U.S. SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.


                                    FORM 10-K

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

                   for the Fiscal Year Ended December 31, 1998
                        Commission file number 333-61441


                       TELEHUB COMMUNICATIONS CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

             Nevada                                    36-413-6730
 (Jurisdiction of incorporation)         (I.R.S. Employer Identification Number)
 
                                 CO-REGISTRANTS
                                 --------------
                      TeleHub Network Services Corporation
                        TeleHub Technologies Corporation
                           TeleHub Leasing Corporation
          (Exact Name of Co-Registrants as Specified in their Charters)

         Illinois                   333-61441                  36-406-6622
          Nevada                    333-61441                  36-421-3797
          Nevada                    333-61441                  36-335-3108
     (Jurisdiction of           (Commission File            (I.R.S. Employer 
       incorporation)                Number)             Identification Number)

                        1375 Tri-State Parkway, Suite 250
                             Gurnee, Illinois 60031
                                 1 (800) TELEHUB
                (Address, including zip code, & telephone number,
                  of Registrants' principal executive offices)


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

            Title of each class       Name of exchanges on which registered
            -------------------       -------------------------------------
              Not Applicable                     Not Applicable

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

Indicate by check mark whether  Registrants (1) filed all reports required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that  Registrants  were required
to file such reports),  and (2) were subject to such filing requirements for the
past 90 days. Yes[ X ] No[ ]

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  Registrants'   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ].

The aggregate  market value of TeleHub  Communications  Corporation  ("TeleHub")
common shares held by  non-affiliates  as of February 28, 1999 was approximately
$42,836,725, based on a price of $14. 58 per common share.

There were 12,901,664 TeleHub common shares outstanding on February 28, 1999.




<PAGE>

                TELEHUB COMMUNICATIONS CORPORATION & SUBSIDIARIES
                         (COMMISSION FILE NO. 333-61441)

     ANNUAL REPORT ON SEC FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1998



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>          <C>                                                                                                 <C>
PART I............................................................................................................2
   Item 1.   Business.............................................................................................2
   Item 2.   Properties..........................................................................................18
   Item 3.   Legal Proceedings...................................................................................18
   Item 4.   Submission of Matters to a Vote of Security Holders.................................................18

PART II..........................................................................................................19
   Item 5.   Market for Registrant's Common Equity and Related Stockholders Matters..............................19
   Item 6.   Selected Consolidated Financial Data................................................................20
   Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations...............20
   Item 8.   Financial Statements and Supplementary Data.........................................................28
   Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................51

PART III.........................................................................................................51
   Item 10.    Directors and Executive Officers of Registrants...................................................51
   Item 11.    Executive Compensation............................................................................54
   Item 12.    Security Ownership of Certain Beneficial Owners and Management....................................58
   Item 13.    Certain Relationships and Related Transactions....................................................59

PART IV..........................................................................................................64
   Item 14.    Exhibits and Financial Statement Schedules........................................................64

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.......................................................................28

POWER OF ATTORNEY

SIGNATURES
</TABLE>



NOTE  CONCERNING  FORWARD-LOOKING  INFORMATION.  Some of the information in this
Report contains  forward-looking  statements that involve  substantial risks and
uncertainties  that constitute  "forward-looking  statements"  under the Private
Securities  Litigation Reform Act of 1995.  Forward-looking words such as "may,"
"will," "expect," "anticipate,"  "believe," "estimate" and "continue" or similar
words identify such  statements.  Investors  should read statements that contain
these  words   carefully   because  they:  (1)  discuss  the  Company's   future
expectations;  (2)  contain  projections  of the  Company's  future  results  of
operations or of its financial condition;  or (3) state other  "forward-looking"
information.  The Company  believes  that it is  important to  communicate  such
future expectations to its investors. However, there may be events in the future
that the Company has not  accurately  predicted or over which the Company has no
control.  These events may include the Company's  limited  operating history and
uncertainty  as to the Company's  future  profitability;  uncertainty  as to the
Company's  ability to meet  business  targets  and  budgets  and to develop  and
implement  operational,  sales and  marketing  and  financial  systems to manage
rapidly growing  operations;  competition from other  participants in the highly
competitive telecommunications industry; uncertainty as to the Company's ability
to obtain  financing  on  acceptable  terms to finance  its  business  strategy;
uncertainty  as to the  Company's  ability  to obtain and  protect  intellectual
property   rights  or  to  develop   proprietary   products  that  will  receive
intellectual   property   protection;   the   possibility   that   technological
developments  may  adversely  affect the  commercial  viability  of VASP(TM) (as
defined) and the Company's other products; unanticipated regulatory changes that
may change the competitive environment to the Company's detriment; the Company's
efforts to address Year 2000 issues. Cautionary language in this report provides
examples of risks,  uncertainties and events that may cause the Company's actual
results  to  differ   materially   from  the   expectations   described  in  the
forward-looking statements of this Report. Occurrence of the events described in
this Report  could have a material  adverse  effect on the  Company's  business,
operating results and financial condition.



<PAGE>

                                                             
                                     PART I

Item 1.           Business

General. TeleHub Communications Corporation (collectively with its subsidiaries,
"Company")  believes  it has the  only  universal  ATM-based  telecommunications
network in commercial  operation  that is capable of seamlessly  interconnecting
with the PSTN. The Company's  first-to-market  proprietary  software,  VASP(TM),
will enable  telecommunications  service providers to (i) integrate the delivery
of voice,  video and data over a single platform;  (ii) seamlessly  interconnect
with the PSTN; (iii) provide real-time monitoring of telecommunications traffic;
and (iv)  facilitate the unbundling of the local loop. The Company's ATM managed
network,  which began carrying  commercial  traffic in December 1997,  acts as a
"proof of concept" for and generates revenues to support the Company's growth.

         The  Company  believes  the  platform   addresses   significant   needs
throughout  the  telecommunications  industry  for  improved  systems  and  less
reliance on legacy  hardware.  While the legacy network evolved  principally for
voice transmission, demand for data, video and advanced voice services has grown
rapidly  over the past ten years.  The legacy  network,  designed  to handle the
lower  bandwidth  requirements of voice traffic,  has inherent  service and cost
inefficiencies  when  carrying  data and video  transmissions.  Incumbent  Local
Exchange  Carriers ("ILEC") granted access to the local loop only on a "bundled"
basis  (where  carriers  must  purchase  an  entire  package  of  local  service
elements),  rather than offering  access to individual  local  exchange  service
elements.  Recent regulatory  changes have introduced  competition in both local
and long distance  telephone  services.  In particular,  requirements that ILECs
"unbundle" the local loop and permit other carriers to purchase individual local
exchange  elements should facilitate market entry. To be competitive in this new
environment   and  to  meet  growing  demand  for  high  speed  data  and  video
transmission  services,  telecommunications  carriers  are  seeking to enter new
markets  rapidly and to introduce  differentiated  services in a  cost-effective
manner.  Three major  carriers,  Sprint,  AT&T and Bell Atlantic,  have recently
announced plans to deploy, over the next two years, voice-over-ATM services that
will interconnect  with the PSTN, a service which TeleHub already offers.  While
such  networks  would  compete  directly  with the  TeleHub ATM  network,  those
carriers are potential customers for VASP(TM). In addition,  OEMs such as Lucent
Technologies  Inc.  and  Nortel  have  recently   announced  major  acquisitions
attempting to provide network  solutions needed for  transporting  carrier-class
voice transmissions over more efficient data networks. The Company believes that
its VASP(TM) technology provides ILECs, CLECs, IXCs and OEMs with the ability to
accelerate the introduction of new products and services, to reduce costs and to
enter into new markets rapidly.

         TeleHub  operates  two  principal   subsidiaries:   TeleHub  Technology
Corporation (TTC), which develops the commercial  applications of VASP(TM),  and
TeleHub Network  Services  Corporation  (TNS),  which operates the Company's ATM
network.  TTC is marketing  VASP(TM)-based  voice and data products to potential
customers in the OEM segment, like Newbridge,  Nortel and Tellabs, as well as in
the carrier market,  including ILECs, CLECs and IXCs. The ability to carry voice
quality transmissions over an ATM backbone, and VASP(TM)'s ability to offer toll
and certain central office switching  capabilities on a software basis, open the
multi-billion  dollar  voice  switch  market to ATM  switch  manufacturers.  For
example,  Newbridge has purchased a "right-to-use" perpetual license for a trial
system of VASP(TM) for $5.0 million. In addition,  the Company has signed an OEM
agreement with Siemens Information and Communications  Networks, Inc. (Siemens).
Moreover,  with future enhancements,  the Company expects VASP(TM) to allow LECs
to unbundle  the local loop and offer local  number  portability  ("LNP")  using
existing facilities,  while protecting LECs' proprietary customer databases,  an
issue which management believes has significantly  delayed the implementation of
local exchange competition.

         TNS, which utilizes  VASP(TM)  technology,  currently  offers wholesale
long  distance  services  to the  switchless  reseller  market.  Because  of the
inherent  efficiencies  in  carrying  voice  traffic  over an ATM  backbone  and
VASP(TM)'s ability to seamlessly interconnect that traffic into the PSTN, TNS is
able to offer switched  wholesale  voice  services at rates  generally 10% - 40%
lower than those currently offered by competing wholesale service providers.  As
a result,  TeleHub's wholesale customer base has been expanding and, at December
31,  1998,  includes  twenty-six  switchless  resellers  who  have  transitioned
approximately   200,000  presubscribed  lines  to  TNS's  network.  The  Company
estimates that these reseller customers will represent approximately 1.5 million
presubscribed  long distance lines which can be transitioned onto TNS's network.
TNS also expects to offer wholesale long distance services to ILECs, CLECs, ITCs
and international  carriers terminating traffic in the United States.  TeleHub's






                                       2
<PAGE>

network,  interconnected via leased lines from WorldCom,  reaches  approximately
64% of the telephone  exchanges in the United States  directly and the remaining
36% through contractual relationships with other carriers.

         Management  believes that the integration of the VASP(TM) technology on
an ATM backbone provides the following competitive advantages:

o    The Company believes that TeleHub's  VASP(TM)-enhanced  network is the only
     publicly-switched  ATM network in  commercial  operation  which  allows for
     seamless   interconnection  with  the  PSTN  without  requiring  additional
     telephone equipment or modified dialing procedures. A VASP(TM)-enhanced ATM
     network allows for increased  capacity and  efficiencies,  thereby lowering
     costs as compared to networks utilizing legacy technology.

o    When fully deployed,  VASP(TM) will allow for dynamic bandwidth allocation.
     VASP(TM) will enable TeleHub to replace a customer's fixed leased-line data
     network  with one which (i) is variable,  where the customer  only pays for
     capacity used, and (ii) can be publicly switched,  and therefore  connected
     nearly  anywhere  in the United  States,  which  management  believes is an
     improvement over competitors' existing service offerings.

o    VASP(TM)  enables certain  call-processing  instructions to be moved out of
     the LECs' central office,  thereby  reducing the traditional  dependence on
     the local exchange  switch.  The synergy  between an ATM-based  network and
     VASP(TM) enables the delivery of expanded  telecommunications services on a
     virtual basis without the need for an extensive switching network.

o    VASP(TM) provides  real-time  monitoring of  telecommunications  traffic, a
     feature which the Company believes no other carrier offers. VASP(TM) allows
     real-time  access to billing  information and customer calling patterns and
     also provides for electronic order entry and trouble ticketing.  Management
     believes these capabilities reduce network downtime,  provisioning  delays,
     maintenance costs and operating expenses, and improve customer service.

o    VASP(TM)  distinct data analysis  capabilities and open  architecture  will
     enable carriers to develop and implement new products and services, such as
     millisecond  billing. The open architecture design of the VASP(TM) software
     allows  carriers to program and deploy these new services more quickly than
     legacy  systems,  which are  dependent on  time-consuming  hardware  vendor
     modifications.

Industry Overview
         According  to  1996  industry  data  released  by  the  FCC,  the  U.S.
telecommunications  industry  served  more  than 90  million  households  and 25
million  businesses  (approximately  158 million  access  lines),  and generated
revenues  approaching $196.3 billion.  Telecommunications  wireline services are
provided in three  principal  markets:  long  distance,  local exchange and data
products and services.  While VASP(TM)'s  technology is applicable to nearly all
aspects of telecommunications  services, as well as OEMs who sell their products
to carriers,  TNS markets its products and services to customers  principally in
the wholesale long distance services market.

         The Long  Distance  Market.  The FCC's  Statistics  of Common  Carriers
reports  that  the  domestic  long  distance   industry   generated  revenue  of
approximately  $88.6 billion in 1997.  The long distance  market is comprised of
three tiers. The first tier consists of facilities-based long distance carriers,
such as AT&T, MCI, WorldCom and Sprint, who provide long distance communications
services using their own equipment to transmit  telephone calls.  These carriers
collectively  accounted  for  approximately  80% of all toll  revenues  in 1997.
"Second tier" carriers, consisting primarily of switched resellers such as Excel
Communications  Inc.,  Cable and  Wireless,  plc.,  LCI  International  Inc. and
Frontier  Corporation  ("Frontier"),  accounted for  approximately  6.0% of toll
revenue in 1997. The remaining market share, or "third tier," is held by smaller
companies primarily consisting of switchless resellers.

         TNS is marketing  wholesale  long distance  services,  which consist of
providing  bulk  transmission  capacity to  resellers.  According  to the Yankee
Group,  wholesale long distance services constitute a market with estimated 1997
revenues of $5.4 billion,  growing at a rate  approximately  between 10% and 15%
annually.  The Company estimates that the market for the wholesale  "switchless"
resale  segment of the wholesale long distance  resale market was  approximately
$2.4 billion in 1997 and continues to grow at a rate of 10% to 12% annually.




                                       3
<PAGE>

         The Local Exchange  Market.  According to FCC data,  total revenue from
local telecommunications  services in 1997 was approximately $103.0 billion. The
Telecommunications  Act was enacted in large part to increase competition in the
local telecommunications  industry and provide a framework for other carriers to
compete  with LECs by  reselling  local  telephone  service,  leasing  unbundled
elements of the ILECs'  networks or building new local service  facilities.  The
Telecommunications  Act has created many opportunities for alternative providers
in the local services market. The Company believes that large telecommunications
users will increasingly demand diversity in local telecommunications  providers,
as has  been  the  case in long  distance  and  private-line  telecommunications
services,  and that VASP(TM) will facilitate  other carriers'  entrance into the
local exchange market and their utilization of unbundled network elements.

         The Data Products and Services Market.  Data products and services have
been the highest growth segment of the telecommunications industry in the 1990s.
According to Data Communications,  data-related  products and services accounted
for revenues of almost $79.0 billion in 1997--a growth rate of approximately 17%
from 1996.  According  to the Yankee  Group,  current  trends  suggest that data
revenues  will double over the next three years and will grow five times  faster
than voice revenues.  TNS is targeting the data market through both private line
and  bandwidth-on-demand   products,  which  will  be  integrated  on  TeleHub's
VASP(TM)-managed ATM network.

  Technology
  Circuit, Packet and Cell Switching Technologies
         There are three switching technologies used in communications networks:
circuit-switched  systems,  packet-switched  systems and cell-switched  systems.
Circuit-switched  systems establish a dedicated  channel for each  communication
(such as a telephone call for voice or facsimile),  maintain the channel for the
duration of the call,  and disconnect the channel at the conclusion of the call.
Packet-switched  communications systems, including  voice-over-Internet Protocol
networks,  format the  information  to be  transmitted  (such as e-mail,  voice,
facsimile or data) into a series of shorter digital  messages called  "packets."
Packet-switched systems offer several advantages over circuit-switched  systems,
particularly  the  ability to  commingle  packets  from  several  communications
sources simultaneously onto a single channel.  Cell-switched  technology,  which
includes  ATM,  combines  elements  of both  circuit and packet  switching.  ATM
closely   resembles   packet   switching  in  that  it  breaks  a  communication
transmission  into  cells,  which are  packets of a fixed  size,  which are then
placed on  channels  that are  shared by several  data  streams.  ATM  resembles
circuit  switching  in  that  it  provides   connection-oriented  service.  Each
connection has a set-up phase, during which a "virtual circuit" is created.

         There  are  many  Internet   Protocol  ("IP")  networks   currently  in
operation.  While generally adequate for data transmission needs, these networks
usually  are not  configured  to  provide  the voice  quality  of a  traditional
telephone call. With current technology,  this quality can only be achieved by a
combination  of a substantial  cushion of  communications  capacity,  customized
end-user  equipment,  dial-up "access codes," and/or other special procedures to
initiate a call.

         There are also concerns about the quality,  reliability and security of
packet-switched systems.  Packets are transported on a first-come,  first-served
basis with no guarantee of success.  Some packets may experience  severe delays,
while others may be dropped and never arrive. Certain data communications,  such
as e-mail and file  transfers,  require 100% accuracy,  but can easily  tolerate
delay.  Real-time voice  transmissions  can tolerate only minor delays,  but can
tolerate some distortion. Real-time video broadcasts have very low tolerance for
both delay and distortion.

         Cell   switching   can  resolve  most  of  the  problems   inherent  in
packet-switched  networks:  (i) a cell will not be delayed  behind an  unusually
large  packet  and (ii) the  addressing  information  contained  in the cell can
include   prioritizing  and  sequencing   data,  which  eliminates   delays  and
distortion.  Thus,  an ATM  carrier  can offer  quality of  service  performance
guarantees.

         The fact that the ATM circuit is virtual,  not  physical,  provides two
major  advantages.  First,  it is not  necessary  to reserve  exclusive  network
resources  for a  given  connection,  and  thus  the  economic  efficiencies  of
statistical  multiplexing  of several  simultaneous  data  transmissions  can be
realized. Second, once a virtual circuit path is established,  switching time is
minimized,  allowing much higher network  throughput.  TeleHub decided to deploy





                                       4
<PAGE>

VASP(TM) over an ATM network because of ATM's superior  capabilities as compared
to alternative circuit and packet switching systems.

  Voice Switching Over ATM
         With the development of voice switching over ATM,  efficiencies  can be
achieved through  integrated,  consolidated  networks for voice,  data and video
connected  via  leased  lines  or  public  networks.  ATM  delivers  operational
simplicity  equivalent to that of the virtual  private  network ("VPN") and adds
the superior bandwidth economics of multiplexing. Voice calls may be efficiently
transported   via  virtual   circuits,   with  voice  quality   assured  due  to
sophisticated  voice adaptation  techniques and quality of service support.  The
Company  believes  the   communications   industry  is  moving  rapidly  towards
consolidated  networks  based on ATM switching  because these networks offer the
advantages  of  speed,   economy,  and  interoperability  for  the  spectrum  of
networking applications.

  Signaling System Number 7
         Technology has changed the architecture of telephone switching systems.
The  Signaling  System  Number  7  ("SS7")  is  the  current  telecommunications
industry-accepted  system of protocols and procedures used to control  telephone
communication  and  provide  routing  information.  SS7 is also used to  provide
vertical  calling   features  such  as  calling  card  validation,   800  number
portability  (i.e.,  the routing of 800 numbers to a new  location)  and calling
name delivery. By storing information, such as routing data, billing information
and technical  system data and controls at the Signal Control Point ("SCP"),  an
SS7 network allows call set-up and routing to be accomplished independent of the
voice circuits.

         SS7  is  characterized  by  high-speed   packet  data  and  out-of-band
signaling  (signaling  that  does not  take  place  over  the  same  path as the
transmission  itself, such as a voice conversation).  Traditional  telephony was
in-band,  where the  signals to set up a call  between  one  switch and  another
always  took place over the same  trunk  that would  eventually  carry the call.
Out-of-band signaling establishes a separate digital channel for the exchange of
signaling  information.  This channel is called a signaling link. When a call is
placed,  the dialed digits,  trunk selected and other pertinent  information are
sent between switches using their signaling links, rather than the trunks.

         Out-of-band  signaling has several advantages over traditional  in-band
signaling:  (i) it allows for the transport of more data at higher speeds;  (ii)
it allows for signaling at any time during the call,  not only at the beginning;
(iii) it enables signaling to network elements to which there is no direct trunk
connection;  and (iv) it  provides  both  error  correction  and  retransmission
capabilities to allow continued  service in the event of signaling point or link
failures.  However,  under traditional  circuit-switched  systems, SS7 signaling
identifies  the trunk to which a call must be routed to and that  trunk  must be
present and  available at all times.  Therefore,  the  bandwidth is reserved and
paid for whether it is used or not. Moreover, that leased line is engineered for
the busy hour model,  so that little or no call  blocking  occurs.  In contrast,
VASP(TM)  has features of SS7 imbedded  within it and,  therefore,  transactions
which are sent over a VASP(TM)-managed network can be switched directly into the
PSTN.  TeleHub  improves upon the  traditional  SS7 call model because  VASP(TM)
interprets  the SS7 messages on a dynamic  basis,  so that ATM  connections  are
created  "on-demand."  On the ATM  backbone,  only a  portion  of the busy  hour
capacity is permanently connected.

  Operational Support Systems
         OSS  encompass  a broad  array of software  and  systems  that  perform
critical  functions  for   telecommunications   carriers,   including  ordering,
provisioning,  service assurance and billing. Ordering systems allow carriers to
collect customer information,  retrieve current service information, capture and
validate new service  requests,  verify  availability  of selected  services and
transmit  completed orders to one or more  provisioning  operational  supporting
systems. Carriers use provisioning systems to install services for new customers
and to change or add services for existing customers.  Service assurance systems
allow  carriers  to perform  testing,  monitoring  and  reporting  necessary  to
maintain  network  availability  and feed  operational  data to  other  business
systems.  Carriers use billing  systems to collect,  collate,  manage and report
billing information.

         Historically,  as carriers have added new services, such as wireless or
Internet-based  services,  they have developed  multiple,  distinct  operational
supporting   systems.   These  legacy,   proprietary  OSS  have  typically  been
mainframe-based  systems that in many cases  utilize  incompatible  software and
technologies,  making  communication  among  systems  difficult.  These  OSS are





                                       5
<PAGE>

further strained by the many incremental changes that have been made in order to
accommodate new technologies,  such as client/server technology and advancements
in data networking,  and the proliferation of value-added services, such as call
waiting,  call forwarding and voice mail. Despite these  difficulties,  carriers
are unable to replace  completely  existing OSS due to the large investments and
vast  amounts  of  historical  data  contained  in these  systems.  As a result,
carriers  continue  to make  incremental  modifications  to these  OSS,  further
increasing their complexity and  interoperability  difficulties.  In contrast to
the current  telecommunications  environment in which carriers use disparate OSS
systems for each aspect of a call transaction  (e.g., call processing,  billing,
traffic monitoring and decision support systems),  TeleHub's VASP(TM) integrates
all of these  functions into one system that is compatible  with legacy systems.
VASP(TM) is capable of processing all information regarding a call in real-time,
is scalable to a carrier-class  level,  and has the flexibility to integrate new
services and products quickly and seamlessly.

The TeleHub Solution
         TeleHub was formed to  capitalize  on the demand for  advanced  network
features  and  capabilities  resulting  from the  telecommunications  industry's
changing competitive and regulatory environment.  Existing carriers must develop
new OSS that are  interoperable  with their legacy systems,  not only to support
initiatives like LNP and the unbundling  requirements of the  Telecommunications
Act,  but  also  to  enable  carriers  to  respond  to  increasing   competitive
challenges.

         VASP(TM) addresses several  shortcomings of legacy networks  including:
(i) the inability to switch packet- and cell-based  traffic into the PSTN;  (ii)
the lack of real-time management, billing and monitoring capabilities; (iii) the
inflexibility  of  hardware-based  network  architectures;  and (iv) the lack of
integrated OSS capabilities.  VASP(TM) creates virtual  switching  capabilities,
permits  real-time  network  supervision and facilitates the introduction of new
service offerings. When fully deployed, VASP(TM) will integrate voice, video and
data  on  a  single   switched   network   and   enable  the   provisioning   of
bandwidth-on-demand services.

Key benefits of the Company's solution include:

         New Market Opportunities. VASP(TM) allows customers to overcome some of
the traditional barriers to entry in the telecommunications service markets such
as hardware  limitations  and the high cost of  facilities.  Management  expects
VASP(TM)-enhanced  carriers to be able to enter the local, long distance, voice,
video and data  transmission  markets using one  integrated  network.  Utilizing
TeleHub's ATM network, switchless resellers soon will be able to offer video and
data  services in addition to their  customary  voice  services.  Similarly,  by
incorporating  VASP(TM) into their products,  ATM switch manufacturers can enter
the voice switch market.

         Flexible and Scalable Architecture.  VASP(TM) is a software solution in
contrast to the  hardware-based  configuration of legacy  networks.  The Company
believes that VASP(TM)'s open  architecture  and integrated OSS capabilities can
be adapted to most existing vendor hardware and are easily and readily scalable,
so that carriers,  both small and large, can quickly and  inexpensively  develop
and  implement new products and services.  Existing  switching  platforms do not
have this  flexibility  and often  require  costly and time  consuming  hardware
modifications to add or change services.

         Rapid  Market  Entry  and  Cost  Avoidance.  Management  believes  that
VASP(TM)  offers the  capabilities  of a  facilities-based  network on a virtual
basis and therefore will allow  carriers to enter markets  quickly and avoid the
time and expense associated with procuring and installing costly central office,
tandem and  distribution  facilities.  Also,  OEMs  could  readily  adapt  their
existing products for multiple markets rather than incur significant  expense to
develop separate products for each market.

         Improved  Time-to-Market  for New Products and Services.  Historically,
new  product  and  service  offerings   required  extensive  testing  to  insure
compatibility with existing network configurations. VASP(TM) allows such testing
to be completed in less time than with the  legacy-based  systems and allows new
products and services to be rolled out electronically to the entire network from
one central location.

         Improved  Network  Management.  VASP(TM)  allows  real-time  access  to
billing  information  and  customer  calling  patterns,  and also  provides  for
electronic  order entry and trouble  ticketing.  With  real-time  supervision of
network activity,  VASP(TM)-managed  networks can monitor customer traffic,  and





                                       6
<PAGE>

the specific network  elements  involved in carrying a particular call while the
call  is   in-process.   Such  networks  can  also  recover  from  line  errors,
transmission faults and even catastrophic failures much more quickly than legacy
systems allow currently.  Network  maintenance and repair personnel can use this
data  to  build  more  efficient  routing  and  restoration   functions.   These
capabilities should reduce network downtime,  provisioning  delays,  maintenance
costs and operating expenses,  as well as enable carriers to improve the quality
of their services and to offer more responsive customer care.

         Increased Revenue from Existing Customers.  VASP(TM)-equipped  carriers
are able to store,  maintain and access relevant information about customers and
their calling patterns on-line.  The Company believes that such real-time market
research  could be  harnessed  to generate  additional  revenues or identify new
marketing opportunities.

         Increased  Value  to  Resellers.   VASP(TM)  enhances  the  competitive
position of resellers.  TNS offers  voice-over-ATM  services at rates  generally
lower  than  traditional  circuit-based  voice  rates  or  other  point-to-point
advanced  voice  services.  TNS's  reseller  customers will also soon be able to
expand their service  offerings to include  video and data services  without the
need to  procure  high cost  private  data  networks.  With  bandwidth-on-demand
pricing,  end-user  customers are charged only for actual  bandwidth used, which
makes  video and data  services  affordable  for  small  end-user  customers  (a
reseller's principal market).  Using VASP(TM)'s advanced information  management
capabilities, TNS can electronically provision new customers and diagnose delays
much more  quickly  than legacy  systems,  so new  customers  can quickly  start
generating revenue for the reseller.

Business Strategy

         The  Company's  objective  is to  become  a  leading  provider  of next
generation services and software solutions to the  telecommunications  industry.
Key elements of the Company's strategy include:

         Leverage  its  First-to-Market  Advantage.  The Company  will  continue
leveraging its proprietary  technology to influence  industry  standards,  build
market share quickly and develop innovative packaging and pricing plans.

         Build Market Share on the TNS Network.  Company will  continue to build
TNS's   customer  base  by  leveraging   the   competitive   advantages  of  its
VASP(TM)-managed  ATM  network.  TNS expects to continue  offering  its enhanced
services at rates generally  lower than competing  carriers while also providing
superior   services,   including   real-time  access  to  billing  and  customer
information,  electronic provisioning and trouble ticketing,  and soon, to offer
switched video and data services.

         Expand  Strategic  Alliances.  The Company will continue to enhance its
joint marketing and technology  development  efforts through strategic alliances
with  leading  equipment  manufacturers  and  carriers.  The  Company has formed
strategic alliances with manufacturers, such as Newbridge, to assist the Company
in   introducing   its  VASP(TM)   technology   into  the  next   generation  of
telecommunications  equipment.  Further the Company has signed an OEM  licensing
agreement with Siemens to sell its VASP(TM)  software  bundled with Siemens' ATM
switches to next  generation  carriers.  In  addition,  the Company has formed a
strategic relationship with Comdisco, a network services provider, to accelerate
entry into targeted  corporate  markets and to stimulate growth of the Company's
customer base. The Company  continues to pursue  additional  relationships  with
other telecommunications industry participants.

         Operate and  Enhance the Next  Generation  Platform.  The Company  will
continue to enhance  VASP(TM) to offer a broader  range of products and services
to carriers and OEMs. Further  enhancements of VASP(TM) are also directed toward
the continued  integration  of the Company's  long distance ATM network with the
local services market.  Because TNS is currently utilizing  VASP(TM),  potential
TTC  customers  can  witness  the  benefits  of  a  VASP(TM)-based  platform  in
operation,  as well as utilize the TNS network  for  developing  and testing new
products.

         Attract  Experienced  Management.  The Company will continue to attract
highly qualified  individuals with proven expertise from various segments of the
telecommunications  and related  industries.  The Company's  management team has
extensive and diverse  experience.  Management has demonstrated its expertise by
deploying  and  operating  TeleHub's  ATM  network and by  developing  a growing
customer base for its wholesale  services,  as well as by developing,  enhancing
and licensing the VASP(TM) technology.




                                       7
<PAGE>

Products and Services

  TeleHub Technologies Corporation

         VASP(TM) applications are designed to administer,  operate, control and
manage  switching  devices and network  elements in the public carrier  services
market. The Company believes that VASP(TM) provides  telecommunications carriers
with superior billing,  management and control  capabilities.  VASP(TM) has been
designed  to  be  integrated   with  any  carrier's   customer  care,   billing,
provisioning  and  network   management   applications.   VASP(TM)   accumulates
information about network events for each phone call and generates a Transaction
Detail Record ("TDR").  The TDR can be converted into the standard industry call
detail record or into customized  information  that allows service  providers to
bill innovatively (e.g.,  millisecond billing).  In addition,  service providers
can access their databases  containing customer  information and individual call
records in real-time to trouble  shoot  problems and identify  customer  calling
patterns.  This  information  can be  obtained by simple  dial-up  access from a
personal  computer,  as opposed to the current  network  process of  downloading
information  from each switch in the network,  which can take more than a day to
complete.  The carrier can use such  information  as a strategic  advantage  for
pricing and offering targeted products based upon real-time market feedback. The
Company's software can also be used as a network surveillance monitoring device.
The  software  has the  ability  to  track  phone  calls  from  end-to-end  and,
therefore,  can  locate  the  specific  network  element  that may be  causing a
problem.  These  advantages,  coupled with the capability to provision  circuits
electronically, will significantly reduce carriers' operating costs.

         The Company expects that future releases of VASP(TM) will allow for the
replacement of the Class 4/tandem  switch and eventually the Class  5/end-office
switch.  Based upon engineering  studies, the Company believes that by using ATM
and VASP(TM) in place of  traditional  switch  fabrics,  the reduction in tandem
switching investment will lower the overall cost of multi-city  interconnections
by 45% to 60%. The open system  architecture  is scalable from small sizes up to
hundreds of phone calls per second,  and its underlying  hardware  platforms and
control  center  designs  are  selected  to meet  the  operating  objectives  by
accumulating no more than one hour of downtime during each twenty year period of
service (99.999% uptime service level objective).  VASP(TM) is also adaptable to
other transmission mediums such as IP, cable and wireless.

TTC's products and services include the following:

         Virtual Class 4/Tandem Switching (available today). The Company expects
that its software,  combined with an ATM switching platform,  will be capable of
replacing the  traditional  Class 4/tandem  switch.  This capability will enable
data service  providers to offer voice  products over their  existing  networks.
VASP(TM),  running on a Sun  Microsystems  server and  controlling ATM switches,
offers  a 30%  to 40%  savings  over  the  cost  of  purchasing  and  installing
traditional  tandem switches.  In addition,  TeleHub's  VASP(TM)-based  software
solution   offers  other   benefits,   including  cost  effective   scalability,
customization to specific  customer  requirements and  applications,  and faster
introduction of new products.

         Local Switch Bypass (available today). TTC is engineering  solutions to
identify Internet data and other  long-holding time calls (e.g., voice mail) and
route them directly to called parties,  thereby bypassing  end-office and tandem
switches.  The Company  expects this  technology  to address  carriers'  growing
problem of  congestion  at  end-office  and tandem  switches  caused by Internet
traffic.  TTC's solution allows  carriers to manage existing  traffic levels and
flow without purchasing additional switch capacity.

         Virtual  Class  5/End-Office  Switching  (expected  to be  available in
second quarter of 1999). TeleHub is enhancing its VASP(TM) solution to duplicate
the basic  functionality  of a Class  5/end-office  switch.  TeleHub expects its
virtual Class 5 solution to provide  carriers  with the  capability to enter the
local  market  with a voice  product  at a  fraction  of the cost of buying  and
installing a conventional Class 5/end-office switch. The same advantages offered
by  TeleHub's  Class  4/tandem  switch  solution  apply  here--reduced   capital
expenditures,  customization and faster  time-to-market for new products.  As an
example,  many CLECs  have data  Points of  Presence  ("POPs")  which  currently
utilize ATM switches.  TeleHub  expects its solution to allow CLECs to carry and
switch voice traffic using their existing ATM networks without  purchasing Class
5/end-office switches.




                                       8
<PAGE>

         Virtual STP/SCP  Signaling  (available  today).  Signal Transfer Points
("STPs") and SCPs are key elements of the underlying SS7 network. Messages, such
as telephone number,  calling card validation,  800 number routing,  and calling
name delivery are transmitted to STPs that route the messages to the proper SCPs
where call processing information is stored. Embodied within the VASP(TM) design
today are both SCP and STP  functionality,  thereby allowing carriers to perform
their own SS7  signaling,  without  purchasing  signaling  services or expensive
equipment.  VASP(TM)  contains  translation and routing  instructions  needed to
deliver advanced network services and can be further enhanced as new services or
requirements are identified.  The necessary STP functions are also  incorporated
in the  VASP(TM)  design to handle the  signaling  and  management  of  "on-net"
traffic.  The conventional STP is deployed in the TeleHub design as an interface
to the other  carriers  in the PSTN and to act as a  firewall  to  protect  both
parties proprietary information from compromise.

         Mediated  Access Services  ("MAS")  (expected to be available in 1999).
The  Telecommunications  Act and  subsequent  FCC mandates will require  service
inter-operability   between   the  various   proprietary   systems  of  existing
telecommunications  carriers. Local and long distance carriers and their current
software  vendors  are  therefore  expending  significant  design  and  software
development resources trying to create the inter- operability solutions that can
be achieved through VASP(TM). TeleHub expects many carriers to select TeleHub as
a service  supplier and VASP(TM) as a standard  product to integrate the various
operating overlays.

         TeleHub  expects its MAS  capability to provide  neutral  "third-party"
access to service  management system and OSS databases  throughout the industry.
Any service provider  (virtual or  facilities-based)  will be able to obtain the
key call treatment  information  necessary to process customer calls,  while the
proprietary information of the database owner is protected from compromise.  The
first  requirement  for  mediation  results  from the  FCC's  mandated  LNP that
requires  the RBOCs and GTE  Corporation  ("GTE") to permit  their  customers to
switch to another  competing LEC and still retain their same  telephone  number.
The Company  believes its MAS will encourage the LECs to offer  unbundled  local
service  elements to other carriers as required by the  Telecommunications  Act.
Management  believes  this is  currently  the  greatest  hurdle for the RBOCs to
overcome in achieving  their long  standing goal of entry into the long distance
business within their regions.

         Switched  Virtual  Circuit  ("SVC")  (expected to be available in first
quarter  2000).  The  Company is in the  process  of  developing  a SVC  product
expected to provide  carriers with a cheaper  alternative  to permanent  virtual
circuit (i.e., point-to-point) products offered today. The advantage of a SVC is
that when the circuit is not utilized, the capacity can be allocated for another
use. A permanent virtual circuit must allocate  bandwidth to the user regardless
of whether there is traffic flowing over the circuit.

TTC Customer Relationships
         Since the initial release of VASP(TM), the Company has actively pursued
OEMs,  CLECs and other  network  service  providers  to license its  proprietary
technology.  As of December  31, 1998,  the Company has signed an OEM  licensing
agreement,  which provides for the sale of two VASP(TM)  licenses.  In addition,
TTC has  submitted  proposals to two CLECs.  In the OEM market,  The Company and
Newbridge   have  signed  an  agreement   whereby   Newbridge  has  purchased  a
"right-to-use"  license for a trial  system of VASP(TM) for $5.0 million for use
in its  laboratory  and has  proposed a  VASP(TM)-enhanced  solution  to several
RBOC's. TTC anticipates entering definitive contracts during 1999.

         The Company has formed a joint venture that will use VASP(TM) to manage
satellite telecommunications delivery in the Australasian region (Australia, New
Zealand,  Southeast  Asia,  India,  and  the  Philippines).   The  Company  will
contributed a non-exclusive  VASP(TM) license and associated  technical  support
and received a 49%  interest,  while the joint venture  partner will  contribute
$5.0 million for operating  funds and is initially  managing the joint  venture.
The  Company  believes  that the  joint  venture  will  introduce  the  VASP(TM)
technology into a new geographic market and demonstrate  VASP(TM)'s  benefit for
satellite  networks  just as TNS  demonstrates  VASP(TM)'s  ability for wireline
networks.

  TeleHub Network Services Corporation
         Network.  TeleHub's  VASP(TM)  solution has been  developed to converge
voice, data and video on its single network. TNS's backbone is centered on three
ATM switching platforms located in Chicago,  New York and Los Angeles. The three
sites are  connected  via DS-3  (growing to OC-12) fiber optic lines leased from





                                       9
<PAGE>

WorldCom. TNS's network, utilizing WorldCom's backbone circuits to connect TNS's
planned  POPs,  is  designed  to  ultimately  reach  over 90% of U.S.  telephone
exchanges  (currently  at  64%).  The use of  TNS's  ATM  backbone  between  its
switches, as compared to conventional legacy technologies, is estimated to yield
a 3:1 (or more) increase in traffic carrying  capacity and significant  savings.
TeleHub believes that its savings on the backbone are achieved via an ability to
use  available   contracted  permanent  bandwidth  in  an  "on-demand"  fashion.
TeleHub's backbone bandwidth  allocation strategy assumes that only a portion of
the busy hour bandwidth needs to be permanently  connected,  an assumption based
upon standard industry traffic engineering models. The rest of the bandwidth can
be used to handle busy hour traffic between other signaling  service  providers.
It is  VASP(TM)'s  ability to create or tear down network  connections  remotely
"on-demand"  that  enables  TeleHub  to  most  efficiently   utilize   available
bandwidth.  For example,  in a network with  cross-country  switches,  busy hour
bandwidth would be allocated on the East Coast at a different time than it would
be required on the West Coast.  Available  bandwidth  could be shifted to follow
the traffic peaks, resulting in a lower overall bandwidth requirement than would
be necessary in a fixed facility network.

         Long Distance.  TNS provides wholesale long distance services to ILECs,
CLECs and international  telephone  companies that terminate  telephone calls in
the United States.  TNS offers its customers  competitive  pricing yet maintains
margins  higher  than its  competitors  because of the  efficiencies  of its ATM
backbone.  The inherent  advantages of ATM coupled with VASP(TM)  enables TNS to
better  manage and control its network,  therefore  further  enhancing  its cost
advantage. In addition, TNS provides its carrier customers with real-time access
to end user billing  information and calling patterns,  thereby allowing them to
market enhanced services to their customer bases.

         Bandwidth-on-Demand  (expected to be available in 2000). TNS expects to
provide a  bandwidth-on-demand  product  utilizing a VASP(TM) SVC product.  With
bandwidth-on-demand,  end-user  customers are charged only for actual  bandwidth
used,  which  makes  video  and data  services  affordable  for  small  end-user
customers (resellers' principal market).

         The following table  summarizes the manner in which the Company expects
TNS's services to meet industry needs:

<TABLE>
<CAPTION>
Services Segment               Current Industry Environment               TNS Offering
------------------------       ----------------------------------         ---------------------------------------
<S>                            <C>                                        <C>
Wholesale Long Distance        o  Predominately voice offering            o  Integrated voice, video and data
                               o  Fixed capacity pricing                  o  Bandwidth on demand pricing
                               o  Limited and delayed access to           o  Real-time access to customer
                                  customer information (including            information (calling patterns and
                                  calling  patterns)                         billing)
</TABLE>


TNS Customer Relationships
         TNS has  targeted  the  switchless  reseller  segment,  which  in 1997,
consisted of approximately 500 service providers with annual revenues  estimated
at $2.1 billion.  Additionally,  TNS is targeting ILECs, CLECs and international
telephone  companies  that terminate  traffic in the United States.  TNS is also
marketing  its data services to large  Fortune 1000  companies.  TNS has entered
into a memorandum of  understanding  with  Comdisco,  whereby the companies will
jointly market long distance services to Comdisco's existing customer base.

         As of December  31,  1998,  the  Company  had  entered  into twenty six
contracts to provide long  distance  services to  switchless  resellers who have
transitioned  approximately  200,000  end-user  lines  onto TNS's  network.  The
Company  estimates that these reseller  customers  represents  approximately 1.5
million end-user  telephone lines which can be transitioned  onto TNS's network.
In  addition,  the Company is  currently in active  contract  negotiations  with
multiple other service carriers.

Sales and Marketing
  TeleHub Technologies Corporation
         TTC utilizes a small and  experienced  internal sales force,  strategic
alliances,  and  co-marketing  agreements  to market its VASP(TM)  software.  In
addition,  TeleHub leverages the sales forces of its strategic  partners and OEM
vendors to further  penetrate  its  targeted  markets.  The TeleHub  sales force
focuses its selling efforts on potential  customers in the OEM segment,  such as





                                       10
<PAGE>

Newbridge,  Ascend,  General Datacom Industries Inc., World Access, Fore Systems
Inc.,  Coyote Network Systems Inc.,  Lucent,  Siemens,  Telefonekitieboleset  LM
Ericsson  ("Tekelec") and Nortel.  TTC markets custom platform services to RBOCs
and CLECs, and to network service providers such as Comdisco.

  TeleHub Network Services Corporation
         TNS has an  experienced  internal  sales  department  that  works  with
several  experienced  external  sales agents.  TNS's sales effort is directed at
many of the same carrier  customers as TTC, but offers  transport  and switching
services as opposed to software  solutions.  TNS markets the  capability  of its
VASP(TM)-enhanced ATM network, thereby allowing its customers to offer a broader
range of services than current product offerings encompass. For example, TNS has
been able to market voice services to Comdisco's existing customers,  to whom it
previously only offered data services.

Competition
         The telecommunications industry is highly competitive, rapidly evolving
and subject to constant technological change. In particular,  there are numerous
companies offering long distance products and services,  and the Company expects
competition  to increase  in the future.  The  Company  believes  that  existing
competitors are likely to continue to expand their product and service offerings
to appeal to existing or  potential  customers  of the  Company.  Moreover,  the
Company  expects  that new  competitors  are likely to enter the  communications
market  and some of these new  competitors  may market  communications  services
similar to the Company's  products and  services,  which would result in greater
competition.    However,   increased   competition   also   creates   additional
opportunities for the Company to market its  VASP(TM)-based  products to current
and future  participants  in the local exchange,  long distance,  data and video
markets.

         Many  competitors   (such  as  AT&T,  MCI,  Sprint,   WorldCom,   Qwest
Communications  International  Inc. and others) and potential  competitors  have
substantially  greater  financial,  personnel,  technical,  marketing  and other
resources  than the  Company.  The  Telecommunications  Act allows the RBOCs and
others (such as electric utilities and cable television  companies) to enter the
long  distance  market.  A  continuing  trend  toward  consolidation,   mergers,
acquisitions and strategic  alliances in the  telecommunications  industry could
give rise to significant  new  competitors to TeleHub or its customers.  TeleHub
anticipates  that certain  entrants will be strong  competitors  because,  among
other reasons,  they may (i) be well capitalized;  (ii) already have substantial
end-user  customer  bases and brand name  recognition;  and/or  (iii) enjoy cost
advantages  relating  to local loops and access  charges.  The  introduction  of
additional  strong  competitors  into the switched long distance  business could
mean  that  TeleHub  and  its  customers  would  face  substantially   increased
competition.  As a new  entrant,  TeleHub  will  compete  primarily by providing
superior service and support and on price.

         In addition,  the regulatory  environment in which the Company operates
is  undergoing  significant  change.  As this  regulatory  environment  evolves,
changes may occur which could create  greater or unique  competitive  advantages
for all or some of the Company's current or potential competitors, or could make
it easier for additional parties to provide services.

         In the United States,  price  competition in the long distance business
has generally  been  intensive.  AT&T,  the leading long distance  carrier,  was
reclassified as a non-dominant  carrier,  which allows AT&T substantial  pricing
flexibility.   Long  distance   carriers,   including  AT&T  as  well  as  other
non-dominant  carriers such as TNS,  currently  must file tariffs at the FCC for
domestic  interstate  services and for  international  services.  However,  such
tariffs  can be amended on one day's  notice;  therefore,  price  changes by one
carrier can be matched readily by the others.  The long distance  communications
industry is significantly  influenced by the marketing and pricing  decisions of
larger  industry  participants  such as AT&T,  MCI,  Sprint  and  WorldCom.  TNS
believes that its wholesale customers generally price their service offerings at
or below the prices  charged by AT&T for its long  distance  reseller  services.
Rate reductions by AT&T and other  first-tier  carriers may necessitate  similar
price decreases by the Company.

         Under the Telecommunications Act, RBOCs have the opportunity to provide
out-of-region  long distance  services  immediately  and in-region long distance
services  if  certain  conditions  are met.  RBOC entry  into the  domestic  and
international  long  distance  business  and the  emergence  of other  new local
competitors could result in substantial  competition to the Company and may have
a material adverse effect on the financial  condition,  results of operations or





                                       11
<PAGE>

cash flow of the  Company.  In  December  1997,  a federal  court ruled that the
Telecommunications  Act's  pre-conditions to the RBOCs' entry into the in-region
long  distance   telecommunications  services  are  unconstitutional  (the  "SBC
Decision").  Other federal courts have reached contrary  decisions,  and the SBC
Decision has been stayed pending appellate  review.  The result of the appellate
review cannot be predicted.  If the SBC Decision were upheld on appeal, it could
have an adverse effect on the Company and other carriers  because it would speed
the entry of the RBOCs into the in-region long distance  market and would reduce
the primary incentive for RBOCs to open their local markets to competition.

         The long distance industry is undergoing significant consolidation that
has created and will continue to create numerous other entities with substantial
resources to compete for long distance  business.  New  technologies  could also
give rise to new regulation or new competition. The Company's larger competitors
have significantly greater name recognition,  financial,  technical, network and
marketing  resources.  They also may offer a broader  portfolio  of services and
have long standing relationships with customers targeted by the Company.

         The Company has entered  into  telecommunications  services  agreements
with its wholesale long distance  customers  which do not contain  minimum usage
commitments  and which are cancelable  upon short notice without  penalties.  If
these services  agreements are canceled or are not renewed upon expiration,  the
loss  of  customers  could  have a  material  adverse  effect  on the  Company's
business,  operating  results and financial  condition.  Prices for domestic and
international  long distance calls have decreased in recent years and are likely
to continue to decrease. There can be no assurance that the Company will be able
to compete effectively in the domestic or international long distance markets.

         TTC  faces  competition  from  some of the most  experienced  companies
engaged in the development of telecommunications equipment and related software.
Examples  include  switch  vendors  (Lucent,  Nortel and  Siemens),  ATM vendors
(Nortel, Siemens, Alcatel NA Cable Systems Inc. ("Alcatel"),  Cisco and Ascend),
signaling   products   vendors   (Nortel  and   Tekelec),   and  OSS   providers
(Hewlett-Packard  Inc. and Applied  Digital Access Inc.).  The Company  believes
that  existing  competitors  are  likely to  continue  to expand  their  product
offerings to appeal to existing or potential  customers of the Company.  Many of
the  Company's  existing   competitors  have  financial,   personnel  and  other
resources,  including  brand name  recognition,  substantially  greater than the
Company. TTC may well find itself both a strategic partner and a competitor with
some of these companies.

         In the future, the Company may be subject to intense competition due to
the development of new technologies, such as ATM and wave division multiplexing,
resulting in an  increased  supply of domestic  and  international  transmission
capacity. The telecommunications  industry is experiencing a period of rapid and
significant  technological  evolution  marked by the introduction of new product
and service  offerings.  The  introduction  of new  products or emergence of new
technologies  may cause  capacity  to greatly  exceed the demand,  reducing  the
pricing of certain  services to be provided  by the  Company.  The effect on the
Company's  operations of technological  changes cannot be predicted,  and if the
Company is unable to keep pace with advances,  it could have a material  adverse
effect on the financial  condition,  results of operations  and cash flow of the
Company.

         The Company believes that its proprietary software is unique in that it
provides for the only ATM service in commercial  operation  that can be switched
into the PSTN. Other telecommunications  carriers can provide their own networks
and can provide  those  networks to other  carriers.  Numerous  established  and
start-up national and regional fiber optic networks are owned by IXCs, ILECs and
CLECs,   including  AT&T,  MCI  and  Sprint,  each  of  whom  has  greater  name
recognition,  financial,  personnel,  technical and marketing resources than the
Company.  Other companies have announced or may be planning the  construction of
additional networks.

Regulation
         The following  summary of regulatory  developments and legislation does
not  purport to  describe  all present  and  proposed  federal,  state and local
regulations and legislation  affecting the  telecommunications  industry.  Other
existing federal,  state and local legislation and regulations are currently the
subject  of  judicial  proceedings,   legislative  hearings  and  administrative
proposals  which  could  change,  in varying  degrees,  the manner in which this
industry operates.  Neither the outcome of these  proceedings,  nor their impact
upon the  telecommunications  industry or the Company,  can be predicted at this
time.  This  section  also  briefly  describes   regulatory  and  tariff  issues
pertaining to the operation of the Company.




                                       12
<PAGE>

         TeleHub's services are subject to federal, state, and local regulation.
The  Company's  business  strategy  is to continue to operate TNS as a wholesale
telecommunications  service  provider.  To the  extent  the  Company's  business
strategy  changes,  the Company could become  subject to  additional  regulatory
requirements.  Pursuant  to the  Communications  Act of 1934,  as  amended  (the
"Communications  Act") including as amended by the  Telecommunications  Act, the
FCC exercises  jurisdiction  over all of TNS's  facilities  and services used to
provide,  originate,  or terminate  interstate or international  communications.
State  regulatory  agencies have  jurisdiction  over all of TNS's facilities and
services used for intrastate  communications.  Local  governments  often require
communications  carriers to obtain  licenses  or  franchises  to utilize  public
rights-of-way necessary to install and to operate networks, equipment, and other
facilities. In addition to regulation by multiple government agencies, different
regulatory  requirements  apply to long  distance  services  than apply to local
exchange  services.  For example,  long distance  carriers must pay regulatorily
determined access charges to LECs.  Communications carriers must also contribute
to universal  service support  mechanisms,  which are being developed by federal
and  state  agencies.  The  jurisdictional  reach of  federal,  state  and local
regulatory authorities is subject to continuous change, controversy and judicial
review.  TNS is  unable  to  predict  the  effect or  outcome  of such  changes,
controversy or judicial review.

         The Telecommunications Act eliminates many of the pre-existing barriers
to competition in telecommunications  markets, preempts state and local barriers
to entry  into the local  exchange  and other  telecommunications  markets,  and
establishes  relationships  between and among  telecommunications  carriers  and
providers.  The Telecommunications Act delegates to the FCC and state regulatory
agencies broad authority to implement the law.

         The  Company  is  subject  to the  authority  of the FCC and the  state
regulatory agencies to enforce applicable regulatory  requirements.  The FCC and
state regulatory  agencies may address regulatory  non-compliance with a variety
of  enforcement  mechanisms,  including  monetary  forfeitures,  refund  orders,
injunctive relief, license conditions and/or license revocation.

         The regulation of the  telecommunications  industry is changing rapidly
and the regulatory  environment varies  substantially from state to state. There
can be no assurance that future regulatory,  judicial or legislative  activities
will not have a material adverse effect on the financial  condition,  results of
operation,  or  cash  flow of the  Company  or that  domestic  or  international
regulators  or third parties will not raise  material  issues with regard to the
Company's compliance or non-compliance with applicable laws and regulations.

         Long Distance  Services.  TNS's  wholesale  long distance  services are
subject  to  federal   regulation   governing   interstate   and   international
telecommunications services. As a communications common carrier, TNS must comply
with  the  requirements  of  the  Communications  Act,  as  well  as  the  FCC's
regulations promulgated under the Communications Act.

         Pursuant to the Communications Act, among other things, common carriers
such as TNS  must  offer  service  on a  non-discriminatory  basis  at just  and
reasonable  rates.  Such  carriers  are  also  subject  to the  FCC's  complaint
jurisdiction.  IXCs  providing  international  services  are  required to obtain
authority  under  Section  214 of the  Communications  Act and to file a  tariff
containing the rates, terms and conditions applicable to their services prior to
initiating their international  telecommunications services. The Company holds a
Section  214  certificate  from the FCC for global  facilities-based  and global
resale authority.  The Company is a non-dominant  international carrier and also
must comply with the federal  statutory and  regulatory  requirements  of common
carriage  in  the  offering  of  its   international   services.   International
telecommunications  service  providers are also required to file copies of their
contracts with other  carriers,  including  foreign  carrier  agreements,  and a
variety of reports regarding their international revenue,  traffic flows and use
of international facilities.  Carriers holding Section 214 authority are subject
to FCC rules  requiring,  among other  things,  prior  approval for transfers of
control and  assignments,  and  notifications  or approvals  of certain  foreign
carrier investments.

         Because  the  interstate  long  distance  services  market  has  become
sufficiently  competitive,  the FCC has streamlined the regulation of interstate
carriers.  Thus, the FCC has ordered that  non-dominant IXCs do not need to file
tariffs offering their services.  While the Order is being reviewed by a Federal
appeals  court,  the court has  stayed  the FCC's  de-tariffing  decision.  As a
result,  IXCs must continue to file interstate tariffs (as well as international





                                       13
<PAGE>

tariffs).  TNS has filed tariffs with the FCC. In addition,  TNS can install and
operate non-radio  facilities for the transmission of interstate  communications
without prior FCC authorization.

         TNS's  intrastate  long-distance  services  are also  subject  to state
regulations.  TNS has obtained or applied for  authority  to provide  intrastate
services  from  various  state  regulatory  agencies and has filed and is in the
process of filing  tariffs  specifying  the rates,  terms and conditions for its
wholesale intrastate services.

         Local Exchange  Services.  Although  TeleHub does not intend to provide
local  exchange  services  directly  to end  users,  certain  of TNS's  proposed
services will make local exchange  features and capabilities  available to other
carriers. To offer its local  exchange-related  services, TNS may need to obtain
certifications  to provide  local  exchange  services from and file tariffs with
state  regulatory  agencies,   and  negotiate  agreements  with  the  ILECs  for
interconnection, co-location and unbundled access.

         State  Requirements.  Most  states  require  a  certification  or other
authorization  to offer local  exchange and long distance  intrastate  services.
These  certifications  generally require a showing that the carrier has adequate
financial,  managerial and technical resources to offer the proposed services in
a  manner   consistent  with  the  public   interest.   In  addition  to  tariff
requirements,   most  states  require  that  common  carriers  charge  just  and
reasonable rates and not discriminate among similarly situated  customers.  Some
states  also  require  the filing of  periodic  reports,  the payment of various
regulatory  fees and  surcharges,  and  compliance  with service  standards  and
consumer  protection  rules.  States  also  often  require  prior  approvals  or
notifications  for certain  transfers of assets,  customers or ownership and for
the issuance of stock,  bonds or other forms of  indebtedness.  As a result,  in
certain states TNS requested approvals, made notifications or took other actions
relating to its issuance of a guarantee  pursuant to the Initial Note  Offering.
While TNS expects to obtain all  necessary  approvals  for the  Exchange  Offer,
there can be no assurance  that such  approvals  will be obtained,  or that they
will be  obtained  on a timely  basis.  States  generally  retain  the  right to
sanction a carrier or to revoke  certifications  if a carrier violates  relevant
laws and/or  regulations.  If any state regulatory  agency were to conclude that
the Company is or was  providing  intrastate  service  without  the  appropriate
authority,  the agency could initiate enforcement  actions,  which could include
the imposition of fines, the disgorging of revenues, or the refusal to grant the
regulatory   authority   necessary  for  the  future   provision  of  intrastate
telecommunications services.

         State  regulatory  agencies  also  regulate  access  charges  and other
pricing for  telecommunications  services  within each state. If regulations are
changed to allow variable pricing of access charges based on volume, the Company
could  be  placed  at a  competitive  disadvantage  over  larger  long  distance
carriers.

         The   Communications    Act   was   substantially    amended   by   the
Telecommunications  Act, which provides for  comprehensive  reform of the United
States' telecommunications laws. The Telecommunications Act may have potentially
significant  effects on the financial  condition,  results of operations or cash
flow  of  the  Company.  The  Telecommunications  Act  is  designed  to  enhance
competition in, among other markets,  the local  telecommunications  marketplace
by,  among other  things:  (i)  removing  state and local entry  barriers,  (ii)
requiring  ILECs  to  provide   interconnection   to  their  facilities,   (iii)
facilitating  the end users' choice to switch  service  providers  from ILECs to
CLECs,  and (iv)  requiring  access to  rights-of-way.  The  legislation is also
designed  to  increase  local  competition  by  newer  competitors  such as long
distance carriers,  cable companies and public utility  companies.  In addition,
the  Telecommunications  Act imposes certain conditions upon all LECs, including
CLECs. To the extent the Company is required to obtain certifications as a CLEC,
these obligations would apply to the Company.  Among these  requirements are the
duties  to  establish   number   portability,   dialing  parity  and  reciprocal
compensation  arrangements.  These  requirements  may cause the Company to incur
additional administrative and regulatory expenses.

         On August 8, 1996, the FCC released the Interconnection Decision, which
established a framework of minimum,  national rules  enabling state  commissions
and the FCC to begin  implementing many of the local  competition  provisions of
the  Telecommunications  Act. Among other things, the  Interconnection  Decision
prescribed certain minimum points of interconnection,  adopted a minimum list of
unbundled  network  elements that ILECs must make available to competitors,  and
adopted a methodology for states to use when setting wholesale prices for retail
services.  The U.S.  Court of Appeals for the Eighth  Circuit  issued a decision
vacating certain portions of the Interconnection  Decision and the United States
Supreme  Court has agreed to consider  the  challenges  to the Eighth  Circuit's






                                       14
<PAGE>

decision filed by the FCC and interested carriers.  Whether the Eighth Circuit's
decision  will  stand,  or what  further  actions the FCC may or may not take in
response to these decisions cannot be predicted.

         Local  Government  Authorizations.  Because  TNS is  selling  wholesale
services to other carriers,  permitting and franchising requirements are usually
handled by those carriers.  However, TNS has obtained necessary local government
authorizations  for the  installation  and operation of facilities that it owns.
The termination of the existing local government  authorizations  prior to their
expiration dates or failure to renew such authorizations  where applicable could
have a material adverse effect on the financial condition, results of operations
and cash flow of the Company. In some municipalities,  carriers must pay license
or franchise fees.

         Universal  Service  Charges.   In  1997,  the  FCC  released  an  order
establishing a significantly  expanded federal  universal service subsidy regime
to be  funded  by  interstate  carriers  and  certain  other  entities.  The FCC
established  new  universal  service  funds to  support  telecommunications  and
information service provided to qualifying  schools,  libraries and rural health
care providers,  and expanded the federal  subsidies for local telephone service
provided to low-income consumers. In accordance with the Telecommunications Act,
the FCC adopted plans to implement the  recommendations of a Federal-State Joint
Board to preserve  universal  service,  including a definition of services to be
supported, and defining carriers eligible for contributing to and receiving from
universal  service  subsidies.  The FCC plans to revise its rules of subsidizing
service  provided to consumers  in high cost areas,  which may result in further
substantial  increase in the overall cost of the subsidy program. The FCC issued
a public  notice in April  1998  seeking  comment  on  proposals  to revise  the
methodology for determining  universal service support. The outcome of the FCC's
pending and future proceedings  relating to universal service or their effect on
the Company cannot be predicted.  Several  parties have appealed the FCC's order
and those appeals are pending before a federal appeals court. The outcome of the
further FCC proceedings or of the pending  judicial appeals or petitions for FCC
reconsideration on the Company's operations cannot be predicted.

Employees

The Company  employed 252 full time  personnel as of December 31, 1998.  TeleHub
has an  employment  contract  with  its  Chief  Executive  Officer  ("CEO")  and
President,  key  executives  denoted  under   "Management-Executive   Employment
Agreements" and other executives.  For employees without  employment  contracts,
the Company has arranged for a third party  contractor  to hire those  employees
and handle payroll and benefits.  None of TeleHub's employees are members of any
labor unions. TeleHub also utilizes independent contractors and consultants.

Glossary


Ancillary Services                        Options   available   to  an  enhanced
                                          service  provider,  which  support and
                                          complement  the  provision of enhanced
                                          services.  Examples  include  protocol
                                          conversion  and DID with third  number
                                          billing inhibited.

Asynchronous Transfer Mode (ATM)          Asynchronous   Transfer   Mode-A  fast
                                          cell-switched  technology  based  on a
                                          fixed-length   53-byte  cell.  ATM  is
                                          capable of handling  voice,  data, and
                                          video   transmissions  over  the  same
                                          facility.

Client                                    End user computer on a network  (local
                                          or Internet).

Competitive Access Provider (CAP)         A  new  term  coined  by  the  FCC  to
                                          describe  a   facilities-based   local
                                          carrier  (such  as  MFS,  MCI,  Metro,
                                          etc.)  competing   directly  with  the
                                          incumbent  carrier.  A CAP can also be
                                          referred to as a CLEC.

Competitive Local Exchange
   Carrier (CLEC)                         A  new  term  coined  by  the  FCC  to
                                          describe  a   facilities-based   local
                                          carrier    (defined   in    1996   FCC
                                          Interconnection Order).  Such carriers
                                          may also be called CAPs.

DS-3                                      Digital service, Level 3. Equipment of
                                          28  T-1  channels,  and  operating  at
                                          44.736 Mbps. Also called T-3.




                                       15
<PAGE>

End-Office                                A Central  Office to which a telephone
                                          subscriber  is   connected--frequently
                                          referred to as a Class 5  office--that
                                          actually  delivers  dial  tone  to the
                                          subscriber.

Incumbent LEC (ILEC)                      With  respect  to an area,  the  local
                                          exchange  carrier that, on February 8,
                                          1996,   provided   telephone  exchange
                                          service  in such area and on that date
                                          was  deemed  to  be a  member  of  the
                                          exchange  carrier  association or is a
                                          person  or  entity  that,  on or after
                                          February  8, 1996,  became a successor
                                          or   assign   of  a   member   of  the
                                          foregoing. RBOCs are considered ILECs.

Independent Telephone Company (ITC)       A  telephone  company  not  affiliated
                                          with one of the former RBOCs.

Interexchange Carrier (IXC)               These    are    carriers     providing
                                          connections  between  Local Access and
                                          Transport  Areas  (LATAs)  and serving
                                          areas  where the  calling  and  called
                                          customers  are  located  in  different
                                          LATAs.

Internet Protocol (IP)                    Part of the TCP/IP family of protocols
                                          describing  software  that  tracks the
                                          Internet  address  of  nodes,  routes,
                                          outgoing   message,   and   recognizes
                                          incoming messages.

InterLATA                                 Telecommunications    services    that
                                          originate in one LATA and terminate in
                                          another.

Leased Lines                              A carrier or  reseller  leases T3, T1,
                                          or  OC-level  trunks  for use  between
                                          switching  facilities.  The carrier or
                                          reseller is  responsible  for ensuring
                                          that  there  is  enough   capacity  to
                                          support the requisite traffic.

LEC                                       Local  Exchange   Carrier-any  company
                                          that is  engaged in the  provision  of
                                          local  telephone  exchange  service or
                                          exchange access.

Network Element                           A facility  or the  equipment  used in
                                          the provision of a  telecommunications
                                          service.  The term includes subscriber
                                          numbers, databases, signaling systems,
                                          and information sufficient for billing
                                          and   collection   or   used   in  the
                                          transmission,    routing,   or   other
                                          provision   of  a   telecommunications
                                          service.

Number Portability                        The  technology   that  will  allow  a
                                          telephone  number  to  travel  with  a
                                          customer  from place to place and, for
                                          800  numbers,  from one long  distance
                                          carrier to another.

Operational Support Systems (OSS)         Methods  and   procedures   (generally
                                          mechanized)  that directly support the
                                          daily       operation      of      the
                                          telecommunications          provider's
                                          infrastructure,       e.g.,      order
                                          processing, equipment assignment, etc.
                                          A typical  LEC will have  hundreds  of
                                          OSSs.

Public Switch Telephone
   Network (PSTN)                         Usually refers to the worldwide  voice
                                          telephone  network  accessible  to all
                                          those  with   telephones   and  access
                                          privileges   (i.e.,   in  the   United
                                          States,  it was  formerly  called Bell
                                          System   Network   or  the  AT&T  long
                                          distance network).

Regional Bell Operating
   Company(RBOC)                          Originally  seven  regional  telephone
                                          companies  created by the  divestiture
                                          of AT&T in 1984. Each company consists
                                          of  two   or   more   Bell   Operating
                                          Companies.



                                       16
<PAGE>


Reseller                                  Company   that   uses   and  buys  the
                                          transmission  facilities  and capacity
                                          of another carrier. The price at which
                                          it  buys  services  is  the  wholesale
                                          rate.

Service Control Point (SCP)               Also called Signal  Control  Point.  A
                                          remote   database   within   the   SS7
                                          network.

Server                                    The  main   computer   on  a  network,
                                          including  local area networks  (LANs)
                                          and hosts on the  Internet.  So called
                                          because  it   "serves"   software   or
                                          information to the "client"  computers
                                          on the network.

Service Provider                          A carrier or other  organization  that
                                          provides  dial  tone,   access  lines,
                                          transport,    e-mail    or    Internet
                                          connectivity, typically for a fee.

Signaling System 7 (SS7)                  An    internationally    standardized,
                                          general purpose  signaling  system. It
                                          is a dedicated  signaling network that
                                          is separate  from the regular  message
                                          network.  The  message  network  still
                                          carries the voice  and/or data between
                                          the calling and called parties.

Signal Transfer Points (STP)              Highly  reliable  packet switches that
                                          route   signaling   messages   between
                                          signaling  end points on the  network.
                                          STPs are the  "signaling  tandems"  of
                                          the  signaling  network.  STPs provide
                                          translation and routing  functions for
                                          signaling  messages  received from the
                                          network.  Synchronous  Optical Network
                                          (SONET)   A  family   of   fiber-optic
                                          transmission  rates from 51.84 Mbps to
                                          13.22   Gbps.   SONET  is  an  optical
                                          interface    standard    that   allows
                                          internetworking     of    transmission
                                          products from multiple vendors.

Switchless Resellers                      Like aggregators, these companies have
                                          no  facilities,  but they assume their
                                          own  identity   through   billing  and
                                          customer care  services-earning  their
                                          revenues  on  the  difference  between
                                          wholesale and retail rates.

Telecommunications                        The  transmission   between  or  among
                                          points   specified  by  the  user,  of
                                          information  of  the  user's  choosing
                                          (including    voice,    data,   image,
                                          graphics, and video) without change in
                                          the   form   or    content    of   the
                                          information.

Telecommunication Carrier                 Any  provider  of   telecommunications
                                          services.

Third-Tier Carriers                       Also known as  switch-based  resellers
                                          or  carriers.  These  companies  lease
                                          networks to  interconnect  one or more
                                          of their own  switches.  Revenues vary
                                          dramatically-from  under $1 million to
                                          over $100  million  annually.  


Virtual Access Services
   Platform(VASP)(TM)                     The Company's proprietary software and
                                          database  which  provide  an  Advanced
                                          Intelligence      Network     platform
                                          front-end   database   integrator  for
                                          billing,    management   and   control
                                          interfacing adjuncts.





                                       17
<PAGE>


Item 2.  Properties

Real Property.  The Company leases 97,647 square feet of office space in Gurnee,
Illinois,  for  its  corporate  offices,   technology  development  and  network
operations  center  pursuant to leases  expiring  at various  times from 2000 to
2006.  TNS  leases  15,341  square  feet in  downtown  Chicago  for its  Chicago
telecommunications  switches,  pursuant  to a lease  expiring  in 2001,  another
14,705  square  feet in downtown  Los  Angeles,  California  for its Los Angeles
telecommunications  switch pursuant to a lease expiring in 2007, and conduit and
co-location space in downtown Los Angeles pursuant to a lease agreement expiring
in 2007.  TNS leases  15,217  square feet in downtown  New York City for its New
York  telecommunications  switches,  pursuant to a lease  expiring in 2007.  TTC
leases  office space in Kansas City,  Missouri  pursuant to a lease  expiring in
September 2000. TeleHub Leasing Corporation leases office space in Bedford,  New
Hampshire on a month-to-month lease.

         In March 1999, the Company closed its corporate office in Walnut Creek,
California.  The  Company  leases  4,771  square  feet of  office  space at that
location  pursuant to a lease  expiring in 2002;  the Company has subleased that
space for the remainder of the lease term.

Intellectual  Property.  The VASP(TM)  software is one of the Company's  primary
assets.  Management  is seeking to protect the Company's  intellectual  property
rights in the VASP(TM)  software under applicable law including using,  when and
as appropriate,  trade secret and patent  protections.  Specifically the Company
has several patents pending relating to the VASP(TM) technology. There can be no
assurances that the Company's means of protecting its proprietary  rights in the
United  States  or  abroad  will  be  adequate  or  that  competitors  will  not
independently  develop similar  technologies.  The Company's future success will
depend  in  part  on its  ability  to  protect  its  proprietary  rights  to the
technologies used by VASP(TM).


Item 3.           Legal Proceedings

         The  Company is not  currently  engaged in any legal  proceedings.  The
Company is,  however,  subject to state  commission,  FCC and court decisions as
they relate to the  interpretation  and implementation of the applicable federal
and  state  laws  and  regulations,  such  as the  Communications  Act,  and the
Telecommunications  Act. In some cases,  the Company may be bound by the results
of on-going proceedings before these bodies.


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

         The Company held its 1998 Annual General  Shareholders  Meeting ("AGM")
on Monday,  August 24, 1998, in  Lincolnshire,  Illinois.  Management  solicited
proxies for this  meeting.  Holders of both Company  common  shares and Series A
Preferred  Shares  participated  in the AGM, with each Series A Preferred  Share
having the same voting  power as one common  share.  At the AGM,  the  Company's
shareholders:

     1. Elected the  following  Class B Directors to serve until the 2001 Annual
General Meeting:
                                             Shares       Shares       Shares
              Name                          in Favor      Against    Not Voting
              ----                        -----------     -------    ----------
              Michael G. McLaughlin        11,299,450           0             0
              John F. Slevin               11,299,450           0             0
              John R. Snedegar             11,299,450           0             0

         No proxies were solicited in opposition to management's  nominees,  who
were all elected unopposed.

     2.  Increased the common shares  reserved for issuance  under the Company's
         1997 Stock  Option  Plan  (11,239,450  Shares in favor,  15,000  Shares
         opposed and 45,000 Shares abstaining).

     3.  Appointed PricewaterhouseCoopers,  LLP (the successor firm to Coopers &
         Lybrand  LLP), as the  Company's  independent  auditors for 1998 fiscal
         year  (11,299,450  Shares in favor,  no  Shares  opposed  and no Shares
         abstaining).





                                       18
<PAGE>


     4.  Ratified  the  actions  of the  Board of  Directors  since the 1997 AGM
         (11,239,450  Shares in favor,  15,000 Shares  opposed and 45,000 Shares
         abstaining).


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholders Matters.

         There is no established  public trading market for the Company's equity
securities.  On  February  28,  1999,  there were 247 record  holders of TeleHub
common  shares and 178 record  holders of  TeleHub  Series A  Preferred  Shares.
TeleHub has not paid  dividends on its common shares and Preferred  Shares,  and
the Board  intends to  continue a policy of  retaining  earnings  to finance its
growth and for general corporate purposes. Moreover, the indenture ("Indenture")
governing the  Corporation's  13.875%  Series B Senior  Discount  Notes due 2005
("Notes") limits Company's  ability to pay cash dividends.  In addition,  future
loan agreements also might limit  Company's  ability to pay cash dividends.  The
Company does not anticipate paying any dividends in the foreseeable future.





Issuance  of  Unregistered  Securities.   The  following  tables  summarize  all
securities that the Company issued or sold during the fiscal year ended December
31, 1998 that were not sold in registered offerings:

<TABLE>
<CAPTION>
               Equity Securities        
               -----------------        
Date       Title              Amount         Underwriter                 Consideration              Exemption         
----       -----              ------         -----------                 -------------              --------- 
<S>        <C>                 <C>           <C>                  <C>                               <C>
7/30/98    Common Shares      68,599         FSC Corporation      1,000,000($14.5775 per Share)     Sec. 4(2)
                                             (Wholly owned subsidiary of BancBoston Corporation)

                Debt Securities  
                ---------------  
Date       Title              Amount         Underwriter                 Consideration               Exemption 
----       -----              ------         ------------                -------------               --------- 
7/30/98    Units*                125         BancBoston Securities Inc.    $83,553,750               Rule 506
-----------------
<FN>
*    consisting  of  $1,000  principal  amount at  maturity  of Series A 13.875%
     Senior  Discount  Notes due 2005 plus a warrant to purchase  16.667  common
     shares for $0.01 per common share
</FN>
</TABLE>


<TABLE>
<CAPTION>
                  Options & Warrants
                  to purchase common shares                                                 Per Share
Date              Title          Shares Purchasable    Class of Holder                    Exercise Price      Exemption
----              -----          ------------------    ---------------                    --------------      ---------
<S>               <C>                        <C>       <C>                                          <C>        <C>
1/01/98           Options                     386,500  Employees                                    $10.00     Sec 4(2)
1/01/98           Options                     100,000  Directors                                    $10.00     Sec 4(2)
1/01/98           Warrant                     150,000  Executive Officer                            $10.00     Sec 4(2)
3/04/98           Warrant                      15,000  Consultant                                   $10.00     Sec 4(2)
3/16/98           Warrant                      40,000  Consultant                                   $10.00     Sec 4(2)
3/17/98           Option                      409,500  Employees                                    $10.00     Sec 4(2)
3/18/98           Option                       80,000  Directors                                    $10.00     Sec 4(2)
3/18/98           Option                       97,378  Employees                                     $5.00     Sec 4(2)
3/24/98           Warrant                      10,000  Vendor                                       $10.00     Sec 4(2)
5/01/98           Warrant                      75,000  Broker                                       $10.00     Sec 4(2)
5/20/98           Warrant                     240,000  Lender/Affiliate                             $10.00     Sec 4(2)
6/02/98           Warrant                     900,000  Executive Officer & Director                 $12.50     Sec 4(2)
7/01/98           Warrant                   2,082,732  Broker                                        $0.01     Sec 4(2)
8/31/98           Warrant                     157,000  Consultant                                   $14.58     Sec 4(2)
8/24/98           Option                    1,105,000  Employees                                    $14.58     Sec 4(2)
9/16/98           Option                       53,000  Employees                                    $14.58     Sec 4(2)
10/1/98           Option                      206,100  Employees                                    $14.58     Sec 4(2)
12/16/98          Option                      140,000  Employees                                    $14.58     Sec 4(2)
12/31/98          Option                       15,000  Employees                                    $14.58     Sec 4(2)


</TABLE>


                                       19
<PAGE>

Item 6.      Selected Financial Data

         The following selected consolidated  financial data for the period from
inception  (January  18,  1996) to  December  31,  1996 and for the years  ended
December  31, 1997 and 1998 have been derived  from the  Consolidated  Financial
Statements which have been audited by  PricewaterhouseCoopers  LLP,  independent
accountants.  The following selected consolidated  financial data should be read
in conjunction with the Consolidated  Financial Statements and the notes thereto
and "Management's  Discussion and Analysis of Financial Condition and Results of
Operations" included herein.

<TABLE>
<CAPTION>
                                                   Inception to    Year Ended      Year Ended
                                                    December 31,   December 31,    December 31,
                                                        1996            1997            1998
                                                   ------------    ------------    ------------
<S>                                                                <C>             <C>     
Statement of Operations Data:    
Revenue                                                    --      $  2,901,280    $  8,407,087
Operating expenses other than depreciation
     And amortization                                 3,667,319      19,483,912      61,030,188
Depreciation and amortization                            68,556         784,548       4,574,368
                                                   ------------    ------------    ------------
               Total operating expenses               3,735,875      20,268,460      65,604,556
               Operating loss                        (3,735,875)    (17,367,180)    (57,197,469)
Amortization of debt discount                           (85,375)       (546,875)     (2,794,161)
Interest expense, net                                   (66,973)       (213,658)     (5,947,669)
Other income (expense)                                 (599,950)         34,889          (6,086)
                                                   ------------    ------------    ------------
Net loss                                           $ (4,488,173)   $(18,092,824)   $(65,945,385)
                                                   ============    ============    ============ 

Basic and diluted loss per share                   $       (.52)   $      (1.70)   $      (5.21)
Weighted average shares outstanding used in
   per share calculations -- basic and diluted        8,614,815      10,624,251      12,664,260
Balance Sheet Data:
Working Capital                                    $ (1,370,554)   $  6,445,243    $ 30,019,168
Total assets                                          4,029,254      34,258,400      70,409,776
Total debt, including current portions                  160,107      12,599,299      78,834,726
Stockholders' equity (deficit)                       (2,975,254)     17,393,445     (21,676,216)

Number of Employees
                                                              9              88             252
</TABLE>




Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

         The  following  discussion  should  be read  in  conjunction  with  the
Consolidated  Financial  Statements and related notes thereto included elsewhere
in this report.  The results shown herein are not necessarily  indicative of the
results  to  be  expected  in  any  future  periods.  This  discussion  contains
forward-looking statements based on current expectations which involve risks and
uncertainties.   Actual   results  and  timing  of  certain  events  may  differ
significantly from those projected in such  forward-looking  statements due to a
number of factors, including those set forth in this report.





                                       20
<PAGE>

Overview
         After three years of research and  development,  the Company was formed
in January  1996.  The  Company  has  developed  what it  believes  is the first
universal  ATM-based  network with the  potential  to integrate  the delivery of
voice,  data and video on one network.  The Company  launched  commercial  voice
services on its network in December  1997 and since then has entered into twenty
six contracts,  ranging from one to three year terms, to provide  interstate and
intrastate  long  distance  services  to  switchless  resellers.   As  customers
transition their traffic onto TeleHub's network, the Company expects significant
growth in revenues.  The Company expects that as revenues increase, the variable
costs  associated  with  operating  the  TeleHub  network  should  decline  as a
percentage of total revenues,  and accordingly margins will improve. The Company
believes that the TeleHub network should have positive  EBITDA at  approximately
$15 million a month of on-net revenues,  although there is no assurance that the
Company will be able to achieve  such  revenues.  Additionally,  the Company has
signed several memoranda of understanding and has distributed  several proposals
to license its VASP(TM) services.  The Company expects to license its technology
to  multiple  carriers  and  OEMs  by  the  end of  1999.  The  Company  expects
significant  growth in  revenues  from the  licensing  of VASP over the next two
years. The foregoing  expectations are  forward-looking  statements that involve
risks and  uncertainties,  and actual results could vary as a result of a number
of factors including the Company's operating results,  the results and timing of
the Company's launch of new products and services, governmental,  legislative or
regulatory  changes,  the  ability of the  Company to meet  product  and project
demands,  the  success  of the  Company's  marketing  efforts,  competition  and
acquisitions of complementary businesses, technologies or products.

         Since  inception,  the Company has incurred net losses and  experienced
negative cash flow from  operations  and expects to continue to operate at a net
loss and to experience  negative cash flow at least through 1999.  However,  the
Company's  ability  to  achieve   profitability  and  positive  cash  flow  from
operations is dependent  upon the Company's  ability to  substantially  grow its
revenues and achieve other operating  efficiencies.  The Company experienced net
losses of  approximately  $65.9  million  and $18.1  million  for the year ended
December 31, 1998 and December 31, 1997, respectively. At December 31, 1998, the
Company had  approximately  $31.1  million of net deferred tax assets  comprised
primarily  of start up costs  which are  capitalized  for tax  purposes  and net
operating loss  carry-forwards.  Due to uncertainty of realization,  a valuation
allowance  has been  provided to  eliminate  the net  deferred tax asset at both
December 31, 1998 and 1997.  Pursuant to the provisions of the Tax Reform Act of
1986 (the "Tax Reform Act"), utilization of the net operating loss carryforwards
may be  subject  to an annual  limitation  as  defined  in the Tax  Reform  Act.
Furthermore,  the Company  believes that it is more likely than not that it will
not generate taxable income through 1999, and possibly  beyond,  and accordingly
will not realize the Company's  deferred tax assets  through 1999,  and possibly
beyond.  The Company will continue to assess the  realizability  of the deferred
tax assets based on actual and forecasted  operating results.  See Note 5 to the
Consolidated Financial Statements.

         To fund its  operations,  the  Company  has raised  gross  proceeds  of
approximately  $43.5 million of equity  capital  through two private  placements
(the "Spring 1997 Offering" and the "Fall 1997  Offering") and in July 1998, the
Company  completed  an  initial  note  offering  yielding  $65.9  million in net
proceeds after deducting  offering  expenses and repaying a $11.4 million bridge
loan. The Company also received a $1 million equity  investment from the initial
purchaser.



  Year ended December  31, 1998 compared to year ended December 31, 1997
  Revenue
         Revenue  increased  $5.5  million to $8.4 million from $2.9 million for
years ended December 31, 1998 and 1997,  respectively.  TTC licensed VASP(TM) to
Newbridge for $5.0 million, $3.0 million of which was recorded the year December
31, 1998,  and TNS  generated  $5.4  million of revenue from network  operations
during the year ended December 31, 1998.

  Operating expenses
         Operating  expenses increased $45.3 million to $65.6 million from $20.3
for the years ended December 31, 1998 and 1997, respectively.  Monthly recurring
network  circuit costs,  personnel  costs,  network  equipment  lease  payments,
depreciation expense, and facility costs increased by $15,020,000,  $13,075,000,
$8,195,000,  $3,790,000,  $1,035,000,  respectively.  Significant operating cost





                                       21
<PAGE>

increases were necessary to expand the network to efficiently handle anticipated
subscriber  traffic,  and to manage the financial and administrative  aspects of
the business. Increased personnel costs reflect an increase in employees from 88
as of December 31, 1997 to 252 as of December 31, 1998.  All operating  expenses
are primarily variable and are expected to increase in future periods as revenue
increases.   Research  and  development  expenses  increased  by  $3,999,000  to
$8,244,000  from  $4,245,000  for the year  ended  December  31,  1998 and 1997,
respectively.  Research and development costs will increase in future periods to
continue the development of the Company's product and service offerings.

    Amortization of debt discount
         Amortization  of debt  discount  for the year ended  December  31, 1998
amounted to $2,794,000.  Warrants  issued in connection with the Comdisco Bridge
Loan  accounted  for  $1,460,000.   The  remaining  $1,334,000  related  to  the
amortization of warrants  associated with the debt offering.  For the year ended
December 31, 1997, amortization of debt discount was $547,000,  which related to
premiums  paid  to  Hartford  Holdings  Ltd.  ("HHL")  in  connection  with  the
settlement of all outstanding bridge loans and notes issued to the Company.

  Interest income (expense), net
         Net  interest  expense  for  the  year  ended  December  31,  1998  was
$5,948,000 as compared to $214,000 for the year ended  December 31, 1997.  Gross
interest expense increased  approximately  $6,863,000 as a result of the Initial
Note Offering and Comdisco  Bridge Loan  agreement.  The total interest and debt
discount  amortization  expense  relating to the  Comdisco  Bridge  Loan,  which
originated  in early  May 1998 and was  repaid in late July  1998,  amounted  to
approximately  $2,550,000.  Interest income increased  $1,129,000 as a result of
increased cash and equivalent balances available for short term investments.

  Net loss
         The Company  reported a net loss of $65.9 million and $18.1 million for
the year ended  December  31, 1998 and  December  31,  1997,  respectively.  The
Company has not  recorded  any benefit for income  taxes due to the  uncertainty
surrounding  the  realization  of the  favorable  tax  attributes  in future tax
returns. Accordingly, the Company has recorded a valuation allowance against its
total net deferred tax assets.

Year  ended  December  31,  1997  compared  to  period  from  January  18,  1996
(inception) to December 31, 1996

  Revenues
         The Company  commercially  introduced  its  services in December  1997.
Revenue was first recognized in 1997 for licensing fees, consulting services and
network services. Revenue for the year ended December 31, 1997 was $2.9 million.
TTC recorded  $2.0  million in November  1997 under a licensing  agreement  with
Newbridge.  TNS recognized $900,000 for consulting services and generated $1,300
of network revenue in December 1997. No revenue was generated  during the period
from January 18, 1996 (inception) to December 31, 1996.

  Operating expenses
         Total operating expenses increased approximately $16.6 million to $20.3
million  from $3.7  million for the year ended  December 31, 1997 and the period
from January 18, 1996 (inception) to December 31, 1996, respectively.  Personnel
costs, consulting services,  network equipment lease payments, monthly recurring
network circuit costs,  facility costs,  and depreciation  expense  increased by
$5,616,000,   $2,216,000,  $2,193,000,  $2,164,000,  $1,087,000,  and  $716,000,
respectively.  The  significant  increase  reflects  the  implementation  of the
Company's  business plan which resulted in accelerated  development  efforts and
network  expansion  and  build-out,  as well  as  infrastructure  growth  of the
Company.  Research and development  expenses increased  $2,638,000 to $4,245,000
from  $1,607,000  for the year ended  December 31, 1997 and 1996,  respectively.
Research and  development  costs will increase in future periods  reflecting the
continuing development of the Company's product and service offerings.

         Total TNS operating expenses increased  approximately  $11.7 million to
$13.8  million  from $2.1  million for the year ended  December 31, 1997 and the
period from January 18, 1996  (inception)  to December  31, 1996,  respectively.
This increase was due to the network expansion, as well as infrastructure growth
for the segment.  Total TTC  operating  expenses  increased  approximately  $4.9
million to $6.5 million  from $1.6 million for the year ended  December 31, 1997






                                       22
<PAGE>

and the  period  from  January  18,  1996  (inception)  to  December  31,  1996,
respectively.  This increase related  primarily to the accelerated  research and
development efforts discussed previously.

    Amortization of debt discount
         Amortization  of debt  discount  increased  approximately  $462,000  to
$547,000  from $85,000 for the year ended  December 31, 1997 and the period from
January 18, 1996 (inception) to December 31, 1996, respectively. Amortization of
debt  discount  is  related  to  premiums  paid to HHL in  connection  with  the
settlement of all outstanding bridge loans and notes issued to the Company.  The
Company  began  amortizing  the total  premiums  of  $632,000  during the fourth
quarter of 1996. The remaining unamortized balance of the debt discount was paid
during the first quarter of 1997 when these obligations were settled.

  Interest expense, net
         Net interest expense increased  approximately $147,000 to $214,000 from
$67,000 for the year ended  December  31,  1997 and the period from  January 18,
1996  (inception) to December 31, 1996,  respectively.  Gross  interest  expense
increased  approximately  $453,000  primarily  due to  increased  capital  lease
balances  associated  with the  purchase  of  three  switching  platforms.  This
increase was partially  offset by interest income during the year ended December
31, 1997 of $306,000 related to higher cash and equivalents balances.

  Other income (expense)
         Other  income was  $35,000  for the year  ended  December  31,  1997 as
compared  to other  expense of  $600,000  for the period  from  January 18, 1996
(inception)  to  December  31,  1996.  In 1996,  other  expense  related  to the
termination  of a proposed  merger  whereby  the  Company  indemnified  HHL from
certain  claims and  liabilities.  The Company  issued a note payable to HHL for
$600,000 which was later settled  through the issuance of Preferred  Stock.  See
"Certain Relationships and Related Transactions."

  Net loss
         Net loss increased  approximately  $13.6 million to $18.1 million  from
$4.5  million for the year ended  December  31, 1997 and the period from January
18, 1996 (inception) to December 31, 1996, respectively.

         The TNS net loss increased approximately $10.8 million to $13.7 million
from $2.9  million  for the year ended  December  31,  1997 and the period  from
January 18, 1996  (inception)  to December 31, 1996,  respectively.  The TTC net
loss increased  approximately $2.8 million to $4.4 million from $1.6 million for
the year  ended  December  31,  1997  and the  period  from  January  18,  1996,
respectively.

Liquidity and Capital Resources

         To date the  Company  has  satisfied  its cash  requirements  primarily
through lease  financing,  the sale of capital stock,  the Initial Note Offering
and loans from  affiliates.  The  Company's  principal  uses of cash are to fund
working capital  requirements and capital  expenditures and to service its lease
financing obligations.

         For the year ended  December 31, 1998,  net cash used in operations was
$44,837,000  primarily  related to net losses,  offset by  increases in accounts
payable  and  accrued  expenses.  Net  cash  used in  investing  activities  was
$3,787,000  for the year  ended  December  31,  1998.  This  related  to capital
expenditures  for  network  equipment,  offset  by  proceeds  from  the sale and
lease-back of equipment and a decrease in restricted  cash. Net cash provided by
financing  activities was  $75,972,000  for the year ended December 31, 1998 and
related  primarily to proceeds from Initial Note Offering  offset by payments on
capital leases and debt  obligations.  The Company obtained  additional  capital
lease  financing of $1,080,000  during the year ended  December 31, 1998.  Total
payments on capital  lease  obligations  and long-term  debt were  approximately
$1,706,000  during the year ended December 31, 1998. The Company is committed to
make payments under various  operating  leases.  See Note 6 to the  Consolidated
Financial Statements.

         On July 30,  1998,  the Company  completed  the Initial  Note  Offering
yielding  approximately  $65,900,000 in net proceeds after offering expenses and
repaying the Bridge Loan.  Additionally,  BancBoston  Securities  Inc. made a $1
million equity investment in the Company.




                                       23
<PAGE>


         For the twelve month period ended  December 31, 1997, net cash used for
operating activities was $16,625,000  primarily related to net losses, offset by
increases  in  accounts  payable  and  accrued  liabilities.  Net cash  used for
investing  activities was $9,629,000.  This related to capital  expenditures for
network  equipment,  leasehold  improvements and an increase in restricted cash.
Net cash provided by financing  activities was $35,449,000  relating to proceeds
received  from  two  private   placements  of  equity  securities  during  1997.
Approximately  80% of the cash  requirements were utilized by TNS as compared to
20% by TTC in 1997. The cash  requirements  related to funding  working  capital
needs as well as capital expenditures.

         On March 31,  1999,  the Company  signed a  definitive  agreement  with
Newbridge  Networks  Corporation  ("Newbridge") to form a new venture to further
develop the Company's Virtual Access Services Platform  ("VASP(TM)")  technology
and related products that are essential to world-wide, end-to-end,  service-rich
communications  (Newbridge  Transaction").  Under  terms of the  agreement,  the
Company's wholly owned subsidiary TeleHub Technologies Corporation ("TTC"), will
form a wholly  owned  subsidiary  ("NewCo") to be  incorporated  in the State of
Nevada. At closing,  TTC will contribute all of its assets and liabilities,  the
Company will  contribute all of it assets  relating to its VASP(TM)  technology,
including all intellectual property rights, to NewCo.  Newbridge will contribute
$52 million directly into NewCo. NewCo will immediately remit $22 million to TTC
to pay off an  intercompany  liability.  Newbridge  will also  remit $8  million
directly to the Company.  In  exchange,  NewCo and the Company will issue 19% of
the common stock of NewCo to Newbridge. Under terms of the Agreement,  Newbridge
has an option to purchase up to a 50% interest in NewCo for $10 million  dollars
("Newbridge Option"). The Newbridge Option expires in one year.

         The Company expects to incur additional  operating losses through 1999.
The  Company  believes  that the net  proceeds  from the joint  venture  will be
sufficient  to meet  anticipated  cash  needs for  working  capital  and for the
acquisition of capital  equipment  until the fourth quarter of 1999.  Based upon
anticipated  sales terms and  projections,  the Company may be required to raise
additional funds through a public or private financing,  strategic relationships
or other  arrangements.  There can be no assurance that such additional funding,
if needed,  will be available on terms attractive to the Company, or at all. The
Company's  forecast of the period of time through which its financial  resources
will be adequate to support its operations is a  forward-looking  statement that
involves risks and uncertainties,  and actual results could vary materially as a
result of a number of factors, including those set forth below under the caption
"Risk Factors--Future Capital Needs; Uncertainty of Additional Financing."


Year 2000 Readiness

         The term "Year 2000 Issue"  generally  describes  the various  problems
that  might  result  from  improper   processing  of  dates  and  date-sensitive
calculations  involving  dates in the Year 2000 and beyond.  The Year 2000 Issue
results  from  computer  programs  using two digits  rather  than four digits to
define the applicable  year, so that all dates are  interpreted as being between
1900  and  1999.   Computers  and  other  equipment  using  such  programs  will
incorrectly  interpret dates after the year 1999. Such  misinterpretation  might
cause system failures or  miscalculations  and thereby disrupt  operations,  for
example,  temporary inability to process  transactions,  to send invoices, or to
engage in other normal  business  activities.  Year 2000 issues could affect the
Company through the Year 2000  incompatibility  of its own computer  systems and
equipment  as well as that of  third  parties  with  whom the  Company  conducts
business.

     Readiness Task Force
         Since the Company's  formation,  management has been aware of Year 2000
issues and has sought Year 2000 compatibility in the development of VASP(TM) and
the TNS network.  The Company has created a task force to evaluate its Year 2000
readiness  as it may  affect  the  Company's  operations.  The  task  force  has
established a five-step  process in order to achieve Year 2000 readiness.  These
steps  are  (1)   identification,   (2)   assessment,   (3)   remediation,   (4)
implementation and (5) maintenance.

         Identification. The task force is inventorying all technologies used in
the  Companys  business.  These  technologies  include  hardware,  software  and
embedded microchips. The task force will review both internal systems (including






                                       24
<PAGE>

VASPJ(TM),  information  technology  assets,  equipment and other systems);  and
external systems (i.e.,  third-party  manufactured products used by the Company,
and issues with customers, vendors and suppliers).

         The task force has identified eight major areas (involving 71 different
products)  in which  utilizes  third party  hardware  and  software  but has not
completed  such  identification  for the TNS network or its  administrative  and
management systems.

         Assessment.  As the inventory discloses different  technologies used by
the Company,  the task force is assessing  the Year 2000  compatibility  of each
inventoried  item.  The task force will verify Year 2000  compatibility  through
testing or from the  manufacturer's  documentation.  To obtain such manufacturer
documentation,  the  task  force is  searching  the  manufacturer's  web site or
soliciting  an  official  Year 2000  compatibility  certificate.  Of  particular
importance in this assessment step is monitoring the Year 2000 readiness efforts
of the Company's  critical vendors and customers.  The Company does not yet have
enough   information  to  evaluate  whether  potential  Year  2000  issues  with
third-parties might have a material adverse effect on operations.

         The  task  force  assessed  the Year  2000  compliance  of third  party
hardware and software utilized in VASP(TM).  Such assessment included contacting
the vendor's  representatives and examining technical document for the products.
The task force has determined that, of the 71 different third party products, 43
products (60.6%) are Year 2000 compliant, 17 products (22.5%) are non-compliant,
7 products  (9.9%) do not use  date-sensitive  data,  and 4 products  (5.6%) are
still being assessed. More recent Year 2000 compliant versions are available for
15 of the non-compliant  products,  and compliant versions are under development
for the other two non-compliant  products. The task force estimates the cost for
acquiring  the Year 2000  compliant  versions  of such  products  could be up to
$100,000.  The task force has not yet tested under Year 2000 scenarios,  has not
identified  the extent of any  non-compliance  and has not assessed the possible
financial consequences.

         Remediation. When finding systems that are Year 2000 incompatible,  the
task force will then determine the appropriate  remedial action for that system;
this determination will be performed on a case-by-case  basis.  Remedial actions
could involve  replacement,  upgrading,  software patches, and substitution with
other products.  The Company  anticipates that remedial actions will require use
of the Company's internal resources,  third-party  manufacturers,  suppliers and
vendors and potentially additional third-party  consultants,  as necessary.  The
remediation will then be performed and thoroughly tested. The task force has not
yet encountered any items requiring a major remediation effort.

         Implementation.  After successfully completing remediation and testing,
the Company will implement the Year 2000 ready  technology.  The Company expects
to complete all  implementations  and be fully Year 2000 ready by June 30, 1999.
However,  the Company could  encounter a  significant  internal or external Year
2000 issue which,  if not remediated in a timely  manner,  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

         Maintenance.  To maintain Year 2000  compatibility  after completion of
the compliance plan, the task force is drafting Year 2000 business rules.  These
rules  will  cover  both  internally  created   applications  and  purchases  of
technologies. Company employees will be required to ensure the applications they
create  are  Year  2000  compatible,   with  the  assistance  of  the  Company's
information systems department.  All future purchases of hardware,  software and
other technologies will require Year 2000 compatibility certification or similar
documentation.  The Company expects to circulate these rules  internally  during
the third quarter of 1999.

     Contingency Planning.
         The Company will address contingency  planning in the second quarter of
1999. The Company  currently  does not foresee  extensive  contingency  planning
efforts.  Principal  activities will include backing up all data bases,  keeping
the information systems department's schedule clear in January of 2000.

    Costs.
         Other than time spent by the task force  personnel which could be spent
on other  matters,  the Company has not yet  incurred any  significant  costs in
identifying  Year 2000 issues.  The Company does not anticipate any  significant
further costs in the  Identification or Assessment stages by the task force. The






                                       25
<PAGE>

Company  believes that total costs for becoming 100% Year 2000  compatible  will
not be significant. Hardware upgrades will come out of the normal capital budget
and software  changes should not involve  material  amounts.  However,  since no
material Year 2000 issues have yet been  identified or assessed and therefore no
contingency  plans have been  finalized,  the costs for  remediation of any Year
2000 issues might be significant. As the Company continues to gather information
on its Year 2000 issues,  the Company will  re-evaluate  its ability to estimate
costs  associated  with the Year 2000 issue.  There can be no assurance  that as
additional  Year 2000 issues are addressed,  the Company's costs to correct such
issues will be consistent with historical costs.

         The Company  believes that adequate  resources  have been allocated for
this purpose and does not expect to incur  significant  expenditures  to resolve
Year 2000  issues.  However,  there can be no  assurance  that the Company  will
identify all Year 2000 problems in its systems in advance of their occurrence or
that the Company  can  successfully  remedy any  problems  that are  discovered.
Failure  to achieve  Year 2000  compatibility  could  disrupt  operation  of the
network,  or impact  the  Company's  ability to bill or  collect  revenues.  The
expenses of the Company's  efforts to address such problems,  or the expenses or
liabilities  to which  the  Company  may  become  subject  as a  result  of such
problems,  could materially adversely affect the Company's business,  prospects,
operating  results,  financial  condition  and its  ability to service and repay
indebtedness, including the Notes. The revenue stream and financial stability of
existing  customers may be adversely  impacted by Year 2000 issues,  which could
cause fluctuations in the Company's revenues and operating profitability.


Quarterly Results of Operations

         The following tables set forth statement of operations data for each of
the Company's last eight  calendar  quarters and the percentage of the Company's
revenues  represented by each line reflected therein.  This information has been
prepared on the same basis as the audited financial  statements contained herein
and, in  management's  opinion,  reflects all  adjustments,  consisting  only of
normal  recurring  adjustments,   necessary  for  a  fair  presentation  of  the
information for the periods presented. The operating results for any quarter are
not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
                                                                                       QUARTERS ENDED:
                                                                                       ---------------
                                                                March  31, 1998  June 30, 1998   Sept. 30, 1998  Dec. 31, 1998
                                                                  ------------    ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>             <C>         
Revenues                                                          $  3,006,601    $    152,664    $  1,454,103    $  3,793,719

Operating  expenses other than depreciation
   and  amortization                                                 9,173,827      13,217,616      16,076,303      22,562,442

Depreciation and amortization                                        1,025,356       1,072,162       1,173,337       1,303,513
                                                                  ------------    ------------    ------------    ------------

          Total operating expenses                                  10,199,183      14,289,778      17,249,640      23,865,955
                                                                  ------------    ------------    ------------    ------------
          Operating loss                                            (7,192,582)    (14,137,114)    (15,795,537)    (20,072,236)
                                                                  ------------    ------------    ------------    ------------

Amortization of debt discount                                             --           973,525       1,025,612         795,024

Interest expense, net                                                  202,348         907,809       2,112,562       2,724,950

Other income (expense)                                                   1,005           9,753           6,131         (22,975)
                                                                  ------------    ------------    ------------    ------------
           Net loss                                               $ (7,393,925)   $(16,008,695)   $(18,927,580)   $(23,615,185)
                                                                  ============    ============    ============    ============

Basic and diluted loss per share                                  $       (.59)   $      (1.27)   $      (1.49)   $      (1.86)
                                                                  ============    ============    ============    ============

Weighted average share outstanding used
    in share calculation - basic and diluted                        12,634,450      12,634,450      12,683,654      12,703,515
                                                                  ============    ============    ============    ============

</TABLE>











                                       26
<PAGE>


<TABLE>
<CAPTION>

                                                                                          QUARTERS ENDED:
                                                                                          ---------------
                                                                 March  31, 1997   June 30, 1997  Sept. 30, 1997  Dec. 31, 1997
                                                                   ------------    ------------    ------------    ------------
<S>                                                                <C>             <C>             <C>             <C>
Revenues                                                                   --              --              --      $  2,901,280

Operating  expenses other than depreciation
   and  amortization                                                  1,680,621       3,428,047       6,279,995       8,095,249

Depreciation and amortization                                            54,618          71,888         136,912         521,130
                                                                   ------------    ------------    ------------    ------------

          Total operating expenses                                    1,735,239       3,499,935       6,416,907       8,616,379
                                                                   ------------    ------------    ------------    ------------
          Operating loss                                             (1,735,239)     (3,499,935)     (6,416,907)     (5,715,099)
                                                                   ------------    ------------    ------------    ------------

Amortization of debt discount                                           546,875            --              --              --

Interest expense, net                                                    14,375         (50,211)         (2,333)        251,827

Other income (expense)                                                       38              38              38          34,775
                                                                   ------------    ------------    ------------    ------------
           Net loss                                                $ (2,296,451)   $ (3,449,686)   $ (6,414,536)   $ (5,932,151)
                                                                   ============    ============    ============    ============

Basic and diluted loss per share                                   $       (.23)   $       (.34)   $       (.62)   $       (.50)
                                                                   ============    ============    ============    ============

Weighted average share outstanding used
    in share calculation - basic and diluted                         10,022,413      10,134,450      10,356,135      11,965,754
                                                                   ============    ============    ============    ============
</TABLE>




Results of Operations as a percentage of  revenues



                                                   December 31,    December 31,
  Statement of Operations Data:                         1997          1998
  -----------------------------                         ----          ----
  Revenue                                                  100%          100%
  Operating expenses other than depreciation
       And amortization                                    672%          726%
  Depreciation and amortization                             27%           54%
                                                     -----------     ---------
                   Total operating expenses                699%          780%
                                                     -----------     ---------
                   Operating loss                          599%          680%
                                                     -----------     ---------
  Amortization of debt discount                             19%           33%
  Interest  expense, net                                     7%           71%
  Other income (expense)                                     1%            0%
                                                     -----------     ---------
  Net loss                                                 624%          784%
                                                     ===========     =========

                                                

Note: From the period  inception to December 31, 1996 is excluded from the above
table due to the Company generating no revenues.







                                       27
<PAGE>


Item 8.      Financial Statements and Financial Statement Schedule





                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Accountants..................................... 29

Consolidated Balance Sheets........................................... 30

Consolidated Statements of Operations................................. 31

Consolidated Statement of Stockholders' Equity (Deficit).............. 32

Consolidated Statements of Cash Flows................................. 36

Notes to Consolidated Financial Statements............................ 37

Financial Statement Schedule..........................................E-2

Schedule II - Valuation and qualifying accounts.......................E-2





         The following consolidated financial statements do not include separate
financial  statements of the Company's  Subsidiaries  (TeleHub Network Services,
TeleHub  Technology  Corporation and TeleHub Leasing  Corporation) as management
has determined that they would not be material to investors.  This determination
is  based  on the  fact  that  (I)  the  parent  company  has no  operations  or
significant  assets other than its  investments  in its  subsidiaries,  (ii) the
guarantor  subsidiaries are wholly owned,  (iii) the subsidiaries'  guarantee of
the parent company's debt are full,  unconditional,  joint and several, (iv) the
operations  of the sole  non-guarantor  in which the  Company  holds a  minority
interest  are  immaterial  to the  consolidated  financial  statements;  and (v)
segment  information  is  presented  in  note 16 to the  following  consolidated
financial statements.











                                       28
<PAGE>




                        Report of Independent Accountants



March 5, 1999, except for Note 17
as to which the date is March 31, 1999


To the Board of Directors and Stockholders of
TeleHub Communications Corporation:



In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, stockholders'equity (deficit) and of cash
flows  present  fairly,  in all material  respects,  the  financial  position of
TeleHub  Communications  Corporation  and its  subsidiaries  (the  "Company") at
December 31, 1997 and 1998,  and the results of their  operations and their cash
flows for the period from January 18, 1996  (inception) to December 31, 1996 and
for the years ended  December 31, 1997 and 1998,  in conformity  with  generally
accepted  accounting  principles.  In addition,  in our opinion,  the  financial
statement  schedule listed in the  accompanying  index presents  fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and  financial  statement  schedule  are  the  responsibility  of the  Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedule based on our audits.  We conducted
our audits of these  statements in accordance with generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements, the Company has accumulated losses from the development of
its products and services and must obtain substantial  additional  financings to
execute its business plan. These factors raise  substantial  doubt regarding the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 1. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.




/s/ PricewaterhouseCoopers LLP




San Francisco, California






                                       29
<PAGE>

                       TELEHUB COMMUNICATIONS CORPORATION

                           CONSOLIDATED BALANCE SHEETS



                                                     December 31,   December 31,
                                                           1997          1998
                                                      -----------   -----------
                          Assets
Current assets:
    Cash and cash equivalents                         $ 9,380,320   $36,727,589
    Restricted cash                                     1,730,382       416,321
    Accounts receivable, net of allowance for
       doubtful accounts of $1,093,594 in 1998               --       3,114,053
    Prepayments on leases                                 905,268       905,268
    Debt issuance costs                                      --         874,338
    Other assets                                          505,333       983,516
                                                      -----------   -----------
Total current assets                                   12,521,303    43,021,085

Property and equipment, net                            19,446,322    21,062,255
Prepayments on leases                                   1,939,054     1,044,085
Debt issuance costs                                          --       4,874,105
Other assets                                              351,721       408,246
                                                      -----------   -----------
           Total assets                               $34,258,400   $70,409,776
                                                      ===========   ===========

                                                     

        Liabilities and Stockholders (Deficit)
Current liabilities:
    Accounts payable                                  $ 1,995,639   $ 5,802,730
    Accrued liabilities                                 1,809,032     4,500,579
    Current portion--capital lease obligations          2,028,898     2,393,015
    Current portion--long-term debt                       238,624       281,116
    Deferred gain on sale/leaseback                         3,867        24,477
                                                      -----------   -----------
          Total current liabilities                     6,076,060    13,001,917

Capital lease obligations                               9,655,461     8,274,635
Other long-term debt                                      676,316    67,885,960
Accrued liabilities                                       449,385     2,893,850
Deferred gain on sale/leaseback                             7,733        29,630
                                                      -----------   -----------
          Total liabilities                            16,864,955    92,085,992
                                                      -----------   -----------
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
  Convertible preferred stock, $.001 par value;
     100,000,000 shares authorized;
     4,000,000 shares designated  as Series A;
     3,500,000 shares issued and
     outstanding at December 31, 1997 and 1998;
     liquidation preference $17,500,000                     3,500         3,500
  Common stock, $.001 par value;
     100,000,000 shares authorized; 12,634,450, and
     12,703,537 shares issued and outstanding at
     December 31, 1997 and 1998 respectively               12,634        12,704
Common stock warrants                                   1,831,234    27,246,651
Additional paid-in capital                             38,613,919    40,105,733
Note receivable--stockholder                             (250,000)     (400,000)
Deferred compensation                                    (236,845)     (118,422)
Accumulated deficit                                   (22,580,997)  (88,526,382)
                                                      -----------   -----------
         Total stockholders' equity (deficit)          17,393,445   (21,676,216)
                                                      -----------   -----------
         Total liabilities and  stockholders'
              equity (deficit)                        $34,258,400   $70,409,776
                                                      ===========   ===========


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                       30
<PAGE>



                       TELEHUB COMMUNICATIONS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                   January 18,
                                                      1996
                                                 (inception) to   Year Ended      Year Ended
                                                  December 31,    December 31,    December 31,
                                                       1996            1997            1998
                                                  ------------    ------------    ------------

<S>                                               <C>             <C>             <C>    
Revenues:     
   Telecommunications services                    $       --      $      1,280    $  5,371,889
   Licenses                                               --         2,000,000       3,000,000
   Consulting services                                    --           900,000          35,198
                                                  ------------    ------------    ------------
                                                          --         2,901,280       8,407,087
                                                  ------------    ------------    ------------

Operating expenses:
   Operations                                          401,878       9,676,095      40,215,031
   General and administrative                        1,616,265       4,606,776       7,558,079
   Research and development                          1,606,608       4,245,347       8,244,274
   Sales and marketing                                  42,568         955,694       5,012,804
   Depreciation and amortization                        68,556         784,548       4,574,368
                                                  ------------    ------------    ------------
               Total operating expenses (1)          3,735,875      20,268,460      65,604,556
                                                  ------------    ------------    ------------
Operating loss                                      (3,735,875)    (17,367,180)    (57,197,469)
                                                  ------------    ------------    ------------

Other income (expense):
   Amortization of debt discount                       (85,375)       (546,875)     (2,794,161)
   Interest expense                                    (66,973)       (520,148)     (7,383,366)
   Indemnification expense                            (600,000)           --              --
   Interest income                                        --           306,490       1,435,697
   Other income                                             50          34,889          (6,086)
                                                  ------------    ------------    ------------
               Net loss                           $ (4,488,173)   $(18,092,824)   $(65,945,385)
                                                  ============    ============    ============

Basic and diluted loss per share                  $      (0.52)   $      (1.70)   $      (5.21)
                                                  ============    ============    ============
Weighted average shares outstanding
    used in per share calculations
    basic and diluted                                8,614,815      10,624,251      12,664,260
                                                  ============    ============    ============


(1) The following related party balances are included in the operating expenses:
   Related party                                  $  1,926,027     $   415,000    $    633,261
                                                
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.






                                       31
<PAGE>



                       TELEHUB COMMUNICATIONS CORPORATION


            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)



<TABLE>
<CAPTION>
                                                                                                         Stock               
                                      Preferred Stock      Common Stock     Common Stock  Additional  Committed     Note     
                                      ---------------      ------------     ------------   Paid-In       To Be   Receivable  
                                      Shares    Amount   Shares    Amount     Warrants     Capital      Issued   Stockholder 
                                      ------    ------   ------    ------     --------     -------      ------   ----------- 
<S>                                                      <C>        <C>                    <C>                               
Balances at 
 January 18, 1996 (inception):
  Common stock issued
    in exchange for                                      1,510,000  $1,510                 $(1,510)                          
    contributed software                                                                                                     
  Common stock issued 
    in exchange for
    cash and note receivable                             1,500,000   1,500                    (500)                    $(500)
  Common stock issued 
    in exchange for
    contribution of 
    VASP software                                        2,740,000   2,740                  (2,740) 
  Common stock
    issued for cash                                      4,250,000   4,250                 995,750                           
  Common stock committed
    to be issued per
    Bridge Loan Agreement                                                                              $512,250
  Net Loss                                                                                                                   
                                      ------    ------  ----------  ------    --------     -------      -------   ---------- 
Balances, 
    December 31, 1996                                   10,000,000  10,000                 991,000      512,250         (500) 
    note receivable                                                                                                      500 
  Common stock committed
    to be issued per                                                                                                         
    Bridge Loan Agreement                                                                               120,000              
  Common Stock issued per                                                                                                    
    Bridge Loan Agreement
    and in exchange                                                                                                          
    for note receivable                                    134,450     134                 672,116     (632,250)     (40,000)
  Series A convertible
    preferred stock and                                                                                                  
    warrant to purchase
    Common Stock issued                                                                                                      
    conversion of notes payable      490,000       490                                   2,449,510                           
   Series A convertible
    preferred stock and      
    warrant to purchas
    Common Stock issued
    for cash, net of
    cash issuance 
   costs of $2,005,921             3,010,000     3,010                          72,240  13,041,069                           
  Forgiveness of 
    note receivabl
    in exchange for
    consulting services                                                                                               40,000 
  Private placement of 
    Common Stock and 
    warrant to purchase 
    additional Common Stock   
    for cash, net of issuance 
    cost of $1,848,720                                   1,000,000   1,000     501,000   8,150,263                           
 Supplemental private placement
    of Common Stock for cash, 
    net of issuance costs
    of $2,198,286                                                                                                            
                                                         1,490,000   1,490     746,490  12,700,224              
        

</TABLE>






                                       32
<PAGE>


                       TELEHUB COMMUNICATIONS CORPORATION


            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                                         
<TABLE>
<CAPTION>
                                                       
                                                                                             Total                         
                                                                                         Stockholders'                     
                                                           Deferred        Accumulated      Equity                         
                                                          Compensation       Deficit       (Deficit)                       
                                                          ------------       -------       ---------                       
<S>                                                                                              <C>  
Balances at                                                                                                                
 January 18, 1996 (inception):                                                                                             
  Common stock issued                                                                                                      
    in exchange for                                                                                                       
    contributed software                                                                           -                        
  Common stock issued                                                                                                      
    in exchange for                                                                                    
    cash and note receivable                                                                     $500                      
  Common stock issued                                                                                                      
    in exchange for                                                                                                        
    contribution of                                                                                                        
    VASP software                                                                                                          
  Common stock                                                                                                             
    issued for cash                                                                         1,000,000                      
  Common stock committed                                                                                                   
    to be issued per                                                                                                       
    Bridge Loan Agreement                                                                     512,250                            
  Net Loss                                                                 $(4,488,173)    (4,488,173)                     
                                                          ------------     -----------     ----------                      
Balances,                                                                                                                  
    December 31, 1996                                                       (4,488,173)    (2,975,423)                     
  Repayment of shareholder                                                                                                 
    note receivable                                                                               500                      
  Common stock committed                                                                                                   
    to be issued per                                                                                                       
    Bridge Loan Agreement                                                                     120,000                      
  Common Stock issued per                                                                                                  
    Bridge Loan Agreement                                                                                                  
    and in exchange                                                                                                        
    for note receivable                                                                             -                      
  Series A convertible                                                                                                     
    preferred stock and                                                                                                    
    warrant to purchase                                                                                                    
    Common Stock issued                                                                                                    
    conversion of notes payable                                                             2,450,000                      
   Series A convertible                                                                                                    
    preferred stock and                                                                                                    
    warrant to purchas                                                                                                     
    Common Stock issued                                                                                                    
    for cash, net of                                                                                                       
    cash issuance                                                                                                          
   costs of $2,005,921                                                                     13,116,319                      
  Forgiveness of                                                                                                           
    note receivabl                                                                                                         
    in exchange for                                                                                                        
    consulting services                                                                        40,000                        
  Private placement of                                                                                                     
    Common Stock and                                                                                                       
    warrant to purchase                                                                                                    
    additional Common Stock                                                                                                
    for cash, net of issuance                                                                                              
    cost of $1,848,720                                                                      8,652,263                      
 Supplemental private placement                                                                                            
    of Common Stock for cash,                                                                                              
    net of issuance costs                                                                                                  
    of $2,198,286                                                                          13,448,204         
                                                                                                                           
                                                                                                                           
</TABLE>




                                       33
<PAGE>

                        
                       TELEHUB COMMUNICATIONS CORPORATION

                                                               
     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - (Continued)

<TABLE>
<CAPTION>
                                                                                                         Stock               
                                      Preferred Stock      Common Stock     Common Stock  Additional  Committed     Note     
                                      ---------------      ------------     ------------   Paid-In       To Be   Receivable  
                                      Shares    Amount   Shares    Amount     Warrants     Capital      Issued   Stockholder 
                                      ------    ------   ------    ------     --------     -------      ------   ----------- 
<S>                                                      <C>        <C>                    <C>                               

  Common Stock issued
    for payment of 
    note payable net of                                                                           
    issuance cost of $14,010                                10,000      10       5,010      85,980                           
  Issuance of stock options
    at below fair value
    and related
    deferred compensation                                                                  523,757                           
  Amortization of deferred  
    compensation related
    to stock options                                                                                                         
  Issuance of stock warrants
    in return for services
    and related
   deferred compensation                                                       506,494                                       
  Amortization of deferred
    compensation related
    to stock warrants                                                                                                        
  Issuance of note receivable
    to employee in                                                                               
    December 1997                                                                                                   (250,000)
   Net loss                                                                                                                  
                                      ------    ------   ---------  ------    --------     -------      ------   ----------- 
 Balances,
    December 31, 1997               3,500,000    3,500  12,634,450  12,634   1,831,234  38,613,919           -      (250,000)
  Amortization of deferred
    compensation related
    to stock options                                                                                                         
  Issuance of fully vested   
    employee stock options
    in lieu of bonus                                                                       486,884                           
  Issuance of stock warrants
    relating to the 
    debt issuance and
   services provided                                                         3,154,739                                       
  Common stock issued
    for cash                                                68,587      69                 999,931                           
  Issuance of stock warrants
    related to notes issued                                                 22,260,678                                       
  Issuance of note
    receivable to employees                                                                                         (635,340)
  Repayment of note
    receivable from employee                                                                                         485,340 
  Common stock issued 
    upon exercise of                                                                                                         
    stock options                                              500       1                   4,999                           
  Net Loss                                                                                                                         
                                   ----------    -----  ---------- ------- -----------  ----------      ------     --------- 
  Balances
    December 31, 1998              $3,500,000    3,500  12,703,537 $12,704 $27,246,651 $40,105,733           -      (400,000)
                                   ==========    =====  ========== ======= ===========  ==========      ======     =========    

</TABLE>
  


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.




                                       34
<PAGE>
                                            


                       TELEHUB COMMUNICATIONS CORPORATION


            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                                         
<TABLE>
<CAPTION>
                                                  
                                                                                        Total                         
                                                                                    Stockholders'                     
                                                     Deferred        Accumulated       Equity                         
                                                    Compensation       Deficit        (Deficit)                       
                                                    ------------       -------        ---------         

<S>                                                    <C>           <C>               <C> 
  Common Stock issued                                                                                  
    for payment of                                                                                     
    note payable net of                                                                                
    issuance cost of $14,010                                                               91,000        
  Issuance of stock options                                                                            
    at below fair value                                                                                
    and related                                                                                        
    deferred compensation                               (523,757)                               -        
  Amortization of deferred                                                                             
    compensation related                                                                               
    to stock options                                     286,912                          286,912        
  Issuance of stock warrants                                                                           
    in return for services                                                                             
    and related                                                                                        
   deferred compensation                                 (14,450)                         492,044        
  Amortization of deferred                                                                             
    compensation related                                                                               
    to stock warrants                                     14,450                           14,450        
  Issuance of note receivable                                                                          
    to employee in                                                                                     
    December 1997                                                                        (250,000)     
   Net loss                                                           (18,092,824)    (18,092,824)     
                                                    ------------       ----------      ---------- 
 Balances,                                                                                          
    December 31, 1997                                   (236,845)     (22,580,997)     17,393,445   
  Amortization of deferred                                                                          
    compensation related                                                                            
    to stock options                                     118,423                          118,423   
  Issuance of fully vested                                                                          
    employee stock options                                                                          
    in lieu of bonus                                                                      486,884   
  Issuance of stock warrants                                                                        
    relating to the                                                                                 
    debt issuance and                                                                               
   services provided                                                                    3,154,739   
  Common stock issued                                                                               
    for cash                                                                            1,000,000   
  Issuance of stock warrants                                                                        
    related to notes issued                                                            22,260,678   
  Issuance of note                                                                                  
    receivable to employees                                                              (635,340)  
  Repayment of note                                                                                 
    receivable from employee                                                              485,340   
  Common stock issued                                                                               
    upon exercise of                                                                                
    stock options                                                                           5,000   
  Net Loss                                                            (65,945,385)    (65,945,385)
                                                    ------------       ----------      ---------- 
  Balances                                                                                          
    December 31, 1998                                  $(118,422)    $(88,526,382)   $(21,676,216)  
                                                    ============       ==========     ===========   
                                                                                                    
                                                      
</TABLE>

                                       35
<PAGE>


                       TELEHUB COMMUNICATIONS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                           January 18,
                                                               1996
                                                          (inception) to    Year ended     Year ended
                                                           December 31,     December 31,    December 31,
                                                               1996            1997            1998
                                                           ------------    ------------    ------------

<S>                                                        <C>             <C>             <C> 
Cash flows from operations        
      Net Loss                                             $ (4,488,173)   $(18,092,824)   $(65,945,385)
      Adjustments to reconcile net loss to net cash
        used in operating activities
        Depreciation & amortization                              68,556         784,548       4,574,368
        Provisions for bad debts                                   --              --         1,093,594            
        Amortization of debt issuance costs                        --              --           352,898            
        Amortization of deferred compensation                      --           301,362         605,307
        Amortization of debt discount                            85,375         546,875       2,794,161
        Accretion of debt                                          --              --         4,863,814
        Indemnification expense financed and settled
           through issuance of stock                            600,000            --              --   
        Expenses financed through notes payable                 161,243            --              --   
        Items settled through issuance of stock and
         other equity transactions                                 --           820,801       1,694,452
        Other non-cash credits                                     --           (47,734)         (8,757)
        Changes in operating assets and liabilities:
         (Increase) decrease in assets:
            Accounts Receivable                                    --              --        (4,207,647)
            Prepayments on leases                                  --        (2,844,322)        894,969
            Other Assets                                       (884,159)         27,105        (534,708)
          Increase (decrease) in liabilities:
            Deferred revenue                                  1,350,000      (1,350,000)           --
            Accounts Payable                                    791,107       1,204,532       3,807,091
            Accrued liabilities                                   7,742       2,250,675       5,136,012
            Accounts payable - related parties                  179,085        (179,085)           --
            Accrued interest                                     58,296         (58,296)           --
            Deferred gain from sale and lease-back                 --            11,600          42,507
                                                           ------------    ------------    ------------
            Net cash used in operating activities            (2,070,928)    (16,624,763)    (44,837,324)

Cash flows from investing activities:
      Payments for property and equipment                      (572,672)     (8,897,005)     (6,321,930)
      Proceeds from sale and lease-back of equipment               --           998,352       1,220,692
      Restricted cash                                              --        (1,730,382)      1,314,061
                                                           ------------    ------------    ------------
            Net cash used in investing activities              (572,672)     (9,629,035)     (3,787,177)

Cash flows from financing activities activities:
      Proceeds from debt issue                                     --              --        77,452,409
      Proceeds from issuance of common stock                  1,000,500      22,091,467       1,005,000
      Proceeds from issuance of preferred stock                    --        13,116,319            --
      Receipt of payment on shareholder notes receivable           --               500            --   
      Proceeds from notes payable to shareholders             1,850,000         650,000            --
      Repayment of shareholder notes                               --        (1,000,000)           --
      Payment on note receivable - related party                   --              --          (635,340)
      Repayment on note receivable - related party                 --          (250,000)        485,340
      Payments on capital lease obligations & loans             (21,964)       (159,309)     (2,335,639)
      Proceed from loans                                           --         1,000,205      12,000,000
      Repayment of loan                                            --              --       (12,000,000)
                                                           ------------    ------------    ------------
             Net cash provided by financing activities        2,828,536      35,449,182      75,971,770
                                                           ------------    ------------    ------------
Net increase in cash and cash equivalents                       184,936       9,195,384      27,347,269
Cash and cash equivalents balance - beginning of period            --           184,936       9,380,320
                                                           ------------    ------------    ------------
Cash and cash equivalents balance - end of period          $    184,936    $  9,380,320    $ 36,727,589
                                                           ============    ============    ============
</TABLE>


See Note 14 for Supplemental Disclosure of Cash Flow Information.

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.






                                       36
<PAGE>



1.  Organization and Basis of Presentation:
  Organization:
     TeleHub Communications  Corporation was formed in January 1996 to develop a
wholesale long distance communications carrier network deploying its proprietary
technology. In September 1996, the name of TeleHub Communications was changed to
TeleHub Network Services ("TNS").  In addition,  a new holding company,  TeleHub
Communications  Corporation  (the  "Company" or "TeleHub")  was formed.  TeleHub
initiated  an exchange  offer in which TNS  stockholders  received  ten thousand
shares of TeleHub common stock for each share of TNS common stock on like terms.
This  exchange  offer  closed on January 1, 1997.  All of the shares in TNS were
exchanged in this manner. The Company possesses proprietary software and systems
known as the Virtual  Access  Services  Platform  ("VASP(TM)"),  which have been
under  development to allow the management,  billing and control of voice,  data
and video content using  cell-based  efficiencies of asynchronous  transfer mode
("ATM"). The Company's wholly-owned  subsidiary,  TeleHub Technology Corporation
("TTC"), markets and enhances the VASP(TM) technology. The Company has installed
equipment  in three  switching  centers  located in Chicago,  New York,  and Los
Angeles. The Company's activities to date have consisted of product development,
raising capital, acquiring property and equipment, and marketing its products.

     These financial  statements  reflect the financial  position and results of
operations for TeleHub and its consolidated  subsidiaries,  TNS, TTC and TeleHub
Leasing Corporation  ("TLC").  The capital structure of the new holding company,
TeleHub has been  reflected on a  retroactive  basis for all periods  presented.
Additionally,  the  name  of the new  holding  company,  TeleHub  Communications
Corporation, has been applied on a retroactive basis.

     At December 31, 1998,  TLC was  incorporated  but had no activity.  TeleHub
owns all of TLC's common stock.

     The telecommunications  industry is highly competitive,  as is the specific
wholesale  long  distance  market the  Company is  entering.  The success of the
Company in the wholesale long distance  business is dependent upon the Company's
ability to generate  significant  customer traffic,  to manage an efficient long
distance  network and  related  customer  service,  and future  enhancements  of
VASP(TM).  The Company has not  previously  managed a long distance  network and
there  can be no  assurance  that its long  distance  services  can be sold at a
profit.   Furthermore,   the  VASP(TM)   platform  is  subject  to   substantial
technological  uncertainty  and  there  can be no  assurance  that the  VASP(TM)
platform can be commercially successful.

  Basis of Presentation:

       During 1998, the company emerged from the development stages.

     The  financial  statements  have been  prepared  assuming  the Company will
continue  as a going  concern.  The  Company has  accumulated  losses  since its
inception  in 1996,  related  primarily to the  development  of its software and
construction  of its network sites.  Management has developed an operations plan
that  requires  substantial  additional  debt and equity  financing  to complete
product   development  and  to  successfully   launch  and  market  products  in
development.  The  Company's  continued  existence is dependent  upon  obtaining
sufficient  additional  financing and  achieving  profitable  operations.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  The Company raised additional proceeds through various financing
(See Notes 9 and 17).  The  Company  will  require  additional  funds to sustain
operations  for  the  next  twelve  months.  The  Company  is  planning  to fund
operations  with  proceeds from the sale of equity or debt  instruments  or from
entering into a joint venture  agreements  such as the one discussed in Note 17.
However,  there  can be no  assurance  that the  Company's  efforts  to  achieve
profitable  operations  or raise  additional  capital  will be  successful.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


                                       37
<PAGE>


2.  Significant Accounting Policies:

  Principles of Consolidation:
     These consolidated financial statements of the Company include the accounts
of TeleHub  Communications  Corporation and its wholly owned  subsidiaries.  All
significant inter-company balances and transactions were eliminated.

  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.

  Revenue Recognition:
     Telecommunications Services:
         Revenues  from  telecommunications  services  provided to customers are
     recognized as services are rendered.

     Licenses:
         Revenues  from  licenses  are  recognized  when the user  installs  the
     product,  if  there  are  no  significant   post-delivery  obligations  and
     collection of the  receivables  is probable.  Revenue from  maintenance  is
     recognized  ratably  over the  product's  life cycle,  which may exceed one
     year. Costs related to insignificant obligations are accrued.
         One customer  accounted  for all of the  Company's  licensing  revenues
     during fiscal year 1997 and 1998.

     Consulting Services:
         The Company's policy is to recognize  revenue from consulting  services
     as such services are performed.

  Software Development Costs:
     Statement of Financial  Accounting  Standards  No. 86,  Accounting  for the
Costs of Computer Software to be Sold, Leased, or Otherwise  Marketed,  requires
that  software   development   costs  be  capitalized  once  the   technological
feasibility  of the software  product has been  established.  As of December 31,
1998 all software  development costs have been charged to expense in the periods
incurred as internally generated  capitalizable  software development costs have
not been material.

  Research and Development Costs:
     Costs  related to research and  development  activities  are expensed  when
incurred.

  Property and Equipment:
     Depreciation and amortization are computed on the straight-line  basis over
the  estimated  useful  lives of the assets or the length of the capital  lease,
whichever is shorter. Estimated useful lives are as follows:

                Computer equipment........................ 3 years
                Network equipment......................... 5 years
                Office furniture..........................10 years

     Expenditures  incurred  for  assets  under  construction  are  capitalized.
Leasehold  improvements are amortized on a straight-line  basis over the term of
the lease, or the useful life of the assets; whichever is shorter.

     Maintenance  and repairs are expensed as incurred.  When assets are sold or
retired,  the cost and related  accumulated  depreciation  are removed  from the
accounts and any resulting gain or loss is included in operations.

     The Company reviews  property and equipment for impairment  whenever events
or changes in  circumstances  indicate the carrying value of an asset may not be
recoverable.  No such events have occurred to date. In performing the review for
recoverability,  the Company  would  estimate the future cash flows  expected to







                                       38
<PAGE>

result from the use of the asset and its eventual disposition. The amount of the
impairment  loss, if an  impairment  exists,  would be  calculated  based on the
excess of the carrying amount of the asset over its fair value.


  Cash and Cash Equivalents:
     All cash and cash  equivalents are held in checking,  money market accounts
or short-term  investments with original maturities of 90 days or less, with two
banks. Cash equivalents are recorded at cost, which  approximates fair value. As
of December 31, 1998, these balances exceeded existing federally insured limits.

Issuance of Equity Instruments to Non-Employees
     The Company issues equity instruments to non-employees in consideration for
goods or services.  Such  transactions are accounted for based on the fair value
of the  consideration  received  by the  Company or the fair value of the equity
instrument issued, whichever is more reliably measurable,  as required under the
provisions of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation.

  Income Taxes:
     The Company  accounts  for income  taxes in  accordance  with  Statement of
Financial  Accounting  Standards No. 109,  Accounting  for Income  Taxes,  which
requires an asset and liability  approach to financial  accounting and reporting
for income taxes.  Accordingly,  deferred tax assets and liabilities  arise from
the differences  between the tax basis of an asset or liability and its reported
amount  in the  financial  statements  and  net  operating  loss  carryforwards.
Deferred  tax amounts are  determined  by using the tax rates  expected to be in
effect  when the taxes will  actually be paid or refunds  received,  as provided
under  currently  enacted tax law.  Valuation  allowances are  established  when
necessary to reduce  deferred tax assets to the amount  expected to be realized.
Income tax  expense or benefit is the tax payable or  refundable,  respectively,
for the period plus or minus the change in deferred  tax assets and  liabilities
during the period.

  Net Loss Per Share:
     The Company  computes  loss per share  pursuant to  Statement  of Financial
Accounting Standards No. 128, Earnings per Share.

Recently Issued Accounting Pronouncements:

     In June 1997, the Financial  Accounting  Standards Board (FASB) issued SFAS
130,  "Reporting  Comprehensive  Income."  SFAS 130  establishes  standards  for
reporting  comprehensive  income and its  components  in a financial  statement.
Comprehensive  income as defined  includes  all changes in equity  (net  assets)
during a period  from  non-owner  sources.  Examples  of items to be included in
comprehensive  income,  which are  excluded  from net  income,  include  foreign
currency    translation    adjustments    and   unrealized    gains/losses    on
available-for-sale  securities.  The  Company  does not  have any  comprehensive
income items. Therefore, SFAS No. 130 is not applicable to the Company.

     During 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information,"  effective for the year ended September 30,
1999. The Company  implemented  the disclosure  requirements  of SFAS No. 131 in
1998 (See note 16).

     In March 1998, the FASB issued SFAS No. 132, "Employer's  Disclosures about
Pensions and Other Postretirement  Benefits." SFAS No. 132 significantly changes
current  financial  statement  disclosure  requirements  from  those  that  were
required  under  SFAS  87.  The  Company  does  not  have  a  pension  or  other
postretirement  benefit plan. Therefore,  SFAS No. 132 will not be applicable to
the Company.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting  standards  for  derivative  instruments  and for hedging  activities.
Because the Company has not entered into derivative financial  instruments,  the
implementation  of SFAS  No.  133  will  not  have an  impact  on the  Company's
consolidated results of operations, financial position or cash flows.






                                       39
<PAGE>

   Reclassifications:
     Certain  amounts in the  financial  statements  have been  reclassified  to
conform with the current year's presentation.

3.  Property and Equipment:
       Property and equipment consists of:   
<TABLE>
<CAPTION>
                                                               December 31,    December 31, 
                                                                    1997            1998
                                                               ------------    ------------ 
<S>                                                            <C>             <C>    
             Equipment under capital lease:     
                  Network equipment                            $ 12,740,048    $ 13,940,388
                  Computer equipment                                182,072         182,072
                  Furniture                                         151,787         132,252
              Network equipment                                   1,744,888       3,779,410
              Computer and production equipment                   2,026,160       3,947,129
              Furniture                                             758,078       1,104,944
              Leasehold improvements                              2,648,658       3,239,644
                                                               ------------    ------------
                            Total property and equipment         20,251,691      26,325,839
              Less accumulated depreciation and amortization       (805,369)     (5,263,584)
                                                               ------------    ------------
              Property and equipment, net                      $ 19,446,322    $ 21,062,255
                                                               ============    ============

</TABLE>



     Included in accumulated  depreciation  and  amortization  is $312,737,  and
$3,001,892  of  accumulated  amortization  as of  December  31,  1997 and  1998,
respectively, related to leased furniture and equipment.

     Depreciation and  amortization  expense was $784,548 and $4,574,368 for the
year ended December 31, 1997 and 1998, respectively.



4.  Accrued Liabilities:
     The primary components of accrued liabilities are as follows:

                                                     December 31,  December 31,
                                                         1997         1998
                                                      ----------   ----------
         Employee bonuses                             $  708,362   $1,114,464
         Sales tax on purchased equipment                694,153      694,153
         Accrued lease payments                            6,109    1,500,461
         Other accrued expenses                          400,408    1,191,501
                                                      ----------   ----------
                      Total Accrued Liabilities       $1,809,032   $4,500,579
                                                      ==========   ==========
                                                       












                                       40
<PAGE>


5.  Income Taxes:
     The primary components of temporary  differences that give rise to deferred
taxes are as follows:

<TABLE>
<CAPTION>
                                                        December 31, 1997              December 31, 1998
                                                        -----------------              -----------------

                                                     Federal          State         Federal           State
                                                  ------------    ------------    ------------    ------------

<S>                                               <C>             <C>             <C>             <C>         
   Deferred tax assets:

   Capitalized R&D for tax purposes               $  4,800,000    $    820,000    $  3,600,000    $    620,000

   Net operating loss                                2,200,000         400,000      23,740,000       4,140,000

   Other, including nondeductible accruals           1,000,000         230,000       2,230,000         660,000
                                                  ------------    ------------    ------------    ------------

   Total deferred tax assets                         8,000,000       1,450,000      29,570,000       5,420,000

   Depreciable assets                                 (200,000)         30,000        (720,000)       (130,000)
                                                  ------------    ------------    ------------    ------------

   Net deferred tax asset                            7,800,000       1,420,000      28,850,000       5,290,000

   Valuation allowance                              (7,800,000)     (1,420,000)    (28,850,000)     (5,290,000)
                                                  ------------    ------------    ------------    ------------

   Net deferred tax asset                         $       --      $       --      $       --      $       --
                                                  ============    ============    ============    ============

</TABLE>
                                                      

     Due to uncertainty of  realization,  a valuation  allowance was provided to
eliminate  the net  deferred tax asset at both  December 31, 1998 and 1997.  The
valuation allowance  increased  $24,920,000 and $8,580,000 during the year ended
December 31, 1998 and December 31, 1997, respectively.

     At  December  31,  1998,   the  Company  had  net   operating   loss  (NOL)
carryforwards of approximately $69,420,000 and $69,580,000 for federal and state
income tax purposes, respectively. These carryforwards expire:

                                                NOL         Expiring in Year 
      Year ended December 31,              Carryforwards   Ending December 31,
      -----------------------              -------------   -------------------

      Federal
           1996.........................     $1,650,000           2011
           1997.........................      4,850,000           2012
           1998.........................     62,920,000           2018
      State
           1996.........................      1,650,000           2002
           1997.........................      5,000,000           2002
           1998.........................     62,930,000           2003

     The effective income tax rate differs from the statutory federal income tax
rate  primarily  due to the  inability to recognize the benefit of net operating
losses.

     Pursuant to the  provisions of the Tax Reform Act of 1986,  utilization  of
the NOL  carryforwards  may be subject to an annual  limitation  if the  Company
experienced  a greater  than 50% change in  ownership  of the  Company  within a
three-year period.






                                       41
<PAGE>

6.  Commitments and Contingencies:

  Lease Obligations:
     The Company is obligated  under the terms of operating  leases with various
parties for office space, switch room facilities, office equipment and vehicles.
These contracts may provide for adjustments or escalations based upon changes in
consumer  price  indices  or  operating  expenses.   A  summary  of  such  fixed
commitments  at  December  31,  1998  for the next  five  succeeding  years  and
thereafter is as follows:




                                                         Capital     Operating 
       Years                                             Leases        Leases
   ------------------------------------------------   -----------   -----------
       1999                                           $ 3,167,370   $15,083,532
       2000                                             3,121,621    14,861,158
       2001                                             3,121,621     9,108,965
       2002                                             3,092,275     2,837,515
       2003                                                  --       2,804,341
       Thereafter                                            --       8,292,352
                                                      -----------   -----------
       Total minimum lease payments                    12,502,887   $52,987,863
                                                                    ===========
       Less amount representing interest                1,835,237
                                                      -----------
       Present value of minimum lease payments
            under capital leases                       10,667,650
       Less current portion                             2,393,015
                                                      -----------
   Noncurrent portion                                 $ 8,274,635
                                                      ===========

     Rent  expense is  recorded  on a  straight  line basis over the life of the
lease.   Rent  expense  under  all  operating  lease  agreements  was  $133,553,
$3,397,635,  and $12,624,406 for the period from January 18, 1996 (inception) to
December 31, 1996, the years ended December 31, 1997 and 1998, respectively.

     In January  1999,  the Company  entered into a 46 month  equipment  capital
lease under which the Company has  committed to make  approximately  $900,000 in
payments.

  Purchase Commitments:
     During  1996  and  1997,  the  Company  entered  into  equipment  financing
arrangements  with an equipment  vendor to purchase  equipment.  At December 31,
1996,  $2,273,972  was  payable to the  vendor.  In January  1998,  the  Company
renegotiated  the terms of its  arrangements  into a capital lease.  The amounts
owed at December 31, 1997 and 1998 are reflected in the capital lease balances.

  Employment Agreements:
     The Company has entered  into  employment  agreements  with  certain of its
executives.  These  agreements  generally  provide for two to four-year  initial
terms and thereafter  one-year renewal terms until either party provides 30 days
notice of termination prior to the end of a term. If the Company  terminates the
employment without cause, or if the employment is terminated upon the occurrence
of a major transaction,  as defined,  involving the Company,  then the executive
shall receive a termination fee equal to 50% to 200% of the  executive's  annual
salary plus benefits plus a specified  bonus.  Payments  shall only be made upon
execution of a standard  release  waiving all claims  against the  Company.  The
Company's  total  potential  obligation  under these  employment  agreements was
$3,579,397 at December 31, 1998.  Subsequent  to December 31, 1998,  the Company
made several severance payments which reduced this obligation by $465,250.

  Litigation:
     On April 15, 1997, Cam-Net  Communications  Network, Inc. ("Cam-Net") filed
an action  against  the  Company in the  United  States  District  Court for the
Northern District of Illinois (Cam-Net  Communications  Network, Inc. v. TeleHub
Communications  Corp. and TeleHub Network Services Corp.,  Cause No. 97 C 2578).
Cam-Net  alleged,  among  other  complaints,  the  breach  of a  September  1996
agreement  under  which  TeleHub  was to  create  a new  network,  billing,  and
accounting system for Cam-Net's operations. Cam-Net further alleged that it paid
TeleHub a consulting fee of $1,350,000,  but that TeleHub failed to complete the
system. The Company recorded the $1,350,000 it received from Cam-Net as deferred









                                       42
<PAGE>

revenue at December 31, 1996 pending resolution of this complaint.  During 1997,
the Company settled its litigation  with Cam-Net out of court.  The terms of the
settlement required the Company to return $450,000 of the consulting fees it had
received  to  Cam-Net.  The Company  retained  $900,000  in fees  related to the
consulting services and recognized such fees as revenue during 1997.



7.  Related Party Transactions:

     Hartford  Holdings,  Ltd.  ("Hartford"),  a substantial  shareholder of the
Company, is controlled by the Chairman of the Board of Directors of the Company.
The Vice-chairman,  President and Chief Executive Officer of the Company holds a
beneficial  interest in the Sledge  Family Trust which is a  shareholder  of the
Company.  Hartford  and the Sledge  Family Trust  advanced  funds to further the
Company's  growth and  development in amounts  further  described in Note 9. The
Company has also indemnified Hartford from certain losses incurred in connection
with the matter discussed in Note 8.

     During  1996,  the Company paid the  President of the Company  $110,500 for
consulting  services  associated with the Cam-Net merger negotiations which were
subsequently  abandoned (Note 8). The Company also incurred $169,304 in expenses
for consulting services provided by the Chairman of the Board of Directors. This
amount was payable to Hartford at December  31, 1996 and was settled on March 7,
1997 through the  issuance of 33,800  shares of Series A  Convertible  Preferred
Stock.

     In  January  1996,   Roseville  Computer  Projects  Limited   ("Roseville")
contributed certain software in exchange for shares of common stock in TNS which
were later converted into 1,510,000  shares of the Company's  common stock. As a
result of this  transaction,  Roseville and the Company  became  entities  under
common control. In March 1996, Roseville assigned all rights, title and interest
in the VASP(TM) to the Company in exchange for additional shares of common stock
in TNS which were later converted into 2,740,000  shares of the Company's common
stock. No value was assigned to the contributed software.

     During 1997,  Roseville sold certain network databases and libraries to the
Company for $485,000.  Under a 1997  consulting  agreement  with the Company,  a
Roseville  subsidiary  provided consulting services and maintained those network
databases  and  libraries  for  the  Company  for a fee of  $20,000  per  month.
Roseville's  subsidiary  received  a total of  $325,000  under  this  consulting
agreement prior to being terminated on January 1, 1998.

     During  1996,  development  efforts  on  the  VASP(TM)  were  continued  by
employees of the Company and  programmers  and system  developers  contracted by
Access Point  Communications  Corp.  ("APCC").  APCC is  controlled by the Chief
Technology Officer of the Company.  APCC billed the Company $974,915 pursuant to
this arrangement during the period from January 18, 1996 (inception) to December
31, 1996.  The Company  began  contracting  directly  with the  programmers  and
developers  in January 1997. A subsidiary  of Roseville  received  approximately
$300,000 in 1996 as a subcontractor  of APCC. This fee also covered the 1996 use
of certain network  databases and libraries owned by Roseville.  During the year
ended  December  31, 1997 and the period from  January 18, 1996  (inception)  to
December 31, 1996, the fees totaled $240,000 and $85,000, respectively, and were
paid  directly to the Roseville  subsidiary.  The Company also  reimbursed  APCC
$36,308 for other operating  expenses during 1996. During 1996, the Company also
paid APCC  management  fees and  library  maintenance  fees of $550,000 of which
$14,535 remained outstanding at December 31, 1996.

     The Company's Chief  Technology  Officer has extended,  without  additional
consideration, personal guarantees to further support lender requirements on one
operating and one capital lease obligation.

     The Company loaned its Chief  Financial  Officer  $250,000 due in 1999. The
interest rate for this note  receivable is 1% over the prime rate. The executive
pledged a warrant  exercisable  for the purchase of 150,000  shares at $7.50 per
share as collateral. In May 1998, the executive repaid the principal of the loan
and the related accrued interest.






                                       43
<PAGE>

     During 1997, Company  contracted with International  Telecom for consulting
services.  International  Telecom  is  owned  by the  Chairman  of the  Board of
Directors. Fees to International Telecom during 1997 totaled $175,000.

     In February 1998,  the Company loaned  $112,029 to an executive in exchange
for  an  unsecured  non-interest  bearing  promissory  note.  In May  1998,  the
executive repaid this note.

     In August 1998, the Company loaned $400,000 to an executive in exchange for
an  interest  bearing  promissory  note,  which  is  collateralized  by a second
mortgage on prime  residential real estate,  pursuant to executive's  relocation
and employment  contract.  Also in August 1998,  the Company loaned  $235,340 to
another executive. This note was repaid in November 1998.

     In 1998, the Company contracted  Telemetrix Resource Group Limited (TRG) to
provide billing  processing and consulting  services.  Hartford is the principal
owner of TRG and is  controlled by the Chairman of the Board of Directors of the
Company.  In 1998,  TRG  billed the  Company  approximately  $458,000  for these
services.  TRG  continued to provide such  services on an ongoing basis in 1999.
Additionally,  in February  1999,  the Company and TRG entered  into a letter of
intent to purchase a billing software license for approximately $2.5 million. In
March 1999,  the Company  advanced  $250,000 to TRG which  represents 10% of the
software license fee.
This is refundable, less outstanding fees for any services rendered.

8.  Indemnification Expense:
     During 1996, the Company agreed to indemnify Hartford (see Note 7) from any
claims and liabilities that Hartford might incur in assisting with the placement
of securities of Cam-Net.  Parties unrelated to Hartford had previously advanced
$600,000  to  Cam-Net  in  connection  with  a  private   placement  of  Cam-Net
securities.  When the proposed merger was terminated, the securities offering by
Cam-Net was also rescinded, and Hartford was required to repay $600,000 pursuant
to its  arrangement  with  the  advancing  party.  The  Company  recognized  its
obligation to indemnify Hartford as an expense during the period ending December
31,  1996.  The  Company  issued a note  payable to Hartford  for this  $600,000
obligation which is included in notes payable at December 31, 1996. The note was
settled through the issuance of 120,000 shares of Series A Convertible Preferred
Stock and a warrant to purchase  60,000 shares of the Company's  common stock on
March 7, 1997.

9.  Long-Term Debt:
     In May 1998, the company received a $12 million loan ("Bridge Loan") from a
financial institution. The Bridge Loan accrued interest at an annual rate of 12%
and  was  collateralized  by all  of  the  Company's  intangible  property.  The
financial  institution  also  received a warrant to  purchase  240,000  share of
common  Stock for $10.00 per share,  exercisable  until May 5, 2005 or two years
after an initial public offering. The Company recorded the loan at a discount of
approximately $1,460,000,  which discount was allocated to the warrant. The fair
value of the warrant was estimated on the date of grant using the  Black-Scholes
model with the following  assumptions:  expected  volatility  of 35%,  risk-free
interest  rate of 5.76%,  expected  life of 7 years and no  dividends.  The debt
discount has been recorded at the fair value of the warrant.  The Company repaid
this Bridge Loan in July 1998.

     On July 30, 1998, TeleHub completed the sale of 125,000 units consisting of
13.875%  Senior  Discount  Notes due 2005.  Included with this debt, the Company
issued  warrants to  purchase  2,082,732  shares of common  stock at an exercise
price of $0.01 per share  (hereafter  "Units").  Each  Unit  consists  of $1,000
principal  amount at  maturity  of notes  (hereafter  "Notes")  and one  warrant
(hereafter " Warrant"),  each Warrant  representing the right to purchase 16.662
shares of  common  stock.  The  Company  recorded  the  Notes at a  discount  of
approximately  $22,261,000,  which  discount was allocated to the warrants.  The
debt discount was  calculated in accordance  with the  provisions of APB No. 14,
Accounting for  Convertible  Debt and Debt Issued with Stock  Purchase  Warrant,
using a common stock price of $14.58 per share.  The gross proceeds of the Notes
totaled $83,553,750.







                                       44
<PAGE>


     As of December 31, 1998, the long-term debt consists of:

         13.875% Senior Notes Due 2005,
           including accretion of $4,863,814               $  88,417,564
         Debt discount, 
           net of amortization of $1,333,874                 (20,926,804)
         Other long-term debt                                    676,316 
                                                           -------------
                         Total                                68,167,076 
         Less Current Portion                                    281,116
                                                           -------------

         Long Term Portion                                 $  67,885,960
                                                           =============


     Total  long-term  debt  maturities  in 1999,  2000  and 2001 are  $281,116,
$269,384, $125,816, respectively. There is no long-term debt maturing in 2002 or
2003.

     The Companies  wholly owned  subsidiaries  (TNS, TTC and TLC) provided full
and unconditional guarantees of the Company's debt on a joint and several basis.

10.  Letters of Credit:
     At December 31, 1998, the Company has $411,000 available in standby letters
of credit with a financial institution.  The letters of credit expire at various
times  throughout  1999.  The  letters of credit  are  secured  by  $416,321  of
certificates  of  deposit,  reflected  as  restricted  cash in the  accompanying
financial statements.

11.  Common and Preferred Stock:
  Preferred Stock:
     The Company has authorized  100,000,000 shares of Preferred Stock, of which
4,000,000  are  designated  Series A  Convertible  Preferred  Stock  ("Series  A
Stock").  At December 31, 1998,  there were  3,500,000  shares of Series A Stock
outstanding.

     Preferred  stockholders  receive one vote for each common  share into which
such  preferred  shares  are  convertible.  Each  share  of  Series  A Stock  is
convertible  at the option of the  stockholder  into one share of the  Company's
common  stock.  Shares of the Series A Stock have a  liquidation  preference  of
$5.00 per share. All shares of Series A Stock automatically  convert into common
stock in the event that the  Company  completes  an initial  public  offering or
becomes subject to the reporting  requirements of the Securities Exchange Act of
1934. The Series A Stock is noncumulative.

  Common Stock:
     The Company has authorized  100,000,000 shares of common stock. At December
31, 1998, there were 12,703,537 shares of common stock outstanding.

  Common Stock Warrants:

     Issued in conjunction with equity and debt financings:
     In February 1997, the Company issued warrants to purchase  1,750,000 shares
of Company common stock to certain  shareholders in connection with the issuance
of Series A Preferred Stock for cash. These warrants are exercisable at any time
from February 20, 1998 to February 20, 2000.

     In August 1997, the Company issued  warrants to purchase  875,000 shares of
Company common stock to certain  shareholders in connection with the issuance of
common stock for cash. These warrants are exercisable through August 26, 2000.

     In July 1998, the Company issued warrants to purchase  2,082,732  shares of
common  stock at an exercise  price of $0.01 per share in  conjunction  with the
Initial Note Offering.  These warrants are  exercisable at any time through July
2005.




                                       45
<PAGE>


     Issued for services and financing:
     The Company also issued  warrants to purchase  common stock to  consultants
and equipment lease providers.  At December 31, 1998, the following  warrants to
purchase common stock were outstanding:


      Number
    Of Shares           Aggregate
  Under Warrant       Exercise Price   Exercise Period
  -----------------   --------------   ---------------
          301,000         1,655,500    Exercisable at any time  from  April 30,
                                       1998 to April 30, 2000
          150,000         1,500,000    Exercisable at any time from  April  30,
                                       1998 to April 30, 2000
           25,000           187,500    Exercisable at any  time from August 15,
                                       1997 to August 15, 2000
          375,000         2,812,500    Exercisable at any time from  December 8,
                                       1998 to December 8, 2000
            1,750            13,125    Exercisable at any time from December 25
                                       1998 to December 25, 2000
            5,500            55,000    Exercisable at any time from December 15,
                                       1997 until the later of December 15, 2004
                                       or  second  anniversary   of  an  initial
                                       public offering
            4,667            35,000    Exercisable  at  any  time  from June 15,
                                       1997 until the later of
                                       June 15, 2007 or the fifth anniversary of
                                       an initial public offering
           45,000           337,500    Exercisable at  any  time from  August 1,
                                       1998 to November 14, 2000
           60,000           450,000    Exercisable at  any  time  from  April 1,
                                       1998 to April 1, 2000
           10,000           100,000    Exercisable at  any time  from  March 24,
                                       1998 to March 24, 2000
           75,000           750,000    Exercisable at any time from  May 1, 1999
                                       to May 1, 2001
          240,000         2,400,000    Exercisable at any time from  May 5, 1998
                                       until the later of May 5, 2005
                                       or the fifth anniversary  of  an  initial
                                       public offering
          100,000         1,250,000    Exercisable  at any  time until the later
                                       of June 2, 2008 or  fifth anniversary  of
                                       an initial public offering
          157,000         2,289,060    Exercisable at any time until  August 31,
                                       2001
       -----------      ------------
         1,549,917       $13,835,185    Total
       ===========       ===========         
    


     The following table  summarizes  information with respect to stock warrants
issued to non-employees that were outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                                                                                                          Weighted
                                                         Weighted                                         Average
                                         Weighted        Average                                          Exercise
                                         Average        Remaining        Weighted         Number          Price of
                         Number         Fair Value     Contractual       Average        Exercisable     Exercisable
     Range of          Outstanding     of Options/         Life          Exercise           at            Options/
  Exercise Prices      at 12/31/98       Warrant         (Years)          Price          12/31/98         Warrants
  ---------------      -----------       -------         -------          -----          --------         --------
<S>                      <C>              <C>              <C>            <C>             <C>              <C>  
$5.50 - $7.50            812,417          $2.48            1.8            $6.76           802,417          $6.75
$10.00                   480,500          $4.28            4.6            $10.00          395,500          $10.00
$12.50 - $14.58          257,000          $5.53            5.4            $13.77          257,000          $13.77
                       ---------                                                        ---------
                       1,549,917                                                        1,454,917
                       =========                                                        =========
</TABLE>

     The fair value of each non-employee grant is estimated on the date of grant
using  the  Black-Scholes  model  with  the  following   assumptions:   expected
volatility of 35%, risk-free interest rate ranging from 6.62% to 5.20%, expected
lives  ranging  from 2 to 10 years and no  dividends.  The  Company  charges the
related  compensation  costs to expense at the time the services are provided or
over the life of the related financing arrangement. The compensation expense for
the year ended December 31, 1998, amounted to $3,154,739. Warrants issued during
the twelve  month  period  ended  December  31, 1998 were valued  using the same
assumptions.





                                       46
<PAGE>


  Option Issued to Non-Employee:
         The  Company  has  issued an option to  purchase  10,000  shares of the
Company's  common stock at an exercise  price of $5.00 per share to a consultant
in exchange for  services  rendered.  As of December  31, 1998,  this option was
exercisable  until August 1, 2007. The Company  estimated the fair value of this
option  and  charged  such  amount  to  expense  at the time the  services  were
provided. The Company reserved 10,000 shares of common stock for the exercise of
this option and as of December 31, 1998, the option had not been exercised.


12.  Employee Stock Option Plan:
     In 1997,  the Company  created an Employee  Stock Option  Plan.  Under this
plan,  the  Company  may  grant  options  for  common  stock  to its  employees,
directors,  and  consultants  either as incentive  stock options or nonstatutory
options.  The  exercise  price of each  option  is  determined  by the  Board of
Directors and an option's maximum term generally is 10 years.  Options generally
vest 25% on the day of  grant,  and 25%  annually  on  January  1st of each year
thereafter.  At December 31, 1998,  4,600,000  shares of stock were reserved for
the exercise of stock options.

     During 1997,  the Company  granted a warrant to purchase  150,000 shares at
$7.50 per share to an employee. This warrant expires on the fifth anniversary of
an initial public offering.

     During 1998, the Company granted  warrants to purchase  1,005,000 shares at
$10.00 - $12.50  per  share to  employees.  These  warrants  expire on the fifth
anniversary of an initial public offering.

     The following  table  summarizes  activity under the Company's stock option
plan for the period ended December 31, 1997 and December 31, 1998:

<TABLE>
<CAPTION>
                                                                                Option and                        Weighted
                                                                Number          Warrant Price      Aggregate      Average
                                                              of Shares          Per Share           Price        Exercise
                                                              ----------        ----------        ----------     ----------


<S>                                                            <C>             <C>                <C>   
Options and warrants:      
  Granted                                                      1,626,000       $5.00 - $7.50      $7,460,000         $5.28
  Exercised                                                            -             -                     -             -
  Forfeited                                                      (10,500)          $5.00             (52,500)        $5.00
  Expired                                                         (1,500)          $5.00              (7,500)        $5.00
                                                              ----------                         -----------
Options and warrants outstanding at December 31, 1997          1,614,000                           7,400,000         $4.58
  Granted                                                      3,597,478       $5.00 - $14.58     44,445,368        $12.35
  Exercised                                                         (500)         $10.00              (5,000)       $10.00
  Forfeited                                                     (112,000)      $5.00 - $10.00     (1,173,715)       $10.48
  Expired                                                        (17,970)      $5.00 - $10.00       (159,535)        $8.88
                                                              ----------                          ----------
Options and warrants outstanding at December 31, 1998          5,081,008                         $50,507,118         $9.94
                                                              ==========                         =========== 

</TABLE>


     Employee  options and warrants to purchase  512,500 and 2,517,371 shares of
common stock were exercisable at December 31, 1997 and 1998,  respectively,  and
1,441,000  and 663,492  shares  remained  available for issuance at December 31,
1997 and 1998, respectively.





                                       47
<PAGE>


     The following table  summarizes  information  with respect to stock options
and warrants outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                                                                         Weighted                                 Average
                                                          Weighted       Average                                 Exercise
                                                           Average      Remaining    Weighted                   Price of
                            Range of        Number       Fair Value    Contractual   Average       Number      Exercisable
     On Grant Date          Exercise      Outstanding    Of Options/       Life      Exercise   Exercisable      Option/
  Exercise Price was:        Prices       At 12/31/98      Warrant       (Years)      Price     At 12/31/98     Warrants
  -------------------        ------       -----------      -------       -------      -----     -----------     --------

<S>                          <C>               <C>           <C>            <C>        <C>         <C> 
Below fair value of               
 the stock                   $5.00             499,158       $3.96          8.67       $5.00       308,158          $5.00
Above fair value of
 the stock                $5.00 - 5.50       1,030,000       $0.06          8.66       $5.07       515,000          $5.07
Below fair value of
 the stock                   $7.50             150,000       $3.73          8.66       $7.50       150,000          $7.50
Above fair value of
 the stock               $10.00 - 12.50      1,925,250       $4.97          9.05      $11.04     1,175,063         $11.70
Above fair value of
 the stock                   $14.58          1,068,500       $5.91          9.66      $14.58       267,125         $14.58
At fair value of
 the stock                   $14.58            408,100       $5.91          9.82      $14.58       102,025         $14.58
                                          -------------                                        ------------
                                             5,081,008                                           2,517,371
                                          =============                                        ============
</TABLE>
                                          

     The following  information  concerning  the Company's  stock option plan is
provided  in  accordance   with  SFAS  No.  123,   Accounting  for   Stock-Based
Compensation.  The Company  accounts for the plan in accordance  with APB No. 25
and related  Interpretations.  In accordance with APB No. 25, for the year ended
December  31, 1998,  the Company  incurred  compensation  expense in relation to
employee stock options and warrants totaling $605,307.

     The fair value of each option and warrant grant is estimated on the date of
grant using the minimum value method with the following assumptions:

                                               1997                1998
                                               ----                ----
      Expected life                          10 years           9.5 years
      Risk free interest rate                  5.7%                5.2%
      Expected volatility                        -                  -
      Expected dividends                         -                  -

     As a result of the above  assumptions,  the weighted  average fair value of
the options and the warrants  granted for the years ended  December 31, 1997 and
1998 was $1.24 and $5.45, respectively.

     Had the Company  accounted for compensation  expense  according to SFAS No.
123, the pro forma net loss would be as follows:

                                         December 31, 1997    December 31, 1998
                                         -----------------    -----------------
      Net loss - as reported                   $18,092,824          $65,945,385
      Net loss - pro forma                     $18,939,602          $71,911,550
      Net loss per share--as reported             $   1.70             $   5.21
      Net loss per share--pro forma               $   1.78             $   5.68


     Subsequent  to December 31, 1998,  the Company  issued  options to purchase
256,500  and  180,000  shares  of  common  stock  to  employees  and  directors,
respectively, at an exercise price of $14.58 per share.






                                       48
<PAGE>


     During the first quarter 1999,  the Company  recorded  notes  receivable of
$1,018,900  relating  to the  exercise  of stock  options as  prescribed  in the
Company's  employee  stock  option  plan.  These  notes  mature in two years and
carries interest at rates ranging from 4.8% to 5% per annum.


13.  401(k) Plan:
     In June 1997,  the  Company  established  a 401(k) Plan (the  "Plan").  All
employees of the Company are eligible to participate in the Plan. The Company is
not obligated to make  contributions to the Plan and made no such  contributions
during fiscal 1997 or 1998.

14.  Supplemental Disclosure of Cash Flow Information:

<TABLE>
<CAPTION>
                                              January 18, 1996
                                                (inception) to   Year Ended   Year Ended
                                                  December 31    December 31  December 31
                                                      1996         1997          1998
                                                  -----------   -----------   -----------
<S>                                               <C>           <C>           <C>        
   Cash payment for interest                      $     7,761   $   487,379   $ 1,383,702
   Noncash investing and financing activities:
      Property and equipment financed by
               capital lease obligations              182,071    10,018,475     1,080,306
      Property and equipment financed
               by equipment vendor                  2,273,972          --            --
      Settlement of accounts payable, related
              shareholders, through issuance of
              preferred stock                            --         150,000          --
      Settlement of accrued interest through
              issuance of preferred stock                --          38,757          --
      Settlement of notes payable
              issuance of preferred stock                --       2,261,243          --
      Common stock issued per Bridge
              loan agreement                             --         672,250          --
      Issuance of stock options to employees             --         262,013       605,307
      Issuance of stock options to nonemployees          --          24,900          --
      Issuance of stock warrant to employees             --         151,500          --
      Issuance of stock warrant to nonemployees          --         102,994     1,694,452

</TABLE>

















                                       49
<PAGE>

15.  Net Loss Per Share:
         In  accordance   with  the   requirements  of  Statement  of  Financial
Accounting  Standards  No. 128,  Earnings  Per Share,  a  reconciliation  of the
numerator and denominator of basic and diluted EPS is provided as follows:

<TABLE>
<CAPTION>
                                                    January 18, 1996
                                                     (inception) to    Year Ended       Year Ended
                                                      December 31,     December 31,     December 31,
                                                           1996             1997            1998
                                                     -------------    -------------    ------------
<S>                                                  <C>              <C>              <C>  
   Numerator--Basic and Diluted EPS        
              Net loss                               $  (4,488,173)   $ (18,092,824)   $(65,945,385)
                                                     =============    =============    ============

   Denominator--Basic and Diluted EPS
   Weighted average common stock outstanding             8,614,815       10,624,251      12,664,260
                                                     =============    =============    ============

   Basic and diluted loss per share                  $       (0.52)   $       (1.70)   $      (5.21)
                                                     =============    =============    ============
</TABLE>

         Options and warrants to purchase an additional 5,191,987 and 11,348,657
shares of common stock were outstanding as of December 31, 1997 and December 31,
1998,  respectively,  and were excluded from the loss per share  calculation  as
they have the effect of decreasing loss per share. In addition,  the Company had
3,500,000,  3,500,000  and  3,500,000  shares  of  convertible  preferred  stock
outstanding  as of December 31, 1997 and  December  31, 1998.  The effect of the
conversion of such shares of preferred stock was also excluded from the loss per
share calculation.

16.  Segment information:
         The Company operates in two business segments:  (i)  telecommunications
software products; and (ii)  telecommunications  network services. The following
table presents revenues and other financial  information by business segment for
January 18, 1996  (inception)  until year ended December 31, 1996 and year ended
December 31, 1997 and December 31, 1998:

                                          Software       Network 
                                          Products      Services   Consolidated
   Year Ended December 13, 1998
   ----------------------------
        Revenues                        $ 3,035,198   $ 5,371,889   $ 8,407,087
        Operating loss                   14,291,815    42,905,654    57,197,469
        Identifiable assets              15,084,499    55,325,277    70,409,776
        Depreciation and amortization       891,168     3,683,200     4,574,368
        Capital expenditures              1,840,305     5,561,931     7,402,236

   Year Ended December 31, 1997
   ----------------------------
        Revenues                        $ 2,000,000   $   901,280   $ 2,901,280
        Operating loss                    4,434,231    12,932,949    17,367,180
        Identifiable assets               7,359,999    26,898,401    34,258,400
        Depreciation and amortization       185,651       598,897       784,548
        Capital expenditures              1,506,012    16,715,315    18,221,327

   January 18, 1996 (inception) to
    December 13, 1996
    -----------------
         Revenues                               --            --            --
         Operating loss                  $ 1,606,607   $ 2,129,267   $ 3,735,875
         Identifiable assets                    --       4,029,254     4,029,254
         Depreciation and amortization          --          68,556        68,556
         Capital expenditures                   --       3,028,715     3,028,715

         Identifiable assets are those assets used exclusively in the operations
of each business  segment,  or which are allocated when used jointly.  Virtually
all of the Software Products revenues were generated from one customer.










                                       50
<PAGE>


17.  Subsequent Event:
     On March 31, 1999, the Company signed a definitive agreement with Newbridge
Networks Corporation  ("Newbridge") to form a new venture to further develop the
Company's Virtual Access Services Platform  ("VASP(TM)")  technology and related
products   that  are   essential   to   world-wide,   end-to-end,   service-rich
communications  (Newbridge  Transaction").  Under  terms of the  agreement,  the
Company's wholly owned subsidiary TeleHub Technologies Corporation ("TTC"), will
form a wholly  owned  subsidiary  ("NewCo") to be  incorporated  in the State of
Nevada. At closing,  TTC will contribute all of its assets and liabilities,  the
Company will  contribute all of it assets  relating to its VASP(TM)  technology,
including all intellectual property rights, to NewCo.  Newbridge will contribute
$52 million directly into NewCo. NewCo will immediately remit $22 million to TTC
to pay off an  intercompany  liability.  Newbridge  will also  remit $8  million
directly to the Company.  In  exchange,  NewCo and the Company will issue 19% of
the common stock of NewCo to Newbridge.

     Under terms of the  Agreement,  Newbridge has an option to purchase up to a
50%  interest  in  NewCo  for $10  million  dollars  ("Newbridge  Option").  The
Newbridge Option expires in one year.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

                 None


                                    PART III




Item 10.      Directors and Key Executive Officers of Registrant

         Each Director holds office until the next meeting of  shareholders  for
election of such  Director's  class and until  successors  have been elected and
qualified or until such Director's death,  resignation or removal. The Company's
officers are appointed by, and serve at the discretion of, the Board.  Set forth
in the table below are the names,  ages, and current  positions of the Directors
and executive officers of the Company.


Name                            Age     Positions
----                            ---     ---------
William W. Becker(1)            69      Chairman of the Board
Donald H. Sledge(2)             58      President, Vice Chairman, 
                                        Chief Executive Officer and Director
Michael G. McLaughlin(3)        36      Chief Technology Officer and Director
Herbert H. Swinburne            57      President of TNS
John A. Strand III              53      Acting President of TTC
Richard M. Harmon(2)            48      Chief Financial Officer, Treasurer, 
                                        Corporate Secretary and Director  
                                        (resigned effective January 22, 1999)
John R. Lawson                  41      Chief Financial Officer, Treasurer, and 
                                        Corporate Secretary
                                        (effective January 25, 1999)
Barry C. Lescher(2)             43      Assistant Secretary and Director
John F. Slevin(3)               62      Director
Oz Pedde(1)                     56      Director
John R. Snedegar(3)             49      Director
Martin R. Walsh(1)              46      Director

(1)  Class C Director--term expires 1999.
(2)  Class A Director--term expires 2000.
(3)  Class B Director--term expires 2001.









                                       51
<PAGE>

         William W. Becker  joined  TeleHub in March 1996 and serves as Chairman
of  the  Board.  Mr.  Becker  is a  principal  of  HHL,  the  Company's  largest
shareholder.   He  also  serves  as  Chairman  of   SkyConnect   Inc.,   AirCell
Communications,  Inc.,  Trans Digital Inc., VR-1 Inc.,  E-Star Inc. and Northern
Cable Inc.  Prior to joining  TeleHub,  Mr. Becker founded a number of companies
involved in telecommunications,  cable TV, oil and gas, real estate development,
and other industries. From 1993 to 1995, Mr. Becker was a principal of WWB Oil &
Gas Ltd. Mr. Becker was a significant investor in IntelCom Group, Inc. (now, ICG
Communications,  Inc.) for which he served as chairman and CEO from 1987 to June
1995.

         Donald H. Sledge joined the Company in January 1996 as President,  Vice
Chairman,  CEO and Director  and is the CEO and a Director of TTC and TNS.  From
1994 to 1995, Mr. Sledge served as President and Chief Operating Officer ("COO")
of West Coast  Telecommunications,  Inc., a NASDAQ listed long distance  company
purchased  by  Frontier.  From  1993  to  1994,  Mr.  Sledge  served  as Head of
Operations  for New T&T, a Hong  Kong-based  start-up  company.  Mr.  Sledge was
Chairman  and CEO of Telecom New Zealand  International  from 1991 to 1992.  Mr.
Sledge  was a member  of the  board of  advisors  of Calex  and is  currently  a
director of DataProse, CyWorld Talk, which currently trades on the Alberta Stock
Exchange,   AirCell   Communications  Inc.  and  Executive  Telecard,   Inc.,  a
telecommunications  company traded on NASDAQ, and serves as an advisor and board
member to several small  technology-based  start-up companies.  In addition, Mr.
Sledge serves as the Chairman of United Digital Network Inc. ("United Digital"),
a long  distance  switch  based  reseller,  which is under  an  agreement  to be
acquired by Star Telecommunications, Inc.

         Michael G.  McLaughlin  founded  TeleHub in January  1996 and serves as
Chief  Technology  Officer ("CTO") and a Director of TeleHub,  TTC and TNS. From
1994 to 1995, Mr.  McLaughlin served as President and a director of Access Point
Communications  Corporation.  In 1992, he formed The McLaughlin Group, Inc. (now
"T.M.G.I.,  Inc.") which provided consulting services to large corporate clients
involving  cost  reduction and analysis,  network  configuration  strategies and
negotiation  of  communication  carrier  contracts.   From  1983  to  1991,  Mr.
McLaughlin worked for ROLM, a business unit of IBM Corporation  ("ROLM"),  where
he was a  communications  engineer  responsible for the design,  development and
implementation of communications networks for ROLM's largest accounts, including
The Sears Network, General Electric Company, IBM and Baxter Laboratories Inc.

         Herbert H.  Swinburne  joined  TeleHub  in  January  1998 and serves as
President  of TNS.  From 1991 until he joined  TeleHub,  Mr.  Swinburne  was the
Director and General  Manager of Major Account  Network  Design for AT&T Canada,
which  provides long distance  services.  From 1989 to 1991,  Mr.  Swinburne was
Director of Proposal Engineering at Sprint, and from 1988 to 1989, Mr. Swinburne
was  Director  of the  Technical  Advisory  Center at  Sprint.  Prior to joining
Sprint,  Mr.  Swinburne  was  a  Program  Manager  for  Telenet   Communications
Corporation where he was responsible for managing the nationwide packet services
for the Department of Agriculture.

         John A. Strand III joined  TeleHub as TTC's  Acting  President  in June
1998. From 1991 to 1998, Mr. Strand was the Director of Technology  Planning and
Integration  for Sprint.  Prior to his position  with Sprint,  he was a regional
manager for SRI International, an international research institute.


         Richard M. Harmon joined  TeleHub in March 1997 as the Chief  Financial
Officer  ("CFO"),  Treasurer  and  Corporate  Secretary and became a Director in
March 1998.  Mr. Harmon is the  Treasurer  and Corporate  Secretary of TNS. From
1992 to 1996, Mr. Harmon was the CEO of Education Finance Corporation, a company
he founded to provide student loans to vocational  trade students.  From 1990 to
1992,  Mr. Harmon  served as President of Clean Air Transit.  From 1985 to 1990,
Mr.  Harmon  founded and was  President of Network  Media  Corporation,  a cable
network  advertising  sales  group.  Between  1980 and 1985,  Mr.  Harmon  was a
principal  with Network  Development  Corporation,  a consulting  and investment
company emphasizing  telecommunications and cable television. Prior to that, Mr.
Harmon  served as CFO and COO for Franklin  Supply.  Mr.  Harmon also worked for
Allstate  Insurance  Company,  where he made private equity investments in early
stage companies.  Effective January 22, 1999, Mr. Richard M. Harmon resigned his
positions with the Registrants in order to pursue other interests.






                                       52
<PAGE>


         John R. Lawson joined  TeleHub in April 1997 as  Controller  and became
the Chief  Financial  Officer  ("CFO"),  Treasurer  and  Corporate  Secretary in
January 25, 1999.  Mr. Lawson has 18 years of financial  management  experience.
From  1990 to  1993,  he was  Vice  President  -  Corporate  Controller  for TRO
Learning,  a software  development  company,  and,  among his other  activities,
managed that company's  initial public  offering  consummated in 1992.  Prior to
joining  TRO  Learning,  Mr.  Lawson  served  in  various  financial  management
positions for AAR  Corporation,  a publicly traded aviation  services and supply
company,  including  Controller  of European  Operations.  Mr.  Lawson began his
career as an  auditor  with  Coopers & Lybrand  LLP (now  PricewaterhouseCoopers
LLP).  He has a BS in  accounting  from  Bradley  University  and is a Certified
Public Accountant.

         Barry C.  Lescher  joined  TeleHub as a Director  in 1996 and serves as
Executive Vice President of TTC, a Director of TNS and Assistant Secretary. From
1994 to 1997,  Mr.  Lescher held  engineering  positions  at  telecommunications
companies   which  included   American   Teletronics,   TMGI  and  Access  Point
Communications Corporation.  From 1989 to 1994, Mr. Lescher was a communications
engineer  with  ROLM.  Prior to that,  Mr.  Lescher  worked  for a  family-owned
business that was involved in the  installation  and operation of  communication
systems.

         John (Jack) F. Slevin is Chairman,  President,  and CEO of Comdisco,  a
New York Stock Exchange ("NYSE") listed company and was appointed to the TeleHub
Board in July 1997. He has been  Comdisco's  Chairman of the Board since January
1996 and was named Comdisco's  President and CEO in July 1994. Mr. Slevin served
as  Comdisco's  COO from 1993 through 1994 and was executive  vice  president of
Comdisco's  North  American Sales since 1992. He has been a member of Comdisco's
board of  directors  since 1979.  Mr.  Slevin is also a director of Media One, a
NYSE listed company, and Interworld Corp.

         Oz (Oswald)  Pedde,  a Director of TeleHub  since March 1998,  has been
President  and CEO of Watson & Associates,  a Toronto  based  telecommunications
service and consulting  firm since January 1, 1998. From 1995 to 1998, Mr. Pedde
was  self-employed  as a consultant.  From 1991 to 1995, Mr. Pedde was President
and CEO of Manitoba Telephone Systems, a diversified Canadian telecommunications
company and was one of the founding  members of the Council of CEOs that created
the "Stentor  Alliance," an association of Canada's major  telephone  companies.
During such period, Mr. Pedde was also a director of Telesat, Canada's satellite
carrier.

         John R.  Snedegar  joined  TeleHub's  Board in March 1998.  He has been
President  and CEO of  United  Digital,  which  trades  on the  Vancouver  Stock
Exchange  since 1990. He was also the President and CEO of AmeriTel  Management,
Inc.   ("AmeriTel"),    a   California   based   provider   of   long   distance
telecommunications  and  management  services  from 1980 to 1992.  In 1992,  Mr.
Snedegar led AmeriTel through the acquisition of West Coast  Telecommunications,
Inc.,  forming WCT  Communications,  Inc.  Mr.  Snedegar  served on the board of
directors of this carrier until its sale to Frontier in early 1995. He is also a
director  of  StarBase  Corporation,  a  California-based  software  development
company which trades on NASDAQ, Star  Telecommunications,  Inc., a long distance
carrier  specializing  in  international  services  which trades on NASDAQ.  Mr.
Snedegar also serves as President of Kendall Venture Funding,  Ltd., a reporting
company based in Alberta, Canada.

         Martin  R.  Walsh  has been the  President  of Walsh &  Associates,  an
Illinois  high  technology  consulting  firm  since  January  1, 1998 and joined
TeleHub's  Board  in March  1998.  Previously,  Mr.  Walsh  had been a  Comdisco
executive,  serving as Executive Vice President of Marketing and a member of the
Office of the President of Comdisco  since 1996,  President of the Large Systems
Division from 1993 to 1996, and Senior Vice President - Trading between 1985 and
1993,  and a Vice  President  from 1982 to 1985.  Mr.  Walsh  originally  joined
Comdisco in 1978.






                                       53
<PAGE>



Item 11.      Executive Compensation

Executive Compensation
The following table provides certain summary information concerning compensation
paid or  accrued by Company  and its  subsidiaries  to or on behalf of Donald H.
Sledge,  President and CEO of the Company,  and the five most highly compensated
executive  officers of the Company  (the "Named  Officers")  for the period from
January 18, 1996 (inception) to December 31, 1996 and for the fiscal years ended
December  31, 1997 and 1998.  The Company  has not  granted  stock  appreciation
rights.


 Summary Compensation Table

<TABLE>
<CAPTION>
                                                       Annual                                Long-Term               All Other
                                                    Compensation                            Compensation            Compensation
                               Fiscal              ------------       Other Annual         ---------------          ------------
Name and Principal Position    Year     Salary        Bonus           Compensation ($)  Warrants (#)   Options (#)       ($)
---------------------------    ----     ------        -----           ----------------  ------------   -----------       ---
<S>                            <C>     <C>            <C>     <C>        <C>    <C>                      <C>           <C>    <C>
Donald H. Sledge               1998    178,938        44,739  (1)        13,752 (3)              -        28,750        6,572 (4)
   President and Chief         1997    175,000        87,500  (2)        10,800 (3)              -       150,000        9,804 (5)
   Executive Officer
    of TeleHub                 1996     70,000          -      -           -     -               -          -         110,500 (6)


Richard M. Harmon              1998    160,335        90,088  (7)         6,126 (3)         450,000       26,246       38,000 (8)
   Chief Financial Officer     1997    106,250        62,466  (2)          -     -          150,000      100,000       61,859 (9)
   and Secretary of TeleHub    1996       -             -      -           -     -               -          -             -    -
                                                                                                                                
Michael G. McLaughlin          1998    178,938        44,739  (1)        16,240 (3)        500,000       28,750           -    -
   Chief Technology Officer    1997    175,000        87,500  (2)        17,645 (3)              -      150,000           -    -
    of TeleHub                 1996       -             -      -                 -               -         -              -    -
                                                                                                                                
Barry C. Lescher               1998    153,375        38,348  (1)         9,526 (3)              -       33,654           -    -
   Executive Vice President    1997    136,320        68,268  (2)           701 (3)                     100,000           -    -
    of  TTC                    1996       -             -      -                  -              -         -              -    -
                                                                                                                                
Timothy Carey Chandler         1998    153,375        38,348  (1)          500 (10)              -        7,500           -    -
   Senior Vice President       1997    150,000        75,000  (2)           333(10)                      50,000           -    -
   Software Development        1996     68,750          -      -                 -               -         -              -    -
    of TTC                     
                                                                                                                                
Herbert H. Swinburne           1998    160,000        40,000  (1)         5,400 (2)              -      100,000           -    -
   President of TNS                                                                                                             
                                                                                                                               

<FN>
(1)      Related to 1998 accrued bonus to be paid in cash in 1999.
(2)      Related to 1997 accrued  bonus with an option to be paid either in cash
         or by a combination of cash and stock options in 1998.
(3)      Car allowance.
(4)      Consists of $6,572 paid for life insurance premium.
(5)      Consists of $5,000 set aside in a 401(k) plan by the Company and $4,804
         paid for life insurance premium.
(6)      Consulting  fees for services  prior to  commencement  of employment on
         August 1, 1996. 
(7)      Consists of cash bonus  payment of $50,000 and 1998 accrued bonus to be
         paid in cash in 1999 of $40,088.
(8)      Consists of reimbursement for country club membership.
(9)      Consists of $29,359 for relocation expenses and $32,500 consulting fees
         for services prior to executing Mr. Harmon's employment agreement.
(10)     Allowance in lieu of certain employee benefits.
</FN>
</TABLE>










                                       54
<PAGE>


                       Options Granted in Last Fiscal Year
                                Individual Grants

<TABLE>
<CAPTION>
                                                                                                        Potential Realizable
                                                                                                          Value at Assumed
                                                                                                             Annual Rates
                                             % of Total                                                     Of Stock Price
                                              Options                        Market                          Appreciation
                                             Granted to      Exercise        Price                         For Option Term
                               Options      Employees in      Or Base       On Date      Expiration       ---------------
Name                          Granted (#)    Fiscal Year    Price ($/Sh)   of Grant (1)      Date         5% ($)     10% ($)
----                          -----------    -----------    ------------   ------------      ----         ------     -------
<S>                              <C>             <C>            <C>            <C>         <C>           <C>        <C>    
Donald H. Sledge                 8,750           .34            5.00           9.82        3/18/2008      96,213     179,117
                                 20,000          .77            10.00          8.87        1/1/2008       88,966     260,130

Richard M. Harmon                6,246           .24            5.00           9.82        3/18/2008      68,679     127,859
                                 20,000          .77            10.00          9.82        3/18/2008     119,915     309,411

Michael G. McLaughlin            8,750           .34            5.00           9.82        3/18/2008      96,213     179,117
                                 20,000          .77            10.00          8.87        1/1/2008       88,966     260,130

Barry C. Lescher                 13,654          .53            5.00           9.82        3/18/2008     150,136     279,505
                                 20,000          .77            10.00          8.87        1/1/2008       88,966     260,130

Timothy C. Chandler              7,500           .29            5.00           9.82        3/18/2008      28,468     153,529

Herbert H. Swinburne            100,000          3.86           10.00          8.87        1/1/2008      444,830    1,300,650


<FN>
(1)      Market price as  determined  by the Company  based  certain third party
         transactions
</FN>

</TABLE>






   Aggregated Options Exercisable in Last Fiscal Year and FY-End Option Values

<TABLE>
<CAPTION>
                                                                                                     Value of Unexercised
                                                                                                   In-the-money Options at
                                                Value Realized                                     FY-End (Market Price of
                                               (Market Price at      Number of Unexercised        Shares at FY-End ($14.58)
                            Shares Acquired     Exercise Less        Options at FY-End (#)         Less Exercise Price) (1)
Name                        on Exercise(#)     Exercise Price)   Exercisable    Unexercisable   Exercisable    Unexercisable
----                        --------------     ---------------   -----------    -------------   -----------    -------------
<S>                                                                 <C>             <C>           <C>             <C>     
Donald H. Sledge                    -                 -             83,750          95,000        $784,144        $791,919

Richard M. Harmon                   -                 -             56,246          70,000        $538,837        $570,600

Michael G. McLaughlin               -                 -             83,750          95,000        $802,325        $810,100

Barry C. Lescher                    -                 -             63,654          70,000        $609,805        $570,600

Timothy C. Chandler                 -                 -             32,500          25,000        $311,350        $239,500

Herbert H. Swinburne                -                 -             25,000          75,000        $114,500        $343,500

<FN>
(1)      Market price as  determined  by the Company  based  certain third party
         transactions.
</FN>
</TABLE>






                                       55
<PAGE>

Compensation Plans
         1997 Stock  Option  Plan.  The  Company's  1997 Stock  Option Plan (the
"Plan") was adopted by the Board and approved by the stockholders in May 1997. A
total of 4,600,000  shares of Common Stock have been reserved for issuance under
the Plan,  as amended on March 18, 1998 by the Board.  As of December  31, 1998,
options to purchase  3,926,008 shares of Common Stock were outstanding under the
Plan, and no shares had been issued upon exercise of previously granted options.
The Plan provides for grants to employees of the Company (including officers and
employee  directors) of "incentive stock options" ("ISOs") within the meaning of
Section 422 of the Internal  Revenue Code of 1986, as amended (the "Code"),  and
for grants of nonstatutory  stock options to employees  (including  officers and
employee directors and non-employee  directors) of the Company or any subsidiary
of the  Company.  The Plan is  administered  by the Board or a committee  of the
Board (the  "Administrator").  The Plan is currently  being  administered by the
Board.  The  Administrator  may  determine  the  terms of the  options  granted,
including the exercise  price,  the number of shares  subject to each option and
the  exercisability of the option.  The Administrator also has the full power to
select  the  individuals  to whom  options  will  be  granted  and to  make  any
combination of grants to any participants.

         Options  granted  generally  vest  immediately  as to 25% of the shares
subject to the  option  and then at a rate of 25% of the  shares  subject to the
option on January 1st of the  subsequent 3 years  following the grant date.  The
term of an option is determined by the specific option agreement.  No option may
be exercised by any person after its term or the Plan expires.

Executive Employment Agreements
         The Company has entered into employment  agreements with Messrs. Sledge
and McLaughlin, commencing January 2, 1997, Mr. Lescher commencing on January 1,
1997, Mr. Harmon commencing on May 4, 1998, Mr. Swinburne  commencing January 1,
1998. Mr. Chandler  commencing April 17, 1997 and Mr. Strand commencing  October
1,  1998.  The  Company  also  has  employment  agreements  with  certain  other
executives.

         The Company's employment  agreements with Messrs. Sledge and McLaughlin
provide for an initial  five year term and Mr.  Lescher's  employment  agreement
provides for an initial two year term.  After the initial term each agreement is
automatically  renewed  for an  additional  one-year  term  until  either  party
provides  30  days  notice  of  termination  prior  to the  end of a  term.  The
agreements  provide for an annual base salary and an incentive bonus  determined
by the Board. Messrs. Sledge and McLaughlin also receive stock options under the
Company's  Plan.  If the Company  terminates  any of the  employment  agreements
without  cause or if the  Company  or the  employee  terminates  the  respective
employment  agreement upon the occurrence of a major  transaction  involving the
Company, then Messrs. Sledge and McLaughlin will receive a termination fee equal
to 200% of their annual  salaries plus  benefits and  specified  bonuses and Mr.
Lescher will receive 100% of his annual  salary plus  benefits  plus a specified
bonus.  Each  of  Messrs.  Lescher,  Sledge  and  McLaughlin  is  subject  to  a
confidentiality covenant and Messrs. Sledge and McLaughlin are each subject to a
one-year non-competition commitment following the termination of his employment.
Mr. McLaughlin may also be reimbursed for the annual premiums that he incurs for
his disability and $5,000,000 term life insurance policies.

         The Company has employment agreements with Messrs. Harmon and Swinburne
which provide for an initial four-year term and thereafter  one-year terms until
either party provides 30 days notice of termination  prior to the end of a term.
The  agreements  provide  for an  annual  base  salary  and an  incentive  bonus
determined by the Board. Messrs. Swinburne and Harmon also receive stock options
under the Company's Plan. Mr. Swinburne receives  performance options if certain
criteria are met. If the Company  terminates  the employment  agreement  without
cause or if the Company or the employee terminates the employment agreement upon
the  occurrence  of a major  transaction  involving  the  Company,  then Messrs.
Swinburne and Harmon shall each receive a  termination  fee equal to 100% of his
annual salary plus benefits plus a specified bonus.  Payments shall only be made
upon the employee's  execution of a standard  release waiving all claims against
the Company.  Messrs. Swinburne and Harmon are each subject to a confidentiality
covenant.  In  addition,  Mr.  Harmon is subject  to a one year  non-competition
commitment  following  termination of his employment.  The Company's  employment
agreement  with Mr.  Harmon also provides that the Company would loan Mr. Harmon
up to $400,000  for the  purchase  of a home upon his  permanent  relocation  to
Illinois.  This  loan,  made in  August  1998,  is  evidenced  by a  seven  year
promissory  note at 7%  interest,  collateralized  by a second  mortgage  on Mr.
Harmon's home.




                                       56
<PAGE>

         The Company's  employment  agreement with Mr. Chandler  provides for an
initial two-year term and thereafter  one-year terms until either party provides
30 days notice of termination prior to the end of a term. The agreement provides
for an annual base salary and an incentive bonus determined by the Board. If the
Company terminates the employment  agreement without cause, or if the Company or
Mr. Chandler terminates the employment  agreement upon the occurrence of a major
transaction involving the Company, then Mr. Chandler shall receive a termination
fee equal to 50% of his annual  salary plus  benefits  plus a  specified  bonus.
Payments shall only be made upon Mr. Chandler's  execution of a standard release
waiving  all  claims  against  the  Company.   Mr.  Chandler  is  subject  to  a
confidentiality covenant.

         The Company  has an  employment  agreement  with John A. Strand with an
initial four-year term and thereafter one-year terms until either party provides
30 days notice of termination prior to the end of a term. The agreement provides
for an annual base salary and an incentive  bonus  determined by the Board.  Mr.
Strand also receives  stock  options  under the  Company's  Plan. If the Company
terminates the  employment  agreement  without  cause,  or if the Company or Mr.
Strand  terminates  the  employment  agreement  upon the  occurrence  of a major
transaction  involving the Company,  then Mr. Strand shall receive a termination
fee equal to 100% of his annual  salary plus  benefits  plus a specified  bonus.
Termination  payments  shall  only be made  upon  Mr.  Strand's  execution  of a
standard  release waiving all claims against the Company.  Mr. Strand is subject
to a confidentiality agreement.

         The Company has employment  agreements  with certain other  executives.
These agreements  generally have a two-year initial term and thereafter one-year
renewal terms until either party provides 30 day notice of termination  prior to
the end of a term.  The  agreements  provide  for an annual  base  salary and an
incentive bonus  determined by the Board,  plus eligibility for awards under the
Company's Plan. If the Company terminates the employment without cause or if the
employment is terminated  upon the occurrence of a major  transaction  involving
the Company,  then the executive shall receive a termination fee equal to 50% to
100% of his annual salary plus benefits plus a specified  bonus.  Payments shall
only be made upon execution of a standard release waiving all claims against the
Company.  The agreements  also contain a  confidentiality  covenant.  Certain of
these employment agreements contain a one year non-competition covenant

Director Compensation
         TeleHub  currently does not provide cash  compensation to its Directors
who are not also  employees for attendance at Board or committee  meetings,  but
does reimburse  expenses related to such attendance (e.g.,  airfare or telephone
charges). Directors annually receive options to purchase 20,000 shares of Common
Stock under the stock  option plan;  the  exercise  price is market price at the
time of grant and the options vest at the start of the next fiscal year.

Compensation Committee Interlocks; Audit Committee
         During  1997 and until May 31,  1998,  the entire  Board  served as the
Compensation  Committee,  which  determines  the  compensation  of the Company's
executive officers. Two executive officers, Messrs. Sledge and McLaughlin served
on the Board and therefore also the  Compensation  Committee  during 1997, while
Messr.  Harmon,  the  Company's  CFO,  joined  the Board  (and the  Compensation
Committee) in March 1998.  Since June 1998,  Messrs.  Slevin and Pedde have been
the only members of the Compensation Committee.  Since February 1996, Mr. Sledge
has served as the Chairman of United Digital and as a member of its compensation
committee.  Mr.  Snedegar has served as the  President  and a director of United
Digital since 1990. The Board has also  established an Audit Committee  composed
of  Messrs.  Walsh,  Snedegar  and  Slevin,  which  recommends  to the Board the
selection of independent  accountants,  and reviews the scope and results of the
audit and other services provided by the independent accountants.







                                       57
<PAGE>

Item 12.      Security Ownership of Certain Beneficial Owners and Management

         The  following  table sets forth as of December  31, 1998 the number of
shares of Common Stock and Preferred  Stock owned by (i) each executive  officer
and  Director  and  each  person  who  owned  of  record,  or was  known  to own
beneficially,  more than five percent of the Company's  outstanding Common Stock
or Preferred Stock, and (ii) executive officers and Directors as a group. Unless
otherwise  indicated,  the address for each of the following persons or entities
is c/o TeleHub  Communications  Corporation,  1375  Tri-State  Parkway,  Gurnee,
Illinois 60031.





                                                                   Percent of
                                              Number of Shares     Outstanding
Name                                          Beneficially Owned    Shares(1)
----                                          ------------------    -------- 
5% Stockholders:
Hartford Holdings, Ltd                            5,191,950  (2)       31.4%
   Box 143, Cayman Islands
   British West Indies
Roseville Computer Projects Limited               4,100,000            25.3%
   P.O. Box 556, Charleston, Nevis
   West Indies
Sledge Family Trust                               1,494,167  (3)        9.2%
   27 Cherry Hill Court
   Alamo, California
Executive Officers and Directors:
William W. Becker                                 5,324,450  (4)       32.0%
   Chairman of the Board of Directors
Donald H. Sledge                                  1,635,417  (5)       10.0%
   Vice-Chairman of the Board, Chief
   Executive Officer and President
Michael G. McLaughlin                               641,250  (6)        3.8%
   Chief Technology Officer and Director
Herbert H. Swinburne                                 50,000  (7)        0.3%
   President of TNS
Richard M. Harmon                                   551,246  (8)        3.3%
   Chief Financial Officer, Treasurer,
   Secretary and Director
Barry C. Lescher                                    108,654  (9)        0.7%
   Assistant Secretary and Director
John F. Slevin                                      764,000  (10)       4.6%
   Director
John A. Strand III                                  175,000  (11)       1.1%
   Acting President of TTC
Oz Pedde                                             20,000  (12)       0.1%
   Director
John R. Snedegar                                     20,000  (12)       0.1%
   Director
Martin R. Walsh                                      20,000  (12)       0.1%
   Director
Executive officers and Directors
   as a group (11 beneficial owners)              9,310,017  (13)      49.2%





                                       58
<PAGE>


(1)   Based on 16,203,537  shares of Common Stock outstanding as of December 31,
      1998 (which includes full conversion of the 3,500,000  shares of Preferred
      Stock  outstanding  as of  December  31, 1998 at the rate of 1 for 1) plus
      shares  of Common  Stock  that may be  acquired  by the  indicated  person
      pursuant  to  any  options  and  warrants   exercisable  within  60  days.
      Beneficial  ownership is determined  in  accordance  with the rules of the
      SEC.  Such shares,  however,  are not deemed  outstanding  for purposes of
      computing the percentage  ownership of the other stockholders or groups of
      stockholders.

(2)  Includes  4,384,450  shares of Common  Stock,  480,000  shares of Preferred
     Stock and 327,500  shares of Common  Stock  issuable  upon the  exercise of
     warrants.

(3)  Includes 1,479,167 shares of Common Stock, 10,000 shares of Preferred Stock
     and 5,000 shares of Common Stock issuable upon exercise of warrants.

(4)  Includes 132,500 shares of Common Stock issuable  pursuant to stock options
     exercisable  within  60 days  and all  shares  owned by HHL,  of which  Mr.
     Becker, the Company's Chairman, is the principal shareholder.

(5)  Includes 141,250 shares of Common Stock issuable  pursuant to stock options
     exercisable within 60 days and all shares owned by the Sledge Family Trust,
     of which Mr. Sledge is trustee and a beneficiary.

(6)  Includes 141,250 shares of Common Stock issuable  pursuant to stock options
     exercisable within 60 days and 500,000 shares of Common Stock issuable upon
     exercise of warrants.

(7)  Includes  50,000 shares of Common Stock issuable  pursuant to stock options
     exercisable within 60 days.

(8)  Includes  450,000 shares of Common Stock issuable upon exercise of warrants
     and 101,246  shares of Common  Stock  issuable  pursuant  to stock  options
     exercisable within 60 days.

(9)  Includes 108,654 shares of Common Stock issuable  pursuant to stock options
     exercisable within 60 days.

(10)  Includes 10,000 shares of Common Stock,  30,000 shares of Preferred Stock,
      168,500 shares of Common Stock issuable upon exercise of warrants,  40,000
      shares of Common  Stock  issuable  pursuant to stock  options  exercisable
      within 60 days, all personally owned by Mr. Slevin.  Also includes 200,000
      shares  of Common  Stock and  315,500  shares  of  Common  Stock  issuable
      pursuant  to warrants  that are owned by  Comdisco,  for which Mr.  Slevin
      serves as Chairman and CEO.

(11) Includes 175,000 shares of Common Stock issuable  pursuant to stock options
     exercisable within 60 days.

(12) Includes  20,000 shares of Common Stock issuable  pursuant to stock options
     exercisable within 60 days.

(13) Includes  6,073,617  shares of Common  Stock,  520,000  shares of Preferred
     Stock,  1,766,500 shares issuable upon the exercise of warrants and 949,900
     shares issuable pursuant to options exercisable within 60 days.



ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In 1998, the Company contracted Telemetrix Resource Group Limited (TRG)
to provide billing processing and consulting services. Hartford is the principal
owner of TRG and is  controlled by the Chairman of the Board of Directors of the
Company.  In 1998,  TRG  billed the  Company  approximately  $458,000  for these
services.  TRG  continued to provide such  services on an ongoing basis in 1999.
Additionally,  in February  1999,  the Company and TRG entered  into a letter of
intent to purchase a billing software license for approximately $2.5 million. In
March 1999,  the Company  advanced  $250,000 to TRG which  represents 10% of the
software license fee. This is refundable, less outstanding fees for any services
rendered.





                                       59
<PAGE>


         In August  1998,  the Company  loaned  $400,000  to Mr.  Harmon for the
purchase of a home upon his permanent relocation to Illinois, in accordance with
Mr.  Harmon's  employment  agreement.  Mr.  Harmon gave the Company a seven year
promissory  note at 7%  interest,  collateralized  by a junior  mortgage  on Mr.
Harmon's home.

         In August 1998, the Company also loaned $235,340 to Mr. McLaughlin, who
gave the Company a six month  promissory  note at 18% interest.  Mr.  McLaughlin
repaid this note in November 1998. If Mr. McLaughlin defaults on this note, then
the Company may setoff unpaid  amounts  against the amounts to be paid under Mr.
McLaughlin's  employment  contract.  While this note is not secured, the Company
believes its potential setoff rights exceed the amount of the note.

         On June 2, 1998,  the  Company  issued to Mr.  Slevin,  a  Director  of
TeleHub and President and CEO of Comdisco,  a warrant to purchase 100,000 shares
of Common Stock for $12.50 per share,  exercisable  until the later of ten years
after issuance or five years after an initial public offering.

         On May 13, 1998, Mr. Harmon sold warrants to purchase 150,000 shares of
Common Stock,  with an exercise  price of $7.50,  for $4.91 per warrant to three
individuals,  including Mr.  Slevin who purchased  warrants for 50,000 shares of
Common Stock.

         In May 1998,  the  Company  received  a $12  million  Bridge  Loan from
Comdisco.  The Bridge Loan was collateralized by all of the Company's intangible
property,  including  VASP(TM).  Comdisco  also  received a warrant to  purchase
240,000  shares of Common Stock for $10.00 per share,  exercisable  until May 5,
2005. The Company repaid this Bridge Loan,  including  approximately  $98,600 of
accrued interest, from the proceeds of the Initial Note Offering.

         In March 1998, the Company  granted to Mr. Martin Walsh, a Director,  a
warrant  to  purchase  15,000  shares of  Common  Stock for  $10.00  per  share,
exercisable until March 4, 2001. Later in March 1998, Mr. Walsh joined TeleHub's
Board.

         In February 1998, the Company loaned $112,029 to Mr.  Swinburne,  TNS's
President.  Mr.  Swinburne gave the Company an unsecured,  non-interest  bearing
promissory note in exchange for the loan. In May 1998 Mr.  Swinburne repaid this
loan.

         In December 1997,  Comdisco received a warrant to purchase 5,500 shares
of Common  Stock at a price of $10.00 per share,  exercisable  at the earlier of
seven years after issuance or two years after an initial public  offering of the
Company's  capital stock. Mr. Wheatley,  a Comdisco  executive,  also received a
warrant to purchase 1,750 shares of Common Stock at a price of $7.50 per share.

         In the Fall 1997 Offering, Mr. Slevin purchased one unit (10,000 shares
of Common  Stock and  warrants to  purchase  3,500  shares of Common  Stock) and
Comdisco  purchased 20 units (200,000 shares of Common Stock and 70,000 warrants
to purchase Common Stock).

         In November 1997, the Company  loaned  $250,000 to Mr. Harmon,  its CFO
and a Director.  Mr. Harmon gave the Company a promissory note bearing  interest
at 1% over the prime rate,  secured by warrants  to purchase  150,000  shares of
Common Stock at $7.50 per share. Mr. Harmon repaid this loan in May 1998.

         In the Spring 1997  Offering,  Mr.  Slevin  purchased 1.5 units (30,000
shares of  Preferred  Stock and  warrants  to  purchase  5,000  shares of Common
Stock). See "Security Ownership of Certain Beneficial Owners and Management."

         In April 1997, the Company  entered into an equipment  lease  financing
facility  with  Comdisco.  As of March 31, 1998,  the Company had utilized  four
installments of this facility for a total of $6,156,407. These installments have
quarterly lease rate factors ranging from 8 1/2% to 9 1/2%, have terms of 3 to 4
years,  have  aggregate  quarterly  payments  of  approximately  $460,000  and a
repurchase option for fair market value at the end of the term.




                                       60
<PAGE>

         In  December  1996,  HHL agreed to provide a bridge  loan of up to $1.0
million to the  Company  with an  interest  rate of 17% per annum.  The  Company
repaid the  principal  and accrued  interest on this loan in March 1997 from the
net proceeds of the Spring 1997  Offering.  Concurrently,  the Company issued to
HHL  134,450  additional  shares  of  Common  Stock  pursuant  to the  terms  of
obligations  owed by the  Company  to HHL,  including  the  bridge  loan and the
Indemnification  Obligation  (as defined).  In  connection  with the issuance of
these  shares,  the  Company  accepted  a note  from HHL for  $40,000  which was
subsequently paid.

         During  1996,  HHL provided  consulting  services to the Company with a
value of  $169,000,  which the Company  paid  through  the Spring 1997  Offering
issuance of 33,800  shares of  Preferred  Stock.  HHL is the  Company's  largest
shareholder and Mr. William Becker, the Company's  Chairman,  is a principal and
the primary shareholder of HHL. The Company also has a consulting agreement with
International   Telecommunications   Consultants,  an  affiliate  of  HHL.  This
agreement  provides for a $175,000  annual  consulting fee. The Company has been
informed  that HHL is in  preliminary  negotiations  for a business  transaction
involving the Australasian  joint venture partner.  See  "Business-TTC  Customer
Relationships."  HHL is also a client of Watson &  Associates,  an  affiliate of
Director Oz Pedde.

         During 1996, the Company agreed to indemnify HHL (the  "Indemnification
Obligation")  from any claims and  liabilities  that  might be  incurred  by HHL
through its efforts to assist in the  placement of $3.0 million of securities of
Cam-Net  Communications  Network  Inc.  ("Cam-Net"),  a Canadian  company  which
proposed  merging  with  the  Company.  Parties  unrelated  to HHL had  advanced
$600,000 on a private  placement  of  securities  of Cam-Net.  When the proposed
merger was terminated, the securities offering by Cam-Net was also canceled, and
HHL was  required  to  repay  $600,000  pursuant  to its  arrangement  with  the
advancing party. The Company fulfilled its Indemnification  Obligation to HHL by
issuing 120,000 shares of Preferred Stock and 60,000 warrants to purchase Common
Stock at $7.50 per share in the Spring 1997 Offering.

         In  January  1996,  Roseville  Computer  Projects  Ltd.   ("Roseville")
contributed  software to the Company in exchange for 151 shares of capital stock
of TNS. In March 1996,  Roseville  assigned all right, title and interest in the
VASPJ  software to TNS in exchange for an additional 274 shares of capital stock
of TNS. In January 1997, Roseville exchanged all of its TNS shares for 4,250,000
shares of  TeleHub  Common  Stock.  In July  1997,  Roseville  sold its  network
databases and libraries and assigned all associated right, title and interest to
the  Company for  $485,000,  of which  $200,000  was paid in August 1997 and the
$285,000 balance of which,  plus interest at the rate of 12% per annum, was paid
in January 1998. A Roseville  subsidiary provided consulting services (primarily
maintenance  of the  network  data bases and  libraries)  to the  Company  for a
$20,000 monthly fee. The Roseville subsidiary received a total of $325,000 under
this consulting arrangement, which was terminated on January 1, 1998.

         During 1996, the Company contracted for software  development  services
with Access Point Communications  Corporation  ("APCC"), an entity controlled by
Mr.  McLaughlin,  a Director and the CTO of TTC. The Company paid APCC  $974,915
for these services  during 1996, and also  reimbursed APCC $36,309 for operating
expenses advanced by APCC. The Company also incurred $550,000 in management fees
to APCC for services  provided by Messrs.  McLaughlin  and Lescher and other TNS
principals  and for network  library  maintenance  fees. Of the $974,915 paid to
APCC, a subsidiary of Roseville  received  $300,000 as a subcontractor  to APCC.
The  Company's  relationship  with APCC  terminated at the end of 1996, at which
time Messrs. McLaughlin and Lescher became full-time Company employees.

         HHL and the Sledge  Family  Trust (the  "Trust"),  significant  Company
shareholders,   advanced  initial  funding  for  development  of  the  Company's
business. Mr. Donald Sledge, the Company's Vice Chairman, CEO and President,  is
a trustee and  beneficiary  of the Trust.  During  1996,  HHL loaned the Company
$1,350,000, evidenced by two 7.5% promissory notes, and $411,243, evidenced by a
12% promissory note, and the Trust made a $50,000 loan to the Company, evidenced
by a 7.5%  promissory  note.  Concurrently  with the Spring 1997  Offering,  HHL
exchanged the promissory notes,  related accrued interest,  the  Indemnification
Obligation  and  accounts  payable  balances  totaling  $2.4 million for 480,000
shares of Preferred  Stock and the Trust  exchanged its $50,000  promissory note
for 10,000 shares of Preferred Stock. In conjunction with the exchange,  HHL and
the Trust also received  warrants to purchase,  respectively,  240,000 and 5,000
shares of Common Stock at $7.50 per share.





                                       61
<PAGE>

         The Company  believes that all of these  transactions  were on terms no
less favorable to the Company than it could have obtained in  transactions  with
unrelated third parties.

         proceeding  arising  from such  person's  actions  or  inaction's  as a
director,  officer or agent.  Such  indemnification  includes  reimbursement  of
expenses incurred by such person in advance of such legal proceeding.

         The Company  will report to the holders of the Notes and to the IRS the
amount of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payments on the Notes.

























































                                       62
<PAGE>






                                POWER OF ATTORNEY
         The  Registrants  and each person whose signature to this Annual Report
on Form 10-K appears below hereby authorizes John R. Lawson,  with full power of
substitution,  to file one or more  amendments,  which  amendments may make such
changes he deems  appropriate,  and the  Registrants and each such person hereby
appoints  John R. Lawson as  attorney-in-fact  with full power to act alone,  to
execute,  in the name and on behalf  of the  Registrants  and each such  person,
individually and in such capacity stated below, and any such amendments.

                                   SIGNATURES
         Pursuant  to the  requirements  of  Section  15(d)  of  the  Securities
Exchange  Act of 1934,  Registrants  have duly caused  this Annual  Report to be
signed on its behalf by the undersigned officer,  thereunto duly authorized,  in
the City of Gurnee, Illinois.
                                         TELEHUB COMMUNICATIONS CORPORATION
                                         TELEHUB NETWORK SERVICES CORPORATION
                                         TELEHUB TECHNOLOGIES CORPORATION
                                         TELEHUB LEASING CORPORATION

March 31, 1999                         By:  /s/ JOHN R. LAWSON
                                           ----------------------------------- 
                                              John R. Lawson, Chief Financial
                                              Officer of each Registrant

         Pursuant to the  requirements of the Securities Act, this Annual Report
has been  signed by the  following  persons in the  capacities  and on the dates
indicated.

<TABLE>
<CAPTION>

         Signature                                     Title                                       Date
         ---------                                     -----                                       ----

<S>                               <C>                                                          <C> 
  /s/ WILLIAM W. BECKER           Chairman of the Board of Directors of                        March 31, 1999
------------------------------    TeleHub Communications Corporation ("TeleHub"),
    William W. Becker             Director  of  TeleHub  Network  Services       
                                  Corporation   ("TNS"),   &  Director  of       
                                  TeleHub Technologies Corporation ("TTC")       
                                  

  /s/ DONALD H. SLEDGE            Vice-Chairman, Chief Executive Officer of TeleHub,           March 31, 1999
------------------------------    Director of TeleHub, TNS & TTC                             
    Donald H. Sledge              and sole director of TeleHub Leasing Corporation ("TLC")   
                                                                                             
                                  
   /s/ JOHN R. LAWSON             Chief Financial Officer, Treasurer, corporate Secretary      March 31, 1999
------------------------------    & Principal Accounting Officer of each Registrant    
     John R. Lawson                     

/s/ MICHAEL G. MCLAUGHLIN         Director of TeleHub & TNS                                    March 31, 1999
------------------------------
  Michael G. McLaughlin

  /s/ BARRY C. LESCHER            Director of TeleHub                                          March 31, 1999
------------------------------
         Barry C. Lescher

   /s/ JOHN F. SLEVIN             Director of TeleHub & TNS                                    March 31, 1999
------------------------------
     John F. Slevin

      /s/ OZ PEDDE                Director of TeleHub                                          March 31, 1999
------------------------------
        Oz Pedde

  /s/ JOHN R. SNEDEGAR            Director of TeleHub                                          March 31, 1999
------------------------------
    John R. Snedegar

  /s/ MARTIN R. WALSH             Director of TeleHub                                          March 31, 1999
------------------------------
   Martin R. Walsh

</TABLE>





                                       63
<PAGE>

                                     PART IV

Item 14.      Exhibits and Financial Statement Schedules

14(a)(1)      Financial  Statements.   The  following   consolidated   financial
              statements  of the Company are filed under Item 8 of this  Report,
              beginning on page F-1 of this Report.

                  Report of Independent Accountants

                  Consolidated Balance Sheets

                  Consolidated Statements of Operations

                  Consolidated Statement of Stockholders' Equity (Deficit)

                  Consolidated Statements of Cash Flows

                  Notes to Consolidated Financial Statements

              The  following  consolidated  financial  statements do not include
              separate  financial  statements  of  the  Company's   Subsidiaries
              (TeleHub  Network  Services,  TeleHub  Technology  Corporation and
              TeleHub  Leasing  Corporation)  as management has determined  that
              they would not be material to  investors.  This  determination  is
              based on the fact that (I) the parent company has no operations or
              significant assets other than its investments in its subsidiaries,
              (ii) the  guarantor  subsidiaries  are  wholly  owned,  (iii)  the
              subsidiaries'  guarantee  of the parent  company's  debt are full,
              unconditional,  joint and several, (iv) the operations of the sole
              non-guarantor  in which the Company holds a minority  interest are
              immaterial  to the  consolidated  financial  statements;  and  (v)
              segment  information  is  presented  in note  16 to the  following
              consolidated financial statements.

14(a)(2)      Financial Statement  Schedules.  The following financial statement
              schedules  of  the  Company  for  the  period   January  18,  1996
              (inception) to December 31, 1996, and the two years ended December
              31, 1997 and 1998,  are included in this Annual Report on SEC Form
              10-K, as required by Item 14(d):

              Report of Independent Accountants on Financial Statement Schedule

              Schedules not listed above were omitted because the information to
              be  set  forth  therein  is  not  applicable  or is  shown  in the
              financial statements or accompanying notes.

14(a)(3)      List of Exhibits

     (1) Underwriting Agreement. No Exhibit Required.

     (2) Plan  of  Acquisition,  Reorganization,   Arrangement,  Liquidation  or
          Succession. None.

     (3) Corporate Organization.

         A. TeleHub Communications Corporation

(a)          (3.A.1) Articles of Incorporation filed with the  Nevada  Secretary
                     of State on September 26, 1998.

(a)          (3.A.2) Certificate  of   Designation  for  Series  A   Convertible
                     Preferred Shares filed with the Nevada Secretary  of  State
                     on January 31, 1997.

(a)          (3.A.3) Bylaws

     (4) Instruments defining the rights of security holders

(a) (4.1) Indenture dated July 30, 1998,  between  Registrant,  Subsidiaries and
State Street Bank ("Bank").









                                       64
<PAGE>



(a)      (4.2)    Forms of Series A/B Senior Discount Note due 2008 (included in
                  Exhibit 4.1).

(a)      (4.3)    Form of Subsidiary Guarantees (included in Exhibit 4.1).

(a)      (4.4)    Registration Rights Agreement  dated July 30, 1998, among  the
                  Registrant,   Subsidiaries  and   BancBoston  Securities  Inc.
                  ("BSI")

      (5)Letter regarding Legality. No Exhibit Required

      (6)No Exhibit

      (7) No Exhibit Required

      (8)Opinion regarding Tax Matters. No Exhibit Required

      (9)  Voting Trust Agreement. None

      (10)  Material Contracts.

(a) (10.1)  Purchase  Agreement  dated July 27, 1998,  by and among  Registrant,
Subsidiaries and BSI.

(a)      (10.2) Warrant  Agreement  dated  as of March  11,  1998  b etween  the
                Registrant, Subsidiaries and Bank.

(a)      (10.3) Warrant  Registration Rights Agreement dated July 30, 1998 among
                Registrant, Subsidiaries & BSI.

(a)      (10.4) Sales  Agreement,  dated as of October 31, 1997,  by and between
                Newbridge   Networks   Corporation  and   the   TeleHub  Network
                Services Corporation.

(a)      (10.5) Equipment  Lease,  dated as of November 11, 1996, by and between
                DSC Finance Corporation and the Company.

(a)      (10.6) Loan and  Security  Agreement,  dated as of May 5, 1998,  by and
                between Comdisco, Inc. and the Company.

(a)      (10.7) The Company's 1997 Stock Option Plan

(a)      (10.8) Form of Incentive Stock Option Certificate

(a)      (10.9) Form of Non-statutory Stock Option Certificate

(a)      (10.10) Employment  Agreement between  Registrant and Donald H  Sledge
                dated January 2, 1997.

(a)      (10.11) Employment  Agreement between Registrant and Michael McLaughlin
                dated January 2, 1997.

(a)      (10.12) Employment  Agreement  between Registrant and Richard M. Harmon
                dated May 4, 1998, as amended.

(a)      (10.13) Employment   Agreement  between TNS and Herb  Swinburne,  dated
                January 1, 1998.

(a)      (10.14) Consulting Agreement, dated January 2, 1997, between Registrant
                and International Telecom Consulting, Inc.

(a)      (10.15) Loan  Agreement,  dated   August 26, 1996 by and  between  TNS,
                Hartford Holdings Ltd ("HHL"), and Donald H. Sledge.





                                       65
<PAGE>

(a)      (10.16) Bridge Loan Agreement,  dated December 10, 1996, by and between
                TNS and HHL.

(a)      (10.17) Reimbursement & Assignment of Recovery dated November 30, 1996,
                among TNS, Hartford Holding Ltd. and Dovedale Investments Ltd.

(a)      (10.18) Promissory  Note   dated  February   13,  1998,  for  C$157,500
                (US$112,029) by Mr. Swinburne to Registrant.

(a)      (10.19) Secured  Promissory  Note,  dated  November 1997 by  Richard M.
                Harmon to Registrant for $250,000, due November 1999.

(a)      (10.20)  Employment  Agreement between TNS and Timothy Chandler,  dated
                April 17, 1997.

(a)      (10.21)  Employment  Agreement  between  TNS and Barry  Lescher,  dated
                January 1, 1997.

(a)      (10.22) Loan   Agreement  between  Registrant  and  Richard M.  Harmon,
                dated August 7, 1998.

(a)      (10.23) Promissory Note, dated August 7, 1998, by  Richard M. Harmon to
                Registrant for $400,000, due September 1, 2005.

(a)      (10.24) Promissory Note, dated August 7, 1998, by Michael G. McLaughlin
                to Registrant for $235,340, due February 19, 1999.

(a)      (10.25) Telecommunications  Service  Agreement  between  TNS and Comtel
                International Corporation, dated March 19, 1998.

(a)      (10.26) Telecommunications  Service  Agreement  between  TNS and Global
                Telephone Corporation, dated April 13, 1998.

(a)      (10.27) Telecommunications  Service Agreement between TNS and  American
                Telephone Network LLC, dated July 8, 1998.

(a)      (10.28)  Amendment  I,  dated  October 8, 1997,  to  Agreement  between
                Registrant and Worldcom,  Inc., together with Worldcom Agreement
                for Worldcom  ATM  Services  dated  October  23,  1996  and with
                Amendment II dated June 18, 1998. Certain portions of  Amendment
                I are  omitted   based  upon  the   Commission's  order granting
                confidential  treatment.  The omitted portions  were  separately
                filed with the U.S. Securities and Exchange Commission.

(a)      (10.29)[Transcend]  Telecommunications  Services Agreement, dated July
                14, 1997, between Registrant and Worldcom Network Services, Inc.

(a)      (10.30)  Transcend  Program  Enrollment  Terms,  dated  August 8, 1997,
                between Registrant and Worldcom Network  Services,  Inc. Certain
                portions of this exhibit are omitted based upon the Commission's
                order granting confidential treatment. The omitted portions were
                separately   filed  with  the  U.S.  Securities   and   Exchange
                Commission.

(a)      (10.31) Transcend  Service  Schedule,  dated  August 8, 1997,   between
                Registrant and Worldcom Network  Services, Inc. Certain portions
                of this  exhibit are omitted  based upon the Commission's  order
                granting  confidential  treatment.  The  omitted  portions  were
                separately   filed  with  the  U.S.   Securities  and   Exchange
                Commission.



                                       66
<PAGE>

(a)      (10.32) Amendment  No. 2, dated  April 1, 1998,  to  Transcend  Program
                Enrollment Terms.  Certain  portions of this exhibit are omitted
                based  upon  the  Commission's   order   granting   confidential
                treatment. The omitted  portions were separately  filed with the
                U.S. Securities and Exchange Commission.

(a)      (10.33) Collocate  Agreement,  dated April 3, 1998,  between Registrant
                and Worldcom Network Services, Inc.

(a)      (10.34) License Agreement,  dated December 24, 1997, between Registrant
                and  Newbridge Networks  Corporation, together with  Addendum #1
                dated March 1, 1998.

(a)      (10.35) Employment  Agreement  between   TCC,  TTC   and  John  Strand,
                effective October 1, 1998.

(a)      (10.36) Employment Agreement between TCC, TNS and John R. Lawson, dated
                July 3, 1997,  with Addendum  dated  September 23, 1998,  and
                Amendment effective January 25, 1999.


       (11) Statement regarding Computation of Per Share Earnings. None.

(c)    (12) Statement regarding Computation of Ratios.

       (13) Annual Report to Security Holders. None.

       (14) Material Foreign Patents. None.

       (15) Letter regarding Unaudited Interim Financial Information. 
            No Exhibit Required

       (16) Letter regarding Change in Certifying Accountant. None.

       (17) Letter regarding Director Resignation. None

       (18) Letter regarding Change in Accounting Principles. None

       (19) Report furnished to Security Holders. No Exhibit Required.

       (20) Other Documents or Statements to Security Holders. 
            No Exhibit Required.

(a)    (21) Subsidiaries of Registrant.

       (22) Published Report regarding Matters Submitted to Vote of Security
            Holders. None

       (24) Power of Attorney.
(c)      (24.1)   Power of Attorney for Officers and Directors of Company 
                  Signature Page to this Annual Report).

(b)    (25)       Statement of Eligibility of Trustee. No Exhibit Required

       (26)       Invitation for Competitive Bids. No Exhibit Required.

(c)    (27)       Financial Data Schedule.

       (28)       Information from Reports Furnished to State Insurance 
                  Regulatory Authorities. None.





                                       67
<PAGE>


      (99)        Other Exhibits.
(a)      (99.1)   Proposed  Form  of  Letter  of  Transmittal  with  respect  to
                  Exchange Offer.

(a)      (99.2)   Proposed Form of Notice of Guaranteed Delivery.

(a)      (99.3)   Proposed Form of Exchange Agent Agreement.
-----------------------------
(a)      Previously   filed  and   incorporated   by   reference   to  Company's
         Registration  Statement on SEC Form S-4 (333-61441) as filed August 13,
         1998,  as amended  October 13, 1998,  as further  amended  November 12,
         1998, and as further amended December 7, 1998.
(b)      Filed with Company's Current Report on SEC Form 8-K  as  filed  January
         25, 1999.  
(c)      Filed  with this  Annual  Report on  SEC Form  10-K for the year  ended
         December 31, 1998.


14(b)    Reports on Form 8-K. A Current Report on Form 8-K was filed January 25,
         1999,  reporting  "Item 5: Other Events" (i.e.,  the resignation of the
         Company's Chief Financial  Officer and appointment of the Company's new
         Chief Financial Officer). No financial statements were filed.

14(c)    Exhibits.  The exhibits required by this  Item 14(c) are  listed  under
         Item 14(a)(3).

14(d)    Financial Statement Schedules.  Schedules not listed above were omitted
         because the information to be set forth therein is not applicable or is
         shown in the financial statements or accompanying notes.



     SUPPLEMENTAL  INFORMATION  TO BE FURNISHED  WITH REPORTS FILED  PURSUANT TO
     SECTION 15(d) OF THE EXCHANGE ACT BY REGISTRANTS  WHICH HAVE NOT REGISTERED
     SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT.

(a)      Annual Reports to Shareholders and Proxy Information

         (1)  Registrants  have not sent to security  holders any annual  report
              covering the Registrants' last fiscal year.

         (2)  Under separate  covers,  four copies of TeleHub's Notice of Annual
              Meeting of Shareholders (held on August 24, 1998) and accompanying
              form of proxy and proxy soliciting material are being furnished to
              the Commission for its information.

(b)      Copies  furnished  to  Commission  are  not  deemed "filed"  with  the
         Commission.

(c)      Annual Reports and Proxy Information subsequently sent to shareholders
         Registrants  will  furnish  the  Commission  with  copies of any annual
         report or proxy materials when such materials are security holders.











                                       68
<PAGE>


                TELEHUB COMMUNICATIONS CORPORATION & SUBSIDIARIES
                         (COMMISSION FILE NO. 333-61441)
     ANNUAL REPORT ON SEC FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1998


                 INDEX TO EXHIBITS FILED WITH THIS ANNUAL REPORT


Exhibt                                                                      Page
--------------------------------------------------------------------------------
 (24) Power of Attorney.

         (24.1)   Power of Attorney for Officers and Directors
                  of Company (Signature Page to this Annual Report)......... 60

(27)  Financial Data Schedule.............................................. E-1

















































                                       69
<PAGE>



Schedule II
Valuation and qualifying Accounts for years ended December 31, 1997 and 1998.

<TABLE>
<CAPTION>
                                                         Additions
                                        Balance at     Charged to    Deductions  
                                         Beginning      Costs and     Accounts       Balance at
Description                              of Period      Expenses     Written Off   End of Period
-----------                              ---------      --------     -----------   -------------
<S>                                                    <C>                           <C>    
1998   
   Allowance for doubtful accounts:          -         $1,058,396         -          $1,058,396
   Valuation allowance against
     net deferred tax assets             9,220,000     24,920,000         -          34,140,000
1997                                                                                     -
   Allowance for doubtful accounts:          -              -             -              -
   Valuation allowance against
     net deferred tax assets               640,000      8,580,000         -          9,220,000


</TABLE>


















                                      E-2