UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington. D.C. 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the three months ended June 30, 1999

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from______to_______

                         Commission file number 1-12835


                               WORLD CALLNET, INC.
             (Exact name of registrant as specified in its charter)

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

           Brecon House, Meridian Gate, 207 Marsh Wall, London E14 9YT
               (Address of principal executive offices) (Zip Code)


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


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


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

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


         Check whether the registrant (1) filed all reports required to be filed
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes X   No __

         As of July 31, 1999 there were 7,933,833 shares of registrant's  common
stock outstanding.

         Transitional Small Business Disclosure Format (Check One):  Yes __ No X


<PAGE>



REGISTRANT'S  DISCLAIMER STATEMENT RE: PRIVATE SECURITIES  LITIGATION REFORM ACT
AND OTHER MATTERS

         The  statements  in this Report on Form 10-QSB and in other  filings by
World CallNet, Inc. (the "Company") with the Securities and Exchange Commission,
or in press  releases  issued by the  Company  that are not based on  historical
information  are  considered  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended,  including statements regarding the
Company's projections,  hopes, expectations,  intentions,  beliefs or strategies
regarding the future.  Forward-looking  statements include, but expectations are
not limited to, plans  discussed  the  Company's  Form 10-K for the period ended
September 30, 1998, in the section entitled  "Description of Business" regarding
(i) the  Company's  plans to market  products in Europe,  North  America,  South
America and Asia,  (ii) the Company's  belief that offering free Internet access
will capture  customers for CallNet PLC, (iii) the Company's  belief that it may
acquire  other  companies  engaged  in  Internet  related  businesses,  (iv) the
Company's  expectation  that the acquisition by the Company of the remaining 85%
of CallNet Plc can be acquired by the end of fiscal year 1999, (v) the Company's
belief  that the  majority  of its  future  revenues  will be  derived  from its
ownership of CallNet PLC, which earns a share of interconnect toll revenues from
companies that provide telephone service to their customers,  (vi) the Company's
belief that CallNet Plc will meet the quarterly  telephone  toll minute  targets
set forth in its agreement with Cable & Wireless  Communications,  Plc ("Cable &
Wireless  Communications"),  (vii) the  Company's  belief that its  products and
services  will appeal to the many  segments of the  Internet  market,  and (vii)
statements  in the  Management's  Discussion  and  Analysis or Plan of Operation
section of this report  regarding (a) the projection that the Company's  working
capital will be adequate  until mid 1999,  (b) the  projection  that  additional
capital from bridge notes and/or sale of equity  securities  will be  necessary,
(c) the expectation that product  manufacturing  and distribution  costs will be
borne by joint venture partners,  (d) the estimate of research / development and
plant  expenditures  for  the  next  twelve  months,  (e) the  expectation  that
telephone  toll  revenues  derived  from  ownership  of CallNet  PLC will be the
primary  source of  internal  liquidity  and  product  sales will be a secondary
source of internal liquidity,  and (f) the belief that Year 2000 issues will not
have a material impact on the Company.

         It is possible that the  Company's  projections,  hopes,  expectations,
intentions, beliefs, plans or strategies regarding the future and hopes outlined
above may not be achieved due to factors and circumstances  discussed  elsewhere
in this Form 10-QSB. See Part 1, Item 2,  "Management's  Discussion and Analysis
or Plan of Operation."

         World CallNet, Inc. is not affiliated with, sponsored by or endorsed by
any of the  following  companies  who have similar  trade names,  trademarks  or
service marks: Worldcall  Communications  International,  Inc.; Computer Calling
Technologies,   Inc.;  AT&T  Corp.;  Worldnet   Communications,   Inc.;  Luckman
Interactive,   Inc.;   Allnet   Communications   Services,   Inc.;   West  Coast
Telecommunications, Inc.; and Worldnet Communications, Inc.



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PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Financial  information required by Item 301(b) of Regulation S-B can be
found on the page following Item 2 below.  The financial  information  contained
herein for the three months and nine months ended June 30, 1999 is unaudited but
includes  all  adjustments  that  the  Company  considers  necessary  for a fair
presentation of the results for such periods.  The financial  information should
be read in  conjunction  with  the  financial  statements  for  the  year  ended
September  30, 1998  included in the  Company's  Annual  Report on Form  10-KSB.
Operating  results for the nine months  ended June 30, 1999 are not  necessarily
indicative  of the  results  that may be  expected  for the  entire  year  ended
September 30, 1999.

Item 2. Management's Discussion and Analysis or Plan of Operation.

         During  1998,  the  Company  sold all of its  interests  in oil and gas
royalty  properties for cash and, after repayment of debt and accounts  payable,
became a publicly  traded  shell.  In October  1998,  the Company  completed the
acquisition  of  World  Wide   Communication   (Holdings)  Ltd.  ("WWCH")  in  a
transaction  accounted for as a reverse  acquisition.  As a result,  the Company
became the successor to the business and financial operations of WWCH, including
its fiscal  yearend of September 30. WWCH was  incorporated  in January 1998 and
during the period from  incorporation  through  June 30, 1999 had been  involved
primarily in capital formation  activities,  refinement of its business strategy
and development of relationships  with industry  partners.  In January 1999, the
Company changed its name to World CallNet, Inc.

LIQUIDITY AND CAPITAL RESOURCES

         Since  its  inception  the  Company  has  not  generated  any  internal
liquidity from any source.  The Company's  principal  external source of capital
for  developing its products and services has been the placement of bridge notes
payable.  In November  and  December  1998,  the Company  completed  the private
placement  of  $1,150,000  in bridge  notes that are due on  December 1, 1999 or
earlier  under certain  circumstances,  including the raising of $3.5 million or
more of additional  capital.  In April 1999,  the Company  completed the private
placement of $550,000 of bridge notes that are due on October 9, 1999 or earlier
under  circumstances  similar  to  the  aforementioned   placement.   Additional
placements of bridge notes or the sale of equity  securities  to fund  operating
expenses will be necessary until the Company's  revenues from operations provide
sufficient cash flow.

         The Company's plan of operation for the next twelve months includes the
ongoing  operation  of its  Internet  service  and  the  continued  development,
manufacturing  and  marketing of its Internet  products  such as Mail TV and its
proprietary keyboard.  The Company will require substantial capital to implement
its  business  plan,  which  is  discussed  further  in Note 2 to the  Financial
Statements.  While  substantially  all  development  costs  will be borne by the
Company,  it is expected that all of the costs of manufacturing and distribution
of these products will be borne by joint venture  partners,  such as Zilog,  OEM
television  manufacturers  and  other  third  parties  seeking  to  acquire  new
microchip technology developed by the Company.


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<PAGE>


         As of June 30,  1999,  the  Company's  working  capital  had been fully
expended to pay its operating costs and administrative  expenses.  To meet these
obligations  during the period since June 30,  1999,  the Company has received a
cash advance of $350,000 from an Australian-based  company,  which has agreed in
principle to purchase  shares of the  Company's  common stock for cash and other
consideration. The terms of the proposed transaction have not been finalized and
as of the  date  of this  report  the  parties  have  not  signed  a  definitive
agreement. The Company expects to satisfy its working capital requirements,  and
to meet other  obligations  for the  remainder  of fiscal 1999 and 2000 from the
sale of debt or equity securities.

         The Company has estimated that MailTV  research and  development  costs
will be approximately  $250,000 during the next twelve months.  Expenditures for
plant and/or significant  capital equipment are estimated at $500,000 during the
next twelve months.

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

         The Company  expects that its primary  source of internal  liquidity in
the future will be revenues from  telephone  toll charges earned under the terms
of  agreements  that  CallNet  Plc,  an  affiliated  entity,  has with Cable and
Wireless  Communications ("CWC"). The agreement with CWC entitles CallNet Plc, a
provider of Internet access,  to receive 50% of the  interconnect  toll revenues
(after  deducting  certain access charges paid to  telecommunications  providers
such as British Telecom) CWC charges its customers for calls to CallNet Plc. The
Company owns fifteen percent (15%) of the capital stock of CallNet Plc and plans
to acquire the  remaining  eighty-five  percent  (85%) of the  capital  stock of
CallNet Plc.

         The agreement with CWC provides that this revenue  sharing  arrangement
is based on CallNet Plc meeting  quarterly  targets  commencing  with the period
beginning March 1, 1999. The initial quarterly target is 10 million minutes with
the  quarterly  target  commencing  on June 1,  1999  increasing  to 30  million
minutes.  If a quarterly target is not met, Callnet Plc will be required to make
certain repayments to CWC based on the difference between the target minutes and
the actual minutes.  The repayment  requirement ranges from 10% of the quarterly
payment made to CallNet Plc for achieving  90% and above of the target  revenues
to 100% of the quarterly payment made to CallNet Plc for achieving less than 50%
of the target revenues. CallNet Plc has thus far exceeded the target minutes for
the quarterly periods that began in March and June 1999.

         The fundamental  business  strategy is to direct telephone usage to the
CallNet Plc telecommunications network from new Internet and existing customers.
The Company's  products are designed to facilitate new Internet access.  Sale of
these products is expected to be a secondary source of revenues for the Company.

YEAR 2000 READINESS

         The Year 2000  presents  concerns for business and consumer  computing.
Aside from the well-known  problems with the use of certain 2-digit date formats
as the year  changes  from 1999 to 2000,  the Year  2000 is a special  case leap
year,  and dates such as 9/9/99 were used by certain  organizations  for special
functions.  This could  result in system  failures  or  miscalculations  causing
disruption  of  operations,  including  among others,  a temporary  inability to

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<PAGE>


process  transactions,  send  invoices  or engage  in  similar  normal  business
activities.  The  problem  exists  for many  kinds  of  software  and  hardware,
including mainframes, mini-computers, PC's and embedded systems.

         The Company is  continuing to test its products and classify its tested
products into the following  categories of compliance:  "compliant,"  "compliant
with  minor  issues,"  and "not  compliant."  All of the  Company's  significant
products  tested are either  "compliant"  or "compliant  with minor  issues," as
defined.  The Company has purchased all of its  information  systems  during the
later part of 1998 with a full awareness of Year 2000 issues.  While the Company
received no written assurance from such vendors that such systems were year 2000
compliant,  computer system hardware and software were carefully reviewed by the
Company-employed  computer  technicians  and  software  engineers  before  being
purchased and placed in service.

         Software  developed  by the Company for Internet  access  relies on the
systems  employed by CallNet Plc, an affiliated  entity that  provides  Internet
service to the Company on an exclusive  basis.  CallNet Plc was  incorporated in
1998 and  under the  direction  and  supervision  of the  Company's  information
systems  technicians  has  followed  the  same  procedures  and  timetables  for
purchasing and placing its information systems in service.

         The  Company  believes  that  purchasing  information  technology  from
vendors such as Intel and Microsoft  basically  eliminates  remediation costs on
systems not fully Year 2000 compliant.  World CallNet's policy is to make future
and current versions of its core products Year 2000 "compliant."

         The Year 2000  issue  also  affects  the  Company's  internal  systems,
including  information  technology  (IT) and non-IT  systems.  World  CallNet is
assessing  the  readiness  of its systems for  handling  the Year 2000,  and has
started the remediation and certification  process.  Contingency plans are being
developed in parallel with the testing and remediation efforts.

         As noted above,  World  CallNet has  addressed the Year 2000 issue with
its largest  suppliers of services,  CallNet  Plc, and is  evaluating  its third
party  distribution  and supply chain to  understand  their  ability to continue
providing  services and products  throughout the change to the year 2000.  World
CallNet is monitoring  key vendors,  product  manufacturers,  distributors,  and
direct  resellers  to avoid any  business  interruptions  in the year 2000.  For
critical third parties with known issues,  contingency  plans will be developed.
The Company is also  reviewing its facilities  and  infrastructure.  Remediation
efforts are under way and certain  contingency  plans are in  development.  In a
worst case scenario,  these unknown third party  variables could have a material
and adverse effect on the Company's ability to conduct its business.

         The Company believes that the Internet as a whole is subject to overall
systems  failure  arising from Year 2000 matters due to the open and interactive
nature of the  Internet.  The Internet is a loose and open network that may have
many non-compliant participants who could corrupt the entire system. The Company
believes that this risk does not apply to the Company to any greater extent that
any other Internet Company.

         While Year 2000  issues  present a  potential  risk to World  CallNet's
internal systems,  distribution and supply chain, and facilities, the Company is

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<PAGE>

minimizing  risk  with a  worldwide  effort.  World  CallNet  is  performing  an
extensive  assessment and is in the process of testing and  remediating  mission
critical  components.  The  current  plan  is to  have  the  majority  of  these
components  resolved by June 1999,  with the  remaining  components  resolved by
September 1999.  Management currently believes that all critical systems will be
ready by the Year 2000. The level of expenditures for information systems,  both
historically  and budgeted for the next year,  are basically  unaffected by Year
2000 issues.  Therefore,  the Company believes that the cost to address the Year
2000 issues is not material. The impact of the Year 2000 on future World CallNet
revenue is difficult  to discern but is a risk to be  considered  in  evaluating
future growth of the Company.

RESULTS OF OPERATIONS

         The results of operations for purposes of this discussion  include only
the financial results of WWCH, the surviving business operation in a transaction
that was treated as a reverse  acquisition.  The Company's financial  statements
report only the business  operations and assets of WWCH.  Financial  information
and related discussions contained in reports previously filed by the Company are
not comparable with the disclosures included herein.

         Revenues of  approximately  $38,886 and $157,363 for the three and nine
months  ended  June  30,  1999,   respectively,   were  derived  from  telephone
interconnect  tolls and license fees related to the  Company's  MailTV  software
chip.

         For the three and nine months ended June 30, 1999 the  Company's  costs
and expenses consisted  primarily of general and administrative  expenses.  Such
expenses  included  salaries  and  other  administrative  expenses  incurred  in
connection with capital  formation and  development of its business plan.  These
expenses are  reflected on the statement of operations as charges to general and
administrative expense.

         Interest  expense of $194,762 is related to $1,700,000 of notes payable
from transactions  completed in April 1999,  December and November 1998 and bear
interest  at 10%  per  annum.  Included  in  interest  expense  is  $132,507  of
amortization  of note discount  attributable  to common stock purchase  warrants
issued to the note  holders.  The Company is obligated to make monthly  interest
payments to holders of these notes.

CAUTIONARY FACTORS

         The  success  of the  Company's  plan  of  operation  may be  adversely
affected by several principal factors.

NEED FOR ADDITIONAL CAPITAL

         The  Company  needs a  substantial  amount of capital  to  achieve  its
business plan.  Conditions in financial markets influence  investors'  attitudes
and  willingness to invest in a particular  industry issuer or type of security.
If the Company is unable to obtain additional  capital through private or public
placement of its debt or equity  securities,  asset based or bank financing,  or
through  ventures  with industry  partners,  its ability to achieve its business
objectives could be substantially impaired.


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COMPETITION

         The online services and Internet  markets are highly  competitive.  The
Company  believes  that  existing  competitors,  which  include,  among  others,
commercial  online  services  such as  America  OnLine  and  Dixon's  FreeServe,
Internet-based  services,  including,  among others, the Microsoft Network,  and
Internet service  providers,  including  various national and local  independent
Internet  service  providers as well as long  distance  and  regional  telephone
companies,  including,  among  others,  British  Telecommunications  and Cable &
Wireless   Communications  and  various  other  regional   telephone   operating
companies,  are likely to enhance  their  service  offerings.  In addition,  new
competitors,  including  Internet  directory  services  and  various  media  and
telecommunications  companies,  have  entered  or  announced  plans to enter the
online services and Internet markets,  resulting in greater  competition for the
Company. Many of the direct competitors and possible future competitors referred
to  above  have  significantly  greater  financial,   technical,  marketing  and
personnel resources than the Company.  These factors may have a material adverse
effect on the Company's  financial condition and operating results. In addition,
in  response  to  increased  competition,   the  Company  may  adopt  additional
strategies  designed to continue the growth in its subscriber  base, such as new
marketing  programs and  promotional  offers and  implementation  of new pricing
programs.  Such strategies may result in an increase in costs as a percentage of
revenue.

         The business of providing  Internet access  services is new,  extremely
competitive,  rapidly evolving and subject to rapid technological  change. World
CallNet expects that such competition  will intensify  significantly in the near
future.  A large number of companies are developing or have  introduced  devices
and  technologies  to facilitate  access to the Internet via a television.  Such
competitors include suppliers of low-cost Internet  technologies.  Set top boxes
and devices are  proposed or under  development,  as well as video game  devices
that provide Internet access. In addition, manufacturers of television sets have
announced plans to introduce Internet access and Web browsing  capabilities into
their products through set-top boxes.

         Personal computer manufacturers are introducing Personal Communications
Systems  that offer  full-fledged  television  viewing  combined  with  Internet
access. Operators of cable television systems also plan to offer Internet access
in  conjunction  with cable  service.  World CallNet also competes with Internet
service providers and commercial online services. There can be no assurance that
World  CallNet's  competitors  will not develop  Internet  access  products  and
services  that are  superior  to, and priced  competitively  with those or World
CallNet,  thereby achieving greater market acceptance than MailTV. Many of World
CallNet's competitors,  as well as potential competitors,  have longer operating
histories,  greater  name  recognition,  larger  installed  customer  bases  and
significantly  greater financial,  technical and marketing  resources than World
CallNet.

SUBSCRIBER ATTRITION RATES

         World CallNet will devote considerable financial and human resources to
attract  subscribers to its service;  however,  due to circumstances that may or
may not be beyond the control of the Company,  these subscribers may discontinue
their  affiliation with the Company.  As a result of subscriber  attrition,  the
revenues  generated  from Internet  usage may decline  considerably,  as may the

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rates that the Company can charge from advertising on its service as well as the
revenues that the Company anticipates from e-commerce.

REPAYMENT OF OBLIGATION UNDER CABLE & WIRELESS AGREEMENT

            The Company  expects that its primary  source of internal  liquidity
will be revenues  from  telephone  toll  charges  earned  under the terms of the
agreement  that CallNet  Plc, an  affiliated  entity,  has with Cable & Wireless
Communications.  The  agreement  with Cable & Wireless  Communications  entitles
CallNet Plc, a provider of Internet  access,  to receive 50% of the interconnect
toll  revenues  (after  deducting  certain  costs) Cable & Wireless  charges its
customers for calls to CallNet Plc. The agreement requires CallNet Plc to refund
certain payments if such telephone toll minutes do not meet certain targets. See
Part 1, Item 2,  "Management's  Discussion  and  Analysis or Plan of Operation -
Liquidity and Capital Resources".

NETWORK CAPACITY AND OPERATIONS

         Rapid  growth in  subscriber  demand may cause the Company and its data
communications  access  providers to  experience  difficulty at certain times in
providing  adequate server and network  capacity.  As a result,  subscribers may
from time to time  encounter  difficulty  in  accessing  and  using the  CallNet
service.  There  can be no  assurance  that the  Company  will be able to expand
server  and  network  capacity  at  a  rate  sufficient  to  satisfy  increasing
subscriber  demands,  and the  failure to do so could  have a  material  adverse
effect on the  Company's  business.  The  Company  currently  relies on  several
companies,  particularly  Cable  &  Wireless  Communications,  to  provide  data
communications  access  to its  service.  Any  damage  or  failure  that  causes
interruptions  in Cable & Wireless  operations  could  have a  material  adverse
effect on the Company's business.

         The  Company's  operations  are dependent on its ability to protect its
computer equipment and the information stored in its data centers against damage
by fire, power loss,  telecommunications  failures,  unauthorized intrusions and
other events.  The Company  believes it has taken prudent measures to reduce the
risk of interruption in its operations.  However, there can be no assurance that
these measures are sufficient.  Any damage or failure that causes  interruptions
in  the  Company's  operations  could  have a  material  adverse  effect  on its
business. While the Company carries property and business interruption insurance
to cover its computer operations, the coverage may not be adequate to compensate
for losses that may occur.

PRESSURES ON OPERATING MARGINS

         One of the  Company's  goals is to  increase  market  share by  rapidly
growing its subscriber  base. To achieve this goal, the Company has aggressively
promoted its service  offerings and may implement other  strategies  designed to
facilitate  subscriber growth. The costs associated with the rapid growth in its
subscriber  base and  investments  in customer  support  have  placed,  and will
continue to place, pressures on the Company's operating margins.

         The Company may adopt  additional  strategies  designed to continue the
growth in its subscriber  base,  such as new marketing  programs and promotional

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offers.  Such  strategies  may result in an increase in costs as a percentage of
revenues.  In  addition,  acceleration  in the  growth of its  subscriber  base,
changes in usage patterns among members or continuing investments in content may
also increase costs as a percentage of revenues.  As a result,  the Company does
not believe its  operating  margins have  stabilized.  There can be no assurance
that the  Company's  operating  margins  will not be  adversely  affected in the
future by such strategies or other conditions.

SEASONALITY

         Subscriber  acquisition  is  expected  to be  highest in the second and
third fiscal  quarters,  when sales of new computers  and computer  software are
highest due to the holiday season. Customer usage is expected to be lower in the
summer  months due largely to extended  day light  hours and  competing  outdoor
leisure activities.

MANAGING A RAPIDLY GROWING AND CHANGING BUSINESS

         The Company  continues to experience  major  changes in its  operations
resulting  from rapid  expansion of its business  and other  factors  which have
placed  significant  demands on its  administrative,  operational  and financial
resources.  The Company's future  performance will depend in part on its ability
to manage its growth and to adapt its administrative,  operational and financial
control systems to the needs of the expanded  entity.  The failure of management
to anticipate,  respond to and manage changing business  conditions could have a
material adverse effect on the Company's business and results of operations.

ACCESS TO CONTENT PROVIDERS

         As competition in the online services market intensifies, it may become
more  difficult  or  expensive  to secure  and  retain  content  and/ or content
providers.  The Company  generally pays royalties to its content providers under
short term renewable agreements,  and there can be no assurance that the loss of
a number of content  providers  or  significantly  increased  costs to  maintain
certain  content  providers  would  not have a  material  adverse  effect on the
Company's business.

NEW BUSINESSES AND INTERNATIONAL VENTURES

         The Company  pursues new products and services to diversify its sources
of revenue and leverage its technological and other  competencies.  There can be
no assurance that the Company will be able to successfully  develop,  or achieve
commercial acceptance for, these new products and services.  The Company intends
to offer online services  internationally through either wholly owned operations
or  through  joint  ventures  with  existing   Internet  service   providers  of
telecommunications  companies. There can be no assurance that the Company or its
partners will be able to successfully  market,  sell and deliver its services in
these  markets.  In addition,  there are certain  significant  risks inherent in
doing business on an international  level,  such as laws governing  content that
differ  greatly  from  country to  country,  unexpected  changes  in  regulatory
requirements,  political risks, export restrictions, export controls relating to
encryption  technology,  tariffs  and  other  trade  barriers,  fluctuations  in

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currency exchange rates, issues regarding  intellectual property and potentially
adverse  tax  consequences,  any or all of  which  could  impact  the  Company's
international operations.

CHANGING TECHNOLOGIES

         As online  services  evolve,  the  Company  will be  required  to offer
technological  advances such as improved data  compression and delivery of voice
and full motion  video.  Currently,  online  services are accessed  primarily by
personal  computers via modem. As online  services  become  accessible by screen
based telephones,  television or other consumer electronic  devices,  and become
commercially  deliverable  over other wired  conduits  such as coaxial and fiber
optic  cable,  the  Company  may have to develop  new  technology  or modify its
existing  technology  to keep pace with  these  developments.  Pursuit  of these
technological advances will require substantial  expenditures,  and there can be
no  assurance  that the  Company  will  succeed in adapting  its online  service
business to alternate access devices and conduits.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

         Changes   in   the    regulatory    environment    relating    to   the
telecommunications  and  media  industry  could  have an  adverse  effect on the
Company's  business.  The Company cannot  predict the  likelihood  that any such
legislation will pass, or the financial impact, if any, the resulting regulation
may have.  Moreover,  the  applicability  to online service and Internet  access
providers  of  existing  laws  governing  issues such as  intellectual  property
ownership,  libel and  personal  privacy is  uncertain.  The law relating to the
liability  of  online  service  companies  and  Internet  access  providers  for
information  carried on or  disseminated  through  their  systems  is  currently
unsettled  and has been the  subject  of several  recent  private  lawsuits.  If
similar  actions were to be initiated  against the Company,  costs incurred as a
result of such actions  could have a material  adverse  effect on the  Company's
business.

RELIANCE ON KEY PERSONNEL

         The  Company's  success  depends  in part upon the  performance  of its
executive  officers and other key employees.  The loss of the services of one or
more of its key personnel  could have a material  adverse effect on the Company.
The  Company  depends on its  continued  ability to  attract  and retain  highly
skilled and qualified personnel.  Competition for such personnel is intense, and
there can be no assurance  that the Company will be successful in attracting and
retaining such personnel.

RELIANCE ON THIRD PARTIES

         The  Company  depends  substantially  upon third  parties  for  several
critical elements of its business, including, among others, CallNet Plc; revenue
sharing and Internet routing agreement with Cable & Wireless  Communications and
the  Company's  agreement  with Zilog,  Inc.  pursuant to which Zilog,  Inc. has
agreed to manufacture and supply MailTV chips to television  manufacturers.  The
Company will outsource the manufacture of its MAILTV retrofit  keyboards from an
outside manufacturer  pursuant to purchase orders placed from time to time, will
not carry significant inventories of these keyboards and will have no guaranteed
supply  arrangements.  The Company relies on local telephone companies and other

                                       10

<PAGE>

companies to provide data communications  capacity via local  telecommunications
lines and leased long distance lines. In addition, the Company relies on CallNet
PLC as an Internet service provider, which the Company plans to acquire.

INTELLECTUAL PROPERTY ISSUES

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

VOLATILITY OF SHARE PRICE

         The  market  price of the  Company's  Common  Stock  has a  history  of
volatility.  Factors  such as  quarterly  variations  in  financial  results and
membership  growth  and usage,  new  pricing  strategies,  the  announcement  of
technological innovations, mergers, acquisitions,  strategic partnerships or new
product  offerings  by the  Company  or its  competitors,  the  entrance  of new
competitors into the online services market and changes in content providers may
have a significant impact on the market price of the Common Stock. Moreover, the
Common Stock could experience price  volatility based on market  conditions.  In
particular,  a substantial  short interest exists in the Company's  Common Stock
which may tend to exacerbate volatility.

SALES OF COMMON STOCK

         Sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices of the Common Stock. The warrants that
have been  issued by the  Company  since the  reverse  acquisition  of WWCH have
provided  for  demand  and  piggyback  registration  rights.  Exercise  of  such
registration  rights could increase the number of shares of Common Stock sold in
the public markets.






                                       11

<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)


                                  BALANCE SHEET

                           (Expressed in U.S. Dollars)

                   AS OF JUNE 30, 1999 AND SEPTEMBER 30, 1998

                                                          (Unaudited)
  ASSETS                                                   June 30,      September 30,
  ------                                                      1999           1998
<S>                                                       <C>            <C>

CURRENT ASSETS:
   Cash                                                   $    11,623    $     1,995
    Other current assets                                       63,252
    Receivable from affiliated entity                         634,087           --
                                                          -----------    -----------
                                                              708,962          1,995
                                                          -----------    -----------
OTHER ASSETS:
   Property and equipment, net of $6,636
      and $0 accumulated depreciation                          72,998           --
   Investments
                                                              500,000        203,772
   Intangible asset, net of $2,925 and $0
      accumulated amortization                                 16,575         19,500
                                                          -----------    -----------
       Total other assets                                     589,573        223,272
                                                          -----------    -----------

                 Total assets                             $ 1,298,535    $   225,267
                                                          ===========    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

CURRENT LIABILITIES:
   Notes payable, net of unamortized discount
     of $115,851 and $0                                   $ 1,584,149    $      --
   Accounts payable and accrued expenses                      537,897         43,041
   Deferred revenue                                              --          193,583
   Due to affiliate                                              --           10,486
                                                          -----------    -----------
            Total current liabilities                       2,122,046        412,675
                                                          -----------    -----------

COMMITMENT AND CONTINGENCY (Notes 3 and 7)

STOCKHOLDERS' DEFICIT:
   Common stock, $.001 par value; 20,000,000
     shares authorized, 7,989,333 and 5,500,000
     shares issues and outstanding                              7,989          5,500
   Additional paid-in capital                               1,048,961        190,660
   Accumulated deficit                                     (1,912,788)      (378,285)
   Foreign currency translation adjustment                     32,327         (5,283)
                                                          -----------    -----------
            Total stockholders' deficit                      (823,511)      (187,408)
                                                          -----------    -----------
            Total liabilities and stockholders' deficit   $ 1,298,535    $   225,267
                                                          ===========    ===========

</TABLE>

             See accompanying notes to these financial statements.

                                       12

<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                             STATEMENT OF OPERATIONS

                           (Expressed in U.S. Dollars)

                FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1999

                                   (Unaudited)
                                                               Three             Nine
                                                              Months            Months
                                                               Ended             Ended
                                                            --------------------------
                                                                    June 30, 1999
                                                                    -------------
<S>                                                         <C>            <C>

REVENUES                                                    $    38,886    $   157,363

COSTS AND EXPENSES:
   Production and development                                     2,385          2,385
   General and administrative                                   557,027      1,475,485
   Interest expense                                             119,943        194,762
   Depreciation and amortization                                  7,661          9,561
   Impairment of marketable securities                             --            9,672
                                                            -----------    -----------
                                                                687,016      1,691,865
                                                            -----------    -----------

NET LOSS                                                       (648,130)    (1,534,503)

OTHER COMPREHENSIVE INCOME - Foreign currency translation
adjustment                                                       19,425         37,610
                                                            -----------    -----------

COMPREHENSIVE LOSS                                          $  (628,705)   $(1,496,893)
                                                            ===========    ===========

NET LOSS PER SHARE (basic and diluted)                      $      (.08)   $      (.20)
                                                            ===========    ===========


WEIGHTED AVERAGE SHARES                                       7,989,000      7,493,000
                                                            ===========    ===========


</TABLE>

             See accompanying notes to these financial statements.


                                       13


<PAGE>

<TABLE>
<CAPTION>


                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                  STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

                           (Expressed in U.S. Dollars)

                     FOR THE NINE MONTHS ENDED JUNE 30, 1999

                                   (Unaudited)

                                                                                                              Foreign
                                                                             Additional                       Currency
                                                        Common Stock          Paid-In       Accumulated      Translation
                                                     Shares      Amount       Capital         Deficit         Adjustment    Total
                                                   ---------    --------     ----------     ------------     -----------  ---------
<S>                                                <C>          <C>          <C>            <C>              <C>          <C>

Balance September 30, 1998                         5,500,000    $  5,500     $  190,660         (378,285)       (5,283)   $(187,408)

Issuance of shares of common stock on October 9,
1998 in connection with acquisition of 100% of
the Company's common stock by General
American Royalty                                   1,829,333       1,829         13,043                -             -       14,872

Issuance of 160,000 shares on November 19, 1998
for cash

Issuance of 500,000 shares to acquire 15% of
CallNet Plc                                          160,000         160        167,400                -             -      167,560

                                                     500,000         500        499,500                -             -      500,000

Issuance of common stock purchase warrants
                                                                                178,358                                     178,358

Net loss for the period                                    -           -              -       (1,534,503)            -    1,534,503)

Foreign currency translation adjustment                    -           -              -                -        37,610       37,610
                                                   ---------      ------    -----------     ------------     ---------    ---------

                                                   7,989,333      $7,989    $ 1,048,961     $ (1,912,788)    $  32,327    $(823,511)
                                                   =========      ======    ===========     ============     =========    =========
</TABLE>


             See accompanying notes to these financial statements.

                                       14



<PAGE>

                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                             STATEMENT OF CASH FLOWS

                           (Expressed in U.S. Dollars)

                     FOR THE NINE MONTHS ENDED JUNE 30, 1999

                                   (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                         $(1,496,893)
   Depreciation and amortization expense                                  9,561
   Impairment of marketable securities                                    9,672
   Accretion of discount on notes payable                               132,507
   Increase in accounts payable and accrued expenses, net of
      foreign currency translation adjustments                          338,883
   Increase in other current assets                                     (63,252)
    Other                                                                 5,797
                                                                    -----------
               Net cash used by operating activities                 (1,063,725)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in amount due from affiliate                               (644,573)
    Purchase furniture and fixtures                                     (79,634)
                                                                    -----------
                                                                       (724,207)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from short-term indebtedness, net of financing costs      1,630,000
   Cash received in common stock issuances                              167,560
                                                                    -----------
                                                                      1,797,560

NET INCREASE IN CASH                                                      9,628

CASH, beginning of period                                                 1,995

CASH, end of period                                                 $    11,623
                                                                    ===========

NON CASH TRANSACTIONS:
   Purchase of net assets in reverse acquisition for common stock        14,872
   Acquisition of CallNet Plc shares for common stock                   500,000
                                                                    -----------
                                                                    $   514,872
                                                                    ===========

             See accompanying notes to these financial statements.

                                       15


<PAGE>


                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------------
     Organization
     ------------
     World CallNet,  Inc. (the  "Company")  (formerly  Worldwide  Communications
     (Holdings)  Limited) is a  development  stage company  incorporated  in the
     United  Kingdom on January 23,  1998.  The  Company's  business  plan is to
     develop  and sell  certain  consumer  internet  software  and  operate as a
     pay-as-you-go   internet  service  provider.   The  accompanying  financial
     statements include the accounts of the Company, its wholly owned subsidiary
     World CallNet  Ltd., a British  telecommunications  electronics  design and
     licensing company, and Overleaf Systems, Limited ("Overleaf"). Overleaf has
     been inactive to date.

     Investments
     -----------
     The  Company's  investments  at June 30, 1999  consist  solely of shares of
     CallNet Plc, an affiliated company, as described in Note 4.

     Foreign Currency Translation
     ----------------------------
     The Company  conducts its  operations and maintains its accounts in British
     pounds.  Financial statements prepared in U.S. dollars are translated based
     on the exchange rate at the balance  sheet date for assets and  liabilities
     and  a  weighted  average  rate  for  revenues  and  expenses.  Translation
     adjustments  are  accumulated  in a  separate  component  of  stockholders'
     deficit entitled foreign currency translation adjustment.

     Loss Per Share
     --------------
     Basic loss per share is computed  based on the weighted  average  number of
     shares outstanding  during the period.  Diluted loss per share takes common
     stock  equivalent  shares  (such  as  options,   warrants  and  convertible
     securities) into consideration. However, common stock equivalent shares are
     not considered when their effect would be anti-dilutive.

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

     Income Taxes
     ------------
     The Company  accounts for income taxes under the  liability  method,  which
     requires  recognition  of  deferred  tax  assets  and  liabilities  for the


                                       16

<PAGE>



                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)


     expected  future tax  consequences of events that have been included in the
     financial statements or tax returns. Under this method, deferred tax assets
     and  liabilities  are  determined  based  on  the  difference  between  the
     financial  statements and tax bases of assets and liabilities using enacted
     tax rates in effect for the year in which the  differences  are expected to
     reverse.  The Company has a tax loss  carryforward at September 30, 1998 of
     approximately  $200,000 and a deferred tax asset,  which is fully reserved,
     of approximately  $50,000. The Company has accrued approximately $77,000 in
     payroll taxes due to United Kingdom taxing authorities.

     Intangible Asset
     ----------------
     Intangible  asset  consists  of  intellectual  property,   which  is  being
     amortized by the straight-line method over five years.

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

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

     The Company is in the  development  stage and has had  $157,363 in revenues
     through June 30, 1999.  In addition,  the Company will require  substantial
     capital to implement its business  plan.  These  factors raise  substantial
     doubt  about the  Company's  ability to  continue  as a going  concern.  In
     December 1998 and April 1999, the Company  completed bridge note offerings,
     in which it raised  proceeds  (net of  consulting  and  finders  fees),  of
     approximately $1,100,000 and $540,000,  respectively.  The Company has also
     negotiated a development and marketing agreement with a much larger company
     that management  believes will facilitate  market  penetration.  Management
     also  intends  to  attempt  to raise  additional  capital in the near term.
     Management  believes  these  actions will permit the Company to achieve its
     objectives  and  attain  profitable  operations  to allow  the  Company  to
     continue as a going concern.

3.   INVESTMENT AND DEFERRED REVENUE
     -------------------------------

     In  September  1998,  the  Company  acquired  2,000,000  shares in Cherokee
     Leisure Plc ("Cherokee"),  a publicly traded company in the United Kingdom,
     from another  company in exchange for payment of $10,189 and  assumption of
     the other company's obligations to Cherokee. The obligations are to design,
     install  and  support a website  for  Cherokee.  The Company had valued the


                                       17

<PAGE>


                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)


     Cherokee  shares based on their  estimated  market value of $203,772 at the
     time of acquisition.  The Company has recorded a deferred revenue liability
     of $193,583,  which  represents the estimated  value of the shares less the
     cash payment. The cash payment was made by CallNet Plc, an affiliate of the
     Company  with  directors  in common  with the  Company,  and is included in
     "receivable from affiliated entity" in the accompanying balance sheet.

     The Company is entitled  to receive 40% of any revenue  generated  from the
     website.  No revenues were generated from the website through July 31, 1999
     and the Company may be obligated to return  500,000  shares of the Cherokee
     stock.  Management of the Company does not believe that the website project
     will be completed or generate any significant future revenues. Accordingly,
     as of June 30, 1999, the entire  investment of $203,772 less the offsetting
     deferred revenue of $193,583 has been taken as an impairment loss.

4.   ACQUISITIONS
     ------------

     In October 1998, 100% of the Company's common stock was acquired by General
     American  Royalty,  Inc.  ("GAR").  The  Company's   stockholders  obtained
     approximately  75% of the outstanding  common stock of GAR and three of the
     Company's  directors  were  appointed  to the board of GAR.  For  financial
     reporting  purposes,  the Company has  accounted for the  transaction  as a
     reverse  acquisition of GAR. As a result of the transaction,  the Company's
     stockholders'  deficit  section  reflects the GAR capital  structure in the
     accompanying balance sheet. As of the closing date of the acquisition,  the
     following amounts were recorded to reflect the accounts of GAR:

                   Total assets                     $ 20,537
                   Total liabilities                   5,665
                                                    --------
                   Stockholder's equity             $ 14,872
                                                    ========


     In February 1999, the Company  completed the acquisition of fifteen percent
     (15%)  of the  stock  of  CallNet  Plc by  issuing  500,000  shares  of the
     Company's  common stock. The CallNet Plc shares were valued at $500,000 and
     are  included  in  Investments  in  the  accompanying  balance  sheet.  The
     transaction  was valued  based on such  factors as the market  price of the
     Company's  common stock,  the  historical  volatility of stock prices,  the
     number  of  shares  held  by  public  shareholders  that  have  no  trading
     restrictions and the relatively large number of shares issued.


                                       18

<PAGE>


                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



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

     In December 1998 and April 1999, the Company  completed a private placement
     of notes payable totaling $1,150,000 and $550,000,  respectively. The notes
     bear  interest at 10% and $850,000 of the notes are  collateralized  by the
     Company's  shares of  Cherokee  Leisure  Plc.  Interest  is due monthly and
     principal  is due in  full  on  December  1,  1999  and  October  9,  1999,
     respectively, or earlier under certain circumstances, including the raising
     by the Company of $3.5 million or more of additional  capital.  The holders
     of the notes were also issued stock  purchase  warrants  entitling  them to
     purchase an  aggregate of 1,675,000  shares of the  Company's  common stock
     between March 1, 1999 and December 1, 2000 at prices ranging from $1.00 per
     share to $10.00 per share.  The Company paid $70,000 in consulting fees and
     issued stock  purchase  warrants,  on the same terms  described  above,  to
     purchase  220,000  shares of common stock in connection  with the offering.
     The  holders  of  these   warrants   have  certain   demand  and  piggyback
     registration  rights.  The  Company  has  valued the  aforementioned  stock
     purchase warrants at $178,358 using a discount factor of 8%. Both the value
     of the stock purchase warrants and the referral fees have been treated as a
     discount to notes payable. Amortization of discount related to the discount
     was  $132,507  for the nine  months  ended June 30, 1999 and is included in
     interest  expense.  Remaining  discount  is  being  amortized  based on the
     maturity dates.

6.   STOCKHOLDERS' EQUITY
     --------------------

     In January 1999,  the Company's  stockholders  approved (1) a change in the
     corporate name of GAR and its  subsidiary,  the Company,  to World CallNet,
     Inc.,  (2) an increase in the  authorized  shares to  30,000,000  shares of
     common  stock and  10,000,000  shares of preferred  stock,  and (3) a stock
     option  plan that had been  adopted by the board of  directors  in November
     1998.  Under the stock option plan,  the  Company's  board of directors may
     grant  options  to acquire  up to a total of  1,000,000  shares of stock to
     officers, directors, employees, advisors or consultants of the Company.

     Effective  November  1998,  the  Company  granted  options to  purchase  an
     aggregate of 600,000 shares as follows:

              Grantee                                                  Options
              -------                                                  -------
              Each of three officers who are also directors            150,000
              One outside director                                     100,000
              One advisory director                                     50,000


                                       19

<PAGE>


                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)


     Each option  entitles  the grantee to purchase  one share of the  Company's
     common  stock at an  exercise  price of $1.50  per  share  and  expires  in
     November 2001.

     In March 1999,  the Company  granted an option to an officer of the Company
     to purchase  100,000  shares of Common Stock at an exercise  price of $3.50
     per share, which option expires in March 2002.

7.   RELATED PARTY TRANSACTIONS
     --------------------------

     Certain  directors and  stockholders  of the Company are  directors  and/or
     stockholders in other companies with which the Company had the transactions
     set forth below:

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

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

     o    The  Company  has made  cash  advances  to  CallNet  Plc,  a 15% owned
          affiliated entity that equaled $634,087 at June 30, 1999.

8.   COMMITMENTS
     -----------

     The Company has  employment  agreements  with three  officers  who are also
     directors.  Each of these employment  agreements  requires an annual salary
     through September 2001 of approximately $110,000 each, and provides that if
     such  agreement  is  terminated  by  either  party  during  the term of the
     agreement,  the full  salary and  benefits  are  required to be paid to the
     executive  officer until the end of the term of the agreement.  Each of the
     these  officers  have  identical  employment  agreements  with CallNet Plc.
     During February and March 1999, the officers deferred 23% of their salaries
     from the Company in the aggregate.  Commencing  with the quarter ended June
     30, 1999, each executive officer has agreed to defer one-half of his salary
     from the Company until a substantial  amount of additional capital has been
     raised by the Company,  as determined  by the Board of Directors,  at which
     time the Company will be obligated to pay to these  executive  officers the
     deferred  portion of their salary.  Such obligation is without interest and
     is an unsecured  obligation  that is  subordinated to the claims of certain
     other unsecured creditors of the Company.

                                       20

<PAGE>

                               WORLD CALLNET, INC.
             (Formerly Worldwide Communications (Holdings) Limited)
                          (A Development Stage Company)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)



     SUBSEQUENT EVENTS
     -----------------

     During July and August 1999,  the Company  received cash advances  totaling
     $350,000 from an Australian-based company, which has agreed in principle to
     purchase  shares  of  the  Company's   common  stock  for  cash  and  other
     consideration.  The  terms  of  the  proposed  transaction  have  not  been
     finalized  and as of the date of this report the parties  have not signed a
     definitive  agreement.  The proceeds from the advances were used to satisfy
     the Company's working capital requirements.


















                                       21

<PAGE>



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         Not applicable.


Item 2.  Changes in Securities.

         In April 1999, the Company issued warrants  exercisable  until April 9,
         2002,  to purchase an aggregate of 1,100,000  shares of Company  common
         stock in  connection  with the  placement  of $550,000 of bridge  notes
         payable  described in Item 5 below.  The exercise  price for 330,000 of
         the  warrants  is $10.00 per share and for  770,000 of the  warrants is
         $4.00  per  share.  The  holders  of these  warrants  have the right to
         exercise  these  warrants  in  cash  or  pursuant  to a "net  exercise"
         provision  whereby  the holder of a warrant  can use shares  subject to
         such warrant at their then fair market value as  consideration  for the
         exercise of such warrant. In addition,  the exercise price with respect
         to these warrants is subject to standard anti-dilution  provisions.  In
         addition,  the  warrants  with a $4.00  exercise  price are  subject to
         "ratchet"   anti-dilution   provisions  whereby,   subject  to  certain
         exceptions,  the exercise  price of such warrants will be  subsequently
         reduced if during the term of the warrant the Company  issues shares of
         Company common stock at a price below $3.60 per share or grants options
         or warrants with an exercise price or conversion  price,  respectively,
         below $3.60 per share. The exercise price with respect to such warrants
         will be reduced to the lowest  issuance price or exercise or conversion
         price.

         The Company also issued  warrants to purchase  37,500 shares of Company
         common  stock at $3.60 (paid in cash and not  adjustable)  per share as
         part of consulting and referral compensation due in connection with the
         placement  of the bridge  notes.  Holders of all of the  aforementioned
         warrants have certain  demand and piggyback  registration  rights.  The
         securities  referenced  herein were issued in transactions  exempt from
         registration under the Securities Act of 1933, as amended,  pursuant to
         the private placement exemption set forth in Section 4(2).


Item 3.  Defaults on Senior Securities.

         Not applicable.


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

         Not applicable.

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<PAGE>


Item 5.  Other Information.

         In April 1999,  the  Company  completed  a private  placement  of notes
         payable totaling $550,000 from three investors. The notes bear interest
         at 10% per annum,  which is payable  monthly.  The  principal is due in
         full on October  9,  1999,  or  earlier  under  certain  circumstances,
         including  the  raising  by the  Company  of  $3.5  million  or more of
         additional  capital.  The Company  paid $12,500 in  consulting  fees in
         connection  with the  placement of the notes and issued stock  purchase
         warrants as described in Item 2 above. The securities referenced herein
         were  issued  in  transactions   exempt  from  registration  under  the
         Securities Act of 1933, as amended,  pursuant to the private  placement
         exemption set forth in Section 4(2).


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

(a)      Exhibits.

          3.1     Certificate of Amendment to the  Certificate of  Incorporation
                  of the Company, which is incorporated by reference herein from
                  Exhibit 3.1 to the Company's Form 8-K, dated January 5, 1999.

         10.1     Securities Purchase Agreement dated as of April 9, 1999 by and
                  among the Company and the Purchasers, which is incorporated by
                  reference  herein  from  Exhibit  10.1 to the  Company's  Form
                  10-QSB for the quarter ended March 31, 1999.

         10.2     Form of Promissory  Note issued to the Purchasers  pursuant to
                  the Securities  Purchase  Agreement,  which is incorporated by
                  reference  herein  from  Exhibit  10.1 to the  Company's  Form
                  10-QSB for the quarter ended March 31, 1999.

         10.3     Form of  Warrant  with an  exercise  price of $4.00  per share
                  issued to the Purchasers  pursuant to the Securities  Purchase
                  Agreement,  which is  incorporated  by  reference  herein from
                  Exhibit  10.1 to the  Company's  Form  10-QSB for the  quarter
                  ended March 31, 1999.

         10.4     Form of  Warrant  with an  exercise  price of $10.00 per share
                  issued to the Purchasers  pursuant to the Securities  Purchase
                  Agreement,  which is  incorporated  by  reference  herein from
                  Exhibit  10.1 to the  Company's  Form  10-QSB for the  quarter
                  ended March 31, 1999.

         10.5     Registration  Rights  Agreement by and between the Company and
                  the Purchasers  pursuant to the Securities Purchase Agreement,
                  which is incorporated by reference herein from Exhibit 10.1 to
                  the  Company's  Form  10-QSB for the  quarter  ended March 31,
                  1999.

         27.1     Financial Data Schedule.


(b)      Reports on Form 8-K.

         None filed during the three months ended June 30, 1999.

                                       23

<PAGE>

                                   SIGNATURES

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


                                               WORLD CALLNET, INC.
                                               (Registrant)


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

                                               Date: August 13, 1999


                                                /s/Aaron Goodman-Simpson
                                               --------------------------------
                                               Aaron Goodman-Simpson, Vice
                                               President and Chief Financial
                                               Officer (Principal Financial and
                                               Accounting Officer)

                                               Date: August 13, 1999







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