SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

   
                                   FORM 10-K/A
    

(Mark One)

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

For the fiscal year ended_____________

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

For the transition period from OCTOBER 1, 1997 to DECEMBER 31, 1997

                       Commission file number 333-33601-02

                                  GST USA, INC.
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             (Exact Name of Registrant as Specified in its Charter)

               Delaware                                      83-0310464
    --------------------------------              ------------------------------
    (State or other jurisdiction of                (IRS Employer Identification
     incorporation or organization                           Number)

                  4001 Main Street, Vancouver, Washington        98663
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                  (Address of Principal Executive Offices)     (Zip Code)

       Registrant's telephone number, including area code: (360) 906-7100

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

                                      None

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

                                      None

  THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(A)
      AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE
                 REDUCED DISCLOSURE FORMAT CONTEMPLATED THEREBY.

            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/

            Indicate   the  number  of  shares   outstanding   of  each  of  the
Registrant's  classes of common  stock,  as of the latest  practicable  date: At
March 26, 1998,  there were  outstanding  10 shares of the  Registrant's  common
stock, no par value per share.

<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF

         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

         The following management's discussion and analysis of financial
condition and results of operations contains forward looking statements that
involve risks and uncertainties. GST USA's actual results could differ
materially from those anticipated in these forward looking statements as a
result of certain factors discussed herein.

OVERVIEW

         GST provides a broad range of  integrated  telecommunications  products
and services, primarily to business customers located in the western continental
United States and Hawaii.  GST's digital networks  currently serve 40 markets in
Arizona,  California,  Hawaii, Idaho, New Mexico, Texas, Washington and Guam. In
addition, GST has networks under construction which, when completed,  will serve
two  additional  markets and expand its regional  footprint to Oregon.  GST also
constructs, markets and manages longhaul fiber optic facilities,  principally in
Arizona,  California and Hawaii. GST's longhaul fiber optic facilities currently
extend  approximately  700 route miles and an  additional  1,600 route miles are
expected  to become  operational  over the next 12  months.  GST's  full line of
products,  which offer a "one-stop"  solution to  customers'  telecommunications
services requirements,  include long distance, Internet, data transmission,  and
private  line  services,  and local  dial tone  services,  which  were  recently
introduced.

         GST has  invested  significant  capital  and effort in  developing  its
telecommunications  business.  This capital has been invested in the development
of GST's  networks  and  longhaul  fiber  optic  facilities,  for the hiring and
development of an experienced  management team, the development and installation
of operating systems, the introduction of services,  marketing and sales efforts
and for  acquisitions.  GST expects to make increasing  capital  expenditures to
expand its networks and longhaul fiber optic  facilities and broaden its service
offerings and may consummate additional acquisitions. Proper management of GST's
growth will  require GST to maintain  quality  control  over its services and to
expand GST's internal management, technical and accounting systems, all of which
will require substantial investment.

         GST, GST USA and their subsidiaries  changed their fiscal year end from
September  30 to  December  31st in  order  to align  financial  reporting  with
regulatory  reporting and to the reporting of others in GST's  industry  sector.
GST,  GST  USA  and  GST  Funding  are  providing  investors  audited  financial
information  for the three month  transition  period ended December 31, 1997 and
will provide audited financial  information for the subsequent  12-month periods
ending  December  31st.  As a result of the  limited  revenues  and  significant
expenses  associated  with the  expansion  and  development  of its networks and
services,  GST's  operating  results  could vary  significantly  from  period to
period.

         LOCAL SERVICES. To facilitate its entry into local services, GST has in
service eight high capacity  digital switches and has installed and is currently
testing six  additional  high  capacity  digital  switches  that are expected to
become  operational by the end of the first quarter of 1998. As demand warrants,
GST  plans  to  continue  to  install  switching  equipment  in its  operational
networks,  in markets  where it is  constructing  networks and in certain  other
cities where GST will rely on the  incumbent  local  exchange  carrier  ("ILEC")
facilities for  transmission.  Once a switch is  operational,  where  regulatory
conditions permit, GST intends to offer local dial tone, in addition to enhanced
services such as ISDN, Centrex, voice mail and other custom calling features.

         GST expects negative EBITDA from its switched services during the 24 to
36  month  period  after  a  switch  is  deployed.  For  switches  operating  in
conjunction with GST's networks, GST expects operating

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margins to improve as the network is expanded and larger  volumes of traffic are
carried on GST's network.  For switches  operating in cities where GST will rely
on ILEC  facilities  for  transmission,  GST will  experience  lower or negative
operating  margins  under  current  ILEC  pricing  tariffs.  Although  under the
Telecommunications  Act, the ILECs will be required to unbundle  local  tariffs,
permitting  GST to purchase only the  origination  and  termination  services it
needs,  thereby decreasing  operating  expenses,  there can be no assurance that
such  unbundling  will be  effected  in a timely  manner  and  result  in prices
favorable to GST.

         LONG  DISTANCE  SERVICES.  GST offers basic and enhanced  long distance
services,   such  as  toll  free,   calling  card,   prepaid  calling  card  and
international  call  back  services,   targeting  primarily  business  customers
purchasing  between  $200 and $15,000 of services per month as well as resellers
and other  carriers.  As part of its  strategy,  GST has acquired  long distance
carriers  and  intends  to  continue  to pursue  acquisitions  of long  distance
carriers in the future.  GST purchases long distance  capacity under  agreements
with certain  major long  distance  carriers  that provide GST capacity at rates
that vary with the monthly traffic generated by GST. GST is obligated to satisfy
certain minimum  monthly usage  requirements of an aggregate of $2.3 million per
month as of January 1, 1998,  increasing  to a maximum of $6.1 million per month
over the next three years. If such  requirements  are not satisfied,  GST may be
required to pay an underutilization fee in addition to its monthly bill.

         INTERNET SERVICES.  GST presently offers  Internet-related  services in
most of its markets,  such as dedicated Internet services,  Web site development
and hosting,  provides  access and upstream  transport  for local ISPs,  EDI and
electronic  commerce  services  and  is in the  process  of  developing  various
Internet  software  applications.  GST also offers dial-up Internet  services to
customers in Portland (Oregon), Vancouver (Washington),  the State of Hawaii and
select  markets in California and intends to begin offering such services in the
Los Angeles,  San Francisco and Houston  metropolitan areas in 1998.  Management
believes that these services will become an important component of GST's overall
product  offerings  and intends to continue  to expand its  Internet  access and
service business to other markets.

         DATA  SERVICES.  GST offers  national  and  international  frame  relay
services on its own frame relay network and through  interconnection  agreements
with other data service  providers.  Under these  agreements,  GST and such data
service  providers  have agreed to link their data  networks and  terminate  one
another's traffic. GST has deployed Cascade  Communications frame relay switches
in 21 markets in the western United States. Such switches can provide both frame
relay and Internet services.

         GST is leveraging its  infrastructure  and network  experience to offer
data networking services such as asynchronous  transfer mode ("ATM"), high speed
LAN connectivity,  video conferencing,  multimedia  networking,  frame relay and
high  capacity  access  to the  Internet.  GST has one ATM  switch  commercially
operational in each of Los Angeles and Ontario, California.

         NETWORK  OPERATIONS.  The  development,  construction  and expansion of
GST's  networks  requires  significant  capital,  a large  portion  of  which is
invested before any revenue is generated.  GST has  experienced,  and expects to
continue to experience,  increasing  negative EBITDA and losses while it expands
its network  operations  and builds its customer  base.  None of GST's  existing
networks is generating  EBITDA.  Based on its experience to date and that of its
competitors,  GST estimates that a new network will generate EBITDA within 30 to
36 months after commencement of commercial operations.  Construction periods and
operating  results will vary from network to network.  There can be no assurance
that GST will be able to establish a sufficient revenue-generating customer base
or achieve EBITDA in any particular market or on a consolidated basis.

         Management  estimates that the total costs associated with the purchase
and  installation  of fiber optic cable and high-speed  electronic  transmission
equipment,  including  capitalized  engineering  costs,  will  range  from $10.0
million to $25.0  million  per  network,  depending  upon the size of the market
served and

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<PAGE>
the scope and  complexity  of the network.  Actual costs may vary  significantly
from this range.  The amounts and timing of these  expenditures are subject to a
variety of factors that may vary significantly by the geographic and demographic
characteristics of each market. In addition to capital expenditure requirements,
upon  commencement of the construction  phase of a network,  GST begins to incur
direct  operating  costs  for such  items  as  salaries  and  rent.  As  network
construction progresses,  GST incurs rights-of-way costs and increased sales and
marketing  expenses.  Certain  direct  preoperating  costs for new  networks are
capitalized until the network becomes operational and are thereafter expensed as
incurred.

         The  initial  development  of a network may take as long as six months,
depending  upon the size and complexity of the network and a variety of factors,
including  the time  required  to obtain  rights-of-way  and other  governmental
approvals, such as franchise agreements.  Once actual construction commences, it
may take from two to six months to complete  the initial  backbone  segment of a
network.  The time  required  during  the  construction  phase is  significantly
influenced  by the  number of route  miles  involved,  the mix of aerial  versus
underground  fiber  deployment,  possible delays in receiving fiber optic cable,
electronic equipment and required permits and other factors.

         MANUFACTURING.  In a series of transactions  between 1993 and 1995, GST
acquired 100% of the outstanding  capital stock of NACT, which produces advanced
telecommunications switching platforms with integrated applications software and
network telemanagement capabilities.  The aggregate consideration paid for GST's
100% interest in NACT was $8.9  million,  consisting of $4.1 million in cash and
notes payable and 956,283 common  shares,  without par value of GST (the "Common
Shares")  valued at $4.8  million.  In February  1997,  GST USA sold one million
shares of NACT's  common  stock for net  proceeds of $9.0  million.  In February
1998,  GST USA sold its  remaining  interest  in NACT for net  proceeds of $86.5
million.

         GST USA.  The majority of GST's  business is performed  through GST USA
and its  subsidiaries.  However,  a portion of the long distance business of GST
was performed through direct wholly owned subsidiaries of GST during the periods
presented below.

RESULTS OF OPERATIONS

THREE MONTHS  ENDED  DECEMBER 31, 1997  COMPARED TO THE  UNAUDITED  THREE MONTHS
ENDED DECEMBER 31, 1996

   
         REVENUES.  Total  revenue for the three months ended  December 31, 1997
increased  $10.0 million,  or 43.2%, to $33.2 million from $23.2 million for the
three months ended December 31, 1996.  Telecommunications  services  revenue for
the three months ended December 31, 1997 increased  $7.5 million,  or 40.7%,  to
$25.9 million from $18.4  million for the three months ended  December 31, 1996.
The increase in  telecommunications  services  revenue  resulted  primarily from
increased  local  and long  distance  service  revenue  generated  by GST  USA's
networks.  Additionally,  during the three months ended  December 31, 1997,  the
Company completed a $1.5 million longhaul conduit sale. To a lesser extent,  the
increase in revenue  resulted  from the  acquisition  of the Guam  operations of
Sprint in October 1997.  Product revenue for the three months ended December 31,
1997 increased $2.5 million, or 52.7%, to $7.3 million from $4.8 million for the
three months ended December 31, 1996. The increase in product  revenue  resulted
primarily from increased unit sales of NACT's STX switch.

         OPERATING EXPENSES. Total operating expenses for the three months ended
December 31, 1997 increased $13.5 million, or 33.3%, to $54.2 million from $40.7
million for the three months ended December 31, 1996.  Network  expenses,  which
include direct local and long distance circuit costs, increased $3.6 million, or
23.8%, to $18.4 million, or 70.8% of telecommunications services revenue for the
three months  ended  December 31, 1997  compared to $14.8  million,  or 80.4% of
telecommunications  services  revenue for the three  months  ended  December 31,
1996. The primary
    

                                       -3-
<PAGE>
   
reason  for the  decrease  in  network  expenses  as a percent of revenue is the
increase in on-net revenues generated at GST USA's network as a percent of total
revenues.   Facilities   administration  and  maintenance  expenses  (consisting
primarily of costs related to personnel  providing  maintenance,  monitoring and
technical assistance for GST USA's networks) for the three months ended December
31,  1997  decreased  $.2  million,  or  6.7%,  to $2.9  million,  or  11.2%  of
telecommunications  services  revenue,  compared  to $3.1  million,  or 16.9% of
telecommunications  services  revenue,  for the three months ended  December 31,
1996.
    

         Cost of product  revenue,  which  represents the costs  associated with
product  revenue of NACT,  increased $.5 million,  or 27.8%, to $2.3 million for
the three months ended  December 31, 1997 from $1.8 million for the three months
ended December 31, 1996.  Cost of product  revenue was 31.9% of product  revenue
for the three  months ended  December  31, 1997  compared to 38.1% for the three
months ended  December 31,  1996.  The decrease in cost of product  revenue as a
percentage of product revenue resulted primarily from economies of scale related
to increased unit sales of NACT's STX switch. Research and development costs for
the three months ended December 31, 1997 increased $.3 million, or 82.0%, to $.7
million  from $.4 million for the three months  ended  December  31,  1996.  The
increase  was due to the  addition of  personnel  to enhance the current  switch
product line and to facilitate  the  development  of new switching  products and
applications.

   
         Selling, general and administrative expenses for the three months ended
December 31, 1997 increased $5.5 million,  or 35.0%, to $21.3 million from $15.8
million for the three months ended December 31, 1996. The increase is due to the
expansion of GST USA's CLEC and enhanced services operations and the hiring of a
significant number of marketing,  management  information and sales personnel to
implement  GST  USA's  integrated  services  strategy.   Selling,   general  and
administrative  expenses  were 64.1% of total revenue for the three months ended
December 31, 1997  compared to 68.0% of total revenue for the three months ended
December 31, 1996.

         Depreciation  and  amortization for the three months ended December 31,
1997 increased $3.8 million, or 81.8%, to $8.5 million from $4.7 million for the
three  months  ended  December  31,  1996.  The  increase  was  attributable  to
newly-constructed   networks   becoming   operational.   GST  USA  expects  that
depreciation  will  continue to increase as it expands its networks and longhaul
fiber optic  facilities  and  installs  additional  switches.  Depreciation  and
amortization  was 25.6% of total revenue for the three months ended December 31,
1997 compared to 20.2% for the three months ended December 31, 1996.

         OTHER  EXPENSES/INCOME.  For the three months ended  December 31, 1997,
net other expenses increased $9.2 million, or 232.5%, to $13.2 million, or 39.8%
of total revenue,  from $4.0 million,  or 17.1% of total revenue,  for the three
months  ended  December 31,  1996.  The primary  reason for the increase was the
inclusion of interest expense associated with the Secured Notes. The increase in
interest  expense  was  partially  offset  by  interest  income  earned  on  the
investment of a portion of the proceeds of the sale of the Secured  Notes.  To a
lesser extent,  net other expenses increased due to NACT's income tax expense as
well as minority interest in the income of NACT.
    

FISCAL 1997 COMPARED TO FISCAL 1996

   
         REVENUES.  Total  revenue for the fiscal year ended  September 30, 1997
("Fiscal 1997") increased $60.9 million, or 147.5%, to $102.2 million from $41.3
million  for  the  fiscal  year  ended  September  30,  1996  ("Fiscal   1996").
Telecommunications  services revenue for Fiscal 1997 increased $48.5 million, or
152.9%,  to $80.2  million from $31.7  million for Fiscal 1996.  The increase in
telecommunications  services  revenue resulted from the inclusion of a full year
of  revenue  from  strategic  acquisitions,   including  Call  America  Business
Communications Corp. and affiliated companies (collectively, "GST Call America")
and  TotalNet  Communications,  Inc.  ("TotalNet"),  as well as  increased  CLEC
service  revenue  generated  by GST  USA's  networks.  To a lesser  extent,  the
increase in telecommunications services revenue
    


                                       -4-
<PAGE>
resulted  from  increased  Internet,  shared tenant and data  services.  Product
revenue for Fiscal 1997  increased  $12.4 million,  or 129.6%,  to $22.0 million
from $9.6 million for Fiscal 1996. The increase in product revenue resulted from
the  introduction  in April 1996 of NACT's STX switch and  subsequent  increased
unit sales.

   
         OPERATING EXPENSES.  Total operating expenses for Fiscal 1997 increased
$97.2 million,  or 119.4%, to $178.6 million from $81.4 million for Fiscal 1996.
Network  expenses,  which include direct local and long distance  circuit costs,
increased $38.1 million, or 143.6%, to $64.7 million for Fiscal 1997 compared to
$26.6  million  for  Fiscal  1996.  Facilities  administration  and  maintenance
expenses   (consisting   primarily  of  costs  related  to  personnel  providing
maintenance,  monitoring and technical  assistance  for GST USA's  networks) for
Fiscal 1997 increased  $1.3 million,  or 12.9%,  to $11.6  million,  or 14.5% of
telecommunications  services  revenue,  compared to $10.3  million,  or 32.5% of
telecommunications services revenue, for Fiscal 1996. The primary reason for the
decrease in facilities  administration and maintenance  expenses as a percent of
telecommunications  services  revenue  was the  inclusion  of revenue  from 1996
strategic acquisitions, a significant portion of which was generated off-net.
    

         Cost of  product  revenue,  which are  costs  associated  with  product
revenue of NACT,  increased $3.1 million,  or 79.7%,  to $7.1 million for Fiscal
1997 from $4.0  million for Fiscal  1996.  Cost of product  revenue was 32.5% of
product  revenue for Fiscal 1997 compared to 41.5% for Fiscal 1996. The decrease
in cost of product  revenue as a percentage  of product  revenue  resulted  from
economies  of scale  related  to  increased  unit  sales of NACT's  STX  switch.
Research and development costs for Fiscal 1997 increased $1.0 million, or 69.3%,
to $2.3 million  from $1.3 million for Fiscal 1996.  The increase was due to the
addition of NACT  personnel  to enhance the current  switch  product line and to
facilitate the development of new switching products and applications.

   
         Selling,  general and administrative expenses for Fiscal 1997 increased
$38.3 million,  or 123.8%,  to $69.2 million from $30.9 million for Fiscal 1996.
The increase is due to the  expansion  of GST USA's CLEC and  enhanced  services
operations  and the  hiring of a  significant  number of  marketing,  management
information  and sales  personnel to  implement  GST USA's  integrated  services
strategy.  Selling,  general  and  administrative  expenses  were 67.7% of total
revenue for Fiscal 1997 compared to 74.8% of total revenue for Fiscal 1996.

         Depreciation  and amortization for Fiscal 1997 increased $15.4 million,
or 185.5%,  to $23.7 million from $8.3 million for Fiscal 1996. The increase was
attributable  to  newly-constructed  networks  becoming  operational  and to the
amortization   of  intangible   assets   related  to  GST  USA's   acquisitions.
Depreciation  and  amortization  was  23.2% of total  revenue  for  Fiscal  1997
compared to 20.1% for Fiscal 1996.

         OTHER  EXPENSES/INCOME.  For Fiscal 1997, net other expenses  increased
$6.7 million, or 43.3%, to $22.1 million, or 21.7% of total revenue,  from $15.4
million,  or 37.4% of total  revenue,  for Fiscal  1996.  Fiscal  1997 net other
expenses  included a $7.4 million gain  recognized on the sale of one million of
GST USA's shares of NACT in February 1997. If the gain had been excluded,  other
expenses for Fiscal 1997 would have  increased  $14.1  million over Fiscal 1996.
Such increase  primarily  resulted from  increased  interest  expense due to the
issuance  of the 1995 Notes in  December  1995 and the  issuance  of the Secured
Notes in May 1997. To a lesser extent,  other  expenses  increased due to income
tax  expense  attributable  to income of NACT,  which as of March 1, 1997 was no
longer consolidated for tax purposes.

FISCAL 1996 COMPARED TO FISCAL 1995

         REVENUES.  Total revenues for Fiscal 1996 increased  $22.6 million,  or
121.1%,  to $41.3 million from $18.7 million for the fiscal year ended September
30, 1995 ("Fiscal 1995").  Telecommunications  services revenues for Fiscal 1996
increased $20.6 million, or 185.4%, to $31.7 million from $11.1 million
    


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for Fiscal 1995. The increase in  telecommunications  services revenues resulted
from the continuing growth of long distance  (including revenues associated with
Fiscal  1995  and  1996  acquisitions),   local,  Internet  and  data  services.
Acquisitions  (primarily the acquisition of International  Telemanagement Group,
Inc. but also the acquisitions of businesses of Reservations, Inc. d/b/a/ Hawaii
On Line ("Hawaii On Line") and  Texas-Ohio  Communications,  Inc. and affiliated
companies  (collectively,  "Texas-Ohio"))  accounted  for $15.1  million  of the
increase in such revenues.  Telecommunications products revenues for Fiscal 1996
increased   $2.0  million,   or  26.6%,   over  Fiscal  1995.  The  increase  in
telecommunications  products  revenues resulted from the introduction by NACT of
the STX product line in the third quarter of Fiscal 1996.

         OPERATING EXPENSES.  Total operating expenses for Fiscal 1996 increased
$52.5 million,  or 181.3%,  to $81.4 million from $28.9 million for Fiscal 1995.
Network  expenses,  which include direct local and long distance  circuit costs,
increased $16.5 million to $26.6 million from $10.1 million for Fiscal 1995, due
to  an  expanded   customer  base  and  increased  usage.  As  a  percentage  of
telecommunications  services revenues, network expenses decreased from 90.9% for
Fiscal 1995 to 83.8% for Fiscal 1996. Facilities  administration and maintenance
expenses  for Fiscal 1996  increased  $8.2  million to $10.3  million  from $2.1
million  for  Fiscal  1995.  As  a  percentage  of  telecommunications  services
revenues,  facilities  administration  and maintenance  expenses  increased from
18.9%  for  Fiscal  1995 to 32.5% for  Fiscal  1996.  The  increase  related  to
additional   personnel  and  facility  costs  required  by  continuing   network
expansion, a substantial portion of which are incurred before the realization of
revenues.
    

         Cost of product  revenues at NACT for Fiscal 1996 increased $.9 million
to  $4.0  million  from  $3.1  million  for  Fiscal  1995.  As a  percentage  of
telecommunications  products  revenues for Fiscal 1996, cost of product revenues
increased  nominally  as compared to Fiscal  1995 due to initial  lower  margins
resulting  from the  discontinuance  of NACT's former switch  product line as it
began to offer the new STX to existing customers. Research and development costs
increased  nominally for Fiscal 1996 relative to Fiscal 1995 as GST USA moved to
more rapidly develop an improved  billing system product and to maintain ongoing
research and  development  of GST USA's existing  hardware and software  product
lines.

   
         Selling,  general and administrative  expenses increased $20.9 million,
or 208.8%, to $30.9 million from $10.0 million for Fiscal 1995. The increase was
due to the expansion of GST USA's CLEC and enhanced services operations,  and to
a lesser extent,  the  acquisitions  during Fiscal 1996 of Tri-Star  Residential
Communications  Corp. and the businesses of Hawaii On Line and  Texas-Ohio.  The
implementation  of GST  USA's  integrated  services  strategy  has  resulted  in
additional marketing, management information and sales staff.

         Depreciation and amortization for Fiscal 1996 increased $5.9 million to
$8.3 million  from $2.4  million for Fiscal 1995 due to  increased  depreciation
resulting from newly  constructed  networks  becoming  operational.  To a lesser
extent,  the increase in depreciation and amortization was also due to increased
amortization of intangible assets resulting from acquisitions.

         OTHER  EXPENSES/INCOME.  Net other  expenses  (income)  for Fiscal 1996
increased $16.2 million to $15.4 million from $(.8) million for Fiscal 1995. The
increase was principally the result of additional  interest  expense  associated
with the 1995 Notes,  offset by interest income resulting from the investment of
the proceeds of the sale of the 1995 Notes.
    

LIQUIDITY AND CAPITAL RESOURCES

         GST USA has incurred  significant  operating and net losses as a result
of the  development  and  operation of its  networks.  GST USA expects that such
losses  will  continue  to  increase  as GST  USA  emphasizes  the  development,
construction and expansion of its networks and builds its customer base.

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<PAGE>
Cash provided by operations  will not be sufficient to fund the expansion of its
networks, longhaul fiber optic facilities and services.

   
         GST USA's net cash used in operating and investing activities was $84.3
million,  $312.2 million, and $137.2 million for the three months ended December
31,  1997,  Fiscal  1997 and Fiscal  1996,  respectively.  Net cash  provided by
financing  activities from borrowings and contributions from GST to fund capital
expenditures,  acquisitions  and  operating  losses was $227.0  million,  $325.4
million and $174.9 million for the three months ended December 31, 1997,  Fiscal
1997 and Fiscal 1996, respectively.

         Capital  expenditures  for the three  months  ended  December 31, 1997,
Fiscal  1997 and  Fiscal  1996 were  $46.7  million,  $225.7  million  and $97.6
million,   respectively.   GST  USA  estimates  1998  capital   expenditures  of
approximately  $245.0 million. The majority of these expenditures is expected to
be made for the  construction of network and longhaul fiber optic facilities and
the purchase of switches and related equipment to facilitate the offering of GST
USA's services.  Continued  significant capital  expenditures are expected to be
made  thereafter.  In addition,  GST USA expects to continue to incur  operating
losses  while it expands  its  business  and builds its  customer  base.  Actual
capital  expenditures  and  operating  losses will  depend on numerous  factors,
including the extent of future  expansion,  acquisition  opportunities and other
factors beyond GST USA's control,  including economic  conditions,  competition,
regulatory developments and the availability of capital.
    

         In addition to GST USA's capital  expenditures  in Fiscal 1996, GST USA
acquired the business of Texas-Ohio  for a purchase price of $.6 million and the
assumption of certain liabilities. All other acquisitions consummated by GST USA
in Fiscal 1996 (Hawaii On Line and  Tri-Star)  were in  consideration  of Common
Shares.  In the first quarter of Fiscal 1997, GST USA acquired the remaining 50%
interest in Phoenix Fiber Access,  Inc.  ("Phoenix  Fiber") owned by ICG Telecom
Group,  Inc.  ("ICG") in consideration of (i) the repayment to ICG at closing of
approximately $2.1 million of intercompany indebtedness and the repayment, under
certain circumstances,  of up to an additional $2.0 million of such intercompany
indebtedness and (ii) the  indemnification of ICG in respect of all indebtedness
of Phoenix Fiber to GST USA and third parties, other than certain liabilities of
Phoenix  Fiber  that  were  assumed  by ICG.  Prior  to the  acquisition  of the
remaining 50% interest,  GST USA had contributed an aggregate of $5.0 million to
Phoenix  Fiber.  In  October  1997,  GST USA  acquired  the  assets of  Sprint's
operations in Guam for  consideration of $2.0 million in cash and $.5 million in
liabilities for services to be provided to Sprint.

         In September 1996, GST Switchco,  Inc. ("GST  Switchco") a wholly owned
subsidiary of GST USA entered into a Loan and Security  Agreement  (the "Siemens
Loan Agreement") with Siemens Telecom Networks  ("Siemens"),  which provides for
loans by Siemens of up to an aggregate of $226.0 million to finance the purchase
of Siemens equipment and certain equipment from other suppliers. At December 31,
1997,  $116.0  million of such  facility was available to GST Switchco (of which
$7.9 million had been provided). GST Switchco may seek to increase the amount of
such  facility  up to $226.0  million  on an as  needed  basis,  subject  to the
negotiation and execution of mutually  satisfactory  documentation.  In December
1996,  GST Equipco,  Inc., a wholly owned  subsidiary of GST USA entered into an
equipment loan and security  agreement  with NTFC Capital Corp.,  which provides
for $50.0  million of  equipment  financing to finance the purchase of equipment
and products from  Northern  Telecom Inc. (all of which had been provided to the
Company at December 31, 1997).

         In March 1997,  NACT completed an initial public offering of its common
stock  pursuant  to which  GST USA and NACT  sold one  million  and two  million
shares,  respectively,  of NACT's common stock, resulting in net proceeds to GST
USA and NACT of approximately $9.0 million and $18.1 million,  respectively.  In
February 1998, GST USA completed the sale of its remaining  interest in NACT for
net proceeds of $86.5 million.

                                       -7-
<PAGE>
         In May 1997, GST Funding completed the Secured Notes Offering of $265.0
million principal amount of Secured Notes. Of the $255.8 million of net proceeds
from the issuance of the Secured  Notes,  as of December 31, 1997  approximately
$93.8 million had been used to purchase securities pledged to fund the first six
interest  payments on the Secured Notes (the first such payment of $16.4 million
having been made in November  1997) and  approximately  $104.4  million had been
used to purchase  telecommunications  equipment,  including  approximately $41.5
million  that had been used to  refinance  indebtedness  of GST USA  incurred to
purchase  equipment.  The indentures  relating to the 1995 Notes and the Secured
Notes include restrictive  covenants which, among other items, limit or restrict
additional  indebtedness  incurred  by GST USA and GST,  investment  in  certain
subsidiaries, the sale of assets and the payment of dividends.

         In November  1997,  GST  completed a stock and debt offering (the "1997
Offering") which yielded net proceeds of approximately  $211.2 million.  The net
proceeds of the 1997  Offering  will be used by GST to fund the expansion of its
infrastructure,  the  expansion of its products  and service  offerings  and for
working capital and general corporate purposes.

   
         As of December 31, 1997,  GST USA had  approximately  $615.3 million of
indebtedness  outstanding.  In addition,  as of December  31, 1997,  GST USA had
$30.5 million of  availability  under a credit  facility (the "Tomen  Facility")
with Tomen America,  Inc. and its affiliates and $108.1 million of  availability
under the Siemens Loan Agreement. Although GST USA's liquidity was substantially
improved as a result of the  proceeds  received  from the sale of the 1995 Notes
and the Secured Notes and from the 1997 Offering,  GST USA will have significant
debt  service  obligations.  GST USA  will be  required  to make  principal  and
interest payments of approximately $56.8 million (of which $35.1 million will be
made from funds  securing  the  Secured  Notes),  $61.3  million (of which $35.1
million will be made from funds securing the Secured  Notes),  $65.7 million (of
which $17.6 million will be made from funds securing the Secured Notes),  $110.2
million and $108.8 million in 1998,  1999,  2000,  2001 and 2002,  respectively.
However,   GST  USA  will  need  to  refinance  a  substantial  amount  of  such
indebtedness.  In addition,  GST USA anticipates  that cash flow from operations
will be  insufficient  to repay the 1995 Notes and the Secured Notes in full and
that such notes  will need to be  refinanced.  The  ability of GST USA to effect
such  refinancings  will be dependent  upon the future  performance  of GST USA,
which  will be subject  to  prevailing  economic  conditions  and to  financial,
business and other  factors,  including  factors  beyond the control of GST USA.
There can be no  assurance  that GST USA will be able to  improve  its  earnings
before  fixed  charges  or that GST USA  will be able to meet  its debt  service
obligations.
    

         At  December  31,  1997,  GST  USA  had  cash,  cash  equivalents,  and
investments,  including restricted cash and investments, of approximately $349.4
million,  compared to $229.7  million at  September  30,  1997.  GST and GST USA
believe  that  the net  proceeds  from  the  sale of NACT  and the  cash on hand
(including the remaining  proceeds from the Secured Notes Offering  available to
purchase  equipment),  and borrowings  expected to be available  under the Tomen
Facility and the Siemens Loan  Agreement will provide  sufficient  funds for GST
and  GST USA to  expand  its  business  as  presently  planned  and to fund  its
operating  expenses  through March 2000.  Thereafter,  GST and GST USA expect to
require  additional  financing.  In the event  that GST and GST  USA's  plans or
assumptions  change or prove to be inaccurate,  or its cash resources,  together
with  borrowings  under  the  current   financing   arrangements   prove  to  be
insufficient to fund GST and GST USA's growth and  operations,  or if GST or GST
USA consummates additional acquisitions, they may be required to seek additional
sources  of  capital  (or  seek   additional   capital   sooner  than  currently
anticipated).  GST and GST USA may also seek to raise additional capital to take
advantage  of  favorable  conditions  in the  capital  markets.  There can be no
assurance that additional  financing will be available to GST and GST USA or, if
available,  that it can be concluded on terms  acceptable  to GST and GST USA or
within  the   limitations   contained   within  GST  and  GST  USA's   financing
arrangements.  Failure to obtain  such  financing  could  result in the delay or
abandonment of some or all of GST and GST USA's  development or expansion  plans
and could  have  material  adverse  effect on GST and GST USA's  business.  Such
failure could also limit the ability of GST and GST USA to make principal


                                       -8-
<PAGE>
and interest payments on its outstanding  indebtedness.  GST and GST USA have no
material  working  capital or other credit  facility under which they may borrow
for  working  capital  and other  general  corporate  purposes.  There can be no
assurance that such a facility will be available to such companies in the future
or that if such a facility were  available,  that it would be available on terms
and conditions acceptable to GST and/or GST USA.

INCOME TAXES AND ADOPTION OF NEW ACCOUNTING STANDARDS
   

         At  December  31,  1997,   GST  USA  had  a  U.S.  net  operating  loss
carryforward of approximately $146.8 million.  While such loss carryforwards are
available to offset future taxable income of GST USA, GST USA does not expect to
generate sufficient taxable income so as to utilize all or a substantial portion
of such loss carryforwards prior to their expiration.  Further,  the utilization
of net operating loss carryforwards  against future taxable income is subject to
limitation if GST USA  experiences  an "ownership  change" as defined in Section
382 of the Internal Revenue Code of 1986, as amended.
    

         In June 1997, the Financial  Accounting Standards Board ("FASB") issued
Statement  of  Financial   Accounting  Standard  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income." SFAS No. 130 established standards for the reporting and
display of comprehensive income and its components in the financial  statements.
GST USA is required to adopt the  provisions  of SFAS No. 130 in 1998,  however,
GST USA believes that adopting this new accounting  standard will not materially
impact the manner of presentation  of its financial  statements as currently and
previously reported.

         In June 1997, the FASB issued SFAS No. 131,  "Disclosure about Segments
of an Enterprise and Related  Information"  ("SFAS No. 131"),  which changes the
way public companies report information about operating segments.  SFAS No. 131,
which is based on the  management  approach  to segment  reporting,  establishes
requirements  to report  selected  segment  information  quarterly and to report
entity-wide  disclosures about products and services,  major customers,  and the
material  countries  in which the  entity  holds  assets  and  reports  revenue.
Management  has not yet evaluated the effects of this change on its reporting of
segment  information.  GST USA will adopt SFAS No. 131 in the fiscal year ending
December 31, 1998.

YEAR 2000 PROGRAM

         Many computer systems experience difficulty processing dates beyond the
year 1999 and, as such,  some  computer  hardware and  software  will need to be
modified  prior to the year 2000 to remain  functional.  GST USA's core internal
systems  that have  been  recently  implemented  are year  2000  compliant.  The
remaining  core  internal  systems  are  scheduled  to be replaced by the second
quarter of 1999 and will be year 2000 compliant when installed.  GST USA is also
completing a preliminary  assessment of year 2000 issues not related to its core
systems, including issues surrounding systems that interface with external third
parties. Based on its initial evaluation, GST USA does not believe that the cost
of remedial  actions will have a material adverse effect on GST USA's results of
operations and financial  condition.  There can be no assurance,  however,  that
there  will  not  be a  delay  in,  or  increased  costs  associated  with,  the
implementation  of changes as the program  progresses,  and failure to implement
such changes could have  an adverse effect on future results of operations.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
          See page F-1.


                                       -9-
<PAGE>
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
          AND REPORTS ON FORM 8-K.

(a)(1)   Financial Statements:  see the Index to Financial Statements.
   (2)   Financial Statement Schedules:  see page S-1.

   (3)   Exhibits:

   *3(a)  Certificate of Incorporation of GST USA, as amended.
   *3(b)  By-Laws of GST USA.

 **4(a)  Indenture dated as of May 13, 1997, by and among GST Funding, GST, GST
         USA and United States Trust Company of New York.

***4(b)  Senior Notes Indenture dated as of December 19, 1995, by and among GST,
         GST USA and United States Trust Company of New York.

***4(c)  Convertible Notes Indenture dated as of December 19, 1995, by and among
         GST, GST USA and United States Trust Company of New York.

 #10(a)  Stock  Purchase  Agreement  dated  December  31,  1997 by and among GST
         Telecommunications,  Inc.,  GST  USA,  Inc.  and  World  Access,  Inc.,
         incorporated  by reference to Exhibit  99.2 to the  Company's  Form 8-K
         dated January 6, 1997.

##27     Financial Data Schedule.

-----------------------------------------------------
*        Incorporated by reference to GST USA's  Registration  Statement on Form
         S-4 (No. 333-33601-02).
**       Incorporated  by reference to GST's  Quarterly  Report on Form 10-Q for
         the period ended June 30, 1997.
***      Incorporated  by reference to GST's Annual  Report on Form 20-F for the
         fiscal year ended September 30, 1995.
#        Incorporated  by  reference  to  Exhibit  99.2 to GST's  Form 8-K dated
         January 6, 1998.
##       Filed herewith.
(b)      Reports on Form 8-K:  None.


                                      -10-
<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 Vancouver, State of Washington, on the 10th day of July, 1998.
    

                                        GST USA, INC.

                                        By: /s/ Joseph A. Basile
                                           ----------------------------------
                                           Joseph A. Basile
                                           Chief Executive Officer

                                POWER OF ATTORNEY

   
         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below constitutes and appoints Joseph Basile, Daniel Trampush , Clifford
Sander, Jack Armstrong and Robert Ferchat his true and lawful  attorney-in-fact,
each acting alone,  with full power of substitution and  resubstitution  for him
and in his name,  place and stead, in any and all capacities to sign any and all
amendments to this report, and to file the same, with all exhibits thereto,  and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission,  hereby ratifying and confirming all that said  attorneys-in-fact or
their  substitutes,  each acting  alone,  may lawfully do or cause to be done by
virtue thereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  this  report  has been duly  signed by the  following  persons  in the
capacities on July 10, 1998.
    

        SIGNATURE                               TITLE

/s/ Joseph A. Basile              President, Chief Executive Officer
------------------------------    (Principal Executive Officer) and Director
    (Joseph A. Basile)

/s/ Daniel L. Trampush            Senior Vice President and Chief Financial
------------------------------    Officer (Principal Financial Officer)
    (Daniel L. Trampush)

/s/ Clifford V. Sander            Senior Vice President, Treasurer and Assistant
------------------------------    Secretary (Principal Accounting Officer)
    (Clifford V. Sander)

/s/ Jack G. Armstrong             Director
------------------------------
    (Jack G. Armstrong)

/s/ Robert A. Ferchat             Director
------------------------------
    (Robert A. Ferchat)

<PAGE>
                          INDEX TO FINANCIAL STATEMENTS

                                                                         Page(s)

GST USA, INC.

Independent Auditors' Report.................................................F-2

Consolidated Balance Sheets at December 31, 1997, and
  September 30, 1997 and 1996................................................F-3

Consolidated Statements of Operations for the
  three-month period ended December 31, 1997
  and the years ended September 30, 1997, 1996 and
  and 1995...................................................................F-4

Consolidated Statements of
  Shareholders' (Deficit) Equity at December 31, 1997
  September 30, 1997, 1996 and 1995..........................................F-5

Consolidated Statements of Cash Flows for the
  three-month period ended December 31, 1997
  and the years ended September 30, 1997, 1996
  and 1995...................................................................F-6

Notes to Consolidated Financial Statements...................................F-7


                                       F-1


<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
GST USA, Inc.:

We have audited the  accompanying  consolidated  balance sheets of GST USA, Inc.
and  subsidiaries  as of December 31, 1997 and September 30, 1997 and 1996,  and
the related  consolidated  statements  of  operations,  shareholder's  (deficit)
equity,  and cash flows for the  three-month  period ended December 31, 1997 and
each of the years in the  three-year  period ended  September  30,  1997.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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 audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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 GST USA, Inc. and
subsidiaries  as of December 31, 1997 and September  30, 1997 and 1996,  and the
results  of its  operations  and cash  flows for the  three-month  period  ended
December 31, 1997 and each of the years in the three-year period ended September
30, 1997, in conformity with generally accepted accounting principles.



/s/ KPMG PEAT MARWICK LLP

Portland, Oregon
February 25, 1998

                                      F-2
<PAGE>
                                  GST USA, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                      (In thousands, except share amounts)
<TABLE>
<CAPTION>

                                                                                                SEPTEMBER 30,
                                                                    DECEMBER 31,           ---------------------------
                          ASSETS                                        1997               1997                 1996
                                                                        ----               ----                 ----

<S>                                                                <C>                  <C>                <C>       
Current assets:
     Cash and cash equivalents                                     $  197,373           $  54,696          $   41,540
     Restricted cash and investments                                   31,731              50,039              16,000
     Accounts receivable, net                                          26,212              21,280              10,950
     Receivable from parent                                               964                 964                 988
     Investments                                                        7,554               3,247               5,177
     Inventory                                                          2,823               2,790               2,406
     Other current assets                                              12,940              10,305               4,610
                                                                    ---------            --------          ----------
                                                                      279,597             143,321              81,671

Restricted investments                                                112,719             121,711                  --
Property and equipment, net                                           406,440             363,929             127,497
Goodwill, net                                                          29,941              33,123              35,650
Other assets, net                                                      50,319              48,791              32,855
                                                                    ---------            --------          ----------
                  Total assets                                     $  879,016           $ 710,875          $  277,673
                                                                    =========            ========          ==========

       LIABILITIES AND SHAREHOLDER'S (DEFICIT) EQUITY

Current liabilities:
     Accounts payable                                              $   14,531           $  21,011          $   12,406
     Accrued expenses                                                  29,850              41,851              22,987
     Payable to parent                                                327,138             112,411              22,687
     Current portion of capital lease obligations                       6,286               6,423                 722
     Current portion of long-term debt                                  3,212               2,861               4,624
     Other current liabilities                                            994                 607                 726
                                                                    ---------            --------          ----------

                                                                      382,011             185,164              64,152
                                                                    ---------            --------          ----------

Other liabilities                                                       1,409               1,088                 158
Capital lease obligations, less current portion                        13,994              15,340               1,453
Long-term debt, less current portion                                  591,813             585,940             210,454
Minority interest                                                      12,732              12,208                 182

Commitments and contingencies

Shareholder's (deficit) equity:
     Common stock, 200 shares authorized, 10 shares
        issued and outstanding, no par value                           78,462              78,373          $   69,957
     Accumulated deficit                                             (201,405)           (167,238)            (68,683)
                                                                    ---------            --------          ----------

                                                                     (122,943)            (88,865)              1,274
                                                                    ---------            --------          ----------

      Total liabilities and shareholder's (deficit) equity         $  879,016           $ 710,875          $  277,673
                                                                    =========            ========          ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                                  GST USA, INC.
                                AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                 (In thousands)
<TABLE>
<CAPTION>

                                                                        THREE-MONTH
                                                                        PERIOD ENDED            YEARS ENDED SEPTEMBER 30,
                                                                        DECEMBER 31,      -----------------------------------
                                                                           1997           1997           1996            1995
                                                                           ----           ----           ----            ----
Revenue:
<S>                                                                     <C>            <C>            <C>            <C>
          Telecommunications and other services                         $  25,940      $  80,234      $  31,726      $  11,118
          Product                                                           7,300         21,982          9,573          7,563
                                                                        ---------      ---------      ---------      ---------
                       Total revenue                                       33,240        102,216         41,299         18,681
                                                                        ---------      ---------      ---------      ---------

     Operating costs and expenses:
          Network expenses                                                 18,361         64,743         26,580         10,103
          Facilities administration and maintenance                         2,906         11,643         10,317          2,096
          Cost of product revenues                                          2,328          7,141          3,974          3,096
          Selling, general and administrative                              21,322         69,152         30,901         10,008
          Research and development                                            746          2,289          1,352          1,270
          Depreciation and amortization                                     8,507         23,672          8,291          2,369
                                                                        ---------      ---------      ---------      ---------
                       Total operating costs and expenses                  54,170        178,640         81,415         28,942
                                                                        ---------      ---------      ---------      ---------
                       Loss from operations                               (20,930)       (76,424)       (40,116)       (10,261)
                                                                        ---------      ---------      ---------      ---------

     Other expenses (income):
          Interest income                                                  (4,077)        (6,315)        (4,927)          (241)
          Interest expense, net of amounts capitalized                     15,853         34,168         18,334            805
          Loss from joint venture                                            --             --            1,495            661
          Other, net                                                          139         (7,237)           794            159
                                                                        ---------      ---------      ---------      ---------
                                                                           11,915         20,616         15,696          1,384
                                                                        ---------      ---------      ---------      ---------
                       Loss before minority interest in
                          (income) loss of subsidiary and
                          income tax expense                              (32,845)       (97,040)       (55,812)       (11,645)
                                                                        ---------      ---------      ---------      ---------

     Income tax expense:
          Current                                                             758          1,802            157             70
          Deferred                                                             92           (899)          --               96
                                                                        ---------      ---------      ---------      ---------
                                                                              850            903            157            166
                                                                        ---------      ---------      ---------      ---------

                       Loss before minority interest in
                          (income) loss of subsidiary                     (33,695)       (97,943)       (55,969)       (11,811)

     Minority interest in (income) loss of subsidiary                        (472)          (612)           411          2,364
                                                                        ---------      ---------      ---------      ---------
                       Net loss                                         $ (34,167)     $ (98,555)     $ (55,558)     $  (9,447)
                                                                        =========      =========      =========      =========
</TABLE>

                                      F-4
<PAGE>
                                  GST USA, INC.
                                AND SUBSIDIARIES

            Consolidated Statements of Shareholder's (Deficit) Equity

                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                                 TOTAL
                                                                                                                 SHAREHOLDER'S

                                                                               COMMON SHARES                ACCUMULATED  (DEFICIT)
                                                                       ---------------------------       --------------------------
                                                                         SHARES         AMOUNT             DEFICIT           EQUITY
                                                                         ------         ------             -------           ------


<S>                                                                        <C>         <C>              <C>               <C>
Balance, September 30, 1994                                                  10        $  16,340        $  (3,678)        $  12,662

Cash contributions from parent                                             --             24,675             --              24,675
Non-cash contributions from parent                                         --              6,894             --               6,894
Net loss                                                                   --               --             (9,447)           (9,447)
                                                                      ---------        ---------        ---------         ---------

Balance, September 30, 1995                                                  10           47,909          (13,125)           34,784

Cash contributions from parent                                             --              9,009             --               9,009
Non-cash contributions from parent                                         --             13,039             --              13,039
Net loss                                                                   --               --            (55,558)          (55,558)
                                                                      ---------        ---------        ---------         ---------

Balance, September 30, 1996                                                  10           69,957          (68,683)            1,274

Capital transaction, sale of subsidiary shares                             --              8,416             --               8,416
Net loss                                                                   --               --            (98,555)          (98,555)
                                                                      ---------        ---------        ---------         ---------

Balance, September 30, 1997                                                  10           78,373         (167,238)          (88,865)

Exercise of subsidiary stock options                                       --                 89             --                  89
Net loss                                                                   --               --            (34,167)          (34,167)
                                                                      ---------        ---------        ---------         ---------

Balance, December 31, 1997                                                   10        $  78,462        $(201,405)        $(122,943)
                                                                      =========        =========        =========         =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                                  GST USA, INC.

                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                                 (In thousands)
<TABLE>
<CAPTION>

                                                                        THREE-MONTH
                                                                        PERIOD ENDED
                                                                        DECEMBER 31,               YEARS ENDED SEPTEMBER 30,
                                                                                        -------------------------------------------
                                                                            1997            1997            1996         1995
                                                                         ------------    ---------     -----------      ------------

Operations:
<S>                                                                     <C>            <C>              <C>             <C>       
     Net loss                                                           $(34,167)      $ (98,555)       $ (55,558)      $  (9,447)
     Items not involving cash:
        Minority interest in income (loss) of subsidiary                     472             612             (411)         (2,364)
        Depreciation and amortization                                      9,251          25,769            9,382           2,819
        Deferred income taxes                                                 92            (899)              --              96
        Accretion of interest                                              5,767          17,099           17,758              --
        Non-cash stock compensation and other expense                        374           2,521              574              --
        Loss on disposal of assets                                            --             679            1,012             122
        Loss on joint venture                                                 --              --            1,495             766
        Gain on sale of subsidiary shares                                     --          (7,376)              --              --
     Changes in non-cash operating working capital:
        Accounts receivable, net                                          (3,528)        (10,148)          (2,321)         (1,522)
        Inventory                                                            (33)           (384)          (2,019)            (13)
        Other current and other assets, net                               (2,727)         (6,496)          (4,176)         (1,848)
        Accounts payable and accrued liabilities                         (18,292)         25,672            2,315            (298)
        Other liabilities                                                    708            (119)             153             413
                                                                         -------       ---------        ---------       ---------
                  Cash used in operations                                (42,083)        (51,625)         (31,796)        (11,276)
                                                                         -------       ---------        ---------       ---------

Investing:
     Acquisition of subsidiaries, net of cash acquired                    (2,105)           (673)          (1,441)            207
     Purchase of investments                                              (4,307)         (3,247)          (9,799)            (28)
     Proceeds from sales of investments                                       --           5,177            5,493              --
     Purchase of fixed assets                                            (46,489)       (223,921)         (76,126)        (27,713)
     Proceeds from sale of fixed assets                                       --           5,774                8              --
     Purchase of other assets                                             (1,688)        (11,057)          (7,575)         (2,150)
     Change in cash and investments restricted for the purchase
        of property and equipment                                         12,217         (59,776)         (16,000)             --
     Proceeds from sale of subsidiary shares, net                            141          27,105               --             615
                                                                         -------        --------        ---------       ---------

                  Cash used in investing activities                      (42,231)       (260,618)        (105,440)        (29,069)
                                                                         -------        --------        ---------       ---------
Financing:
     Proceeds from long-term debt                                          7,729         353,258          175,897          19,923
     Proceeds of debt payable to parent                                  214,353          86,828               --              --
     Principal payments on long-term debt and capital leases             (10,087)         (6,709)          (1,544)           (816)
     Contributions from parent                                                --              --            9,009          24,675
     Deferred debt financing costs                                           (87)        (12,004)          (8,480)           (853)
     Change in investments restricted to finance interest payments        15,083         (95,974)              --              --
                                                                         -------        --------        ---------       ---------

                  Cash provided by financing activities                  226,991         325,399          174,882          42,929
                                                                         -------        --------        ---------       ---------

                  Increase in cash and cash equivalents                  142,677          13,156           37,646           2,584

Cash and cash equivalents, beginning of year                              54,696          41,540            3,894           1,310
                                                                         -------       ---------        ---------       ---------
Cash and cash equivalents, end of year                                  $197,373       $  54,696        $  41,540       $   3,894
                                                                         =======       =========        =========       =========

Supplemental disclosure of cash flow information:
     Cash paid for interest                                             $ 21,684       $   4,982        $   1,813       $     364
     Cash paid for income taxes                                            1,038             638               --             264

Supplemental schedule of non-cash investing and financing activities:
     Recorded in business combinations:
        Assets acquired                                                 $  2,605       $   1,052        $  45,477       $  17,081
        Liabilities assumed                                                  500             379           11,665           7,706
        Minority interest                                                     --              --           (2,686)          1,797
        Common shares of parent                                               --              --           35,057           7,241
     Amounts in accounts payable and accrued liabilities for the
        purchase of fixed assets at year-end                              19,029          19,718           18,291           4,363
     Assets acquired through capital leases                                  480          21,765               --             128
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                                  GST USA, INC.

                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                December 31, 1997 and September 30, 1997 and 1996

                      (In thousands, except share amounts)

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         DESCRIPTION OF THE COMPANY

         GST  USA,  Inc.  (the  Company)  is a  wholly-owned  subsidiary  of GST
         Telecommunications,  Inc. (GST), a Canadian company,  and is engaged in
         the business of providing competitive local exchange services primarily
         in  the  western  United  States.  The  Company  provides  a  range  of
         telecommunications  services  which  include  long  distance,  Internet
         access and data  services.  Upon  formation of the Company in August of
         1994,  GST  transferred  all of its operating  subsidiaries  and equity
         investments to the Company.

         CHANGE IN FISCAL YEAR-END

         In 1997, the Company  changed its fiscal  year-end from September 30 to
         December 31. Included in the accompanying  audited financial statements
         are the results of operations for the three-month period ended December
         31,  1997.   Unaudited   results  of  operations   for  the  comparable
         three-month period ended December 31, 1996 are summarized below:

          Revenues                                       $ 23,217
          Loss from operations                            (17,432)
          Other expenses, net                              (4,034)
          Income tax expense                                   --
          Net loss                                        (21,413)

         BASIS OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
         of the  Company  and its  greater  than  50%  owned  subsidiaries.  The
         Company's investments in unconsolidated companies owned 20% or more are
         accounted for using the equity  method.  All  significant  intercompany
         accounts have been eliminated.

         As discussed in note 2, effective  January 1, 1998, GST  transferred to
         the Company the  businesses  of Call America  Business  Communications,
         Corp. (Call America) and TotalNet Communications,  Inc. (TotalNet). The
         financial  statements included herein have been restated to reflect the
         operations   of  Call  America  and   TotalNet   from  the  dates  such
         subsidiaries  were acquired by GST. The financial  statements have been
         restated in order to conform  with GST's  presentation  as the entities
         are under common control.

         CASH AND CASH EQUIVALENTS

         Cash equivalents consist of short-term,  highly liquid investments with
         original maturities of ninety days or less.

                                      F-7
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         ACCOUNTS AND NOTES RECEIVABLE

         The  Company  maintains a security  interest in the  telecommunications
         systems it sells  until the Company is paid in full.  Notes  receivable
         from customers,  included in accounts receivable,  total $4,055, $3,334
         and  $623 at  December  31,  1997 and  September  30,  1997  and  1996,
         respectively.  Management  provides an allowance for doubtful  accounts
         and  notes  based  on  current  customer   information  and  historical
         statistics.  The allowance for doubtful accounts was $3,956, $3,567 and
         $1,264  at  December  31,  1997  and   September  30,  1997  and  1996,
         respectively.

         CASH AND INVESTMENTS

         The Company follows the provisions of Statement of Financial Accounting
         Standards  (SFAS) No. 115,  ACCOUNTING FOR CERTAIN  INVESTMENTS IN DEBT
         AND EQUITY SECURITIES.

         The  Company  classifies  its  restricted  investments,  consisting  at
         December 31, 1997 of $143,375 in U.S. Treasury securities and $1,075 in
         certificates of deposit, as  available-for-sale  and  held-to-maturity.
         Held-to-maturity  investments,  recorded at  amortized  cost,  totaling
         $81,966 and  $97,049 at  December  31,  1997 and  September  30,  1997,
         respectively,  and maturing  between three months and three years,  are
         restricted   primarily   for  interest   payments.   Available-for-sale
         investments,  totaling  $62,484 and  $74,701 at  December  31, 1997 and
         September 30, 1997,  respectively,  and maturing between two months and
         one year, are restricted  for equipment  purchases.  Available-for-sale
         securities are recorded at amortized cost which approximates the market
         value of such securities at December 31, 1997 and September 30, 1997.

         The Company's  unrestricted  investments  totaling  $7,554,  $3,247 and
         $5,177  at  December  31,  1997  and   September  30,  1997  and  1996,
         respectively,  consist of U. S. Government  securities and certificates
         of  deposit,  all  maturing  within  one year,  and are  classified  as
         available-for-sale which approximates market value.

         INVENTORY

         Inventory  is  stated  at the lower of cost  (first-in,  first-out)  or
         market (net realizable value) and consists of the following:
<TABLE>
<CAPTION>

                                             DECEMBER 31,   SEPTEMBER 30,   SEPTEMBER 30
                                               1997             1997          1996
                                             -----------   -------------    ------------

<S>                                            <C>             <C>           <C>
          Raw materials                        $1,577          $1,065        $  378
          Work in process                         587             499           346
          Finished and refurbished goods          659           1,226         1,682
                                                -----           -----          ----

                            Inventory          $2,823          $2,790        $2,406
                                                =====           =====         =====
</TABLE>

                                      F-8

<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         PROPERTY AND EQUIPMENT

         Property and  equipment is recorded at cost and is  depreciated  on the
         straight-line  basis over their  estimated  useful lives,  which are as
         follows:

              Telecommunications networks                     20 years

              Electronic and related equipment                10 years

              Leasehold improvements                          10 years

              Furniture, office equipment and other        3 - 7 years
              Building                                        40 years

         Construction  engineering  and overhead costs  directly  related to the
         development  of the  Company's  networks are  capitalized.  The Company
         begins  depreciating these costs when the networks become  commercially
         operational.  Depreciation expense totaled $6,152,  $14,844, $5,559 and
         $1,193 for the  three-month  period ended December 31, 1997 and for the
         years ended September 30, 1997, 1996 and 1995, respectively.

         GOODWILL

         Goodwill is amortized,  using the  straight-line  method,  over periods
         ranging from five to twenty  years.  The Company  assesses the carrying
         amount  of  goodwill  for  impairment  whenever  events or  changes  in
         circumstances indicate that the carrying amount may not be recoverable.
         Measurement of any impairment includes a comparison of estimated future
         operating cash flows  anticipated to be generated  during the remaining
         life of the goodwill to the net carrying value. Amortization charged to
         operations was $944, $3,894, $1,690 and $389 for the three-month period
         ended  December  31, 1997 and for the years ended  September  30, 1997,
         1996 and 1995, respectively.

         REVENUE RECOGNITION

         Telecommunication services revenue is recorded upon placing of calls or
         rendering of other related  services.  Product revenue is recorded upon
         shipment of product and is presented in the  accompanying  consolidated
         statements of operations net of product returns.

         Deferred revenue consists of monthly service contract payments received
         in advance,  warranty  payments  received in advance and  research  and
         development  advances,  and is included in other current liabilities in
         the accompanying consolidated balance sheets. Advance warranty payments
         are amortized over the length of warranty on the system sold,  which is
         typically one year.

         LOSS PER SHARE

         The Company does not have any equity  instruments  which are considered
         common stock  equivalents  and, as weighted average common shares total
         only ten for all periods,  loss per share information is not meaningful
         and  is  not  presented  in  the  accompanying  consolidated  financial
         statements.

                                      F-9

<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         ISSUANCE OF SUBSIDIARY STOCK

         Issuances of subsidiary stock are accounted for as capital transactions
         in the accompanying consolidated financial statements.

         MINORITY INTEREST

         In  March  1997,  the  Company's  then  wholly-owned  subsidiary,  NACT
         Telecommunications,  Inc. (NACT),  completed an initial public offering
         of its common  stock,  pursuant  to which the Company and NACT sold one
         and two million shares, respectively, of NACT's common stock, resulting
         in net proceeds of approximately $9,000 and $18,100, respectively. As a
         result of the  offering,  the  Company's  ownership was reduced to 63%.
         Minority interest represents the non-Company owned shareholder interest
         in NACT's equity resulting from the 1997 offering.

         As  discussed in note 11, the Company  sold its  remaining  interest in
         NACT in February 1998.

         CONCENTRATION OF CREDIT RISK

         For purposes of segment reporting,  the Company is presently  operating
         100%  in the  telecommunications  industry  in the  United  States  and
         results of  operations  are derived from United States  operations  and
         substantially  all assets reside in the United  States.  The Company is
         exposed to  concentration  of credit  risk  principally  from  accounts
         receivable.  The  Company's  five largest  telecommunications  services
         customers accounted for approximately  17.8%, 21.4%, 46.9% and 26.8% of
         the Company's consolidated  telecommunications services revenue for the
         three-month  period  ended  December  31,  1997 and for the years ended
         September 30, 1997, 1996 and 1995, respectively.

         INCOME TAXES

         The Company  accounts  for income  taxes under the asset and  liability
         method.  Under the asset and liability  method,  deferred  income taxes
         reflect  the future tax  consequences  of  differences  between the tax
         bases of assets and liabilities and their financial  reporting  amounts
         at each  year-end.  Deferred  tax assets and  liabilities  are measured
         using  enacted  tax rates  expected  to apply to taxable  income in the
         years in which those temporary differences are expected to be recovered
         or settled.  The effect on  deferred  tax assets and  liabilities  of a
         change in the tax rates is  recognized  in  income in the  period  that
         includes the enactment date.  Valuation allowances are established when
         necessary to reduce  deferred tax assets to the amounts  expected to be
         realized.

                                      F-10
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         FINANCIAL INSTRUMENTS

         The carrying  amounts  reported in the balance  sheet for cash and cash
         equivalents,  receivables,  short-term  borrowings and accounts payable
         and  accrued  liabilities  approximate  fair  value  due to  the  short
         maturity of those instruments.

         The carrying amount of the Company's  long-term debt  approximates  its
         fair  value.  The  fair  value  of the  Company's  long-term  debt  was
         determined  based on quoted  market  prices  for  similar  issues or on
         current rates  available to the Company for debt of the same  remaining
         maturities and similar terms.

         Fair value  estimates  are made at a specific  point in time,  based on
         relevant  market  information  about the  financial  instrument.  These
         estimates  are  subjective  in nature  and  involve  uncertainties  and
         matters of significant judgment and therefore cannot be determined with
         precision  .  Changes in  assumptions  could  significantly  affect the
         estimates.

         USE OF ESTIMATES

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

         ADVERTISING COSTS

         The Company expenses advertising costs as incurred.

         RECLASSIFICATIONS

         Certain   reclassifications   have  been   made  in  the   accompanying
         consolidated financial statements for September 30, 1997, 1996 and 1995
         to conform with the December 31, 1997 presentation.

(2)      ACQUISITIONS

         The Company has made the  acquisitions  set forth below,  each of which
         was accounted for as a purchase.  The consolidated financial statements
         include the operating results from the effective date of acquisition.

         PHOENIX FIBER ACCESS, INC. (PHOENIX FIBER)

         In the  first  quarter  of 1997,  the  Company  paid  $2,000 in cash to
         acquire the remaining 50% of Phoenix Fiber, previously 50% owned by the
         Company through a joint venture with ICG Telecom Group,  Inc. (ICG). In
         addition,  the  Company  assumed  the  repayment  of  up to  $2,000  of
         intercompany indebtedness, under certain circumstances, and indemnified
         ICG in respect of all  indebtedness of Phoenix Fiber to the Company and
         third  parties,  other than certain  liabilities  of Phoenix Fiber that
         were assumed by ICG.  Phoenix  Fiber is an Arizona  company  engaged in
         providing   competitive   local   exchange   services  in  the  Phoenix
         metropolitan area.

                                      F-11
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued


         CALL AMERICA

         In the fourth  quarter of 1996,  GST acquired  100% of the  outstanding
         capital stock of Call America,  a California company that provides long
         distance and  ancillary  communications  services.  GST  acquired  Call
         America for  consideration  of 1,313,505 common shares of GST valued at
         $14,905.  An  additional  130,000 GST common shares have been placed in
         escrow and will be issued to the former owners of Call America in 1998,
         subject to certain  indemnification  clauses  contained in the purchase
         agreement.  Additionally,  $533 in notes receivable due from the former
         owners of Call America will be forgiven if certain operating milestones
         are met over the next ten years.  Goodwill of $10,175 was recorded as a
         result of this acquisition.  Effective January 1, 1998, GST transferred
         the ownership of Call America to the Company.

         TOTALNET

         In the fourth  quarter of 1996,  GST acquired  100% of the  outstanding
         capital  stock of  TotalNet,  a long  distance  service  provider.  GST
         acquired  TotalNet for  consideration  of 703,229  common shares of GST
         valued at $8,814.  Goodwill of $4,774 was  recorded as a result of this
         acquisition.  Effective  January 1, 1998, GST transferred the ownership
         of TotalNet to the Company.

         GST TELECOM, INC. (GST TELECOM)

         In a  series  of  transactions  between  1994  and  1996,  the  Company
         purchased  100%  of  the  outstanding  shares  of  GST  Telecom,  which
         develops,  constructs and operates  competitive local exchange networks
         and other  communications  systems.  Consideration paid for GST Telecom
         consisted of 2,100,000  common  shares of GST valued at $15,447,  which
         shares were paid to Pacwest, LLC (Pacwest), an entity controlled by the
         Chief  Executive  Officer  of the  Company.  Goodwill  of  $15,330  was
         recorded as a result of this acquisition.

         OTHERS

         In  October  1997,  the  Company  purchased  the  assets  of  the  Guam
         operations of Sprint Communications Company L.P. (Sprint) which provide
         long distance and ancillary  services in Guam.  Consideration  paid for
         this  acquisition  consisted of $2,000 in cash and $500 in  liabilities
         for services to be provided to Sprint.

         In May 1996, the Company purchased from Tomen America, Inc. (Tomen) the
         remaining  10%  interest  in the GST  Pacific  Lightwave,  Inc.,  a GST
         Telecom  subsidiary  which  operates a fiber  optic  competitive  local
         exchange network in southern  California.  The  consideration  paid for
         this  acquisition  consisted  of $1,250 in cash,  which was recorded as
         goodwill.

                                      F-12
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         During 1996, the Company acquired the assets of Reservations,  Inc. dba
         Hawaii Online (Hawaii Online), the assets of Texas-Ohio Communications,
         Inc.  (Texas-Ohio),  and  100%  of the  outstanding  capital  stock  of
         Tri-Star Residential Communications,  Inc. (Tri-Star). Hawaii Online is
         an Internet  service  provider;  Texas-Ohio is a long distance  service
         provider;  and Tri-Star  provides shared tenant services  consisting of
         long  distance,  cable  television  and security  service to tenants of
         multi-dwelling   apartment   units.   Consideration   paid  for   these
         acquisitions  consisted  of  199,887  common  shares  of GST  valued at
         $1,862, a commitment to issue approximately 50,887 common shares of GST
         valued at $604 over the next year and $719 of cash.  Goodwill of $1,044
         was recorded as a result of these acquisitions.

         The consolidated results of operations for the three-month period ended
         December 31, 1997 reflect each of the acquisitions  discussed above for
         the full period.  Pro forma  results for the years ended  September 30,
         1997,  1996 and 1995 are not material to the financial  statements and,
         as such, have not been presented.

(3)      PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>

                                                       DECEMBER 31,      SEPTEMBER 30,       SEPTEMBER 30
                                                           1997               1997                1996
                                                       ------------      -------------       -------------

<S>                                                     <C>                 <C>              <C>
          Telecommunications networks                   $ 132,028           $ 95,447         $   25,551
          Electronic and related equipment                 68,380             59,804             31,546
          Leasehold improvements                           21,671              9,201              3,619
          Furniture, office equipment and other            14,777             14,186              8,703
          Building                                          3,366              3,366              2,134
          Construction in progress                        192,888            202,545             62,721
                                                         --------           --------          ---------
                                                          433,110            384,549            134,274

          Less accumulated depreciation                   (26,670)           (20,620)            (6,777)
                                                         --------           --------          ---------
                                                        $ 406,440           $363,929         $  127,497
                                                         ========           ========          =========
</TABLE>

         Property  and  equipment  includes  $192,888,  $202,545  and $62,721 of
         equipment  which had not been placed in service at December  31,  1997,
         September 30, 1997 and 1996, respectively, and accordingly is not being
         depreciated.  During the three-month period ended December 31, 1997 and
         the three  years  ended  September  30,  1997,  1996 and 1995,  $3,726,
         $15,170, $2,316 and $291 of interest,  respectively, was capitalized as
         part of telecommunications networks and networks in progress.

                                      F-13
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

(4)      ACCRUED EXPENSES
<TABLE>
<CAPTION>

                                                         DECEMBER 31,      SEPTEMBER 30,       SEPTEMBER 30
                                                             1997              1997                1996
                                                         ------------      --------------      ------------
<S>                                                       <C>               <C>                 <C>     
          Fixed asset purchases                           $  12,157         $ 11,531            $ 14,153
          Carrier costs                                          98            2,113               4,057
          Accrued interest                                    7,966           17,998                 413
          Payroll and related liabilities                     2,595            3,102               1,468
          Other                                               7,034            7,107               2,896
                                                          ---------         --------            --------
                            Total                         $  29,850         $ 41,851            $ 22,987
                                                          =========         ========            ========
</TABLE>

(5)      LONG-TERM DEBT
<TABLE>
<CAPTION>

                                                          DECEMBER 31,    SEPTEMBER 30,        SEPTEMBER 30
                                                               1997           1997                1996
                                                          ------------    -------------        ------------
<S>                                                       <C>               <C>                  <C>
          Senior secured notes, 13.25%, due
               May 1, 2007                                $ 265,000         $265,000             $     --
          Note payable to Tomen, LIBOR plus
               3% (9.0% at December 31, 1997)                61,793           69,137               31,771
          Note payable to NTFC, LIBOR plus
               3.5% (9.5% at December 31, 1997)              50,000           44,634                   --
          Note payable to Siemens, LIBOR plus
               3.5% (9.5% at December 31, 1997)               7,889            5,846                   --
          Senior discount notes, 13.875%, due
               December 15, 2005                            210,136          203,280              177,760
          Other                                                 207              904                5,547
                                                           --------        ---------             --------
                                                            595,025          588,801              215,078
          Less current portion of long-term
               debt                                           3,212            2,861                4,624
                                                           --------        ---------             --------
                                                          $ 591,813         $585,940             $210,454
                                                           ========          =======             ========
</TABLE>

                                      F-14
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued


         The  schedule  of future  principal  payments on  long-term  debt is as
         follows:

          Year ending December 31:

               1998                            $   3,212
               1999                               13,281
               2000                               19,115
               2001                               22,242
               2002                               22,945
               Thereafter                        514,230
                                               ---------
                                               $ 595,025
                                               =========

         SENIOR SECURED NOTES

         In May of 1997, GST Equipment Funding, a wholly-owned subsidiary of the
         Company,  issued  $265,000 in Senior  Secured Notes (the Secured Notes)
         due May 1, 2007.  The Secured  Notes bear  interest at a rate of 13.25%
         with  semiannual  interest  payments  due  beginning  November 1, 1997.
         Approximately  $93,790 of the proceeds were set aside to fund the first
         six scheduled interest payments.  The remainder of the net proceeds are
         restricted  to the  purchase  and  installation  of  telecommunications
         equipment.  The Secured  Notes are secured by the  equipment  purchased
         with the proceeds and are subject to certain debt covenants.

         The Indenture provides that the Company will assume and become a direct
         obligor on the Secured  Notes and GST will  guarantee the Secured Notes
         on May 13, 2000, or earlier if permitted by the terms of their existing
         debt.   Once  assumed,   the  Secured  Notes  will  be  secured  senior
         indebtedness  of  the  Company.  The  note  guarantee  will  be  senior
         unsecured indebtedness of GST.

         The Secured Notes are redeemable at the option of the Company, in whole
         or in part, at any time, on or after May 1, 2002, initially at 106.625%
         of their principal amount, plus accrued and unpaid interest,  declining
         ratably  to 100% on or  after  May 1,  2004.  If on May 13,  2000,  the
         Company is  prohibited  from  assuming  all of the Secured  Notes,  the
         Company  will redeem the  portion of the  Secured  Notes that cannot be
         assumed at 101% of their principal  amount plus accrued interest at the
         date of redemption.

         TOMEN FACILITY

         In the first quarter of fiscal 1995, the Company  entered into a master
         financing agreement with Tomen. Under the agreement, Tomen will loan up
         to  $100,000  to  subsidiaries  of  the  Company  for  development  and
         construction of network  projects.  As of December 31, 1997,  Tomen had
         provided  a  total  of  $69,468  in  debt  financing  to the  Company's
         subsidiaries for construction and operation of its fiber optic networks
         in  southern  California,  New Mexico,  Arizona  and Hawaii.  The Tomen
         financing is secured by the equipment  purchased  with the proceeds and
         subject to certain debt covenants.


                                      F-15
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         NTFC CAPITAL CORPORATION (NTFC) AGREEMENT

         In the first quarter of fiscal 1997, the Company entered into a $50,000
         loan and  security  agreement  with NTFC to  finance  the  purchase  of
         certain  equipment from Northern  Telecom,  Inc. Amounts borrowed under
         the  agreement  bear  interest at LIBOR plus 3.5% and will be repaid in
         twenty  quarterly  installments  beginning in January 1999. The loan is
         secured by the  equipment  purchased  with the  proceeds and subject to
         certain debt covenants.

         SIEMENS TELECOM NETWORKS (SIEMENS) AGREEMENT

         In the fourth quarter of fiscal 1996,  the Company  entered into a loan
         and security agreement with Siemens.  Under the terms of the agreement,
         Siemens  will loan up to $226,000 to the Company for the  purchase  and
         installation of telecommunications  switching and related equipment. At
         December 31,  1997,  $116,000  was  available  to the Company.  Amounts
         borrowed under the agreement initially bear interest at LIBOR plus 4.5%
         and are secured by the equipment. Such interest decreases to LIBOR plus
         3.5% at the time each initial  loan is converted to a term loan,  which
         conversion  occurs at the first calendar quarter  following the initial
         loan.  The  Company is  committed  to  purchase a minimum of $16,500 in
         equipment over three years.  Amounts  borrowed under the agreement will
         be repaid in twenty-four quarterly installments beginning five quarters
         after the initial loan is converted to a term loan. The loan is subject
         to certain debt covenants.

         SENIOR DISCOUNT NOTES

         In the first quarter of fiscal 1996, the Company  issued  approximately
         $160,000  initial  accreted value of 13.875% Senior Discount Notes (the
         Senior Notes) maturing on December 15, 2005. The Senior Notes were sold
         at a substantial discount and there will be no accrual of cash interest
         prior to December 15, 2000 or payment of interest  until June 15, 2001.
         The Senior Notes accrete to a total principal amount,  due December 15,
         2005, of approximately  $312,400 by December 15, 2000. The Senior Notes
         rank in right of payment with all  unsubordinated  indebtedness  of the
         Company.  On or after  December  15,  2000,  the  Senior  Notes will be
         redeemable  at the option of the Company.  The Senior Notes are subject
         to certain debt covenants and are guaranteed by GST.

         GUARANTEE OF PARENT'S DEBT

         The  Company  has  guaranteed  GST's  Convertible  Senior  Subordinated
         Discount Notes (the Convertible Notes) totaling  approximately  $26,133
         at  December  31,  1997.  The  Convertible  Notes  accrete  to a  total
         principal  amount,  due December 15, 2005, of approximately  $39,100 by
         December 15, 2000. On or after December 15, 2000, the Convertible Notes
         will  be  redeemable  at  the  option  of  the  Company  and  GST.  The
         Convertible Notes are subject to certain debt covenants.


                                      F-16
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

(6)      SHAREHOLDER'S (DEFICIT) EQUITY

         COMMON STOCK

         Since  inception,  GST has owned all of the  outstanding  shares of the
         Company.

         NON-CASH CONTRIBUTIONS FROM PARENT

         Non-cash  contributions  from  parent  consist  primarily  of GST stock
         issued  in  connection  with  the  Company's   acquisition  of  certain
         subsidiaries.

         STOCK-BASED COMPENSATION

         Certain  employees  of the Company are  eligible  for stock  option and
         stock bonus awards of GST's common stock. Pursuant to performance-based
         awards,  compensation  expense of $374,  $2,521,  $574 and $-0- for the
         three-month  period  ended  December  31,  1997 and for the years ended
         September 30, 1997, 1996 and 1995,  respectively,  has been recorded in
         the Company's financial statements.

(7)      INCOME TAXES

         The  provision  for income taxes  differs  from the amount  computed by
         applying the  statutory  income tax rate to net income before taxes for
         the  three-month  period  ended  December  31, 1997 and the years ended
         September 30, 1997, 1996 and 1995 as follows:

<TABLE>
<CAPTION>

                                                      DECEMBER 31,    SEPTEMBER 30,     SEPTEMBER 30,      SEPTEMBER 30,
                                                          1997            1997              1996               1995
                                                      -----------     ------------     -------------      -------------

<S>                                                      <C>               <C>               <C>                <C>  
          Computed expected income tax
               expense (benefit) at statutory
               rate                                      (34)%             (34)%             (34)%              (34)%
          Expected state income tax
               expense (benefit                           (4)               (4)               (4)                (5)
          Increase in valuation allowance                 37                36                20                 37
          Amortization of goodwill                         1                 1                 1                  7
          Minority interest                               --                --                --                 (9)
          Effect of inability to offset losses
               of subsidiaries                            --                --                --                  2
          Equity method accounting for
               joint venture                              --                --                 1                  2
          Effect of acquisition of new
               subsidiaries                               --                --                11                  1
          Non-deductible interest                          2                 2                 2                 --
          Other                                            1                --                 3                  1
                                                      ----------      ------------     -------------      -------------

          Income tax expense                               3%                1%               --%             2%
                                                      ==========      ============     =============      =============
</TABLE>


                                      F-17
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         Deferred  income  taxes  reflect  the  net  tax  effects  of  temporary
         differences  between the carrying amounts of assets and liabilities for
         financial  reporting  purposes  and the  amounts  used for  income  tax
         purposes. The tax effects of significant items comprising the Company's
         deferred tax asset and liability are as follows:
<TABLE>
<CAPTION>

                                                           DECEMBER 31,      SEPTEMBER 30,          SEPTEMBER 30
                                                               1997              1997                  1996
                                                           ------------      -------------          ------------

<S>                                                          <C>                <C>                 <C>     
          Deferred tax assets:
               Federal and state net operating
                  loss carryforwards                         $ 53,530           $ 40,269            $ 16,326
               Non-deductible interest                         11,998             13,757               4,608
               Other                                            4,484              3,736               2,063
                                                             ---------          -------             -------
                         Total gross deferred
                            tax assets                         70,012             57,762              22,997
               Less valuation allowance                       (61,581)           (49,448)            (15,386)
                                                             ---------          --------            --------
                         Total deferred tax assets              8,431              8,314               7,611
                                                             ---------          --------            -------
          Deferred tax liabilities:
               Furniture, fixtures and equipment,
                  due to differences in depreciation            5,376              4,918               2,110
               Capitalized software/intangibles                 3,490              3,739               5,501
                                                             ---------          --------            --------
                         Total gross deferred tax
                            liabilities                         8,866              8,657               7,611
                                                             ---------          --------            --------
                         Net deferred tax liabilities        $   (435)          $   (343)           $     --
                                                             =========          ========            ========
</TABLE>

         The  valuation  allowance for deferred tax assets as of October 1, 1994
         was  $713.  The  net  change  in  total  valuation  allowance  for  the
         three-month  period  ended  December  31,  1997 and for the years ended
         September 30, 1997, 1996 and 1995 was an increase of $12,133,  $34,062,
         $11,185 and $3,488, respectively.


                                      F-18
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         The  Company  has net  operating  losses  for income  tax  purposes  of
         approximately $146,843 available to reduce United States taxable income
         of future years, expiring as follows:

          2006                        $    405
          2007                             537
          2008                           2,800
          2009                           5,020
          2010                          36,780
          2011                          64,827
          2012                          36,474
                                      --------
                                      $146,843
                                      ========

         Utilization of net operating losses may be subject to limitation in the
         event of certain  substantial  stock ownership  changes having occurred
         pursuant to IRC Section 382 and referred to hereinafter as an ownership
         change.  The Company may have  incurred an  ownership  change under IRS
         Section  382.  This   potential   ownership   change  would  limit  the
         utilization of any net operating losses incurred prior to the change in
         ownership  date. The Company  intends to complete an analysis under IRC
         Section 382 to determine if an ownership change has occurred.

(8)      LEASES

         The Company is  obligated  under  capital  leases for  equipment  which
         expire at various dates during the next twenty years.  Certain of these
         agreements  contain  clauses  which  allow the  lessor  to  cancel  the
         agreement  upon  twelve-month  written  notice.  However,  the  Company
         believes that the likelihood of such clauses being exercised is remote.
         Gross  amounts  of  equipment  and  related  accumulated   amortization
         recorded under capital leases were as follows:
<TABLE>
<CAPTION>

                                           DECEMBER 31,  SEPTEMBER 30, SEPTEMBER 30,
                                                1997          1997        1996
                                           -----------   ------------  -------------

<S>                                          <C>            <C>          <C>   
          Equipment                          $ 27,003       $26,769      $2,068
          Less accumulated amortization        (6,408)       (4,828)       (291)
                                             --------       -------      -------
                                             $ 20,595       $21,941      $1,777
                                             ========       =======      =======
</TABLE>

         Amortization  of assets  held under  capital  leases is  included  with
         depreciation expense.

         The Company also has  noncancelable  operating  leases,  primarily  for
         facilities,  which expire over the next thirty  years.  Rental  expense
         under  operating  leases  was  $1,114,  $3,385,  $1,501  and  $800  for
         three-month  period  ended  December  31,  1997 and for the years ended
         September 30, 1997, 1996 and 1995, respectively.


                                      F-19
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         Future minimum lease payments under noncancelable  leases (with initial
         or  remaining  lease  terms in excess of one year) and  future  minimum
         capital lease payments as of December 31, 1997 are:
<TABLE>
<CAPTION>

                                                                     CAPITAL      OPERATING
                                                                      LEASES       LEASES
                                                                    -----------------------

          Year ending December 31:
<S>            <C>                                                  <C>           <C>    
               1998                                                 $ 8,400       $ 4,510
               1999                                                   3,319         4,013
               2000                                                   3,176         3,054
               2001                                                   3,097         2,465
               2002                                                   2,780         2,317
               Thereafter                                            12,930         9,012
                                                                    -------       -------
                      Total minimum lease payments                   33,702       $25,371
                                                                    =======       =======

          Less amount representing interest (at rates ranging
               from 9% to 17%)                                       13,422
                                                                    -------
                      Net minimum lease payments                     20,280

          Less current installments of obligations under
               capital leases                                         6,286
                                                                    -------
                      Obligations under capital leases, excluding
                          current installments                      $13,994
                                                                    =======
</TABLE>

(9)      COMMITMENTS AND CONTINGENCIES

         PENSION AND PROFIT SHARING PLANS

         In 1995, the Company  adopted a defined  contribution  401(k) plan (the
         Plan).   Employees  are  eligible  to  participate  in  the  Plan  upon
         commencement of service.  Participants  may defer up to 15% of eligible
         compensation.   Currently,   the  Company  does  not  provide  matching
         contributions for the Plan.

         LONG DISTANCE CARRIERS

         The Company is party to various  contracts with long distance  carriers
         pursuant to which the Company is committed to minimum service fees. The
         average  monthly  minimum  commitments  range from $2,300 to $6,100 per
         month over the next three years. The Company may be required to pay the
         carriers for differences  between the commitment amounts and the actual
         amounts billed.


                                      F-20
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         LEGAL PROCEEDINGS

         On  August  24,  1995,   Aerotel,   Ltd.  and  Aerotel   U.S.A.,   Inc.
         (collectively, "Aerotel") filed a patent infringement suit against NACT
         alleging  that  telephone   systems   manufactured  and  sold  by  NACT
         incorporate  prepaid  calling  features  which  infringe  upon a patent
         issued to Aerotel in  November  1987.  The  complaint  further  alleges
         defamation and unfair  competition  by NACT and seeks various  damages.
         NACT has filed an Answer and Counterclaim  denying patent infringement,
         committing defamation or unfair competition and seeks judgment that the
         Aerotel  patent is invalid  and that  Aerotel has misused its patent in
         violation of antitrust laws. On May 3, 1996, NACT served its motion for
         summary  judgment,  which  the Court  has  indicated  it will deny such
         motion,  although  the Court has not yet  issued  its  ruling.  Aerotel
         amended its complaint to include as defendants the Company and GST. The
         amended  pleadings  allege that the Company and GST have  infringed the
         Aerotel patent,  aided and abetted  infringement  by others,  including
         NACT,  and  participated  in, and aided and  abetted  alleged  tortious
         conduct by NACT.  The Company and GST have served  answers  denying all
         material   allegations  and  intend  to  defend  vigorously.   Pretrial
         discovery has  commenced and is scheduled to be completed in 1998.  The
         case is not  expected  to be tried  until  late  1998 at the  earliest.
         NACT's  patent  counsel  believes  that NACT has valid  defenses to the
         Aerotel claims.  If upheld,  these defenses would also be valid for all
         defendants.  An  unfavorable  decision  in  this  action  could  have a
         material adverse effect on the Company.  Based on information currently
         available,  the Company's  management is of the opinion that there will
         be no material impact of the Company's financial  position,  results of
         operations, or cash flows as a result of this suit.

         Accordingly,   no  provision   for  loss  has  been   provided  in  the
         accompanying consolidated financial statements.

         Concurrent  with the sale of NACT (see note 11),  the Company and World
         Access,  Inc. entered into an agreement  whereby the Company  generally
         will  bear 50% of any  damages,  including  reasonable  attorney  fees,
         losses,  liabilities,  claims and  assessments,  royalties  and license
         fees. Under the agreement,  subsequent to a determination, if any, by a
         Court that the Aerotel patent is valid and it has been  infringed,  the
         Company's liability associated with royalties and license fees, refunds
         and cost of product replacement or modification is limited to $2,000.

         The  Company is  involved  in various  other  claims and legal  actions
         arising  in  the  ordinary  course  of  business.  In  the  opinion  of
         management,  the ultimate  disposition of these matters will not have a
         material  effect  on  the  Company's  financial  position,  results  of
         operations or cash flows.

         REPURCHASE AGREEMENT

         NACT  is  guarantor  for  financing   transactions   executed  under  a
         repurchase  agreement  with  Zions  Credit  Corporation  (Zions)  for a
         maximum of $4,169 at December 31, 1997.  Zions provides lease financing
         to NACT customers on a recourse basis.

                                      F-21
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         EMPLOYMENT AGREEMENTS

         The Company has entered into employment  agreements with key members of
         management.  These  agreements  provide for payments  based upon death,
         disability and change of control. The agreements also contain covenants
         not to compete.

(10)     RELATED PARTY TRANSACTIONS

         MAGNACOM WIRELESS, LLC (MAGNACOM)

         Magnacom, a company 99% owned by Pacwest Network,  Inc. (PNI), which is
         in turn controlled by the Chief Executive  Officer of the Company,  and
         the Company have entered into a  twelve-year  reseller  agreement  (the
         Magnacom Reseller Agreement) pursuant to which (i) the Company has been
         designated a  non-exclusive  reseller of PCS telephone  services in the
         markets in which Magnacom has obtained licenses,  and (ii) Magnacom has
         agreed to use the  Company on an  exclusive  basis to provide  switched
         local and long distance services, and other enhanced telecommunications
         services,  to all of Magnacom's  resellers in markets where the Company
         has  operational  networks.  Magnacom agreed to sell PCS minutes to the
         Company at five cents per  minute,  subject to downward  adjustment  to
         equal the most favorable  rates offered to Magnacom's  other  resellers
         (but in no event less than  Magnacom's  cost).  In connection  with the
         Magnacom  Reseller   Agreement,   the  Company  has  paid  a  total  of
         approximately $14,000 as pre-payments for future PCS services.

         In  addition,  the Company  has been  granted a  conditional  option to
         acquire  up to PNI's  entire  interest  in  Magnacom  (currently  99%),
         conditioned  upon  Magnacom and the Company  entering into an agreement
         for the  construction  and/or operation of Magnacom's  facilities.  The
         condition  precedent to such option has not yet been met.  Such option,
         if and  when the  condition  precedent  is met,  shall  be  subject  to
         compliance  with  all  applicable  FCC  regulations  relating  to prior
         approval of any transfer of control of PCS  licenses,  including  those
         relating to foreign ownership or control and requirements regarding the
         ownership of C and F block  licenses.  Accordingly,  until such time as
         FCC regulations or  administrative  action permit the Company to own in
         excess of 25% of Magnacom,  the option by its terms is limited to a 24%
         interest in Magnacom. The Company, Magnacom and PNI are in negotiations
         with respect to modifying  the option in order to provide,  among other
         things,  that the Company  own no more than a 25%  interest in Magnacom
         upon exercise of such option.

         PACWEST NETWORK, INC. (PNI)

         The operations of the Company's  Hawaiian microwave network require the
         use of radio  licenses  from the FCC. Such licenses are owned by PNI, a
         company  controlled by the Company's  Chief  Executive  Officer.  Under
         agreements  between the Company and PNI, (1) the Company pays a monthly
         fee to PNI to utilize PNI's licenses for its communications traffic and
         (2) PNI pays an  equal  monthly  fee to the  Company  for the  right to
         utilize the Company's facilities for other communications traffic using
         up to 10% of PNI's license capacity.

                                      F-22
<PAGE>
                                 GST USA, INC.
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, Continued

         TOMEN

         Under the  Tomen  facility,  Tomen has the right to act as  procurement
         agent for each network  project it finances.  The Company has purchased
         equipment through Tomen at competitive prices. Additionally, an upfront
         fee of 1.50% of the  aggregate  principal  amount of each  project loan
         advanced and a commitment  fee of .50% per annum on the unused  portion
         of each project loan is payable to Tomen.

         Pursuant to the Tomen agreements,  Tomen has purchased 1,579,902 shares
         of GST common stock for total cash  consideration  of $10,400 and holds
         warrants to purchase an additional  246,155  shares of GST common stock
         at prices ranging from $12.61 to $12.96 per share. Such warrants expire
         at various times between May 1998 and September 1999.

         OTHER

         The Company and GST paid approximately $104, $2,066, $2,264 and $770 in
         legal fees during the  three-month  period ended  December 31, 1997 and
         the years ended September 30, 1997, 1996 and 1995,  respectively,  to a
         firm for whom a director of the Company and of GST serves as counsel.

         Prior to June 1997, the Company's Chief  Executive  Officer served as a
         paid consultant to Tomen. Additionally, Pacwest received a fee equal to
         1% of the aggregate debt and equity financing  provided by Tomen to the
         Company and GST through October 1997. Such fees incurred by the Company
         and GST totaled  $437,  $195 and $221 during the years ended  September
         30, 1997, 1996 and 1995, respectively.

         Receivables from parent are primarily comprised of expenses paid by the
         Company of behalf of GST.

         Payables  to  parent  represent   advances  from  GST  to  be  used  in
         constructing and operating the Company's telecommunications networks.

(11)     SUBSEQUENT EVENT

         In February  1998,  the  Company  completed  the sale of its  remaining
         interest in NACT for net proceeds of $86,545.

                                      F-23
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
GST USA, Inc.:

Under date of February 25, 1998, we reported on the consolidated  balance sheets
of GST USA, Inc. and subsidiaries as of December 31, 1997 and September 30, 1997
and 1996, and the related consolidated  statements of operations,  shareholder's
(deficit)  equity and cash flows for the  three-month  period ended December 31,
1997 and for each of the years in the  three-year  period  ended  September  30,
1997,  which  are  included  in the  transition  report  on  Form  10-K  for the
three-month period ended December 31, 1997. In connection with our audits of the
aforementioned  consolidated  financial  statements,  we also have  audited  the
related  consolidated  financial  statement  schedule listed in the accompanying
index. This financial  statement schedule is the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion  on this  financial
statement schedule based on our audits.

In our opinion,  such financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.


/s/ KPMG PEAT MARWICK LLP


Portland, Oregon
February 25, 1998


                                      S-1


<PAGE>

                                 GST USA. INC.
                      Valuation and Qualifying Accountants

<TABLE>
<CAPTION>
                                           Balance at    Charged     Written off   Balance at
                                           beginning   to bad debt     against      end of
Allowance for doubtful accounts            of period     expense      allowance     period
-------------------------------            ---------     -------      ---------     ------

<S>                                         <C>          <C>            <C>        <C>
Three months ended December 31, 1997        3,567        1,541        1,152        3,956

Year ended September 30, 1997               1,264        5,722        3,419        3,567

Year ended September 30, 1996               1,402        1,809        1,947        1,264

Year ended September 30, 1995                  60        1,354           12        1,402

</TABLE>


                                      S-2
<PAGE>
                                  EXHIBIT INDEX

EXHIBIT

   *3(a)  Certificate of Incorporation of GST USA, as amended.
   *3(b)  By-Laws of GST USA.

 **4(a)  Indenture dated as of May 13, 1997, by and among GST Funding, GST, GST
         USA and United States Trust Company of New York.

***4(b)  Senior Notes Indenture dated as of December 19, 1995, by and among GST,
         GST USA and United States Trust Company of New York.

***4(c)  Convertible Notes Indenture dated as of December 19, 1995, by and among
         GST, GST USA and United States Trust Company of New York.

 #10(a)  Stock Purchase  Agreement dated December 31, 1997 by and among GST, GST
         USA and World Access, Inc.
##27     Financial Data Schedule.

-----------------------------------------------------
*        Incorporated by reference to GST USA's  Registration  Statement on Form
         S-4 (No. 333-33601-02).
**       Incorporated  by reference to GST's  Quarterly  Report on Form 10-Q for
         the period ended June 30, 1997.
***      Incorporated by reference to GST's Annual Report on Form 20-F for the
         fiscal year ended September 30, 1995.
#        Incorporated  by  reference  to  Exhibit  99.2 to GST's  Form 8-K dated
         January 6, 1998.
##       Filed herewith.