<PAGE>

                           UNITED STATES SECURITIES
                            AND EXCHANGE COMMISSION

                                   FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended: June 30, 1999

                                      OR

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

For the transition period from _________ to ____________

Commission file number: 333-53841


                                 WAM!NET Inc.
            (Exact name of registrant as specified in its charter)

          Minnesota                                      41-1795247
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


                              655 Lone Oak Drive
                            Eagan, Minnesota 55121
                   (Address of principal executive offices)
                                  (Zip Code)


                                (651) 256-5100
             (Registrant's telephone number, including area code)

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 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[ ]

As of July 31, 1999 there were 9,297,427 shares of the Corporation's Common
Stock, par value $.01 per share, outstanding.

Total number of pages in this report: 23
<PAGE>

                                 WAM!NET Inc.

                              INDEX TO FORM 10-Q


Part I--Financial Information
                                                                            Page
                                                                            ----
                                                                             No.
                                                                            ----
         Item 1--Financial Statements

               Consolidated Balance Sheets as of June 30, 1999 (unaudited)
                and December 31, 1998 .......................................  3

               Consolidated Statements of Operations for the three and six
                months in the periods ended June 30, 1999 and 1998
                (unaudited)..................................................  5

               Consolidated Statements of Cash Flows for the six months
                in the periods ended June 30, 1999 and 1998 (unaudited)......  6

               Notes to Consolidated Financial Statements (unaudited) .......  8

         Item 2--Management's Discussion and Analysis of Financial Condition
                 and Results of Operations ..................................  9

         Item 3--Quantitative and Qualitative Disclosures About Market Risk.. 17

Part II--Other Information

         Item 2--Changes in Securities and Use of Proceeds .................. 19

         Item 6--Exhibits and Reports on Form 8-K ........................... 19

Signature -- ................................................................ 20

Exhibit Index-- ............................................................. 21

                                      -2-
<PAGE>

                         Part I--FINANCIAL INFORMATION

Item 1--Financial Information

                                 WAM!NET Inc.

                          Consolidated Balance Sheets
                   (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                       June 30,        December 31,
                                                                                         1999              1998
                                                                                    ---------------   ----------------
                                                                                      (Unaudited)
<S>                                                                                 <C>               <C>
Assets
Current assets:
     Cash and cash equivalents  ................................................    $         8,050   $          6,272
     Accounts receivable, net of allowance of $661 and $430, respectively  .....              3,765              3,466
     Inventory  ................................................................              1,577              1,534
     Prepaid expenses and other current assets  ................................              3,339              3,187
                                                                                    ---------------   ----------------
          Total current assets  ................................................             16,731             14,459

Property and equipment:
     Building and land  ........................................................             39,592                605
     Network equipment  ........................................................             63,321             50,907
     Other support equipment  ..................................................             21,673             18,046
     Furniture and fixtures  ...................................................              4,188              2,802
     Leasehold improvements  ...................................................              5,004              6,506
                                                                                    ---------------   ----------------
                                                                                            133,778             78,866
     Accumulated depreciation  .................................................             27,100             16,399
                                                                                    ---------------   ----------------
                                                                                            106,678             62,467
     Goodwill, net of accumulated amortization of $8,601 and $5,308,
          respectively..........................................................             24,124             27,734

     Deferred financing charges, net of accumulated amortization of
          $8,410 and $5,959, respectively.......................................             17,731             20,183
     Other assets  .............................................................                620                616
                                                                                    ---------------   ----------------

          Total assets  ........................................................    $       165,884   $        125,459
                                                                                    ===============   ================
</TABLE>

                                      -3-
<PAGE>

                                 WAM!NET Inc.

                    Consolidated Balance Sheets (continued)
                   (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                            June 30,           December 31,
                                                                                              1999                 1998
                                                                                           ----------          ------------
                                                                                           (Unaudited)
<S>                                                                                        <C>                 <C>
Liabilities and shareholders' deficit
Current liabilities:
  Accounts payable......................................................................    $  13,491           $  17,098
  Accrued salaries and wages............................................................        4,205               4,801
  Accrued expenses......................................................................        4,013               3,176
  Current portion of equipment financing and obligations under capitalized
    leases..............................................................................        6,912               5,324
                                                                                            ---------           ---------
     Total current liabilities..........................................................       28,621              30,399

Long-term debt:
  Subordinated notes payable............................................................       28,319              27,403
  Line of credit........................................................................       25,000              24,000
  Equipment financing...................................................................       12,145              13,536
  13.25% Senior Discounted Notes........................................................      148,182             138,975

Redeemable Preferred Stock, Class A, $10.00 par value:
     Authorized shares--115,206
     Issued and outstanding shares--115,206 and 100,000 at June 30, 1999  and
      December 31, 1998.................................................................        1,152               1,000

Shareholders' deficit:
  Convertible Preferred Stock, Class B, $.01 par value:
     Authorized, issued and outstanding --5,710,425 and 0...............................           57                  --
  Convertible Preferred Stock, Class C, $.01 par value:
     Authorized, issued and outstanding --878,527 and 0.................................            9                  --
  Convertible Preferred Stock, Class D $.01 par value:
     Authorized, issued and outstanding --2,196,317 and 0...............................           22                  --
  Undesignated shares, $.01 par value--1,099,525
  Common Stock, $.01 par value:
     Authorized shares--490,000,000
     Issued and outstanding shares--9,297,427 and 9,288,194 at
       June 30, 1999 and December 31, 1998..............................................           93                  93
  Additional paid-in capital............................................................      156,586              54,302
  Accumulated deficit...................................................................     (232,828)           (164,387)
  Other accumulated comprehensive income (loss).........................................       (1,474)                138
                                                                                            ---------           ---------
  Total shareholders' deficit...........................................................      (77,535)           (109,854)
                                                                                            ---------           ---------
  Total liabilities and shareholders' deficit...........................................    $ 165,884           $ 125,459
                                                                                            =========           =========
</TABLE>

                            See accompanying notes.

                                      -4-
<PAGE>

                                 WAM!NET Inc.

                     Consolidated Statements of Operations
            (dollars in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                           Three months ended              Six months ended
                                                                                  June 30,                      June 30,
                                                                                  --------                      --------
                                                                            1999              1998         1999         1998
                                                                         ----------        ----------   ----------   ----------
                                                                                                 (Unaudited)
<S>                                                                      <C>               <C>          <C>          <C>
Revenues:
  Service revenue.....................................................   $    4,672        $    1,905   $    8,435   $    3,225
  Less rebates........................................................         (725)             (481)      (1,360)        (752)
                                                                         ----------        ----------   ----------   ----------
Net service revenue...................................................        3,947             1,424        7,075        2,473
Software and hardware sales...........................................        1,853             3,919        3,592        4,741
                                                                         ----------        ----------   ----------   ----------
Total revenue.........................................................        5,800             5,343       10,667        7,214

Operating expenses:
Network communications................................................        6,246             3,803       12,723        6,900
Cost of software and hardware.........................................          574             1,214        1,397        1,475
Network operations and development....................................        4,105             6,036        9,391        9,349
Selling, general and administrative...................................       11,758             9,301       22,755       26,120
Depreciation and amortization.........................................        7,851             4,104       16,057        6,026
                                                                         ----------        ----------   ----------   ----------
                                                                             30,534            24,458       62,323       49,870
                                                                         ----------        ----------   ----------   ----------
Loss from operations..................................................      (24,734)          (19,115)     (51,656)     (42,656)

Other income (expense):
  Interest income.....................................................          229               855          429        1,149
  Interest (expense)..................................................       (7,417)           (6,004)     (17,491)      (9,449)
  Other income........................................................          277                12          277           22
                                                                         ----------        ----------   ----------   ----------
Net loss..............................................................   $  (31,645)       $  (24,252)  $  (68,441)  $  (50,934)
Less preferred dividends..............................................       (1,751)              (18)      (2,305)         (35)
                                                                         ----------        ----------   ----------   ----------
Net loss applicable to common stock...................................   $  (33,396)       $  (24,270)  $  (70,746)  $  (50,969)
                                                                         ==========        ==========   ==========   ==========

Net loss applicable per common share - basic and diluted..............   $    (3.59)       $    (2.93)  $    (7.61)  $    (6.15)
                                                                         ==========        ==========   ==========   ==========

Weighted average number of common shares outstanding..................    9,295,786         8,294,741    9,295,786    8,294,741
                                                                         ==========        ==========   ==========   ==========
</TABLE>

                            See accompanying notes.

                                      -5-
<PAGE>

                                 WAM!NET Inc.

                     Consolidated Statements of Cash Flows
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                     Six  months ended
                                                                                          June 30,
                                                                                  ------------------------
                                                                                    1999           1998
                                                                                  --------        --------
                                                                                      (Unaudited)
<S>                                                                               <C>             <C>
Operating activities
Net loss.......................................................................   $(68,441)       $(50,934)
Adjustments to reconcile net loss to net cash used in operating
activities:
     Noncash interest expense, including related warrants values...............     15,372           7,430
     Value of stock options issued to employees and consultants................        118          12,030
     Depreciation and amortization.............................................     16,057           6,124
     Loss on disposal of property and equipment................................         --              27
     Changes in operating assets and liabilities:
          Accounts receivable..................................................       (299)            698
          Prepaid expenses and other assets....................................       (161)         (1,364)
          Accounts payable.....................................................     (3,606)          2,023
          Accrued expenses.....................................................        434             937
                                                                                  --------        --------
Net cash used in operating activities..........................................    (40,526)        (23,029)

Investing activities
Purchases of property and equipment............................................    (16,976)        (18,917)
Purchase of 4-Sight (net of cash acquired).....................................         --         (16,350)
Patent expenditures............................................................        (34)             --
                                                                                  --------        --------
Net cash used in investing activities..........................................    (17,010)        (35,267)

Financing activities
Proceeds from exercise of stock options........................................          2               7
Net proceeds from sale of convertible preferred stock..........................     59,498              --
Proceeds from 13.25% Senior Discount Notes.....................................         --         120,626
Proceeds from line of credit...................................................      1,000           5,203
Payments on line of credit.....................................................         --         (24,003)
Proceeds from equipment financing..............................................      3,102           6,823
Payments on equipment financing................................................     (2,967)         (2,125)
Capitalized financing costs....................................................         --          (1,916)
                                                                                  --------        --------
Net cash provided by financing activities......................................     60,635         104,615
Effect of foreign currencies on cash...........................................     (1,321)            (34)
                                                                                  --------        --------
Increase (decrease) in cash and cash equivalents...............................      1,778          46,285
Cash and cash equivalents at beginning of period...............................      6,272             274
                                                                                  --------        --------
Cash and cash equivalents at end of period.....................................   $  8,050        $ 46,559
                                                                                  ========        ========
</TABLE>

                            See accompanying notes.

                                      -6-
<PAGE>

                                 WAM!NET Inc.

               Consolidated Statements of Cash Flows (continued)

                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                     Six months ended
                                                                                          June 30,
                                                                                   ----------------------
                                                                                    1999            1998
                                                                                   -------        -------
                                                                                        (Unaudited)
<S>                                                                                <C>            <C>
Supplemental schedule of noncash financing activities
  Conversion of accrued interest to subordinated debt...........................   $    --        $   918
  Conversion of accrued dividends to preferred stock............................       152             --
  Issuance of convertible preferred stock in exchange for land,
      building and furniture & fixtures.........................................    40,000             --
  Accumulated and unpaid dividends..............................................        23             35
  Issuance of common stock relating to acquisition..............................        --         20,000
  Conversion of convertible subordinated debenture for common stock.............        --             25

Supplemental schedule of cash flow information
      Cash paid for interest....................................................   $ 2,176        $ 1,132
</TABLE>

                            See accompanying notes.

                                      -7-
<PAGE>

                                 WAM!NET INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Consolidated Financial Statements

     The accompanying consolidated financial statements have been prepared by
WAM!NET Inc. (the `Company') without audit and reflect all adjustments
(consisting only of normal and recurring adjustments and accruals) which are, in
the opinion of management, necessary to present a fair statement of the results
for the interim periods presented.  The statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of regulation
S-X, but omit certain information and footnote disclosures necessary to present
the statements in accordance with generally accepted accounting principles.  The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full fiscal year.  These
financial statements should be read in conjunction with the Company's audited
Consolidated Financial Statements for the year ended December 31, 1998.  The
December 31, 1998 balance sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.  Certain amounts for the prior year have been reclassified to
conform to current year presentation.


2.   Consolidation

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries: FreeMail, Inc., NetCo Communications of
Canada, Inc. and WAM!NET U.K. Limited (formerly 4-Sight Limited). All
intercompany transactions have been eliminated.


3.   Preferred Stock

In January 1999, the Company issued the 1999 MCI WorldCom Convertible Note and
in January 1999 and March 1999, the Company borrowed $10.0 million and $15.0
million, respectively, thereunder. The 1999 MCI WorldCom Convertible Note was
converted into 2,196,317 shares of the Company's Class D Convertible Preferred
Stock, par value $.01 per share (the "Class D Preferred Stock"), immediately
prior to the closing of the Silicon Graphics, Inc. investment discussed below
("SGI Investment"). In connection with the MCI WorldCom Convertible Note, the
Company issued warrants to MCI WorldCom to purchase a total of 350,000 shares of
Common Stock. The warrants have an exercise price of $.01 and are exercisable
from April 30, 1999 until April 30, 2004.

In March 1999, the Company entered into the SGI Investment, providing for the
purchase by SGI of 5,710,425 shares of the Company's Class B Convertible
Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), and
878,527 shares of the Company's Class C Convertible Preferred Stock, par value
$.01 per share (the "Class C Preferred Stock"). The holders of a majority of the
Class B Preferred Stock have the right to designate one member of the Company's
Board of Directors. The aggregate consideration received by the Company for the
Class B Preferred Stock and the Class C Preferred Stock was $75 million, of
which $35 million was paid in cash and $40 million was paid by transfer to the
Company of a corporate campus facility. The Class B Preferred Stock and the
Class C Preferred Stock will be convertible on a one-to-one basis into Common
Stock (subject to anti-dilution adjustments) and will have the right to vote
with the Common Stock, on an as-converted basis, as a single class. The Class B
Preferred Stock and Class C Preferred Stock are convertible immediately
following the issuance date and 18 months following the issuance date,
respectively. The shares of convertible Common Stock into which the Class B
Preferred Stock and the Class C Preferred Stock are subject to certain
registration rights.

                                      -8-
<PAGE>

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


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

     The following discussion and analysis is based on the historical  results
of WAM!NET Inc. (the "Company") and should be read in conjunction with the
Company's Financial Statements included herein. The following discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements.

Overview

     Our initial focus has been our Direct Service.  This is our fastest, most
secure and most reliable transport service, providing direct, guaranteed and
managed access and transport over our private network.  Customers choose the
capacity and speed of their network access device, and the throughput level of
their network connection to meet their requirements.  We released our mid-price
On-Ramp Service in Europe during the first quarter of 1999 and in North America
during the second quarter of 1999.  We recently introduced our lower priced
Internet Gateway Service to our current Direct Service customers, and we expect
to release this service generally at the beginning of the fourth quarter of
1999.  Both On-Ramp and Internet Gateway services are targeted to facilitate
growth in the number and size of workflow groups by permitting connectivity at
lower costs commensurate with lower capacity needs for smaller users who are
often key participants in workflow.  At June 30, 1999, we had an installed base
of 1,776 customer sites using Direct Services, primarily in the US, and an
installed base of 1,427 customer sites using On-Ramp Services, primarily in
Europe.  As we continue to roll out our new services and applications, we expect
that our Direct Service will remain a key component of our business strategy,
but will represent a smaller portion of our overall business

     Revenues.

     Service revenue.  Our service revenue is directly related to customer
traffic through our global private network which is related to the number of,
and degree of utilization by, workflow groups who connect among themselves
through our network.  Our service revenue is derived primarily from annual or
multi-year service contracts which have automatic renewal or extension
provisions.  These contracts generally include a minimum monthly fee and
additional charges for usage that exceeds an included monthly minimum.  We
currently offer our services at scaled minimum usage fees, which typically range
for Direct Service from $650 per month to $4,000 per month, and for On-Ramp
Service from $45 per month to $360 per month.  We begin to earn service revenue
from Direct Service customers following installation of equipment and service at
a customer's premises, which typically lags contract signing by 60 to 90 days.
We begin to earn service revenue from our other services upon contract signing
and/or usage.  We began to record revenue from our On-Ramp Service in March
1999, and will begin to record revenue from Internet Gateway Service during the
third quarter of 1999.  We expect to introduce our initial WAM!BASE services
during the fourth quarter of 1999.

     Rebates.  From inception through the end of 1998, as we launched our Direct
Service, we offered significant promotional programs, including free trial
programs and volume related service rebates to gain new customers and drive
utilization of our services.  These programs typically involved 60 to 90 day
free trials at the beginning of a service contract and extended discount or
rebate programs to stimulate usage during the first year of the contract.  Our
experience with those promotional programs has been favorable, with
approximately 94% of customers continuing to use our service following
expiration of the free trial period.  Rebates from promotional programs will
decline as these programs expire.  We may use similar promotional programs in
the future to introduce new services or to address additional markets.

                                      -9-
<PAGE>

     Software and hardware sales.  Revenue from software and hardware sales
includes primarily the sale of 4-Sight iSDN Manager(TM) software and ISDN cards
under long-term contracts.  In addition, our On-Ramp Service customers may
choose to make a single upfront payment and purchase software instead of paying
monthly service fees under contracts for the use of our On-Ramp software.  In
both cases these purchases appear as software and hardware sales in our revenue.
We expect revenue from software and hardware sales to decline upon completion of
the long-term contracts for 4-Sight iSDN Manager(TM) and ISDN cards.

     No single customer accounted for more than 5% of our revenues for the six
month period ended June 30, 1999 on a consolidated basis.

     Operating Expenses.

     Network communications.  Network communications expense represents the
largest direct cost associated with providing our Direct Service.  Network
communications expense includes both the costs of the high bandwidth, backbone
carrier services interconnecting our global infrastructure of network operating
and data storage centers and distribution hubs as well as the costs of local
loop telephone circuits connecting our network access devices at a customer's
premises to the nearest distribution hub.  Local telephone circuit connections
provided by local exchange carriers account for the substantial majority of
these charges, with significant differences between urban and rural connection
costs.  National and international carrier service, provided to us primarily by
MCI WorldCom, accounts for the balance of these charges.  Network communication
expense is generally a fixed monthly cost per circuit.  We expect that network
communications expense will increase as our network expands; however, we expect
that the cost of these expenses as a percentage of revenue will decline with
increasing utilization of our network.  We also believe that growing competition
among telephony and communications providers may reduce the cost of local
telephone circuit and backbone connections.  We actively seek to obtain and
deploy technologies that will reduce the costs of local telephone circuit
connections, such as wireless technologies and remote dial-up capabilities.  We
also intend to use our network management tools to optimize the use of existing
and planned network capacity as volume increases and traffic patterns begin to
emerge. We continue to incur substantial network communication expense as we
deploy our network and related services and applications globally; however, we
expect the network communications expense as a percentage of revenue to decline.

     Software and hardware.  Software and hardware expense reflects the costs of
software and hardware sold.

     Network operations and development.   Network operations and development
expense  represents costs directly associated with developing, maintaining,
managing and servicing our global private network.  These costs include direct
labor, vendor service fees, point-of-presence charges and research and
development charges, which are often incurred in advance of receiving revenue.
Our currently installed network operating centers account for the substantial
majority of these direct labor and operating costs.  Most of the costs
associated with the development of new services and applications, such as
WAM!BASE, WAM!PROOF, On-Ramp and Internet Gateway, are accounted for as  network
operations expenses and are incurred in advance of receiving revenue.  Upon
reaching technological feasibility for these applications, we begin to
capitalize these expenses until general public release of the application and
then we amortize a portion of these costs over a 2 year period.  This
amortization expense appears in depreciation and amortization.  We expect that
network operations costs will increase as our network expands; however, the cost
of network operations as a percentage of revenue is expected to decline.

     Selling, general and administrative.  Our selling expense consists
primarily of the salaries and commissions of our direct sales force and our
global marketing groups, commissions for channel partners, and the costs of
ongoing marketing activities such as promotions and channel development.  Our
sales and marketing efforts through the end of 1998 were primarily intended to
create awareness of our services, stimulate trial use and induce integration
into customer workflow. With the growth of our installed customer base, we began
in 1999 integrating our services into our customers' workflow and expanding the
size and number of workflow groups such as by introducing more affordable
connectivity options.  We expect to continue to incur significant sales and
marketing

                                      -10-
<PAGE>

expenses in order to obtain increased penetration in selected vertical markets
and to generate increased traffic among existing customers.

     Our general and administrative expense includes administrative salaries,
related overhead and professional service fees. These costs reflect expenditures
related to the rapid growth and expansion of our administrative infrastructure
necessary to manage our expanding operations, and professional service fees for
financing activities, contract negotiations and acquisitions.  We continue to
incur substantial general and administrative expenses as we continue to deploy
our network and related services and applications globally; however, we expect
the cost of general and administrative expenses as a percentage of revenue to
decline. of

     Depreciation and amortization.  We retain ownership of the customer premise
equipment and  most of the hardware and software necessary for our customers to
use our services on a turn-key basis.  Depreciation and amortization expense
includes depreciation of this hardware and software as well as the equipment
located in our distribution hubs and network operating and data storage centers.
We also amortize certain costs relating to the acquisitions of 4-Sight and
Freemail, which we acquired using the purchase method of accounting.  We
anticipate additional capital investments in our network infrastructure
commensurate with customer demand and market opportunity.  As a result, we
anticipate that depreciation and amortization expense will continue to increase
in future periods as we continue to purchase equipment and expand operations;
however, we expect depreciation and amortization expense as a percentage of
revenue to decline.

Results of Operations

Three Month Period Ended June 30, 1999 Compared with Three Month Period Ended
June 30, 1998

     Revenues.

     Service revenue. Service revenue for the three month period ended June 30,
1999 was $4.7 million, compared to $1.9 million for the three month period ended
June 30, 1998, an increase of $2.8 million, or 147.4%. This increase in revenue
was primarily due to growth in the number of customers purchasing Direct
Services, increased utilization by customers, and price increases in monthly
fees. The number of network access devices installed at customer sites increased
to 1,680 at June 30, 1999 from 943 at June 30, 1998, an increase of 737, or
78.2%. Customers sites using On-Ramp Services were 1,427 sites at June 30, 1999;
at June 30, 1998 we had to not yet released our On-Ramp Service.

     Rebates. Rebates for the three month period ended June 30, 1999 were $0.7
million, compared to $0.5 million for the three month period ended June 30,
1998, an increase of $0.2 million, or 40.0%. The increase resulted from
marketing programs implemented during 1998 to stimulate utilization of our
services to introduce pricing schedules and accelerate contract renewals. The
programs generally expire on December 31, 1999

     Net service revenue. Net service revenue for the three month period ended
June 30, 1999 was $3.9 million, compared to $1.4 million for the three month
period ended June 30, 1998, an increase of $2.5 million, or 178.6%. The increase
in net revenue for the three month period ended June 30, 1999, over the three
month period ended June 30, 1998 reflects increased service revenue partially
offset by increased rebates.

     Software and hardware sales. Revenue from software and hardware sales
resulted primarily from fulfillment of long-term contracts entered into by 4-
Sight prior to our acquisition of that company in March 1998. Revenue from
software and hardware sales for the three month period ended June 30, 1999 were
$1.9 million, compared to $3.9 million for the three month period ended June 30,
1998, a decrease of $2.0 million, or 51.3%. The decrease is due to our migration
from sales of 4-Sight software and hardware as stand-alone products to the
rental of software and hardware as part of our service agreements.

                                      -11-
<PAGE>

     Total Revenue. Total revenue for the three month period ended June 30, 1999
was $5.8 million, compared to $5.3 million for the three month period ended June
30, 1998, an increase of $.5 million, or 9.4%, reflecting increased net service
revenue partially offset by decreased hardware and software sales during the
current period compared to the prior period.

     Operating Expenses.

     Network communications. Network communications expense for the three month
period ended June 30, 1999 was $6.3 million, compared to $3.8 million for the
three month period ended June 30, 1998, an increase of $2.5 million, or 65.8%.
This increase resulted primarily from increased costs for local loop connections
related to growth in the number of our Direct Service customers, and to
installation of additional hubs for domestic and foreign network operations. The
average monthly network communications expense per Direct Service customer site
for the three month period ended June 30, 1999 was $1,201, compared to $1,380
for the three month period ended June 30, 1998, a decrease of $179, or 13.0%.
This trend reflects more efficient use of our backbone as we add more Direct
Service customers to our network, a beneficial shift in the geographic mix of
our customers, and generally declining costs of local loop and back-bone
capacity. These trends were partially offset by growth in our Direct Service
customer base in Europe, where local loop costs are generally higher than in
North America. For the three month period ended June 30, 1999 local telephone
circuit connections represented approximately 70%, and national and
international carrier services represented approximately 30% of network
communication expense.

     Software and hardware. The cost of software and hardware for the three
month period ended June 30, 1999 was $0.6 million, compared to $1.2 million for
the three month period ended June 30, 1998, a decrease of $0.6 million, or
50.0%. This decrease reflects the decline in software and hardware sales.

     Network operations and development. Network operations and development
expense for the three month period ended June 30, 1999 was $4.1 million,
compared to $6.0 million for the three month period ended June 30, 1998, a
decrease of $1.9 million, or 31.2%. The decrease was primarily due to completion
of On-Ramp development and the termination of associated development costs, and,
to a lesser extent, to the capitalization of certain development costs for
Internet Gateway and WAM!BASE, partially offset by costs incurred for
establishing our network operations center in Belgium.

     Selling, general and administrative. Selling, general and administrative
expense for the three month period ended June 30, 1999 was $11.8 million,
compared to $9.3 million for the three month period ended June 30, 1998, an
increase of $2.5 million, or 26.9%. The increase was primarily due to (i)
expansion of our European sales force, partially offset by reductions and
realignments in our North American sales force, (ii) increased marketing expense
for trade show attendance associated with new service promotions and (iii)
increased costs associated with the restructuring of our executive and
administrative management team to support our new sales and marketing focus.

     Depreciation and amortization. Depreciation and amortization for the three
month period ended June 30, 1999 was $7.9 million, compared to $4.1 million for
the three month period ended June 30, 1998, an increase of $3.8 million, or
92.7%. This increase is primarily due to depreciation of additional network and
related equipment purchased for network expansion during 1998 and 1999 and
amortization of a full three months of goodwill in 1999 resulting from the
acquisition of 4-Sight.

     Interest income. Interest income for the three month period ended June 30,
1999 was $0.2 million, compared to $0.9 million for the three month period ended
June 30, 1998, a decrease of $0.7 million, or 77.7%. The decrease in interest
income was primarily due to the decrease in our average monthly balance of cash
and cash equivalents.

     Interest expense. Interest expense for the three month period ended June
30, 1999 was $7.4 million, compared to $6.0 million for the three month period
ended June 30, 1998, an increase of $1.4 million, or 23.3%. The increase was
primarily due to (i) the increase in long-term unsecured debt we incurred during
1998 to fund our

                                      -12-
<PAGE>

operations and to acquire 4-Sight, consisting primarily of our 13.25% senior
discounted notes due 2005 (the "1998 Notes") in the accreted principal amount of
$148.2 million at June 30, 1999, and (ii) the increase in equipment financing.
In the three month period ended June 30, 1999, the Company incurred expense in
the amount of $1.2 million representing financing costs including the current
portion of the attributed cost incurred upon issuance of warrants in connection
with certain financing transactions, including the 1998 notes.

     Other income. Other income increased to $0.3 million for the three month
period ended June 30, 1999, from $12,000 for the three month period ended June
30, 1998. This increase primarily reflects receipt of one month's rental income
received from SGI in connection with our lease to SGI in June, 1999 of a portion
of the corporate campus facility in Eagan which we purchased from SGI in March,
1999. This income was partially offset by our continuing rental obligations for
vacated facilities.

     Net loss. Our net loss of $31.7 million for the three month period ended
June 30, 1999 increased $7.4 million, or 30.5%, compared to a net loss of $24.3
million for the three month period ended June 30, 1998. This increase is related
to the higher excess of expenses associated with the continuing operation,
deployment and marketing of our network and network services as described above
over the revenues received during the three month period ended June 30, 1999.


     Six Month Period Ended June 30, 1999 Compared with Six Month Period Ended
June 30, 1998

     Revenues.

     Service revenue. Service revenue for the six month period ended June 30,
1999 was $8.4 million, compared to $3.2 million for the six month period ended
June 30, 1998, an increase of $5.2 million, or 162.5%. The increase is due to
the same factors described above for the comparable three month periods ended
June 30, 1999 and 1998.

     Rebates. Rebates for the six month period ended June 30, 1999 was $1.4
million, compared to $0.8 million for the six month period ended June 30, 1998,
an increase of $0.6 million, or 75.0%. The increase is due to the same factors
described above for the comparable three month periods ended June 30, 1999 and
1998.

     Net service revenue. Net service revenue for the six month period ended
June 30, 1999 was $7.1 million, compared to $2.5 million for the six month
period ended June 30, 1998, an increase of $4.6 million, or 184.0%. The increase
in net revenue for the six month period ended June 30, 1999, over the six month
period ended June 30, 1998 reflects increased service revenue partially offset
by increased rebates.

     Software and hardware sales. Revenue from software and hardware sales for
the six month period ended June 30, 1999 was $3.6 million, compared to $4.7
million for the six month period ended June 30, 1998, a decrease of $1.1
million, or 23.4%. The decrease is due to the same factors described above for
the comparable three month periods ended June 30, 1999 and 1998, and does not
include revenue from sales of 4-Sight software and hardware prior to our
acquisition of 4-Sight in March, 1998.

     Total Revenue. Total revenue for the six month period ended June 30, 1999
was $10.7 million, compared to $7.2 million for the six month period ended June
30, 1998, an increase of $3.5 million, or 48.6%, reflecting increased net
service revenue partially offset by decreased hardware and software sales during
the current period compared to the prior period.

     Operating Expenses.

                                      -13-
<PAGE>

     Network communications. Network communications expenses for the six month
period ended June 30, 1999 were $12.7 million, compared to $6.9 million for the
six month period ended June 30, 1998, an increase of $5.8 million, or 84.1%. The
increase is due to the same factors described above for the comparable three
month periods ended June 30, 1999 and 1998. The average monthly network
communications expense per Direct Service customer site for the six month period
ended June 30, 1999 was $1,271, compared to $1,469 for the six month period
ended June 30, 1998, a decrease of $198, or 13.5%. This trend reflects more
efficient use of our backbone, as we add more Direct Service customers to our
network; a beneficial shift in the geographic mix of our customers; and
generally declining costs of local loop and back-bone capacity. For the six
month period ended June 30, 1999 local telephone circuit connections represented
approximately 70%, and national and international carrier services represented
approximately 30% of network communications expense.

     Software and hardware. The cost of software and hardware for the six month
period ended June 30, 1999, was $1.4 million, compared to $1.5 million for the
six month period ended June 30, 1998, a decrease of $0.1 million, or 6.7%.  This
decrease reflects declining software and hardware sales.

     Network operations and development.  Network operations and development
expense for the six month period ended June 30, 1999 was $9.4 million, compared
to $9.3 million for the six month period ended June 30, 1998.  This expense
includes one-time costs related to the acquisition of 4-Sight in March 1998, and
costs for development of On-Ramp, Internet Gateway and WAM!BASE which were
incurred during 1998 and 1999.  We anticipate a lower level of development costs
for continuing Internet Gateway and WAM!BASE development in future periods.

     Selling, general and administrative.  Selling, general and administrative
expense for the six month period ended June 30, 1999 was $22.8 million, compared
to $26.1 million for the six month period ended June 30, 1998, a decrease of
$3.3 million, or 12.6%.  This decrease is primarily due to a one-time $11.5
million non-cash compensation charge relating to the vesting of option contracts
held by certain of our officers that occurred in the period ended June 30, 1998,
partially offset by increases in other selling, general and administrative
expenses during the current six month period.  After adjusting for the one-time
charge during 1998, recurring selling, general and administrative expense during
the six month period ended June 30, 1999 increased $8.2 million, or 56.2% over
the comparable adjusted amount for the six month period ended June 30, 1998.
The increase in these recurring expenses are due to the same factors described
above for the comparable three month periods ended June 30, 1999 and 1998.

     Depreciation and amortization.  Depreciation and amortization for the six
month period ended June 30, 1999 was $16.1 million, compared to $6.0 million for
the six month period ended June 30, 1998, an increase of $10.1 million, or
168.3%. The increase is due to the same factors described above for the
comparable three month periods ended June 30, 1999 and 1998.

     Interest income.  Interest income for the six month period ended June 30,
1999 was $0.4 million, compared to $1.1 million for the six month period ended
June 30, 1998, a decrease of $0.7 million, or 63.6%. The decrease in interest
income was primarily due to the decrease in the Company's average monthly
balance of cash and cash equivalents.

     Interest expense.  Interest expense for the six month period ended June 30,
1999 was $17.5 million, compared to $9.4 million for the six month period ended
June 30, 1998, an increase of $8.1 million, or 86.2%.  The increase is due to
the same factors described above for the comparable three month periods ended
June 30, 1999 and 1998, and in the six month period ended June 30, 1999 the
Company also incurred interest expense (i) in the amount of $2.8 million in
connection with the 13.25% subordinated unsecured convertible note due August
28, which converted into equity in March 1999, and (ii) in the amount of $5.2
million representing financing costs including the current portion of the
attributed cost incurred for the issuance of warrants in connection with certain
financing transactions, including our 13.25% senior discount notes.

                                      -14-
<PAGE>

     Other income.  Other income for the six month period ended June 30, 1999 is
due to the same factor as described above for the comparable three month period
ended June 30, 1999.

     Net loss.  Our net loss of  $68.4 million for the six month period ended
June 30, 1999, increased $17.5 million, or 34.4%,  compared to a net loss of
approximately $50.9 million for the six month period ended June 30, 1998. The
increase is due to the same factors described above for the comparable three
month periods ended June 30, 1999 and 1998

Liquidity and Capital Resources

     Since inception, we have incurred net losses and experienced negative cash
flow.  Net losses since inception have resulted in an accumulated deficit of
$232.8 million as of June 30, 1999.  We expect to continue to operate at a net
loss and experience negative cash flow for the foreseeable future.  Our ability
to achieve profitability and positive cash flow from operations will depend on
our ability to grow our revenue substantially and achieve other operating
efficiencies.

     From inception through December 31, 1998, we used $86.8 million of  net
cash in operating activities primarily for salaries, consulting and legal
expenses, network operations and overhead expense.  During that period we used
$92.8 million of  net cash in investing activities, of which $76.5 million was
used primarily for the expansion of our network and storage infrastructure, and
$16.4 million (net of cash acquired) was used for the purchase of 4-Sight.  We
obtained $185.5 million of net cash during that period from financing
activities, consisting of $183.5 million net cash proceeds from collateralized
equipment financing and from the issuance of short-term and long-term debt
including $120.6 million net proceeds from the issuance of our 13.25% senior
discount notes, and $2.0 million of net cash proceeds from the sale of our
equity securities.

     For the six month period ended June 30, 1999, we used $40.5 million of  net
cash in operating activities primarily for salaries, consulting and legal
expenses, network operations and overhead expense.  During that period we used
$17.0 million of  net cash in investing activities primarily for the expansion
of our network and storage infrastructure.  During the period we obtained $60.6
million of net cash proceeds from financing activities, consisting of  $59.5
million from the issuance of short-term debt and preferred stock to  MCI
WorldCom and SGI, and $1.1 million from additional net borrowings under credit
facilities and equipment financing.   The increase of $39.0 million in our
building and land assets during the period result from our acquisition of the
SGI corporate campus facility in March 1999 in exchange for the issuance of our
preferred stock.  Changes in other asset and liability balances during the
recent six month period related to timing of expense recognition.

     On January 13, 1999, we issued the 1999 MCI WorldCom convertible note in
the principal amount of $25.0 million due August 28, 1999.  Under the 1999 MCI
WorldCom convertible note we borrowed $10.0 million on January 13, 1999 and
$15.0 million on March 4, 1999.  Also, on that date, we consummated the SGI
investment pursuant to which SGI purchased 5,710,425 shares of Class B
convertible preferred stock and 878,527 shares of our Class C convertible
preferred stock for aggregate net cash proceeds of $35.0 million and $40.0
million by way of transfer to us of SGI's corporate campus facility in Eagan,
Minnesota.  Immediately prior to the closing of our transaction  with SGI, the
1999 MCI WorldCom convertible note was converted into 2,196,317 shares of Class
D convertible preferred stock.  In connection with the issuance of the 1999 MCI
WorldCom convertible note, we also issued warrants to MCI WorldCom to purchase
150,000 and 200,000 shares of common stock at an exercise price of $.01 per
share after April 30, 1999 and exercisable until April 30, 2004.

     Effective June 1, 1999 we amended our 1997 agreement for the acquisition of
Freemail to change the amount and rate of payment of contingent consideration
due to the former Freemail shareholders.  We have decreased the amount payable
from $3.0 million cash to $2.0 million, payable $1.0 million in cash and $1.0
million in shares of our common stock at fair market value.  The rate of payment
has also been changed from 5% of revenue from a selected class of customers to
5% of our total collected revenue, calculated quarterly.  In accordance with
this amendment, the first payment is due by October 30, 1999, for the quarter
ended September 30, 1999.

                                      -15-
<PAGE>

         On July 12, 1999, the Company issued a $2.0 million secured promissory
note to Data Sales Co., Inc. secured by certain equipment. Unless repaid on or
before November 11, 1999, the Company will convey the equipment securing the
note to Data Sales and lease the equipment back from Data Sales. The initial
lease term would be 20 months from November 11, 1999 and would be cancellable
thereafter on two months prior notice from either party. The Company's rental
obligation under the lease would be $120,478 per month. At the end of the lease,
the Company would be able to repurchase the equipment at its then fair market
value.

         On July 16, 1999, the Company entered into a $20.0 million, two year
credit facility with Foothill Capital Corporation. The credit facility contains
a $10.0 million term loan requiring monthly interest payments during the first
18 months and five monthly installments of $210,000 of principal and interest
thereafter with a balloon payment due at maturity. The remainder of the facility
is a revolving credit facility under which Foothill will lend the Company up to
an additional $10.0 million based upon a borrowing base consisting of the
Company's recurring billings or collections from its U.S. customers. Amounts
outstanding under the credit facility incur interest at the Wells Fargo Bank
reference rate plus 1.75% (currently 9.75% per year). The credit facility is
secured by a lien on the Company's corporate campus facility and certain or all
other unencumbered and lienable assets. The credit facility requires the Company
to obtain certain minimum gross margins, specified levels of network access
device installations and minimum EBITDA for the quarter ending September 30,
1999, and for each quarter thereafter until maturity. It also provides for
annual limits on the amount of the Company's capital expenditures. Foothill has
agreed to release the lien on the corporate campus facility upon repayment of
the term loan provided the Company is not then in default, and under certain
circumstances to subordinate or release its lien on equipment to permit the
Company to obtain equipment financing from third parties. The credit facility is
automatically renewable at maturity until cancelled in accordance with its
terms. The Company has currently borrowed approximately $14.0 million under the
credit facility.

     Our ability to continue to fund our operating losses as we expand our
business depends on our ability to obtain additional sources of financing.   We
expect that our available operating capital as of July 31, 1999, as evidenced by
cash, cash equivalent investments,  and availability under existing credit
facilities, together with borrowings under facilities from financial
institutions with whom we are currently negotiating, will be sufficient to fund
our operating losses, capital expenditures, lease payments and working capital
requirements for the remainder of our current fiscal year.  We are seeking
additional financing through some combination of the following: (1) long- and
short-term financing from vendors, banks and other financial institutions, (2)
monetizing our corporate campus facility, and (3) the issuance of our equity
securities.  If additional sources of funding cannot be obtained during the
course of our fiscal year ending December 31, 1999, due to a constraint of
available operating capital, we will be required to significantly slow our
global market penetration, network growth and product development.  In addition,
should we be unable to generate cash from operating or investing activities to
fund our operations and network growth during 1999, management expects that it
would implement plans to reduce cash expenditures.  The reduction of cash
expenditures would have a material adverse effect on our global revenue and
network expansion plans.  We believe that the most evident and clearly
measurable impact resulting from these reductions would be a significant
decrease of installed network customers for the year ending December 31, 1999.
A material reduction in the base of installed customers would slow the growth of
our recurring revenue stream, which is dependent upon customer utilization of
our excess network capacity.  Reductions in network utilization would directly
impact our network revenue and could ultimately defer overall profitability of
our service and products.  Another possible impact of the above outlined
expenditure reductions would be potentially material delays in software product
development, the impact of which could further erode customer retention and
network utilization.


Year 2000 Compliance

     The Year 2000 issue is the result of computer-controlled systems using two
digits rather than four to define the applicable year.  For example, computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000.  As for many other companies, this year
2000 computer issue poses  a potential risk for us as a user of information
systems in the operation of our business, as a provider of managed, high-speed,
digital data delivery network service and the related computer technology and
software to customers, and as a customer of other organizations whose operations
may be affected by year 2000 compliance issues.

                                      -16-
<PAGE>

     Our State of Readiness. We have completed an assessment of our core
business information systems, many of which are provided by outside suppliers,
for year 2000 readiness and are extending that review to include a variety of
other information systems and related business processes used in our operations.
We plan to have changes to critical systems implemented by the end of the third
quarter of 1999 to allow time for testing.  Most of our mission-critical
applications are believed to be year 2000 compliant.  We are also assessing the
possible effect on our operations of the year 2000 readiness of critical
suppliers of products and services.  These include not just suppliers of
components but also our outsourcing partners in manufacturing as well as
suppliers of basic utilities.  Our reliance on key suppliers, and therefore on
the proper functioning of their information systems and software, is increasing,
and there can be no assurance that another company's failure to address year
2000 issues could not have a material adverse effect on our business, financial
condition and results of operation.  Although our assessment is ongoing, we
currently believe that resolving these matters will not have a material adverse
effect on our business, financial condition and results of operations.

     Costs. We have not incurred material historical costs for year 2000
awareness, inventory assessment, analysis, conversion, testing or contingency
planning.  We believe that we are unlikely to experience a material adverse
impact on our business, financial condition or results of operations due to year
2000 compliance issues.

     Potential Risks. We could face substantial claims by customers or loss of
revenue due to service interruptions, inability to fulfill contractual
obligations or to bill customers accurately and on a timely basis, and increased
expenses associated with litigation, stabilization of operations following
critical system failures and the execution of contingency plans.  We could also
experience an inability by customers and others to pay, on a timely basis or at
all, obligations owed to us. Under these circumstances, the adverse effects
would be material, although not quantifiable at this time.  Further, the
cumulative effect of these failures could have a substantial adverse effect on
the economy, domestically and internationally.  The adverse effects of a
domestic or global recession or depression also could be material, although not
quantifiable at this time.  We will  continue to monitor business conditions to
assess and quantify material adverse effects, if any, that may result from the
year 2000 problem.

Item 3--Quantitative and Qualitative Disclosures About Market Risk

     Foreign Currency Exchange Rates.  During the year ended December 31, 1998,
our revenue originating outside the U.S. was 53% of total revenues.  Currently,
we do not employ currency hedging strategies to reduce the risks associated with
the fluctuation of foreign currency exchange rates.  All of our contracts are
denominated in U.S. dollars except for those contracts entered into by our
foreign subsidiaries which are denominated in local currency.  We are unable to
determine what effect, if any, the adoption and use of the Euro will have in the
future on our business, operating results, liquidity and financial condition.

     Our international business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility.  Accordingly, our future
results could be materially adversely impacted by changes in these or other
factors.

     Interest Rates.  We invest cash in a variety of financial instruments,
including bank time deposits and fixed rate obligations of governmental entities
and agencies.  These investments are denominated in U.S. dollars.  Cash balances
in foreign currencies overseas are operating balances and are invested in short-
term time deposits of the local operating bank.

     Investments in fixed rate interest earning instruments carry a degree of
interest rate risk.  Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates.  Due in part to these
factors, our future investment income may fall short of expectations due to
changes in interest rates, or we may suffer losses in principal if forced to
sell securities which have seen a decline in market value due to changes in
interest rates.  Our investment securities are held for purposes other than
trading.

                                      -17-
<PAGE>

     We are exposed to market risk from changes in the interest rates on certain
of our outstanding debt.  The outstanding loan balance under the revolving
credit facility bears interest at a variable rate based on prevailing short-term
interest rates in the U.S. and Europe.  Based on the average outstanding bank
debt for the year ended December 31, 1998, a 100 basis point change in interest
rates would not change interest expense by a material amount.  For fixed rate
debt such as our 13.25% senior discount notes, interest rate changes affect its
fair market value, but do not impact earnings or cash flows.

                                      -18-
<PAGE>

                          Part II--OTHER INFORMATION


Item 2 -- Changes in Securities and Use of Proceeds

     (c)  The information required by this Item 2 of Part II has been previously
reported in Item 2 of Part I of this Form 10-Q, and is incorporated herein by
reference.  For a complete discussion of the transactions involving recent sales
of unregistered securities of the Company please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

     The sale and purchase of the 1999 MCI WorldCom Note and the conversion
thereof into the Class D Preferred Stock and the sale and purchase of the Class
B Preferred Stock, the Class C Preferred Stock and the 1999 MCI WorldCom
Warrants were exempt from the registration requirements of Section 5 of the
Securities Act of 1933 (the "Securities Act") pursuant to the provisions of
Section 4(2) of the Securities Act.

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

(a) Exhibits

    See Exhibit Index

(b) Reports on Form 8-K

    None


                                      -19-
<PAGE>

                                   SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed by the
undersigned thereunto duly authorized.


                                  WAM!NET Inc.

Date: August 4 , 1999


                                  By: /s/ Edward J. Driscoll
                                     ------------------------
                                     Edward J. Driscoll
                                     Chairman of the Board, Chief Executive
                                     Officer and Treasurer

                                      -20-
<PAGE>

                                 EXHIBIT INDEX

Item
Number      Description
------      -----------

2.1    (1)  Agreement for the Sale and Purchase of the entire issued share
            capital of WAM!NET U.K. Limited dated February 11, 1998, among the
            Company, WAM!NET (UK) Limited and the Selling Shareholders listed
            therein.

2.2    (1)  Agreement and Plan of Reorganization dated December 17, 1997 by and
            among NetCo Communications Corporation, NetCo Acquiring Corporation,
            FreeMail, Inc. and the shareholders listed therein.

2.3    *    June 1, 1999 Amendment to the Agreement and Plan of Reorganization
            dated December 17, 1997 by and among WAM!NET Inc. (formerly Netco
            Communications Corporation), NetCo Acquiring Corporation, FreeMail,
            Inc. and the shareholders listed therein.

3.1    (1)  Amended and Restated Articles of Incorporation of the Company.

3.2    (1)  By-Laws of the Company.

4.1    (1)  Indenture dated as of March 5, 1998, between the Company, as Issuer,
            and First Trust National Association, as Trustee.

4.2a   (1)  Certificate for the Rule 144A Original Notes ($200,000,000).

4.2b   (1)  Certificate for the Rule 144A Original Notes ($8,030,000).

4.3    (1)  Certificate for the Regulation S Original Notes.

4.4    (1)  Certificate for the Rule 144A Warrants.

4.5    (1)  Certificate for the Regulation S Warrants.

4.6a   (1)  Rule 144A Unit Certificate. (200,000 Units)

4.6b   (1)  Rule 144A Unit Certificate. (8,030 Units)

4.7    (1)  Certificate for the Regulation S Units.

4.8    (1)  Form of Certificate for the Exchange Notes (incorporated herein by
            reference and included in Exhibit 4.1 to the Company's Registration
            Statement on Form S-4 filed with Securities and Exchange Commission
            on May 28, 1998).

4.9    (1)  Common Stock Certificate.

4.10   (1)  Registration Rights Agreement, dated March 5, 1998, among the
            Company and Merrill Lynch Pierce, Fenner & Smith Incorporated,
            Credit Suisse First Boston Corporation and First Chicago Capital
            Markets, Inc.

4.11   (1)  Common Stock Registration Rights Agreement, dated as of March 5,
            1998, among the Company, WorldCom Inc., Merrill Lynch, Pierce,
            Fenner & Smith Incorporated, Credit Suisse First Boston Corporation
            and First Chicago Capital Markets, Inc.

4.12   (1)  Warrant Agreement, dated as of March 5, 1998, by and between the
            Company and First Trust National Association, as Warrant Agent, to
            purchase common stock of the Company.

4.13   (2)  Certificate Representing 100,000 Shares of Class A Preferred Stock
            of the Company issued to WorldCom Inc. on December 16, 1996
            (Incorporated herein by reference to exhibit 10.5 of the Company's
            Registration Statement on Form S-4 (File No. 333-53841) filed with
            the Securities and Exchange Commission on May 28, 1998).

4.14   (2)  Warrants to purchase 4,157,500 Shares of Common Stock of the Company
            exercisable on or before December 31, 2000, issued to WorldCom Inc.
            on December 16, 1996 (Incorporated herein by reference to exhibit
            10.6 of the Company's Registration Statement on Form S-4 (File No.
            333-53841) filed with the Securities and Exchange Commission on May
            28, 1998).

4.15   (2)  Certificate for 13.25% Subordinated Unsecured Convertible Note due
            August 28, 2005 ($25,000,000 Note) issued to MCI WorldCom, Inc. on
            January 13, 1999.

4.16   (2)  Certificate for 1,679,234 Class A Warrants and 2,840,967 Class B
            Warrants to purchase Common Stock of the Company, issued to WorldCom
            Inc. on September 26, 1997 (Incorporated herein by reference to
            exhibit 10.9 of the Company's Registration Statement on Form S-4
            (File No. 333-53841) filed with the Securities and Exchange
            Commission on May 28, 1998).

                                     -21-
<PAGE>
4.17      (2)  Subordinate Unsecured Convertible Note and Warrant Purchase
               Agreement between the Company and MCI WorldCom, Inc. dated
               January 13, 1999.

4.18      (2)  Preferred Stock Purchase Agreement by and between the Company and
               Silicon Graphics, Inc. dated as of March 3, 1999.

4.19      (2)  Certificate for 150,000 Warrants to purchase shares of Common
               Stock for the purchase price of $.01 per share dated January 13,
               1999.

4.20      (2)  Certificate of Designation of Rights and Preferences of Class A
               Preferred Stock of the Company filed with the Secretary of State
               of the State of Minnesota on March 4, 1999, as corrected and
               filed with the Secretary of State of this State of Minnesota on
               March 5, 1999.

4.21      (2)  Certificate of Designation of Rights and Preferences of Class B
               Convertible Preferred Stock of the Company filed with the
               Secretary of State of the State of Minnesota on March 4, 1999.

4.22      (2)  Certificate of Designation of Rights and Preferences of Class C
               Convertible Preferred Stock of the Company filed with the
               Secretary of State of the State of Minnesota on March 4, 1999.

4.23      (2)  Certificate of Designation of Rights and Preferences of Class D
               Convertible Preferred Stock of the Company filed with the
               Secretary of State of the State of Minnesota on March 4, 1999.

4.24      (2)  Certificate representing 115,206 shares of Class A Preferred
               Stock of the Company issued to MCI WorldCom. Inc. on March 4,
               1999.

4.25      (2)  Certificate representing 5,710,425 shares of Class B Convertible
               Preferred Stock of the Company issued to Silicon Graphics, Inc.
               on March 4, 1999.

4.26      (2)  Certificate representing 878,527 shares of Class C Convertible
               Preferred Stock of the Company issued to Silicon Graphics, Inc.
               on March 4, 1999.

4.27      (2)  Certificate representing 2,196,317 shares of Class D Convertible
               Preferred Stock of the Company issued to MCI WorldCom. Inc. on
               March 4, 1999.

4.28      (2)  Stockholders Agreement by and among the Company, Silicon
               Graphics, Inc. and MCI WorldCom, Inc. dated as of March 4, 1999.

4.29      (2)  Class A Preferred Stock Exchange Agreement by and between the
               Company and MCI WorldCom, Inc. dated as of March 4, 1999.

4.30      (2)  Class D Preferred Stock Conversion Agreement by and between the
               Company and MCI WorldCom, Inc. dated as of March 4, 1999.

10.1      (1)  Credit Agreement among the Company, the Lending Institutions
               party thereto, as Lenders, The First National Bank of Chicago, as
               Agent, dated as of September 26, 1997.

10.2      (1)  Ten Percent Convertible Note Purchase Agreement between the
               Company and WorldCom Inc. dated September 12, 1996 ($5,000,000
               Note).

10.3      (1)  Preferred Stock, Subordinated Note and Warrant Purchase Agreement
               between the Company and WorldCom Inc. dated November 14, 1996.

10.4      (1)  $28,500,000 Seven Percent Subordinated Note due December 31,
               2003, payable to WorldCom Inc.

10.5           Intentionally omitted.

10.6           Intentionally omitted.

10.7      (1)  Right of Refusal Agreement Among WorldCom Inc., Edward Driscoll
               III and Allen L. Witters dated December 16, 1996.

10.8      (1)  Guaranty Agreement dated September 26, 1997, by and between the
               Company and WorldCom Inc.

10.9           Intentionally omitted.

10.10     (1)  Sublease dated September 24, 1997 between the Company and 1250895
               Ontario Limited, relating to the property located at 6100 110th
               Street West, Bloomington, Minnesota.

10.11     (1)  Service Provision Agreement dated as of July 18, 1997, by and
               between the Company and Time Inc.

10.12     (1)  Standby Agreement dated as of July 19, 1997 by and between
               WorldCom Inc. and Time Inc.

10.13     (1)  Employment Agreement dated as of November 14, 1996, by and
               between the Company and Edward J. Driscoll III.

10.14     (1)  Employment Agreement dated as of November 14, 1996, by and
               between the Company and Allen Witters.

10.15     (1)  Employment Agreement dated as of April 16, 1996, by and between
               the Company and James R. Clancy.

                                     -22-
<PAGE>

10.16     (1)  Employment Agreement dated as of May 10, 1995, as amended, by and
               between the Company and Mark Marlow.

10.17     (1)  Agreement dated February 11, 1998 between the Company and
               WorldCom, Inc. modifying certain terms of the (i) 10% Convertible
               Subordinated Note, due September 30, 1999, (ii) 7% Subordinated
               Note, due December 31, 2003, and (iii) 100,000 shares of Series A
               Preferred Stock, all of which are held by MCI WorldCom, Inc.
               (incorporated herein by reference to exhibit No. 4.17 to the
               Company's Registration Statement on Form S-4 (File No. 333-53841)
               filed with the Securities and Exchange Commission on May 28,
               1998)

10.18     (1)  1994 Stock Option Plan

10.19     (1)  Amended and Restated 1994 Stock Option Plan

10.20     (1)  1998 Combined Stock Option Plan.

10.21     (1)  Agreement dated June 5, 1997 between the Company and WorldCom,
               Inc. regarding data services provided by WorldCom, Inc. to the
               Company.

10.22     (3)  Preferred Provider Agreement by and between the Company and
               Silicon Graphics, Inc., dated as of March 4, 1999 (portions of
               this exhibit have been omitted pursuant to a request for
               confidential treatment and have been filed with the Securities
               Commission under separate cover).

10.23     (2)  Sale and Purchase Agreement by and between Silicon Graphics,
               Inc., on behalf of itself and its wholly-owned subsidiary, Cray
               Research, L.L.C., and the Company dated as of March 4, 1999.

10.24     (2)  Lease by and between the Company and Silicon Graphics, Inc. on
               behalf of itself and its wholly-owned subsidiary, Cray Research,
               L.L.C., with respect to the Company's corporate campus facility
               located in Eagan, Minnesota dated as of March 4, 1999.

10.25     (2)  Employment Agreement dated January 1, 1998 by and between John R.
               Kauffman and the Company.

10.26     (2)  Employment Agreement dated November 3, 1997 by and between David
               T. Ottinger and the Company.

10.27     *    Loan and Security Agreement dated July 16, 1999, by and between
               Foothill Capital Corporation and the Company.

27.1      *    Financial Data Schedule.

----------------
(1)       Incorporated herein by reference to the Company's Registration
          Statement on Form S-4 (File No. 333-53841), filed with the SEC on May
          28, 1998.

(2)       Incorporated herein by reference to the Company's Annual Report on
          Form 10-K, filed with the SEC on March 31, 1999.

(3)       Incorporated herein by reference to the Company's Quarterly Report on
          Form 10-Q filed with the SEC on May 17, 1999.

*         Filed herein.

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