mr. Shupe is responsible  for sales  development,  strategic
sales  development,  marketing and Technical  Support.  He joined the Company in
January 1994 as Major Account Manager for sales and became the Director of Sales
and Marketing in January 1996. Mr. Shupe was an account representative, Major


                                       -2-

<PAGE>



Account  Representative,  and National  Account Manager for Sprint from February
1987 through December 1993.

The Board of  Directors  of the Company  currently  consists  of seven  members.
Currently  all  directors   hold  office  until  the  next  annual   meeting  of
stockholders  and until their  successors  have been duly elected and qualified.
Executive  officers are elected by and serve at the  discretion  of the Board of
Directors.

Item 11. EXECUTIVE COMPENSATION
-------- ----------------------

The  following  table sets forth  certain  information  concerning  compensation
during the three previous fiscal years of the Company's Chief Executive  Officer
and each other most highly  compensated  executive  officer of the Company whose
aggregate  cash  compensation  exceeded  $100,000  during the fiscal  year ended
September 30, 1997 (collectively, the "Named Executive Officers").


                           Summary Compensation Table


<TABLE>
<CAPTION>
                                                                                 Long-Term Compensation
                                                                                 -----------------------


                                                Annual Compensation                Awards          Payouts
                                       ------------------------------------      ----------      -----------



                                                                                                   Long-Term
                                                               Other Annual      Securities        Incentive         All Other
                                                               Compensation      Underlying           Plan         Compensation
Name and Principal Position     Year    Salary($)   Bonus($)      ($)            Options(#)        Payouts($)         ($)(2)
---------------------------     ----   ----------   --------   -------------     -----------     -----------     ---------------

<S>             <C>             <C>    <C>          <C>           <C>              <C>              <C>              <C>   
Thomas E. Sawyer(3)...........  1997   --           --            --               85,000             --                 --
         Chairman of the        1996   $222,556     $2,066        $5,608(1)        --                 --             $4,492
         Board of Directors     1995   $140,793     $4,733        $14,959(1)       --                 --                 --

A. Lindsay Wallace............  1997   $165,769     $2,500        --               160,000            --             $4,308
         President and chief    1996   $149,841     $1,036        $27,036(1)       --                 --             $5,055
         Executive Officer      1995   $96,807      $1,300        $63,293(4)       --                 --                 --

Eric F. Gurr..................  1997   $95,769      $4,550        --                90,000            --            $10,385
         Chief Financial        1996   $70,772      $1,200        $5,035(1)        --                 --                 --
         Officer                1995   $53,262      $933          $6,493(1)        --                 --                 --

</TABLE>

----------
(1)      Represent  payments made pursuant to the Company's Profit Sharing Plan.
         The Company terminated this plan in September 1996.

(2)      Represents matching contributions by the Company to its 401(k) Plan.


(3)      Dr. Sawyer served as the Company's Chief Executive Officer from October
         1988 to March  1996.  Dr.  Sawyer  resigned as Chairman of the Board in
         November 1996.  From April 1996 until June 30, 1997,  his  compensation
         has been paid entirely by GST USA for services  rendered to GST USA and
         its subsidiaries.

(4)      Represents sales commissions paid.



                                       -3-

<PAGE>



                               Option Grants Table

NACT Option Grants in Fiscal Year Ended September 30, 1997.







<TABLE>
<CAPTION>
                                                     Individual Grants                                  Potential Realizable Value
                            ----------------------------------------------------------------------         at Assumed Annual Rates
                                                                                                     of Stock Price Appreciation for
                                                                                                               Option Term(1)
                                Number of      % of Total                                             ------------------------------
                               Securities       Options
                               Underlying      Granted to        Exercise or
                                 Options      Employees in        Base Price         Expiration
           Name                Granted (#)    Fiscal Year           ($/Sh)              Date
-------------------------   --------------   --------------     --------------     --------------


                                                                                                           5%($)        10%($)
                                                                                                        ---------     ----------

<S>                             <C>               <C>             <C>                <C>                 <C>            <C>    
Thomas E. Sawyer .........      85,000(2)         9.1%            $   9.35           11/25/01            219,575        485,203

A. Lindsay Wallace .......     160,000(3)        17.1%            $   9.35           11/25/01            413,317        913,323

Eric F. Gurr .............      90,000(4)         9.6%            $   9.35           11/25/01            232,491        513,744
</TABLE>



----------------
(1)      The potential  realizable  portion of the foregoing  table  illustrates
         value that might be realized upon exercise of options immediately prior
         to the expiration of their term,  assuming (for  illustrative  purposes
         only) the  specified  compounded  rates of  appreciation  of the Common
         Stock of the Company over the term of the option.  These numbers do not
         take into account  provisions  providing for  termination of the option
         following  termination of employment,  nontransferability or difference
         in vesting periods.

(2)      Such options are currently vested. Options to purchase 25,000 shares of
         Common Stock became  exercisable  on September  30, 1997 and options to
         purchase 60,000 shares of Common Stock become  exercisable on September
         30, 1998.

(3)      Options  to  purchase  80,000  shares of Common  Stock  vest and become
         exercisable one-third on September 30, 1997, one-third on September 30,
         1998 and the  remaining  one-third  on September  30, 1999.  Options to
         purchase  40,000  shares of Common  Stock vest and  become  exercisable
         one-fourth  on September  30, 1997,  one-fourth  on September 30, 1998,
         one-fourth  on  September  30,  1999 and the  remaining  one-fourth  on
         September 30, 2000.  Options to purchase an additional 40,000 shares of
         Common  Stock vested on September  30, 1997 and become  exercisable  on
         September 30, 1998.

(4)      Options  to  purchase  45,000  shares of Common  Stock  vest and become
         exercisable one-third on September 30, 1997, one-third on September 30,
         1998 and the  remaining  one-third  on September  30, 1999.  Options to
         purchase  22,500  shares of Common  Stock vest and  become  exercisable
         one-fourth  on September  30, 1997,  one-fourth  on September 30, 1998,
         one-fourth  on  September  30,  1999 and the  remaining  one-fourth  on
         September 30, 2000.  Options to purchase an additional 22,500 shares of
         Common  Stock vested on September  30, 1997 and become  exercisable  on
         September 30, 1998.

GST Option Grants.

On June 1, 1996,  GST granted  options to purchase 5,000 of its Common Shares at
an  exercise  price of $10.00 per share to each of Dr.  Sawyer and Mr.  Wallace.
Such options expire on May 31, 2001.  During the fiscal year ended September 30,
1997, Dr. Sawyer, Mr. Wallace and Mr. Gurr exercised options to purchase 75,000,
22,193 and 21,750 Common Shares of GST, respectively.



                                       -4-

<PAGE>



              Option Exercises/Fiscal Year-End Option Values Table

         NACT Aggregated  Option  Exercises  during the most recently  completed
fiscal year and fiscal year-end option values.



<TABLE>
<CAPTION>
                                                                                                                   Value(1) of
                                                                                  No. of Shares                 Unexercised in the
                                                                                 of Common Stock                 Money Options at
                                    Shares                                    Underlying Unexercised                FY-End($)
                                 Acquired on             Value                 Options at FY-End(#)                Exercisable/
            Name                 Exercise (#)         Realized($)           Exercisable/Unexercisable             Unexercisable
-------------------------     ---------------      ---------------      --------------------------------     -----------------------

<S>                                  <C>                  <C>                     <C>                            <C>          
Thomas E. Sawyer............          --                   --                     25,000/60,000                  $161,575/387,780

A. Lindsay Wallace..........          --                   --                     36,667/123,333                 $236,979/797,101

Eric F. Gurr................          --                   --                     20,625/69,375                  $133,299/448,371
</TABLE>




(1)      Represents  the total gain that would be realized  if all  in-the-money
         options  held at  September  30,  1997 were  exercised,  determined  by
         multiplying  the  number  of  shares  underlying  the  options  by  the
         difference  between the per share  option  exercise  price and the fair
         market value of $15.813 per share at September  30, 1997.  An option is
         in-the-money if the fair market value of the underlying  shares exceeds
         the exercise price of the option.

Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between any member of the Company's Board of
Directors or compensation  committee and any member of the board of directors or
compensation  committee  of any  other  company,  nor has any such  interlocking
relationship  existed  in the past,  except as  follows:  Thomas  E.  Sawyer,  a
director  of the  Company,  serves as a director  of each of GST and GST USA and
served as an executive  officer of each of GST and GST USA until April 10, 1997.
W. Gordon  Blankstein,  the  Chairman  of the Board of GST and GST USA,  Stephen
Irwin,  the Vice  Chairman of the Board of GST, and  Clifford V. Sander,  Senior
Vice  President  of GST and GST USA and a director  of GST USA,  each serve as a
director of the Company.

Employment and Consulting Agreements

The Company has entered into an employment  agreement with Mr. Wallace  pursuant
to which,  effective  October 1, 1996,  Mr. Wallace is employed as the Company's
President and Chief  Executive  Officer for a term ending on September 30, 2001.
The agreement  provides for an initial base salary of $160,000  annually or such
greater  amount  as  the  Board  of  Directors  may  determine,   and  incentive
compensation  as awarded  by the Board of  Directors  from time to time.  In the
event of Mr.  Wallace's  death while  employed  by the  Company,  the  agreement
provides  for a payment of one and a half  times his then  current  base  annual
salary, over a period of one and a half years, to his designated beneficiary. In
the event of his  disability,  Mr.  Wallace is to receive the full amount of his
base salary for six months. If such six-month period ends prior to September 30,
2001, he is to receive salary at a rate of one-half his then current base salary
for a further  period ending on the earlier of one year  thereafter or September
30, 2001. The agreement contains covenants  restricting Mr. Wallace's ability to
engage in activities  competitive  with those of the Company for a period ending
on the earlier of two years after his  termination or September 30, 2001. Upon a
change of control of the Company that results in Mr. Wallace's  removal from the
Company's  Board of  Directors,  a significant  change in the  conditions of his
employment or other breach of the agreement, he is to receive liquidated damages
equal to the "base  amount," as defined in the United  States  Internal  Revenue
Code of 1986, as amended (the "Code"), of his compensation.


                                       -5-

<PAGE>



The Company has entered into an employment  agreement  with Mr. Gurr pursuant to
which,  effective  October 1, 1996, Mr. Gurr is employed as the Company's  Chief
Financial  Officer for a term ending on  September  30,  2001.  The terms of Mr.
Gurr's  agreement  are  identical to Mr.  Wallace's  agreement,  except that Mr.
Gurr's agreement provides for an initial base salary of $90,000.

GST USA,  Inc.,  the parent  corporation  of the Company  ("GST  USA"),  and GST
Telecom  entered  into a consulting  agreement  dated April 1, 1996 with Infotec
Consulting,  Inc. ("Infotec") under which Dr. Sawyer, a director of the Company,
provided personal  services to GST and its subsidiaries,  including the Company,
at the rate of $125 per hour for hours invoiced monthly until June 30, 1997. The
agreement  provided that Dr. Sawyer render  management and technical  consulting
services  including the  development and evaluation of strategic and operational
planning,  merger and acquisition proposals,  preparation of reports and studies
thereon and assistance in negotiations and discussions  pertaining thereto. Such
consulting  agreement also contained covenants  restricting Dr. Sawyer's ability
to engage in activities competitive with those of GST and its subsidiaries.  The
agreement  also  provided for a payment to Infotec of one and one half times the
amount paid to Infotec during the six months preceding Dr. Sawyer's death in the
event of Dr. Sawyer's death during the term of the agreement.  The agreement was
mutually  terminated  by the parties on April 10, 1997.  The Company has entered
into a deferred compensation trust agreement with Dr. Sawyer whereby the Company
funded a trust with $144,000,  with principal and related interest thereon to be
paid to Dr. Sawyer based upon a defined payment schedule.

Director Compensation

The Company does not pay any compensation to employees of the Company or GST who
serve on the Board of  Directors.  However,  the Board of  Directors  may in the
future authorize the payment of a fixed sum to directors for their attendance at
regular  and special  meetings of the Board of  Directors  as is  customary  for
similar  companies.  Independent  directors will be reimbursed for out-of-pocket
expenses incurred in connection with attendance at such meetings and receive (i)
an annual  retainer  of  $15,000,  paid  quarterly,  (ii)  $2,500 per  committee
appointment,  (iii) $1,500 for each Board or committee meeting attended and (iv)
$1,000 per committee meeting for serving as chairman of a committee.

1996 Stock Option Plan

The  Company's  1996 Stock Option Plan (the "Stock Option Plan") was approved by
the Board of directors and the sole  stockholder  of the Company on November 26,
1996.  The purpose of the Stock Option Plan is to create  additional  incentives
for the  Company's  employees,  directors  and  others who  perform  substantial
services to the Company by providing an  opportunity  to purchase  shares of the
Common Stock pursuant to the exercise of options  granted under the Stock Option
Plan.  The Company may grant  options that qualify as  incentive  stock  options
under  Section  422 of the  Internal  Revenue  Code of 1986  (the  "Code"),  and
non-qualified stock options. Incentive stock options may be granted to employees
(including  officers  and  directors  who are  employees).  Non-qualified  stock
options  may  be  granted  to  employees,   officers,   directors,   independent
contractors  and consultants of the Company.  As of January 15, 1998,  1,250,000
shares were  reserved  for  issuance  under the Stock Option Plan and options to
purchase 1,039,065 shares of Common Stock were outstanding.

The maximum  number of shares that may be subject to options  granted  under the
Stock Option Plan to any  individual in any calendar year may not exceed 100,000
and the  method of  counting  such  shares  shall  conform  to any  requirements
applicable to "performance-based" compensation under Section 162(m) of the Code.
It is intended that compensation realized upon the exercise of an option granted
under the Stock Option Plan will  thereupon  be regarded as  "performance-based"
under Section  162(m) of the Code and that such  compensation  may be deductible
without regard to the limits of Section 162(m) of the Code.

The Board of Directors or the Compensation  Committee thereof (the "Compensation
Committee")   composed  of  two  or  more  non-management   directors  that  are
"non-employee directors" within the meaning


                                       -6-

<PAGE>



of Rule 16b-3 promulgated under the Exchange Act and "outside  directors" within
the meaning of Section 162(m) of the Code, is authorized to administer the Stock
Option Plan in a manner that  complies  with Rule 16b-3 under the Exchange  Act.
The Board of Directors  or  Compensation  Committee  determines  which  eligible
individuals  are granted  options and the terms of such  options,  including the
exercise  price,  number of shares  subject to the option  and the  vesting  and
exercisability thereof;  provided, the maximum term of an incentive stock option
granted under the Stock Option Plan may not exceed five years.

The exercise  price of an incentive  stock option granted under the Stock Option
Plan must equal at least 100% of the fair market  value of the subject  stock on
the date of grant and the exercise price of all non-qualified stock options must
equal at least 80% of the fair market value of the subject  stock on the date of
grant;  provided,  however,  that if an option  granted to the  Company's  Chief
Executive Officer or to any of the Company's other four most highly  compensated
officers  is  intended  to qualify  as  "performance-based"  compensation  under
Section  162(m) of the Code,  the exercise price must equal at least 100% of the
fair market value of the subject stock on the date of grant. With respect to any
participant  who owns more than 10% of the voting  power of the Common  Stock of
the Company,  the exercise  price of any option granted must equal at least 110%
of the fair market value on the date of grant.  The aggregate  fair market value
on the date of  grant  of the  stock  for  which  incentive  stock  options  are
exercisable for the first time by an employee of the Company during any calendar
year may not exceed $100,000.

Options shall become  exercisable at such times and in such  installments as the
Board of Directors or Compensation  Committee shall provide.  Non-qualified  and
incentive stock options granted under the Stock Option Plan are not transferable
other than by will or the laws of descent or distribution,  and each option that
has not yet expired is  exercisable  only by the recipient  during such person's
lifetime or for 12 months thereafter by the person or persons to whom the option
passes by will or the laws of descent or distribution. The Stock Option Plan may
be amended at any time by the Board of  Directors  although  certain  amendments
require stockholder  approval.  The Stock Option Plan will terminate on November
25, 2006, unless earlier terminated by the Board of Directors.

401(k) Plan

The Company  maintains a defined  contribution  401(k) plan (the "401(k)  Plan")
which is available to all  employees of the Company who have attained the age of
twenty-one.  Such eligible  employees may elect to defer any percentage of their
current salary subject to a maximum of 15% or the statutory  maximum  ($9,500 in
1997),  whichever is the lesser.  The maximum  salary that can be considered for
compensation purposes is $150,000 per year.

The Company  matches the deferrals of its employees to the extent of 50% of such
deferrals, up to a maximum of 7.5% of the annual compensation of such employees.
During the fiscal year ended September 30, 1997, the Company contributed $88,361
to the 401(k) Plan.

Report on Executive Compensation

Compensation Philosophy

The   Compensation   Committee  is   responsible   for   developing  and  making
recommendations  to the  Board  of  Directors  with  respect  to  the  Company's
executive compensation and stock option policies and practices. In addition, the
Compensation  Committee  determines  the  compensation  to be paid to the  Chief
Executive Officer and each of the other executive officers of the Company.

The Company's executive  compensation programs are designed to enhance the value
of the Company to its  shareholders.  This is accomplished  through policies and
practices that facilitate the achievement


                                       -7-

<PAGE>



of the Company's performance objectives,  provide compensation that will attract
and retain the superior  talent required by the Company's  aggressive  goals and
align the executive officers' interests with the interests of its shareholders.

The  Company's  approach  to  executive  compensation,  as  implemented  by  the
Compensation Committee,  has been designed to provide a competitive compensation
program  that will enable the Company to  attract,  motivate,  reward and retain
individuals who possess the skills,  experience and talents necessary to advance
the growth and financial performance of the Company. The Company's  compensation
policies are based on the  principle  that each  executive's  financial  rewards
should be  aligned  with the  financial  interests  of the  shareholders  of the
Company. The Compensation  Committee also believes that the potential for equity
ownership by management is beneficial in aligning management's and shareholders'
interest in the  enhancement  of  shareholder  value.  The  Company's  executive
compensation has two key elements: (i) a long-term component consisting of stock
options and (ii) an annual  component,  i.e.,  base salary,  with more  emphasis
being  placed on the  long-term  component  than on the  annual  component.  The
Company has not  established a policy with regard to Section  162(m) of the Code
because the Company  has not to date paid  compensation  in excess of $1 million
per annum to any employee.

Salaries

Base salaries for the Company's  executive officers are determined  initially by
evaluating  the  responsibilities  associated  with  the  position  held and the
experience of the individual,  and by reference to the  competitive  marketplace
for  management  talent,  including a comparison of base salaries for comparable
positions at comparable companies within the Company's industry.  Adjustments in
salary are determined by evaluating the competitive marketplace, the performance
of the Company,  the performance of the executive  officer,  with respect to the
ability to manage  growth of the  Company,  and any  increased  responsibilities
assumed  by the  executive  officer.  As long  term  compensation  such as stock
options  is the more  important  component  of the  compensation  package,  much
consideration  is given to the stock options held by such executive  officers in
determining  their cash  remuneration.  The Company  believes that its executive
officers' salaries are generally less than those of its competitors. The Company
has employment  agreements with each of Messrs.  Wallace,  Gurr, Brown and Shupe
which initially set the base salaries for such individuals.

In determining the cash bonuses and incentive compensation paid to its executive
officers,  the Compensation Committee considers the extent of achievement by the
Company of its strategic and operating goals, the level of personal  achievement
by the  executive  officer  (such as the level of cost savings  achieved by such
executive  officer),  the  executive  officer's  ability to manage and  motivate
employees and the  achievement  of projects for which the  executive  officer is
responsible. The Compensation Committee also takes into consideration the extent
of the Company's cash reserves available for such payments.

Compensation of Chief Executive Officer

In addition,  with respect to the determination of the Chief Executive Officer's
compensation,  the Compensation Committee made comparisons to other companies in
the  telecommunications  industry carrying on businesses similar to those of the
Company. The consideration  accounted for approximately 50% of the determination
of the Chief Executive Officer's salary. The other 50% was based on the


                                       -8-

<PAGE>



Compensation  Committee's  determination  of  what  level  of  remuneration  was
necessary to attract and retain people having the  experience and ability of the
Company's Chief Executive Officer.

Stock Option Plan

The Stock Option Plan contributes to the Company's ability to attract and retain
the best available personnel. It is the philosophy of the Compensation Committee
to tie a significant  portion of an executive's  total opportunity for financial
gain to increases in the value of the Common Stock of the Company. In the belief
that employees who have a proprietary  interest in the Company will focus on its
long term success and on building shareholder wealth, the Compensation Committee
uses the Stock Option Plan as a basis to create a  foundation  for the long term
growth of the Company and  increased  shareholder  value by providing  executive
officers and key employees  with an opportunity to obtain and build a meaningful
stake in the Company's future.

All   employees,   including   executive   officers  and  part-time   employees,
consultants,  advisors  and  directors of the Company are eligible for grants of
stock options  pursuant to the Stock Option Plan.  During each fiscal year,  the
Compensation  Committee grants stock options to employees,  including  executive
officers,  who are  recommended by management as being in a position to continue
to contribute to the Company's growth and  profitability.  The number of options
granted to a  particular  employee is based on  management's  assessment  of his
performance and contribution.  Options have been granted to key employees at all
levels of the Company's  management.  The ultimate value of the options, if any,
depends  on the  extent to which  shares of Common  Stock  appreciate  in market
value.

The Compensation  Committee  granted five-year options to purchase 32,000 shares
of Common Stock and 30,000  shares of Common Stock to Mr.  Wallace and Mr. Gurr,
respectively,  in October 1997, in each case at an exercise price of $13.625 per
share. These options vest one-third on October 1, 1998,  one-third on October 1,
1999 and the remaining one-third on October 1, 2000.

         DATED this 23rd day of January, 1998.

         (signed)
         Ronald S. Eliason
         Committee Chairman

         (signed)
         Thomas E. Sawyer
         Director



                                       -9-

<PAGE>



Performance Graph

The following  graph  compares the  percentage  change in the  cumulative  total
shareholder  return on the Common  Stock  (being  the  percentage  increase  (or
decrease) in the trading price of the Common Stock based on an investment in the
Common  Stock on  February  26,  1997 (the first day on which the  Common  Stock
commenced trading on Nasdaq) with the cumulative total shareholder return of the
Nasdaq  Market Value Index and with a  communications  industry  index (which is
shown on the graph as the MG Group Index). For comparison purposes it is assumed
that $100 had been invested in the Common Stock and in the securities  contained
in such indices on February 26, 1997.


                         COMPARE CUMULATIVE TOTAL RETURN
                       AMONG NACT TELECOMMUNICATIONS, INC.
                     NASDAQ MARKET INDEX AND MG GROUP INDEX


                              2/26/97                  9/30/97
                              -------                  -------

NACT                          100.00                   166.45
NASDAQ                        100.00                   129.02
MG                            100.00                   114.81







































                                      -10-

<PAGE>



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
-------- ---------------------------------------------------
         MANAGEMENT
         ----------

The following table sets forth information concerning ownership of the Company's
Common Stock  outstanding as of January 23, 1998 by (i) each person known by the
Company  to be the  beneficial  owner  of more  than  five  percent  (5%) of the
Company's Common Stock, (ii) each director, (iii) each of the executive officers
named in the summary  compensation  table and (iv) all  executive  officers  and
directors of the Company as a group.



Name and Address of               Amount of Shares
Beneficial Owner(1)            Beneficially Owned(2)       Percent of Class
-------------------            ---------------------       -----------------

GST USA, Inc.(3)                     5,113,712                   62.9%

Thomas E. Sawyer                     25,000(4)                     *

A. Lindsay Wallace                   76,667(4)                     *

W. Gordon Blankstein                     0                        0%

Stephen Irwin                            0                        0%

Robert L. Olson                          0                        0%

Clifford V. Sander                       0                        0%

Ronald S. Eliason                    25,000(4)                     *

Eric F. Gurr                         43,125(4)                     *

All directors and officers           169,792(4)                  2.0%
  as a group (8 persons)


-----------

*        

        Less than 1%.

(1)     Unless    otherwise    indicated,    all    addresses   are   c/o   NACT
        Telecommunications, Inc. 191 West 5200 North, Provo, Utah 84604.

(2)     Beneficial  ownership has been  determined in accordance with Rule 13d-3
        under the  Securities  Exchange  Act of 1934  ("Rule  13d-3") and unless
        otherwise  indicated,  represents  shares for which the beneficial owner
        has  sole  voting  and  investment  power.  The  percentage  of class is
        calculated in accordance  with Rule 13d-3 and includes  options or other
        rights to  subscribe  which are  exercisable  within  sixty (60) days of
        November 30, 1997.

(3)     The  address of GST USA,  Inc.  is 4317 N.E.  Thurston  Way,  Vancouver,
        Washington 98662.

(4)     Represents shares of common stock issuable upon the exercise of options.




                                      -11-

<PAGE>



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------

From time to time the Company has made  short-term  loans to GST, or  subsidiary
companies  of  GST,  in  order  to  provide  for   temporary   working   capital
requirements. Such loans were made at prevailing rates of interest, and all have
been repaid in full,  with interest.  At the date of this report,  no such loans
were outstanding.

On  July  1,  1997,   the  Company   moved  its  entire   operations  to  a  new
40,000-square-foot  facility in Provo,  Utah. The Company purchased the land and
the building  from GST Realco,  Inc., a subsidiary of GST, with a portion of the
net proceeds of the Company's  initial public  offering.  The purchase price and
additional  costs  to the  Company  to  complete  construction  of the  building
aggregated approximately $4.1 million.

In early 1995, the Company began offering prepaid debit and  international  call
back/reorigination services to its customers that did not yet desire to expend a
substantial  amount of capital on  hardware.  The Company  incorporated  Wasatch
International  Network  Services,  Inc.  ("Wins")  to offer such  services.  The
Company was able to increase sales of its switch systems as a result of services
provided by Wins as certain  users of these  services grew to be able to justify
the capital  expenditure  to purchase a switch.  Effective  October 1, 1995, the
Company declared a dividend  consisting of 100% of the outstanding capital stock
of Wins payable to its sole stockholder, GST USA. Since becoming a subsidiary of
GST USA, Wins has continued to refer customers to the Company.

The Company provides facilities  management services to certain of its customers
who have purchased  switching and billing systems.  Included in the provision of
facilities  management  services is the  offering of network  carrier  services.
Prior to October 1, 1996,  the Company  offered such  services to its  customers
pursuant to a resale  contract that it had negotiated  with major  interexchange
carriers.  Effective  October 1, 1996,  the Company has  purchased a substantial
portion of its carrier  service from GST or  subsidiaries  thereof.  The Company
obtains such service from GST on terms no less  favorable than those accorded to
the network carrier accounts of GST which enjoy the most preferential rates.

The Company believes that the foregoing transactions were in its best interests.
It is the Company's  current  policy that all  transactions  by the Company with
officers,  directors,  5% stockholders and their affiliates will be entered into
only if such  transactions  are  approved  by a  majority  of the  disinterested
independent directors,  are on terms no less favorable to the Company than could
be obtained from unaffiliated parties and are reasonably expected to benefit the
Company.


                                      -12-

<PAGE>


                                   SIGNATURES
                                   ----------

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the  undersigned,  thereunto  duly  authorized,  in the City of
Provo, State of Utah, on the 23rd day of January, 1998.

                                            NACT TELECOMMUNICATIONS, INC.


                                            By: /s/ A. Lindsay Wallace
                                                -------------------------
                                                    A. Lindsay Wallace
                                                    Chief Executive Officer