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 December 31, 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 January 31,  2000 there were  14,821,324  shares of  registrant's
common stock outstanding.

         Transitional Small Business Disclosure Format (Check One): Yes    No x
                                                                       ---   ---


                                       1

<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 in the Company's  Form 10-K for the period ended
September 30, 1999, in the section entitled "Description of Business" regarding:
(i) its plans to  market  its  proprietary  MailTV  products  in  Europe,  North
America,  South  America and Asia  Pacific,  (ii) its belief that  offering free
Internet access will capture customers for CallNet Plc, (iii) its statement that
other companies engaged in Internet related businesses may be acquired, (iv) its
belief that the majority of its future  revenues will be derived from MailTV and
its  ownership of CallNet Plc,  which earns a share of telephone  toll  revenues
from companies that provide  telephone  service to their customers,  and (v) the
belief that its products and  services  will appeal to the many  segments of the
Internet  market;  its  statement in Legal  Proceedings  that the outcome of any
legal  proceedings  and  claims  against  the  Company  will not have a material
adverse  effect on the  Company's  business,  operating  results,  and financial
condition;  and statements in Liquidity and Capital Resources  regarding (i) the
projection that its working capital will be adequate until the end of 2000, (ii)
the  projection  that  additional  capital  from  the  sale of  debt  or  equity
securities will be necessary  after the end of year 2000,  (iii) the expectation
that product  development and  manufacturing  costs will be borne by the Company
and business partners,  (iv) the estimate of property and/or significant capital
equipment  expenditures  for the next twelve months,  (v) the  expectation  that
Internet  related  revenues  derived from its  proprietary  MailTV  products and
ownership of CallNet Plc will be the primary  source of internal  liquidity  and
sales of products that are designed to facilitate new Internet  access will be a
secondary source of internal liquidity,  and (vi) the anticipation that the year
2000 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.






                                       2

<PAGE>



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 ended  December 31, 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, 1999
included in the Company's  Annual Report on Form 10-KSB.  Operating  results for
the three months ended December 31, 1999 are not  necessarily  indicative of the
results that may be expected for the entire year ended September 30, 2000.

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 began  operations in January 1998 and
this report  includes  historical  data since that date.  In January  1999,  the
Company changed its name to World CallNet, Inc.

LIQUIDITY AND CAPITAL RESOURCES

         Since  incorporation  in January  1998,  the Company has been  involved
primarily in capital formation  activities,  refinement of its business strategy
and development of relationships with industry partners. The Company's principal
external  source of capital for  developing  its  products and services has been
proceeds from bridge debt  financing and the private  placement of common stock.
Additional  placements of bridge notes or the sale of equity  securities to fund
operating expenses will be necessary until the Company becomes profitable.

         In December  1998 and April 1999,  the  Company  completed  the private
placement  of  $1,150,000  and  $550,000,  respectively,  in  bridge  notes.  In
September 1999, the Company completed a private placement of 2,900,000 shares of
its common stock to Australian-based  MailTV Pty. The agreement obligates MailTV
Pty to purchase an additional  11,600,000  shares of common stock under the same
terms.  In January  2000,  the Company  completed a private  placement of common
stock totaling  $2,362,500 at $1.75 per share.  The Company used $500,000 of the
proceeds  from the  aforementioned  placements  of common  stock to repay  notes
payable.  Notes payable of $1,200,000  due on December 1, 1999 were not paid and
the Company is in default for the payment of principal  and accrued  interest of
$30,000 as of December 31, 1999.

         The Company's plan of operation for the next twelve months includes the
ongoing  operation of its Internet  service and the  continued  development  and
marketing of its proprietary  Internet products such as MailTV. The Company will
require  substantial  capital to implement its business plan, which is discussed
further in Note 2 to the  Financial  Statements.  It is  expected  that costs of
product  development  and  manufacturing  these  products  will be  borne by the
Company and business  partners such as Zilog, OEM television  manufacturers  and
other third parties seeking to generate new technologies and MailTV applications
developed by the Company.

                                       3

<PAGE>


         The Company has incurred  significant  net losses since inception which
raises  substantial  doubt  about the  Company's  ability to continue as a going
concern.  However, with present working capital of approximately  $3,000,000 and
an additional $8,900,000, which is contracted to be closed by February 29, 2000,
the Company estimates it can satisfy its obligations and cash requirements until
the end of 2000.  To meet its working  capital  obligations  plus  research  and
development  cost  requirements  after the end of 2000, the Company will have to
raise additional capital from external sources if cash generated from operations
is not sufficient.

          If the additional  financing is not successfully  completed and if the
Company  is not able to  obtain  additional  financing  arrangements,  it may be
unable to meet its continuing operational obligations, pursue its basic business
strategy,  take  advantage  of new  opportunities,  develop or enhance  existing
products,  or  respond to  competitive  pressures  and  financial  or  marketing
hurdles.  Such inability could have a materially adverse effect on the business,
operating results and financial condition.  Moreover,  the estimated cost of the
proposed  expansion of the  Company's  production  and  marketing  activities is
subject  to  numerous   uncertainties,   including   the   problems,   expenses,
difficulties,  complications and delays,  many of which are beyond  management's
control,  frequently  encountered  in  connection  with  the  establishment  and
development of new business  activities,  and may be affected by the competitive
environment  in which the  Company is  operating.  Accordingly,  there can be no
assurance  that the Company will  complete the proposed  expansion of production
and marketing activities described herein.

         The  Company  has  estimated   that   expenditures   for  plant  and/or
significant  capital equipment will be approximately  $1,500,000 during the next
twelve months.

         If  necessary,  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 sources of internal liquidity will
be fees,  toll  charges and rebates  earned under the terms of  agreements  with
telecommunications companies doing business with CallNet Plc Internet and MailTV
customers. In addition the Company will earn revenues from e-commerce activities
from both CallNet ISP and MailTV. The fundamental business strategy is to direct
telephone  usage to the CallNet  telecommunications  network by  increasing  the
CallNet Plc  customer  base and through  sales and usage of MailTV.  The Company
also has  agreements  to earn a percentage of sales from  companies  that market
products and services  through web sites hosted by CallNet Plc. The Company also
offers  products that are designed to facilitate new Internet  access.  Sales of
such products and services are expected to be a secondary source of revenues for
the Company.

         The Company has  implemented  certain  changes,  as  necessary,  to its
information  systems and accordingly  does not anticipate any material year 2000
issues from its own systems, programs or from any of its products. The impact of
such issues on the Company's suppliers, customers, vendors and financial service
organizations could have an adverse effect on the Company.


                                       4

<PAGE>


RESULTS OF OPERATIONS

         Revenues  increased  from $34,988 for three  months ended  December 31,
1998, to $379,210 for the three months ended December 31, 1999, due to increases
in licensing  fees and telephone  toll charges earned under the terms of CallNet
Plc's agreements with telecommunications companies.

         General and  administrative  expenses  increased  from $454,180 for the
three months ended  December 31, 1998, to $1,041,376  for the three months ended
December 31, 1999.  The  increase was due to the cost of  additional  personnel,
infrastructure  and  facilities  necessary  to meet the growth in the  Company's
operations. The number of fulltime employees and consultants increased more than
100%  since  September  30,  1998,  as the  Company  emerged  from  being in the
development stage.

         Interest  expense of $5,666 for the three  months  ended  December  31,
1998,  was  incurred on $300,000 of bridge debt that was  completed  in November
1998. For the three months ended December 31, 1999,  interest expense of $37,639
was incurred for the entire  period on  $1,200,000  of debt and $500,000 of debt
that was repaid in October 1999.  Amortization  of the discount  related to such
debt was $195,049  for the three  months ended  December 31, 1999 and was $3,166
for the three months ended December 31, 1998.

         Depreciation  and  amortization for the three months ended December 31,
1999,  includes  $246,450 of  amortization of the excess cost over book value of
the assets of CallNet Plc,  which became a 100% owned  subsidiary of the Company
in September 1999.

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.

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


                                       5

<PAGE>

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 number of companies  are  developing or have  introduced  devices and
technologies  to  facilitate  access to the Internet via a  television.  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
rates that the Company can charge from advertising on its service as well as the
revenues that the Company anticipates from e-commerce.

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


                                       6

<PAGE>


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 to provide data  communications  access to its service.  Any damage or
failure that causes  interruptions  in 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
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.


                                       7

<PAGE>


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
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.


                                       8

<PAGE>


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  revenue  sharing  and  Internet
routing agreements with telecommunications companies 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 companies to provide
data communications capacity via local  telecommunications lines and leased long
distance lines.

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.


                                       9

<PAGE>



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.

















                                       10

<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET, INC.

                           CONSOLIDATED BALANCE SHEETS

                           (Expressed in U.S. Dollars)
                             AS OF DECEMBER 31, 1999

                                   (Unaudited)

ASSETS
------
<S>                                                                      <C>

CURRENT ASSETS:
   Cash                                                                  $    690,670
   Trade accounts receivable, no allowance for doubtful accounts              566,496
   Prepaid expenses                                                              --
   Stock subscription receivable                                              132,097
                                                                         ------------
          Total current assets                                              1,389,263
                                                                         ------------

   Investment in marketable equity securities                                 565,406
   Furniture and fixtures, at cost                                            298,130
   Goodwill, net of accumulated amortization of $328,600                    4,596,689
   Other intangible assets, net of accumulated amortization of $66,586        212,193
   Bonds, deposits and other assets                                            69,438
                                                                         ------------
           Total other assets                                               5,741,856
                                                                         ------------
                 Total assets                                            $  7,131,119
                                                                         ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
    Notes payable                                                        $  1,200,000
   Accounts payable and accrued expenses                                    2,131,872
                                                                         ------------
           Total current liabilities                                        3,331,872
                                                                         ------------
COMMITMENTS (Note 7)

STOCKHOLDERS' EQUITY:
   Preferred stock, $0.001 par value; 10,000,000 shares
      authorized, no shares issued or outstanding                               --
   Common stock,  $0.001 par value; 30,000,000 shares authorized:
      13,471,324 shares issued and 12,971,324 shares outstanding               13,472
   Additional paid-in capital                                              10,826,972
   Accumulated deficit                                                     (6,518,721)
   Treasury stock, 500,000 shares, at cost                                   (522,476)
                                                                         ------------
            Total stockholders' equity                                      3,799,247
                                                                         ------------
            Total liabilities and stockholders' equity                   $  7,131,119
                                                                         ============

</TABLE>





              See accompanying notes to these financial statements.


                                       11

<PAGE>


                               WORLD CALLNET, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                           (Expressed in U.S. Dollars)
                  FOR THE THREE MONTHS ENDED DECEMBER 31, 1999

                                   (Unaudited)

                                              1999            1998
                                         ------------    ------------
REVENUES                                 $    379,210    $     34,988


COSTS AND EXPENSES:
 Production and development                   379,032           --
 General and administrative                 1,041,376         454,180
 Interest expense                              37,639           5,666
 Depreciation and amortization                468,908             325
                                         ------------    ------------
                                            1,926,955         460,171
                                         ------------    ------------

NET LOSS                                 $ (1,547,745)   $   (425,183)
                                         ============    ============

NET LOSS PER SHARE (basic and diluted)   $       (.12)   $       (.06)
                                         ============    ============

WEIGHTED AVERAGE SHARES                    12,971,893       7,245,043
                                         ============    ============
























              See accompanying notes to these financial statements.


                                       12


<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET, INC.

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                           (Expressed in U.S. Dollars)
                  FOR THE THREE MONTHS ENDED DECEMBER 31, 1999

                                   (Unaudited)


                                                                                          Additional
                                     Common Stock                 Treasury Stock            Paid-In     Accumulated
                                 Shares          Amount        Shares       Amount          Capital       Deficit       Total
                                -----------   -----------   -----------   -----------    -----------   ------------   -----------
<S>                             <C>           <C>           <C>           <C>            <C>           <C>            <C>

Balance September 30, 1999       13,471,324        13,442       500,000   $  (522,476)   $10,737,002   $(4,970,976)   $ 5,256,992

Issuance of common stock for
services                             30,000            30          --            --           89,970          --           90,000

Net loss for the period                --            --            --            --             --      (1,547,745)    (1,547,745)

Balance December 31, 1999        13,471,324   $    13,472       500,000   $  (522,476)   $10,826,972   $(6,518,721)   $ 3,799,247
                                ===========   ===========   ===========   ===========    ===========   ===========    ===========

</TABLE>















              See accompanying notes to these financial statements.


                                       13

<PAGE>

<TABLE>
<CAPTION>

                               WORLD CALLNET, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                           (Expressed in U.S. Dollars)
              FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998

                                   (Unaudited)

                                                                         1999          1998
                                                                    -----------    -----------
<S>                                                                 <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                         $(1,547,745)   $  (432,015)
   Depreciation and amortization expense                                273,859           --
   Amortization of debt issuance costs                                  195,049          3,166
   Decrease in receivables                                            1,214,494           --
   Decrease in prepaid expenses                                          99,159           --
   Decrease in bonds, deposits and other assets                         149,381           --
   Increase in accounts payable and accrued expenses                    638,285          2,500
    Other                                                                66,369          1,436
                                                                    -----------    -----------
               Net cash used by operating activities                  1,088,851       (424,588)
                                                                    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase furniture and fixtures                                    (112,424)          --
                                                                    -----------    -----------


CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from short-term indebtedness, net of financing costs           --          334,838
   Repayment of short-term indebtedness                                (500,000)          --
   Cash received in common stock issuances                                 --          167,560
   Decrease in amount due from affiliate                                   --           10,486
                                                                    -----------    -----------
                                                                        500,000        512,884
                                                                    -----------    -----------

NET INCREASE IN CASH                                                    476,427         87,971

CASH, beginning of period                                               214,243          1,995

CASH, end of period                                                 $   690,670    $    89,966
                                                                    ===========    ===========

NON CASH TRANSACTIONS:
   Purchase of net assets in reverse acquisition for common stock          --           14,872
   Issuance of common stock for services                                 90,000           --
                                                                    -----------    -----------
                                                                    $    90,000    $    14,872
                                                                    ===========    ===========

</TABLE>









              See accompanying notes to these financial statements.


                                       14

<PAGE>

                              WORLD CALLNET, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                           Expressed in U.S. Dollars



1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------------

     Organization and Nature of Operations
     -------------------------------------
     World CallNet,  Inc. (the "Company") is incorporated in the United Kingdom.
     The Company is primarily engaged in developing proprietary Internet devices
     and software  applications,  developing  commercial  Internet  websites and
     operating a pay-as-you-go  Internet service provider.  Primarily all of the
     Company's  operations and customers are located in the United Kingdom as of
     December 31, 1999.

     The accompanying  financial  statements include the accounts of the Company
     and its two wholly owned  subsidiaries,  CallNet Plc and Overleaf  Systems,
     Limited  ("Overleaf").  CallNet Plc became a wholly owned subsidiary of the
     Company in September  1999 (see Note 3) and  Overleaf has been  inactive to
     date. All  significant  balances and  transactions  have been eliminated in
     consolidation.

     The  Company  began  operations  as World Wide  Communications  (Holdings),
     Limited  ("WWCH") on January 23, 1998. On October 9, 1998, the stockholders
     of WWCH  exchanged  all  their  shares  for  approximately  75% of  General
     American  Royalty,  Inc.,  ("GAR"),  a public company,  and became a wholly
     owned  subsidiary of GAR. The  management of WWCH became the  management of
     the  combined  company.  Although  GAR was the  acquiring  entity for legal
     purposes, WWCH was considered the acquirer for accounting purposes, and the
     financial statements of the combined company reflect historical accounts of
     WWCH and include the operations of GAR beginning October 9, 1998.  However,
     because GAR was the acquiring entity for legal purposes,  all stockholders'
     equity information in the accompanying  financial  statements and footnotes
     has been  restated  to  conform to GAR's  capital  structure.  The  Company
     changed its name to World CallNet, Inc. in January 1999.

     Investment in Marketable Securities
     -----------------------------------

     The Company's marketable  securities at December 31, 1999 consist of equity
     securities classified as available-for-sale.  Available-for-sale securities
     are carried at estimated  market  value and  unrealized  holding  gains and
     losses are reported in other  comprehensive  income.  At December 31, 1999,
     there was no unrealized gain or loss in these securities.

     Foreign Currency Translation
     ----------------------------

     The Company  conducts  its  operations  and  maintains  its accounts in its
     functional   currency  of  British  pounds.   The  accompanying   financial
     statements are converted into U.S. dollars for the convenience of the users
     at the  prevailing  exchange rate of (pound)1.00 to $1.6165 at December 31,
     1999.


                                       15

<PAGE>


                               WORLD CALLNET, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                            Expressed in U.S. Dollars

     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.  At December 31,
     1999, the Company had  outstanding  options for 2,000,000  shares of common
     stock and outstanding  warrants for 2,145,000 shares of common stock, which
     are not  included  in the  dilutive  calculation  as the  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
     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, 1999 of
     approximately  $2,600,000  that will  expire if unused in 2019,  for United
     States tax purposes;  and $2,200,000  for United Kingdom tax purposes;  and
     the Company has a deferred tax asset at September 30, 1999,  which is fully
     reserved, of approximately $1,560,000.

     Property and Equipment
     ----------------------

     Property and equipment are stated at cost, less  accumulated  depreciation.
     Depreciation  has been  provided  using the  straight-line  method over the
     estimated useful lives of the assets of four years.

     Long-Lived Assets
     -----------------

     The Company's policy is to periodically  review the net realizable value of
     its long-lived  assets,  including  goodwill,  through an assessment of the
     estimated  future  cash  flows  related to such  assets.  In the event that
     assets  are  found  to  be  carried  at  amounts  in  excess  of  estimated
     undiscounted  future  cash  flows,  then the assets  will be  adjusted  for
     impairment to a level  commensurate  with the  estimated  fair value of the
     underlying  assets.  Based  upon  its most  recent  analysis,  the  Company
     believes no impairment of long-lived assets exists at December 31, 1999.


                                       16

<PAGE>


                               WORLD CALLNET, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                            Expressed in U.S. Dollars

     Goodwill
     --------

     Goodwill  represents  the cost of  acquired  businesses  in excess of their
     identifiable net assets and is amortized by the  straight-line  method over
     five years. The Company  recorded  amortization of goodwill of $246,450 and
     $0 for the three months ended December 31, 1999 and 1998.

     Other Intangible Assets
     -----------------------

     Other intangible  assets consist 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.

     Stock-Based Compensation
     ------------------------

     In January  1998,  the Company  adopted  Statement of Financial  Accounting
     Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation",  which
     requires  recognition  of the value of stock  options and warrants  granted
     based on an option  pricing model.  However,  as permitted by SFAS 123, the
     Company  continues  to account for stock  options and  warrants  granted to
     directors and employees pursuant to Accounting Principles Board Opinion No.
     25,   "Accounting   for   Stock   Issued   to   Employees",   and   related
     interpretations. See Note 5.

     Fair Value of Financial Instruments
     -----------------------------------

     The carrying value of the Company's financial  instruments,  including cash
     equivalents,   accounts  receivable,  short-term  borrowings  and  accounts
     payable, approximate fair value due to their short maturities.

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

     The Company has incurred  significant  losses through December 31, 1999. In
     addition,  the Company will require significant additional capital to fully
     implement its business plan.  These factors raise  substantial  doubt about
     the  Company's  ability to continue as a going  concern.  Since January 23,
     1998 (date of inception), the Company completed various debt placements and
     private  placements  of  common  stock,  in which it  raised  net  proceeds
     totaling  approximately  $6,700,000;   including  a  private  placement  of
     securities  in  January  2000 of  $2,362,000.  Management  also  intends to
     attempt to raise additional capital in the near term.  Management  believes
     these  actions will permit the Company to implement  its business  plan and
     attain  profitable  operations  to allow the Company to continue as a going
     concern.


                                       17

<PAGE>

                               WORLD CALLNET, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                            Expressed in U.S. Dollars

3.   ACQUISITION
     -----------

     Acquisition of CallNet Plc
     --------------------------

     On October 9, 1998,  the Company  acquired a 15% interest in CallNet Plc in
     exchange  for  500,000  newly  issued  shares of common  stock,  which were
     recorded at their  estimated  value of $500,000.  On September 2, 1999, the
     Company acquired the remaining 85% interest in exchange for 2,544,560 newly
     issued shares of common stock, which were recorded at their estimated value
     of $4,450,436.  The Company  accounted for its investment  under the equity
     method  until  September  2,  1999 and  applied  the  purchase  method  and
     consolidated   CallNet  Plc  thereafter.   The  accompanying   consolidated
     statement  of  operations  for the three  months  ended  December  31, 1999
     includes operations of CallNet Plc for the entire period.

     Certain  officers  and  directors  of the Company  were also  officers  and
     directors  of CallNet Plc and certain  stockholders  of the Company  held a
     minority interest in CallNet Plc prior to the transactions described above.

     In  connection  with the  acquisition  of CallNet Plc, the Company  assumed
     stock options entitling three directors to purchase an aggregate of 440,000
     shares of its common stock at $1.65 per share (Note 7).

4.   TRANSACTION WITH MAILTV
     -----------------------

     In September  1999,  the Company  entered into an agreement with MailTV Pty
     Ltd.  ("MailTV"),  an  Australian  company,  in which  MailTV is to acquire
     14,500,000 shares of the Company's  common stock  in two phases.  The first
     phase involved the Company exchanging  2,900,000 shares of its common stock
     for $2,718,750 in cash and 453,125 shares of KeyClub.net, a publicly traded
     company  affiliated  with MailTV.  This phase closed on September 30, 1999,
     although  $1,765,530 of the cash was received after closing and recorded as
     stock subscription  receivable in the September 30, 1999 balance sheet. The
     stock of  KeyClub.net  was recorded by the Company at its estimated  market
     value of $565,406.  The second  phase is to involve the Company  exchanging
     11,600,000 shares of its common stock for $10,875,000 in cash and 1,812,500
     shares of  KeyClub.net.  This phase was set to close on December  31, 1999,
     but was extended in December 1999 to February 29, 2000.

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

     At December 31, 1999,  the Company had notes  payable of  $1,200,000  which
     bear  interest at 10% and $850,000 of the notes are  collateralized  by the
     Company's shares of Cherokee Leisure Plc., which is a  bankrupt  entity  at
     December 31, 1999. The principal was due in full on December 1,1999 and the
     Company is in default for  nonpayment  of principal  and $30,000 of accrued
     interest as of December 31, 1999.


                                       18

<PAGE>



                               WORLD CALLNET, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                            Expressed in U.S. Dollars


     The Company issued 1,675,000 stock purchase warrants to the note holders at
     the time the notes  payable were  incurred.  These Company has valued these
     stock purchase  warrants using the Black Scholes  options pricing model and
     allocated  $1,374,791  to  stockholders'  equity based on the relative fair
     market values of the warrants and the notes payable. The value of the stock
     purchase  warrants  has  been  treated  as a  discount  to  notes  payable.
     Amortization  of discount  was  $195,049  and $0 for the three months ended
     December 31, 1999 and 1998, respectively.

6.   STOCK-BASED COMPENSATION
     ------------------------

     1998 Stock Option Plan
     ----------------------
     In January 1999, the 1998 Stock Option Plan (the "Plan") was adopted by the
     Company's  shareholders.  Under the 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.
     Generally,  options granted under the Plan carry an exercise price equal to
     fair market value at the date of the grant and are exercisable for a period
     of three  years  from  the date of the  grant.  The Plan  provides  for the
     exercise of options for a period of ninety  days after  termination,  if an
     employee or director granted options leaves the Company.

     In November 1998,  March 1999 and June 1999, the Company granted options to
     its key directors to purchase  shares of common stock pursuant to the Plan.
     The options were granted at exercise prices ranging from $1.25 per share to
     $3.50 per share and  expire  three  years  from the date of the  grant.  At
     December 31, 1999 there were 2,000,000  options  outstanding,  all of which
     are fully exercisable.

     If not previously exercised,  options outstanding at December 31, 1999 will
     expire as follows:

                                                                        Weighted
                                                                         Average
                                                          Number        Exercise
                                                         of Shares       Price
                                                         ---------      --------

         November 2001                                     500,000       $ 1.50
         June 2002                                       1,060,000         1.25
         September 2002                                    440,000         1.65



                                       19

<PAGE>


                               WORLD CALLNET, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                            Expressed in U.S. Dollars


     Pro Forma Stock-Based Compensation Disclosures
     ----------------------------------------------
     As discussed in Note 1, the Company  applies APB Opinion No. 25 and related
     interpretations  in  accounting  for its stock  options.  During  the three
     months ended December 31, 1999, the Company made no grants of stock options
     to employees and accordingly no  compensation  cost has been recognized for
     the period.

7.   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  $210,000, and provides that if the
     agreement is terminated  by either party during the term of the  agreement,
     the full salary and benefits  are required to be paid to the officer  until
     the end of the term of the agreement.

     The  Company  leases  equipment  and office  facilities  under the terms of
     various non-cancelable rental agreements. Minimum future lease payments for
     non-cancelable  operating leases for the next five years and thereafter are
     as follows:

         Years ending September 30,
         --------------------------
         2000                                        $    399,000
         2001                                             287,000
         2002                                             122,000
         2003                                              87,000
         2004 and thereafter                              151,000
                                                     ------------
                                                     $  1,046,000
                                                     ============

8.   SUBSEQUENT EVENTS
     -----------------

     In January  2000,  the Company  completed a private  placement of 1,350,000
     shares of its common stock for proceeds of $ 2,362,500.





                                       20

<PAGE>



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         Not applicable.

Item 2.  Changes in Securities.

         Not Applicable

Item 3.  Defaults on Senior Securities.

         On  December  1, 1999,  $1,200,00  in  principal  of notes  payable and
         $20,000 of accrued  interest  was due and the Company is in default for
         nonpayment.  Additional interest accrues at $10,000 per month until the
         principal has been repaid.  The Company has no other  outstanding  debt
         arrangements  and the  Company  believes  this  default has not had any
         effect on any other of its agreements.

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

         Not applicable.

Item 5.  Other Information.

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.

         3.2      Amendment   to   Certificate   of   Incorporation,   which  is
                  incorporated by reference  herein as Exhibit 3(i) to Form 8-K,
                  dated October 23, 1998.

         3.3      By-laws of the Company,  which are  incorporated by reference
                  herein as Exhibit 3(ii) to Form 10 filed on March 26, 1997.

         27.1     Financial Data Schedule.





                                       21

<PAGE>



(b)      Reports on Form 8-K.

     1.   A  Current  Report on Form 8-K was filed  with the  Commission  by the
          Company on October 14, 1999, to report the sale of 2,900,000 shares of
          common stock to MailTV Pty for  $2,718,750 in cash and 453,125  shares
          of KeyClub.net, a publicly traded company affiliated with MailTV Pty.

     2.   A Current  Report on Form 8-K/A was filed with the  Commission  by the
          Company on October 15, 1999, to amend the  Company's  October 14, 1999
          Report on Form 8-K.

     3.   A Current  Report on Form 8-K/A was filed with the  Commission  by the
          Company on November 16, 1999,  to report  certain pro forma  financial
          information  regarding  the Company's  acquisition  of 100% of CallNet
          Plc.

     4.   A Current  Report on Form 8-K/A was filed with the  Commission  by the
          Company on December 27, 1999, to report  modifications of the terms of
          the Company's agreement with MailTV Pty.













                                       22

<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: February 21, 2000


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

                                                Date: February 21, 2000

















                                       23