<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ----------------

                                   FORM 10-K

(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
   OF 1934

  for the fiscal year 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: 000-25015

                               ----------------

                         WORLDPORT COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                               84-1127336
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)               Identification No.)

          1825 Barrett Lakes Blvd., Suite 100, Kennesaw, Georgia 30144
                    (Address of principal executive offices)

                                 (770) 792-8735
              (Registrant's telephone number, including area code)

                               ----------------

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

<TABLE>
<CAPTION>
                                                           Names of each exchange
             Title of Each Class                            on which registered
             -------------------                           ----------------------
<S>                                            <C>
                    None                                            None
</TABLE>

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

                        Common Shares, $0.0001 Par Value

                               ----------------

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

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

   As of March 1, 2000, 28,737,589 shares of Registrant's common stock were
outstanding.

   The aggregate market value of the Registrant's common stock held by non-
affiliates on March 1, 2000 was approximately $72,589,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

   The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A within 120 days after the close of the fiscal year ended
December 31, 1999. Portions of such Proxy Statement are incorporated by
reference in Part III of this report.

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<PAGE>

                                     PART I

ITEM 1. BUSINESS

Our Recent Sale Transactions.

  . On November 11, 1999, through WorldPort International, Inc. ("WorldPort
    International"), our wholly-owned subsidiary, we entered into a series of
    agreements with Energis plc ("Energis") to sell our 85% stake in the
    issued and outstanding shares of WorldPort Communications Europe Holding
    B.V. ("WorldPort Europe"), the parent company of EnerTel, N.V.
    ("EnerTel"), a national telecommunications services provider in the
    Netherlands. In connection with the sale of our interest in WorldPort
    Europe, Energis also agreed to purchase all of the issued and outstanding
    shares of WorldPort Communications Limited, our U.K. subsidiary. In
    addition, we agreed to sell our interest in certain switches located in
    New York and London to subsidiaries of Energis. All of these sale
    transactions were consummated on January 14, 2000.

  . Effective February 29, 2000, we sold our subsidiary, International
    InterConnect, Inc. ("IIC"), a Rockledge, Florida-based corporation
    specializing in international long distance services, for a cash payment
    and the assumption of certain liabilities.

  . Effective March 2, 2000, we assigned certain leasehold and equipment
    rights relating to our Miami switch operations to a subsidiary of
    Centennial Communications Corp. for a cash payment and the assumption of
    certain liabilities.

   We also intend to dispose of our other telecommunications assets located in
Omaha, Nebraska in the near future. After these assets are disposed of, we will
have exited our telecommunications network operations.

   As a result of the transactions with Energis, we received approximately
$463.2 million in cash, and Energis assumed approximately $29.9 million of
WorldPort's liabilities. After the payment of our indebtedness, accounts
payable, and transaction costs incurred in the Energis transactions, we
received between $200 and $215 million of net cash proceeds from the sale. As a
result of all of these sales, our only significant asset is cash and cash
equivalents.

Description of Our Former Business.

   In General. Prior to the sale transactions described above, we were a
facilities-based global telecommunications carrier offering voice, data and
other telecommunications services to carriers, Internet service providers
("ISPs"), medium and large corporations and distributors and resellers. The
core of our operations and the source of a significant portion of our revenues
was our EnerTel subsidiary, the leading second network operator in the
Netherlands. EnerTel's switch-based fiber backbone network consisted of three
fiber optic rings extending over 1,200 kilometers linking most of the largest
cities in the Netherlands, and together with EnerTel's interconnection
agreements, passing approximately 70% of the 5.5 million domestic households
and substantially all the domestic and multinational business community in the
Netherlands.

   Prior to the Energis transaction, we had acquired IRUs on AC-1, an undersea
cable connecting North America and Europe, to link EnerTel's switches in
Amsterdam and Rotterdam and our DMS GSP international gateway switch in London
with our U.S. DMS GSP international gateway switches in New York and Miami. As
a result, we had a unified switch network that allowed us to provide On-Net
services to our clients in the Netherlands, our European hub, five other
Western European countries and the United States. During the fiscal year ended
December 31, 1999, although we discontinued our operations in the United States
in August 1999, we continued to conduct our telecommunications network
operations, principally through EnerTel.

   Sales and Marketing. We developed a global sales, marketing and service
organization to market our portfolio of telecommunications products to carriers
and corporate customers worldwide. In particular, in Europe and the United
States we recruited proven sales professionals with well-developed business

                                       1
<PAGE>

relationships in the international long distance industry. We also used
indirect sales through various sales channels, including private branch
exchange ("PBX") manufacturers and resellers. For the medium sized corporate
market, we primarily relied on indirect sales through PBX and other resellers.

   We utilized our independent sales agents and distributors to achieve early
market entry in international markets. To enhance our sales and marketing
efforts, we also maintained memberships in various telecommunications industry
associations, including the European Competitive Telecommunications Association
(ECTA), the Telecommunications Reseller Association (TRA) and CompTel. In
addition, we were a corporate sponsor of Internet2, a project of the University
Corporation for Advanced Internet Development.

   Products. We offered a broad range of voice, data, video and Internet
products and services to customers both within the Netherlands and throughout
Europe. Such services included our switched services, dedicated services,
switch partitioning, virtual points of presence, telehousing and co-location
opportunities, and switchless resale services that we offered carriers, ISPs
and business customers. In addition we offered these customers additional
services such as international calling cards and international operator
services.

   We also offered leased lines, IRU sales, co-location/virtual switching,
switched voice, international calling cards, callback services and voice over
IP products and services in the United States. In Latin America and Asia, we
offered international calling card, debit card and call back based products.

   Dedicated Services. Our network design and network access agreements enabled
us to offer leased or sold (IRU) bandwidth in most cities in Europe and the
United States. We primarily provided dedicated international bandwidth in
increments such as DS-3 and E-1 between our major points of presence in Europe
and the United States, where we installed DMS-GSP switches and entered into
capacity purchase agreements with other network providers. In addition, EnerTel
provided digital leased lines within the Netherlands for carriers and
corporations in increments of E-1 (2 Mbs), E-3 (34 Mbs) and STM-1 (55 Mbs).
Each STM-1 of capacity on our network was the equivalent of three DS-3s or 63
E-1s.

   Co-location/Virtual Switching. Our co-location, switch room leasing and
management, and switch partitioning products enabled us to provide carrier
customers with a turn-key network service package at the same time that we
generated additional transmission traffic for our switched voice, dedicated and
data services. We provided these products and services at our international
switching locations in Amsterdam and London.

   Switched Voice Products. We offered carriers, resellers and corporate
customers switched termination services for voice and fax telecommunications
traffic traveling to points worldwide. Our network design enabled us to offer
international transmission services on a switched basis worldwide.

   Switched Voice--800/900 Services. Though EnerTel, we offered toll-free and
premium services for both third party information service providers as well as
for corporate, carrier and ISP customers.

   Virtual Point of Presence (VPOP). We utilized EnerTel's nationwide network
to offer virtual Internet dial-in service for ISPs, large corporate customers
and resellers. Customers utilizing this service could access the Internet
through an ISP via the EnerTel network through a single access number that
could be dialed from nearly every local calling area in the Netherlands. VPOP
services grew substantially for EnerTel over the past year as a result of the
rapid growth in utilization of the Internet.

   Switchless Resales/Carrier Select Hosting. We provided wholesale network
transmission services for resellers in the Netherlands who provide residential
and small and medium sized business customers with calling services via
proprietary access codes. EnerTel initiated this business to continue to
provide the transmission services for the residential distribution business
which it sold in 1998.

   International Calling Cards. Our international calling card products were
marketed to carriers and to business customers in Europe, the United States,
Latin America and Asia, primarily through international distributors and sales
agents. We offered international pre-paid calling cards, international credit
card billed calling cards, and international call back/direct access.

                                       2
<PAGE>

   Our calling card customers accessed our network for domestic or
international long distance services by dialing a local access number or a
domestic or international toll-free number which connects the customer to our
network. The customer then dialed an access code or personal identification
number (PIN) and, upon account verification, was able to dial a domestic or
international long distance call. In some cases customers utilized dialing
devices which automatically dial the accessed identification numbers.

   Callback Services. Callback access enabled a long distance customer to
access a network from locations where there are no in-country facilities or
resale agreements. The customer accessed the network from the customer's home
or office by dialing a long distance telephone number. The customer received a
"call back" from such number and then used the network to connect to a desired
location.

   Customers. Prior to the sale transactions described above, we served 55 of
the Netherlands' ISPs, 133 medium and large sized corporate customers and 20
carriers, distributors and resellers. We also entered into contracts with an
additional 15 carriers, distributors and resellers.

   Carriers. We categorized our carrier customers as follows: (i) Tier I and
Tier II carriers, including United States-based long distance carriers, (ii)
PTTs, and (iii) emerging alternative carriers, such as competitive local
exchange carriers and PTOs. The carrier customers we targeted typically operate
their own networks in domestic markets, and operate some infrastructure on
international routes.

   Internet Service Providers. We served 55 ISPs in the Netherlands that
provided us with national Internet traffic volumes exceeding 115 million
minutes per month. ISPs generally require high capacity bandwidth transport
from their markets back to the major Internet backbones in the United States.
We provided our Netherlands ISP customers with such transport to the Internet
exchange in Amsterdam. In addition, in January 1999, EnerTel entered into an
agreement to participate as one of a select number of carriers in the GTE
Internetworking, Inc. ("GTEI") Alliance Program for international distribution
of Internet access products. This alliance program extended the global reach of
our VPOP and Internet access products for ISPs and corporate customers.

   Competition. The international and national telecommunications markets in
which we operated were highly competitive. Until recently, telecommunications
markets in the Netherlands and throughout Europe were dominated by the national
PTTs. Since the implementation of a series of European Community and World
Trade Organization directives beginning in 1990, the Netherlands and other
western European countries have started to liberalize their respective
telecommunications markets, thus permitting alternative telecommunications
providers to enter the market. Liberalization has coincided with technological
innovation to create an increasingly competitive market, characterized by
still-dominant PTTs as well as an increasing number of new market entrants. In
the Netherlands, we competed primarily with KPN Telecom. As the former sole PTT
provider of telecommunications services, KPN Telecom had an established market
presence, a fully-built network and financial and other resources that were
substantially greater than ours. In addition, various new providers of
telecommunications services entered the market, targeting various segments.
Companies such as Telfort B.V. (a company which was formed by British Telecom
and Nederlandse Spoorwegen N.V., the Netherlands railroad company, and which
received the other nationwide telecommunications license which was issued in
the Netherlands) as well as Global One Communications, MCI WorldCom, Esprit
Telecom plc., COLT Telecom and VersaTel, competed with KPN Telecom and EnerTel
in the Netherlands for contracts with large multinational companies.
Competition in the Netherlands, as well as the European long distance
telecommunications industry in general, was driven by numerous factors,
including price, customer service, type and quality of services and customer
relationships.

   In other foreign markets, we competed with dominant national telephone
companies, and other major incumbent carriers. In addition, we competed with
other emerging U.S. and international carriers attempting to enter these
markets and with local resellers and marketers of long distance services.

   Company Background. WorldPort was originally organized as a Colorado
corporation under the name Sage Resources, Inc. in January 1989 to evaluate,
structure and complete mergers with, or acquisitions of, other

                                       3
<PAGE>

companies. We remained inactive until 1996 when our domicile was changed to
Delaware and our name was changed to WorldPort Communications, Inc. We
primarily operated through a number of acquired subsidiaries that operated in
Europe, the United States, Latin America and Asia. In addition to our
acquisition of EnerTel, the significant acquisitions we completed since our
formation are described below:

  . In June 1997, our wholly-owned subsidiary, Telenational Communications,
    Inc. ("TNC") acquired substantially all of the telecommunications assets
    and operations of Telenational Communications Limited Partnership, a
    Nebraska limited partnership. The purchased assets included
    telecommunications switches and other network equipment, customer and
    vendor contracts, an FCC section 214 common carrier license and an
    operator services center. The FCC section 214 common carrier license gave
    us the authority to resell both international switched and private line
    services of authorized carriers.

  . In April 1998, our wholly-owned subsidiary, WorldPort/ICX, Inc. ("ICX")
    acquired the telecommunications assets and operations of Intercontinental
    Exchange, a licensed provider of international telecommunications
    services headquartered in the San Francisco Bay area. During the first
    quarter of 1999, we integrated our business of ICX with our Omaha
    operations. ICX has been merged into TNC.

  . In August 1998, we acquired the operations of International InterConnect,
    Inc. ("IIC"), a Rockledge, Florida-based corporation specializing in
    international long distance services which were marketed through
    international distributors primarily in Latin America to multinational
    corporations, foreign embassies, businesses and other high volume
    customers. The telecommunications assets of IIC which we acquired
    included network switching equipment, international private lines and
    other leased circuits between the United States and countries in Latin
    America, and other communications equipment.

   Effective February 29, 2000, we sold our subsidiary, International
InterConnect, Inc. ("IIC"), a Rockledge, Florida-based corporation specializing
in international long distance services, for a cash payment and the assumption
of certain liabilities. We also intend to dispose of the assets of TNC.

Employees.

   With the sale of substantially all of our assets, our need for employees has
decreased. As of March 31, 2000, we had 8 employees.

Reasons for Our Change in Focus.

   In light of the significant and increasing financial reverses experienced
over the last several years, our Board of Directors decided that the sale of
the EnerTel assets was in the best interest of our company and stockholders.
Consequently, we engaged Salomon Smith Barney as financial advisers to conduct
an auction of the EnerTel assets, which led to the January 14, 2000 sale to
Energis. As indicated in the information statement forwarded to stockholders in
connection with the Energis transaction, the Board of Directors considered a
number of factors in reaching its decision to sell to Energis, including the
following:

  . the purchase price offered by Energis was more than five times the
    purchase price that we paid for EnerTel less than two years ago

  . the balance of our outstanding debt obligation and its maturity date of
    November 18, 1999, as well as the prospects of refinancing or otherwise
    repaying the debt

  . the impact that bankruptcy proceedings, if initiated, could have on the
    prospects of our stockholders and creditors realizing value for their
    interests in or claims against WorldPort

  . the impact on our business of the uncertainties associated with our
    financial problems, including risks that customers and suppliers would
    stop doing business with us on customary trade terms and that employees
    might leave; and the increased risk that if we were forced to seek
    protection from our creditors under the bankruptcy laws, we might not be
    able to continue our business

                                       4
<PAGE>

   After considering available options, including a liquidation of the company
or the pursuit of a new business, our Board of Directors decided to sell the
EnerTel assets and pursue a new strategic direction.

Our New Business.

   We intend to invest the proceeds from the sale to Energis in a new business.
The Board of Directors is currently considering strategic alternatives and we
expect to announce the new strategic focus in the near future.

Recent Events.

 Additional Investment By Heico.

   In June 1999, Heico agreed to provide a bond to support a bid by us to
acquire a telecommunications company in Europe. In consideration of the bond,
we agreed to issue to Heico 25,000 shares of our common stock at a purchase
price of $0.01 per share. The bond provided by Heico was returned when our bid
was unsuccessful. Heico purchased the 25,000 shares of our common stock from us
in November 1999.

   In addition, Heico became one of the lenders participating in our interim
loan facility which was repaid with the proceeds of the sale to Energis. In
connection with Heico's participation in our interim loan, warrants to purchase
416,240 shares of our common stock for $.01 per share at any time expiring in
June 2008 were transferred to Heico.

   In December 1999, we entered into a convertible note in favor of Heico in
the aggregate principal amount of $2 million. The convertible note accrued
interest at a rate of approximately 14% per annum and matured on the
consummation of the sale to Energis. Heico has elected to convert the note into
a newly-created series of convertible preferred stock. We are currently
negotiating the terms of the preferred stock with Heico. It is anticipated that
we will issue two million shares of the new preferred stock to Heico in
exchange for its note. The preferred stock will be convertible on a 1:1 basis
into our common stock and will have voting rights on an as converted basis. The
proceeds of this loan were primarily used by us as working capital and for
general corporate purposes pending the receipt of the proceeds from the Energis
transactions.

ITEM 2. PROPERTIES

   Our principal offices are located in the Atlanta, Georgia area and are
leased pursuant to an agreement which expires in June 2003. We also lease
approximately 11,000 square feet of office and operating space in Omaha,
Nebraska for our U.S. operating center pursuant to an agreement which expires
in June 2001.

   We believe that our property and equipment are well maintained and adequate
to support our current needs, although substantial investments are expected to
be made in additional property and equipment for expansion and in connection
with corporate development activities.

ITEM 3. LEGAL PROCEEDINGS

   On April 17, 1998, we were served with a summons and complaint from MC
Liquidating Corporation f/k/a MIDCOM Communications, Inc. ("MIDCOM"). Both we
and TNC, our wholly-owned subsidiary, are named as defendants, as are
Telenational Communications, Limited Partnership, the former owner of the TNC
assets ("TCLP"), and Edmund Blankenau, a principal of TCLP and one of our
former directors. In its complaint, filed on April 8, 1998 in the U.S.
Bankruptcy Court for the Eastern District of Michigan, Southern Division,
MIDCOM seeks payment of over $600,000 for services allegedly provided to TCLP
and us, together with other damages, attorney fees and costs. We intend to
vigorously defend against this claim.

                                       5
<PAGE>

   We are defendants in litigation filed in the Sub-District and District
courts of The Hague, located in Rotterdam, Netherlands. The cases, filed in
January and February, 1999, by Mr. Bahman Zolfagharpour, allege that we
breached agreements with Mr. Zolfagharpour in connection with our purchase of
MathComp B.V. from Mr. Zolfagharpour, our subsequent purchase of EnerTel, and
Mr. Zolfagharpour's employment agreement with WorldPort Communications Europe,
B.V., our former European subsidiary. The litigation seeks dissolution of the
employment agreement and the non-competition clause of the agreement, damages
in an amount exceeding $20 million, and the award of 2,500,000 shares of our
common stock to Mr. Zolfagharpour. We believe that the litigation is wholly
without merit and intend to defend the case vigorously.

   Since July 14, 1999, WorldPort and certain of its former officers have been
named as defendants in multiple stockholder class action lawsuits filed in the
United States District Court for the Northern District of Georgia. The
plaintiffs in these lawsuits seek to represent a class of individuals who
purchased or otherwise acquired common stock from as early as December 31, 1998
through June 25, 1999. Among other things, the plaintiffs allege that the
defendants spoke positively about the Heico financing without disclosing the
risk that non-compliance with certain Nasdaq rules in connection with the
financing might cause WorldPort to be delisted from Nasdaq. The plaintiffs
further allege the subsequent disclosure that WorldPort might be delisted from
Nasdaq adversely affected the value of common stock. The plaintiffs allege
violations of Sections 10(b) and 20(a) of the Exchange Act. WorldPort intends
to defend these lawsuits vigorously, but due to inherent uncertainties of the
litigation process and the judicial system, WorldPort is unable to predict the
outcome of this litigation.

   On November 9, 1999, certain former employees of WorldPort filed an
involuntary bankruptcy petition against WorldPort in the U.S. Bankruptcy Court
for the Northern District of Georgia, Atlanta Division. The petitions alleged
specific claims totaling $99,000 against WorldPort in their petition. Following
settlement negotiations between the parties, on November 18, 1999, the Court
entered an order dismissing the petitioner's claims. The order contained a
specific finding by the Court that consummation of the Sale was in the best
interests of WorldPort, its creditors and stockholders.

   From time to time, we are involved in various other lawsuits or claims
arising from the normal course of business. In the opinion of management, none
of such other lawsuits or claims will have a material adverse effect on our
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   During November 1999, stockholders holding a majority of the outstanding
shares of our common stock (including preferred shares which vote with the
common stock on an as converted basis) executed irrevocable written consents
approving the sale of certain assets to Energis. The assets, which represented
substantially all of our assets, consisted of the following:

  . 85% of the issued and outstanding securities of WorldPort Communications
    Europe Holding B.V., a corporation organized under the laws of the
    Netherlands ("WCEH") and the parent company of EnerTel, N.V. , which
    represented 100% of the securities of WCEH held by WorldPort
    International, Inc., one of our subsidiaries

  . All of the issued and outstanding securities of WorldPort Communications
    Limited, a corporation organized under the laws of England and Wales, and
    one of our subsidiaries

  . All of the interests in two DMS GSP International Gateway Switches
    located in New York and London

   An Information Statement pursuant to Schedule 14C of the Securities Exchange
Act of 1934 was forwarded to all stockholders advising them of such action and
was filed with the United States Securities and Exchange Commission.

                                       6
<PAGE>

   As of November 11, 1999, there were outstanding: 27,547,092 shares of
WorldPort common stock, no shares of WorldPort Series A Convertible Preferred
Stock, 1,104,896 shares of WorldPort Series B Convertible Preferred Stock,
1,416,030 shares of WorldPort Series C Convertible Preferred Stock, 316,921
shares of WorldPort Series D Convertible Preferred Stock, and 141,603 shares of
WorldPort Series E Convertible Preferred Stock, in the aggregate representing
130,239,570 votes entitled to be cast on such date.

   The Delaware General Corporation Law requires that sales of substantially
all the assets of a corporation be approved by stockholders holding a majority
of the votes of the outstanding voting securities of such corporation, which,
on November 11, 1999, consisted of approximately 65 million votes. We obtained
written consents from stockholders holding more than 65 million votes, which
was sufficient to satisfy the requirements of the Delaware General Corporation
Law.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

   The following are the Company's executive officers as of March 31, 2000.

<TABLE>
<CAPTION>
Name                                   Age Principal Position with Registrant
----                                   --- ----------------------------------
<S>                                    <C> <C>
Carl J. Grivner.......................  46 Chief Executive Officer and President
John T. Hanson........................  42 Chief Financial Officer
David Hickey..........................  39 General Manager--Europe
</TABLE>

Carl J. Grivner

   Carl J. Grivner has served as our Chief Executive Officer and President
since June of 1999 and Chairman of the Board of Directors since August 1999.
Mr. Grivner has over twenty years of experience in management, marketing, and
technical experience in the high-tech and telecommunications industries. Most
recently, Mr. Grivner served as chief executive officer of the Western
Hemisphere for Cable & Wireless, a global business voice and data
communications supplier based in the United Kingdom. Previously, Mr. Grivner
served as president and chief executive of Advanced Fibre Communications, a
multi-service access solutions. Prior to joining Advanced Fibre Communications,
he served nine years at Ameritech, where he held a series of management
positions, including president of Enhanced Business Services and president of
its advertising service unit. Previously, Mr. Grivner served nine years in
technical and marketing positions with IBM. Mr. Grivner holds a Bachelors of
Arts degree in biology from Lycoming College and an advanced degree in business
administration from the University of Pennsylvania, Wharton School of Business.

John T. Hanson

   John T. Hanson has been our Chief Financial Officer since July 1999. From
August 1998 to July 1999, Mr. Hanson served as Vice President and Chief
Financial Officer for Millenium Rail, Inc., a railcar repair and maintenance
services company. Prior to that, from 1995 to 1998, Mr. Hanson was Vice
President and Chief Financial Officer for Wace USA, Inc., an international
provider of technology based solutions for the graphic arts industry.
Previously, for ten years, Mr. Hanson served as Vice President Finance and
Controller for Ameritech where he was responsible for building the Telephone
Industry Services business unit, which had sales of $600 million. Prior to
joining Ameritech, Mr. Hanson was chief financial officer for Illinois Bell
Communications, where he was responsible for re-engineering and restructuring.
Mr. Hanson received a Bachelors degree in Accounting from DePaul University and
a Masters degree in management from Northwestern University.

David Hickey

   David Hickey joined us in June 1998 as General Manager--Europe. From 1986 to
June 1998, Mr. Hickey served as a telecommunications consultant and founding
director of Datanet Limited, an independent international telecommunications
consulting firm based in Dublin, Ireland, advising corporate clients, including
carriers and government agencies. Mr. Hickey graduated with honors from the
University College of Dublin with a Bachelors degree in Electrical Engineering.

                                       7
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   Since August 4, 1999, our common stock has traded on the OTC Bulletin Board
under the symbol "WRDP.OB." From November 23, 1998 until August 4, 1999, our
common stock traded on the Nasdaq SmallCap Market under the symbol "WRDP.OB."
From June 17, 1997 until November 23, 1998, our common stock traded on the OTC
Bulletin Board. Prior to June 17, 1997, there was no public market for our
common stock.

   The table below sets forth the high and low sales prices for the common
stock (as reported on the OTC since August 5, 1999 and from June 17, 1997 to
November 23, 1998 and as reported on the Nasdaq SmallCap Market from November
23, 1998 to August 4, 1999) during the periods indicated. The OTC quotations
reflect high and low bid information and reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>
                                                                Price Range of
                                                                 Common Stock
                                                               ----------------
                                                                 High     Low
                                                               -------- -------
<S>                                                            <C>      <C>
Year Ended December 31, 1999:
First Quarter................................................. $11.2500 $6.5625
Second Quarter................................................  12.3750  3.2500
Third Quarter (through August 4, 1999)........................   6.0625  2.6250
Third Quarter (from August 5, 1999)...........................   3.0000  0.4844
Fourth Quarter................................................   3.4375  0.5469
Year Ended December 31, 1998:
First Quarter................................................. $ 7.6200 $6.5000
Second Quarter................................................  14.5000  6.7500
Third Quarter.................................................  17.5000  8.7500
Fourth Quarter (through November 20, 1998)....................  11.1250  6.7500
Fourth Quarter (since November 23, 1998)......................  10.8750  7.5000
</TABLE>

   As of March 1, 2000, there were approximately 142 stockholders of record of
our common stock.

   We have never declared or paid any cash dividends on our capital stock,
although our Series A Preferred Stock accrued dividends from its issuance to
its conversion and dividends equal to 7% of the stated value per annum accrue
on each of our Series B, C, D and E Preferred Stock. We currently intend to
retain future earnings, if any, to finance the growth and development of our
business and, therefore, do not anticipate paying any cash dividends in the
future.

   In 1999, in addition to the stock issuances which we have previously
described in our Forms 10-Q, we made the following issuances of securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act"). All such issuances were made to "accredited investors" as
defined in the Securities Act and its regulations and were exempt from
registration under Section 4(2) of the Securities Act.

  . In June 1999, Heico agreed to provide a bond to support a bid by us to
    acquire a telecommunications company in Europe. In consideration of the
    bond, we agreed to issue to Heico 25,000 shares of our common stock at a
    purchase price of $0.01 per share. The bond provided by Heico was
    returned when our bid was unsuccessful. Heico purchased these 25,000
    shares of common stock from us in November 1999.

  . In December 1999, we entered into a convertible note in favor of Heico in
    the aggregate principal amount of $2 million. The convertible note
    accrued interest at a rate of approximately 14% per annum and matured on
    January 14, 2000. Heico has elected to convert the note into a newly-
    created series of convertible preferred stock. We are currently
    negotiating the terms of the new preferred stock with Heico. It is
    anticipated that we will issue two million shares of the new preferred
    stock to Heico in

                                       8
<PAGE>

   exchange for its note. The preferred stock will be convertible on a 1:1
   basis into our common stock and will have voting rights on an as converted
   basis. The proceeds of this loan were primarily used by us as working
   capital and for general corporate purposes pending the receipt of the
   proceeds from the Energis transactions.

ITEM 6. SELECTED FINANCIAL DATA

   The selected statements of operations data for the period from inception
(January 6, 1989) to December 31, 1995 and each of the years ended December
31, 1996, 1997, 1998, and 1999 and the selected balance sheet data for the
periods then ended have been derived from our Consolidated Financial
Statements audited by Arthur Andersen LLP, included elsewhere herein. You
should read the following selected financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and our Consolidated Financial Statements and Notes thereto,
included elsewhere in this Report.

<TABLE>
<CAPTION>
                               For the
                             Period From
                              Inception
                             (January 6,
                               1989) to       Years Ended December 31,
                             December 31, -------------------------------------
                                 1995      1996    1997(1)    1998(2)   1999
                             ------------ ------  -------   --------  ---------
                               (in thousands, except ratio and per share
                                                 data)
<S>                          <C>          <C>     <C>       <C>       <C>
Statement of Operations
 Data:
 Revenues...................    $  --     $  --   $ 2,776   $ 28,591  $  85,967
 Cost of services...........       --        --     2,605     21,187     57,438
                                ------    ------  -------   --------  ---------
 Gross margin...............                          171      7,404     28,529
Other operating expenses:
 Selling, general and
  administrative............        43       270    2,723     39,147     62,020
 Depreciation and
  amortization..............       --        --       818     11,069     25,396
 Asset impairment...........       --        --       --       4,842     11,902
                                ------    ------  -------   --------  ---------
Operating loss..............       (43)     (270)  (3,370)   (47,654)   (70,789)
                                ------    ------  -------   --------  ---------
Other:
 Interest expense, net......         7        10     (128)   (24,570)   (52,076)
 Other......................       --        --         6     (5,451)        --
                                ------    ------  -------   --------  ---------
 Loss before minority
  interest and income tax
  provision.................       (36)     (260)  (3,492)   (77,675)  (122,865)
 Minority interest..........       --        --       --         903      1,845
                                ------    ------  -------   --------  ---------
 Loss before income tax
  provision.................       (36)     (260)  (3,492)   (76,772)  (121,020)
 Income tax provision.......       --        --       --         --         --
                                ------    ------  -------   --------  ---------
 Net loss...................    $  (36)   $ (260) $(3,492)  $(76,772) $(121,020)
                                ======    ======  =======   ========  =========
 Basic and diluted net loss
  per common share..........    $(0.60)   $(0.11) $ (0.26)  $  (4.47) $   (6.93)
                                ======    ======  =======   ========  =========
 Weighted average common
  shares....................        60     2,358   13,245     17,158     24,244
                                ======    ======  =======   ========  =========
Other Operating Data:
 EBITDA(3)..................    $  (43)   $ (270) $(2,552)  $(31,743) $ (33,492)
 Ratio of earnings to fixed
  charges(4)................       N/A       --       --         --         --
<CAPTION>
                                           As of December 31,
                             --------------------------------------------------
                                 1995      1996    1997       1998      1999(5)
                             ------------ ------  -------   --------  ---------
                                             (in thousands)
<S>                          <C>          <C>     <C>       <C>       <C>
Balance Sheet Data:
Working capital (deficit)...    $   15    $2,787  $(4,143)  $ 29,445  $ (80,138)
Property and equipment,
 net........................         0         0    5,032        676        145
Net assets held for sale....         0         0        0    111,777    101,302
Total assets................        15     2,889   13,197    158,464    104,288
Long-term obligations.......         0       420    4,197     16,717      4,021
Stockholders' equity
 (deficit)..................        15     2,367    4,155     17,522    (83,482)
</TABLE>
--------
(1) Includes the financial results of Telenational Communications, Inc. and
    Wallace Wade, Inc. from June 20, 1997 and July 3, 1997, the respective
    dates of their acquisition.

                                       9
<PAGE>

(2) Includes the financial results of EnerTel and IIC from June 23, 1998 and
    August 1, 1998, the respective dates of their acquisition.
(3) EBITDA represents operating loss adjusted for interest, income taxes,
    depreciation, amortization, and asset impairment. EBITDA is provided
    because it is a measure commonly used in our industry. EBITDA is not a
    measurement of financial performance under GAAP and should not be
    considered an alternative to net income as a measure of performance or to
    cash flow as a measure of liquidity.
(4) For the years ended December 31, 1996, 1997, 1998 and 1999, earnings were
    insufficient to cover fixed charges by approximately $0.3 million, $3.5
    million, $77.7 million, and $122.9 million, respectively. Earnings consist
    of income before income taxes plus fixed charges (exclusive of interest
    capitalized). Fixed charges consist of interest charges and amortization of
    debt issuance costs, whether expensed or capitalized, and the portion of
    rent under operating leases representing interest.
(5) The European operations and IIC were sold in January and February 2000. The
    TNC assets are for sale. Accordingly, the related assets and liabilities
    have been collapsed and reflected as "Assets held for Sale" in the balance
    sheet.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

   You should read the following discussion and analysis in conjunction with
"Selected Financial Data," the Consolidated Financial Statements and Notes
thereto, and the other financial data appearing elsewhere in this Report.

   The information set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") contains certain
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act
of 1934, as amended, and the Private Securities Litigation Reform Act of 1995,
including, among others (i) expected changes in the Company's revenues and
profitability, (ii) prospective business opportunities and (iii) the Company's
strategy for financing its business. Forward-looking statements are statements
other than historical information or statements of current condition. Some
forward-looking statements may be identified by use of terms such as
"believes", "anticipates", "intends" or "expects". These forward-looking
statements relate to the plans, objectives and expectations of the Company for
future operations. Although the Company believes that its expectations with
respect to the forward-looking statements are based upon reasonable assumptions
within the bounds of its knowledge of its business and operations, in light of
the risks and uncertainties inherent in all future projections, the inclusion
of forward-looking statements in this report should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.

   The Company's revenues and results of operations could differ materially
from those projected in the forward-looking statements as a result of numerous
factors, including, but not limited to, the following: (i) changes in external
competitive market factors, (ii) termination of certain operating agreements or
inability to enter into additional operating agreements, (iii) inability to
satisfy anticipated working capital or other cash requirements, (iv) changes in
or developments under domestic or foreign laws, regulations, licensing
requirements or telecommunications standards, (v) changes in the Company's
business strategy or an inability to execute its strategy due to unanticipated
changes in the market, (vi) various competitive factors that may prevent the
Company from competing successfully in the marketplace, and (ix) the Company's
lack of liquidity and its ability to raise additional capital. In light of
these risks and uncertainties, there can be no assurance that actual results,
performance or achievements of the Company will not differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. The foregoing review of important factors should
not be construed as exhaustive. The Company undertakes no obligation to release
publicly the results of any future revisions it may make to forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

                                       10
<PAGE>

   The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.

 Overview

   Until consummation of the sales transactions described in this report, the
Company was a facilities-based global telecommunications carrier offering
voice, data and other telecommunications services to carriers, Internet service
providers ("ISPs"), medium and large corporations and distributors and
resellers. In order to meet its obligations under the Interim Loan Facility due
November 18, 1999, the Company sold substantially all of its material assets
during early 2000. On November 11, 1999, the Company entered into a series of
definitive agreements with Energis plc for the sale of its 85% shareholding in
WorldPort Communications Europe Holdings, B.V., the parent of EnerTel N.V. and
associated assets ("EnerTel") for $522 million. The sale was consummated on
January 14, 2000. The Company applied a portion of the net proceeds realized
from the sale to repay existing debt, including the Interim Loan, trade credit
and other liabilities. Additionally, the Company completed the sale of
International InterConnect, Inc. ("IIC") in February 2000.

   The Company's growth to date has occurred principally through acquisitions,
most notably its acquisition of EnerTel, a national provider of
telecommunications services in the Netherlands. The Company acquired EnerTel in
June 1998, for consideration consisting of approximately $92 million and the
payment of certain EnerTel indebtedness of approximately $17 million. In
November 1998 the Company sold a 15% interest in the direct parent of EnerTel
to former shareholders of EnerTel for approximately $14.8 million, of which
approximately $2.8 million was an equity investment in the subsidiary and
approximately $12 million was in the form of a shareholder note. The principal
on this shareholder note is payable ten years after the Company's repayment of
the Interim Loan, which financed the Company's acquisition of EnerTel.

   In addition to the Company's EnerTel operations, during 1998 the Company
acquired Intercontinental Exchange, Inc. ("ICX") and IIC which serve
distributors and resellers focused on international calling card and private
line services. Formerly based in the San Francisco Bay area, ICX provides
telecommunication services principally through a network of agents and
distributors in Japan and other Asian countries. During the first quarter of
1999, ICX's operations were integrated with the Company's Omaha, Nebraska based
calling card operation and its traffic was migrated to the Company's Omaha
switch. The Company acquired the assets and operations of ICX in April 1998, in
exchange for 400,000 shares of Common Stock.

   In August 1998, the Company acquired the assets and operations of IIC. The
purchase consideration was 879,442 shares of Common Stock and $872,000 in cash.
Based in Rockledge, Florida, IIC specializes in providing international long
distance services primarily in Latin America. IIC's customer base consists
primarily of resellers, multinational corporations, foreign embassies, and
other businesses.

   In February 1998, the Company commenced operations in the Netherlands
through the acquisition of MathComp B.V., whose name was changed to WorldPort
Communications Europe, B.V. ("WorldPort Europe"). In connection with this
acquisition, the Company issued 150,000 shares of Common Stock and paid
$250,000 in cash. The former shareholder of WorldPort Europe is eligible to
earn an additional 2,350,000 shares of Common Stock contingent upon the
attainment of certain revenue and gross margin requirements during the first
and second quarters of 1999. Following the acquisition of EnerTel, the Company
recorded charges of approximately $5.2 million in the fourth quarter of 1998
for the wind down of the WorldPort Europe operations in 1999.

 Commitments

   In conjunction with the sale of the European operations and the Miami
switch, the majority of the Company's significant commitments have been either
assigned to other parties or exited by mutual agreement from both parties. As
of March 2000, the Company has $8.5 million in commitments remaining
principally to two vendors.

                                       11
<PAGE>

Results of Operations

Year Ended December 31, 1999 Compared To Year Ended December 31, 1998

   During the year ended December 31, 1999, the Company incurred a net loss of
$121.0 million compared to a net loss of $76.8 million during the same period
in 1998. Included in this loss incurred during the year ended December 31, 1999
are the operating results of EnerTel, IIC and ICX, including amortization of
the purchased intangibles and recording of financing costs related to the
Company's acquisition of EnerTel, as well as general expenses related to the
Company's worldwide business development and financing activities. The
operating results for ICX and IIC did not have a material impact on the losses
incurred by the Company in 1999. To address and remedy historical operating
losses and to increase its competitiveness, revenues and gross margins, the
Company has taken various steps to improve each subsidiary's operating
efficiency, network capability and carrier cost structure. In August 1999, the
Company took steps to terminate its U.S. wholesale carrier operations and
significantly reduce its U.S. staffing related to those wholesale operations.
It also announced plans to explore strategic alternatives, including the sale
of assets. On November 11, 1999, the Company entered into a series of
definitive agreements with Energis plc for the sale of its 85% shareholding in
WorldPort Communications Europe Holdings, B.V., the parent of EnerTel N.V. and
associated assets ("EnerTel") for $522 million. The sale was consummated on
January 14, 2000. The Company applied a portion of the net proceeds realized
from the sale to repay existing debt, including the Interim Loan, trade credit
and other liabilities. The Company is now considering a new strategic focus
following this sale utilizing the remaining net proceeds.

 Revenues

   Revenues for the year ended December 31, 1999 were $86.0 million compared to
$28.6 million for the year ended December 31, 1998. The increase in revenues is
primarily attributed to the inclusion of the results of operations of EnerTel,
acquired in June 1998 and the commencement of the Company's U.S. wholesale
carrier operations during 1999. EnerTel's revenues were $60.7 million during
the year ended December 31, 1999. The U.S. wholesale carrier operations, which
the Company terminated in the third quarter of 1999, contributed revenues of
$6.8 million during the year ended December 31, 1999. Also contributing to the
increase over the prior year is the inclusion of IIC acquired in July 1998.
This entity contributed approximately $6.9 million in total revenues during the
year ended December 31, 1999. Results for the year ended December 31, 1999 also
include revenue of $2.1 million from the sale of transmission capacity under an
agreement between the Company and a telecommunication carrier.

   EnerTel primarily generates revenue from the transmission of both domestic
and international switched minutes in the Netherlands. EnerTel also derives
revenues from the fixed monthly rental of private line circuits. The growth in
EnerTel's revenues during 1999 included growth in all EnerTel product lines
including virtual point of presence (VPOP) internet access; the Kennisnet
national data network for the Dutch school system, direct access local,
national and international switched services; and 800/900 products as well as
the wholesale portion of the Bel 1600 business, a residential services business
which the Company sold in 1998.

 Gross Margin

   Gross margin for the year ended December 31, 1999 was $28.5 million compared
to $7.4 million for the year ended December 31, 1998. The increase in gross
margin was primarily due to the inclusion of the results of operations of
EnerTel. The Company's primary costs of sales are its cost of terminating
switched minutes through third parties, as well as its cost of access circuits
used to connect its customers in the Netherlands.

 Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased to $62.0 million for
the year ended December 31, 1999 from $39.1 million in the prior year. The
increase is primarily due to (i) the inclusion of the selling,

                                       12
<PAGE>

general and administrative expenses associated with the operation of EnerTel,
the U.S. wholesale carrier operations and IIC, (ii) increased business
development and expansion activity, and (iii) costs incurred in connection with
the termination of the Company's U.S. wholesale carrier operations and the
reduction in the U.S. corporate headquarters staff.

 Depreciation and Amortization

   Depreciation and amortization expense for the year ended December 31, 1999
was $25.4 million compared to $11.1 million for the year ended December 31,
1998. The increase was due to (i) depreciation on the assets acquired in
connection with the EnerTel and IIC acquisitions, (ii) amortization of goodwill
and other intangible assets associated with the EnerTel and IIC acquisitions,
and (iii) depreciation on additional switching and network equipment acquired
during 1998 and 1999.

 Asset Impairment

   In the year ended December 31, 1999, the Company recorded nonrecurring
charges totaling approximately $11.9 million in connection with its decision to
close and/or sell certain U.S. operations. Included in these nonrecurring
charges are charges totaling approximately $10.9 million to write-down the
Company's investment in TNC and IIC to their estimated net realizable value and
an asset impairment charge of $1 million to reduce certain U.S. based
telecommunications equipment to their estimated resale values. In 1998, we
wrote off $4.8 million related to certain assets that were deemed to be
impaired under SFAS 121 as a result of our shift in business focus during 1998.
This write-off principally related to the write-down of certain switching and
network equipment that we operated prior to the EnerTel acquisition and the
write down of certain assets related to WWC, acquired in 1997, which is no
longer part of our strategic plan.

 Other Income (Expense)

   For the year ended December 31, 1999 interest expense, net was $52.1 million
compared to $24.6 million during the same period in 1998. The increase in
interest expense is due primarily to the Interim Loan issued on June 23, 1998.
Interest expense also included interest for the debt the Company assumed in
connection with the EnerTel and IIC acquisitions, and the acquisition of
switching equipment subject to capital lease.

Year Ended December 31, 1998 Compared To Year Ended December 31, 1997

 Revenues

   Revenues increased to $28.6 million from $2.8 million for the years ended
December 31, 1998 and 1997, respectively. The increase in revenues was
primarily due to the inclusion of the results of operations of newly acquired
entities. Of our 1998 revenues, EnerTel contributed $18.3 million, ICX $3.4
million, and IIC $3.2 million.

   EnerTel primarily generates revenue from the transmission of both domestic
and international switched minutes in the Netherlands. EnerTel also derives
revenues from the fixed monthly rental of private line circuits. The growth in
EnerTel's revenues in 1998 included growth in all EnerTel product lines
including virtual point of presence (VPOP) internet access; direct access
local, national and international switched services; and 800/900 products as
well as the wholesale portion of the former Bel 1600 business. In 1998, the
VPOP business represented 36% of EnerTel revenues. In addition, our calling
card and private line operations represented approximately $10.3 million in
1998 revenues, generated through the sale of switched minutes.

 Gross Margin

   Gross margin increased to $7.4 million from $0.2 million for the years ended
December 31, 1998 and 1997, respectively. The increase in gross margin was
primarily due to the inclusion of the results of operations

                                       13
<PAGE>

of ICX, EnerTel, and IIC subsequent to the closing of those acquisitions in
April, June and August 1998, respectively. Our primary costs of sales in 1998
were our cost of terminating switched minutes through third parties, as well as
our cost of access circuits used to connect our customers in the Netherlands.
Our cost of services and resulting gross margin reflects our variable costs
only, and do not reflect the depreciation of network assets.

 Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased to $39.1 million from
$2.7 million for the years ended December 31, 1998 and 1997, respectively. The
increase was primarily due to (i) the inclusion of the selling, general and
administrative expenses associated with the operation of EnerTel and IIC
subsequent to the closing of those acquisitions in June and August 1998,
respectively (approximately $17.1 million), (ii) increased business development
and expansion activity (i.e. professional fees, travel and other costs of
approximately $6.7 million), and (iii) growth in our U.S. operations, marketing
and corporate staff (approximately $5.7 million). Since our acquisition of
EnerTel, we have substantially reorganized its staffing, resulting in certain
severance payments and hiring expenses.

   Selling, general and administrative expenses in 1998 also include
approximately $4.3 million in one time reserves taken in relation to the
discontinuance of operations of WorldPort Europe and our refocusing of the
operations of EnerTel.

 Depreciation and Amortization

   Depreciation and amortization expense increased to $15.9 million from $0.8
million for the years ended December 31, 1998 and 1997, respectively. The
increase was due to (i) depreciation on the assets acquired in connection with
the EnerTel and IIC acquisitions (approximately $3.7 million), (ii)
amortization of goodwill and other intangible assets associated with the
EnerTel and IIC acquisitions (approximately $2.5 million) and (iii)
depreciation on additional switching and peripheral equipment acquired during
1998 (approximately $2.7 million). In 1998, we also wrote off $4.8 million
related to certain assets that were deemed to be impaired under SFAS 121 as a
result of our shift in business focus during 1998. This write-off principally
related to the write-down of certain switching and network equipment that we
operated prior to the EnerTel acquisition and the write down of certain assets
related to WWC, acquired in 1997, which is no longer part of our strategic
plan.

   Other Income (Expense)

   Interest expense, net increased to $24.6 million from $0.1 million for the
years ended December 31, 1998 and 1997, respectively. The increase in interest
expense is due primarily to the Interim Loan, which accounted for $22.1 million
of interest expense in 1998. Interest expense also included interest for (i)
the debt we assumed in connection with the EnerTel and IIC acquisitions, (ii)
the acquisition of switching equipment subject to capital lease and (iii)
borrowings pursuant to certain short-term promissory notes for working capital
purposes.

   Other expense, net increased to $5.5 million from $6,000 for the years ended
December 31, 1998 and 1997, respectively, primarily as a result of costs
incurred with our unsuccessful financing activities during 1998 as well as
certain proposed investments that did not materialize.

Liquidity and Capital Resources

   As of December 31, 1999, the Company had a working capital deficit of
$(80.1) million. The working capital deficit at December 31, 1999 is due to (i)
the Interim Loan (which was repaid in January 2000), (ii) the acquisition of
additional switching and peripheral equipment and transatlantic capacity, the
majority of which is being financed pursuant to capital leases and vendor
financing, and (iii) the operating losses of the Company.

                                       14
<PAGE>

   Our operations used $25.4 million during the year ended December 31, 1999
due primarily to our net loss (approximately $121.0 million) which included
non-cash charges of approximately $77.8 million, principally depreciation and
amortization ($25.4 million), asset impairments ($11.9 million) and interest
($40.2 million). Further, our net working capital change was $19.6 million,
principally due to an increase in payables and accrued liabilities related to
our expanded operations. Our operations used $140.8 million during the year
ended December 31, 1998 due primarily to our net loss (approximately $76.8
million) which included non-cash charges of approximately $41.1 million,
principally depreciation and amortization ($11.1 million) and interest ($23.1
million). Further, our net working capital change was $104.2 million,
principally due to the inclusion of the majority of our assets as net assets
held for sale as well an increase in payables and accrued liabilities.

   Investing activities used $21.4 million during the year ended December 31,
1999. Investing activities during this period consisted entirely of capital
spending. Investing activities used $2.9 million during the year ended December
31, 1998. Such activities consisted primarily of deposits paid in conjunction
with new business alliances.

   Financing activities provided $43.4 million during the year ended December
31, 1999. Financing activities during this period consisted primarily of
proceeds from the issuance of 920,419 shares of the Series C convertible
preferred stock in January 1999, the exercise of an option to purchase 283,206
shares of the Series C convertible preferred stock in July 1999, the issuance
of 141,603 shares of the Series E convertible preferred stock in July 1999, and
the exercise of employee stock options, reduced by principal payments on
capital leases and notes payable. Financing activities provided $150.0 million
during the year ended December 31, 1998. These activities consisted primarily
of (i) our sale of Series B Preferred Stock in the first half of 1998 in
exchange for approximately $12.3 million in cash and the conversion of $1.2
million in outstanding debt, (ii) our sale of Common Stock for $0.9 million in
March 1998, (iii) our $114.7 million in borrowings under the Interim Loan in
June, 1998 net of $5.3 million of offering expenses, (iv) the sale of a
minority interest in the parent of EnerTel for $2.8 million in equity and $12.0
million in a shareholder note in October 1998, and (v) the December 1998 sale
of Series C Preferred Stock for an aggregate $40 million of which $32.5 million
was received in January 1999. In addition we made certain payments on capital
leases and notes payable of $8.8 million.

   To finance the EnerTel acquisition, the Company entered into a $120 million
Interim Loan facility with a consortium of lenders effective June 23, 1998, the
terms of which also included the issuance of warrants. The Interim Loan, which
originally matured on June 23, 1999 and was extended until November 18, 1999,
includes certain negative and affirmative covenants and is secured by a lien on
substantially all of the assets of the Company and certain of its subsidiaries
and a pledge of the capital stock of certain of the Company's subsidiaries. In
order to secure the extension until November 18, 1999, the Company agreed to
pay the Lenders an amendment fee of $600,000 at the maturity date. The
amendment fee has been recorded as interest expense in the accompanying
financial statements. The Interim Loan bears interest at LIBOR (as defined in
the credit agreement related to the Interim Loan) plus 6% per annum (13.5% at
December 31, 1999) increasing by 0.5% per annum at the end of each period of
three consecutive months after June 23, 1998; provided, that such interest rate
shall not exceed 16% per annum if paid in cash or 18% per annum if capitalized.
As of December 31, 1999, the Interim Loan holders, in aggregate, had received
warrants exercisable for 4,069,904 shares of Common Stock at a price per share
of $0.01. In addition to the warrants which the Interim Loan holders had
received as of September 30, 1999, such holders are entitled to receive
additional warrants on the date the Interim Loan is repaid in full, so that all
warrants issued to such holders represent 11% of the Company's fully-diluted
outstanding Common Stock on the date of such repayment. As of December 31,
1999, the warrants were valued at an aggregate of approximately $31.8 million.
The Company applied a portion of the net proceeds realized from the sale of the
European operations to repay all existing debt, including the Interim Loan,
trade credit and other liabilities.

   In order to meet its obligations under the Interim Loan Facility due
November 18, 1999, the Company sold substantially all of its material assets
during early 2000. On November 11, 1999, the Company entered into a series of
definitive agreements with Energis plc for the sale of its 85% shareholding in
WorldPort

                                       15
<PAGE>

Communications Europe Holdings, B.V., the parent of EnerTel N.V. and associated
assets ("EnerTel") for $522 million. The sale was consummated on January 14,
2000. The Company applied a portion of the net proceeds realized from the sale
to repay existing debt, including the Interim Loan, trade credit and other
liabilities. The Company is now considering a new strategic focus following
this sale utilizing the remaining net proceeds. Funding of potential future
operating losses and execution of the Company's new strategic growth plans will
require substantial continuing capital investment. The Company's strategy has
been to fund these cash requirements through debt facilities and additional
equity financing. Although the Company has been able to arrange debt facilities
or equity financing to date, there can be no assurance that sufficient debt or
equity financing will continue to be available in the future or that it will be
available on terms acceptable to the Company. If such financing is not
obtained, we will have to alter our current business plan and seek alternate
financing.

Year 2000 Issue

   The work undertaken by the Company to ensure all critical computer systems
and other date sensitive devices would function correctly in the Year 2000 was
highly successful. There were no material incidents reported. There were no
reports of significant events regarding third parties that impacted revenues or
expenses.

   The Company's original projected total costs for Year 2000 readiness were
approximately $0.2 million. Final projected costs were also $0.1 million with
no material costs remaining to be spent in 2000. From its inception through
December 31, 1999, the Year 2000 program costs, recognized primarily as
expense, amounted to $0.1 million, of which $0.1 million was recorded in 1999.

Market Risk

   We believe that our exposure to market rate fluctuations on our investments
is nominal due to the short-term nature of those investments.

Recent Accounting Pronouncements

   The FASB has issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments--
including certain derivative instruments embedded in other contracts--and for
hedging activities. Adoption of this statement is not expected to have a
material impact on our financial statements.

   In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued a new Statement of Position, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This statement
requires capitalization of certain costs of internal-use software. We adopted
this statement in January 1999, and it did not have a material impact on our
financial statements.

Cautionary Note Regarding Forward-looking Statements; Risk Factors

   Certain statements in this Report include "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Exchange Act of 1934, as amended. We intend the forward-
looking statements to be covered by the safe harbor provisions for forward-
looking statements provided by such laws. All statements regarding our expected
financial position and operating results, our business strategy and our
financing plans are forward-looking statements. These statements can sometimes
be identified by our use of forward-looking words such as "may," "will,"
"anticipate," "plan," "estimate," "expect" or "intend." These statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.

   Although we believe that our expectations that are expressed in such
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be
materially different from and worse than our expectations. As these statements
are forward-looking, we have no

                                       16
<PAGE>

duty to update them. Investing in our common stock involves a certain degree of
risk. You should carefully consider the risks and uncertainties described below
before you purchase any of our common stock. These risks and uncertainties are
not the only ones we face. Unknown additional risks and uncertainties, or ones
that are currently immaterial, may also impair our business operations. In
addition to the risks and uncertainties of ordinary business operations, our
forward-looking statements contained in this Annual Report on Form 10-K are
also subject to the following risks and uncertainties:

Limited Operating History; History of Operating Losses.

   Since we were inactive prior to 1997, we have a limited operating history,
in which we sustained operating and net losses. In addition, we are considering
materially changing our business plan, which will make it more difficult for
you to evaluate our company and its prospects. Our prospects must be considered
with regard to the risks encountered by a company in the early stages of
development.

   We sustained operating and net losses in 1997, 1998 and 1999. For the
following periods, we reported net losses of:

<TABLE>
<CAPTION>
     Period                                                    Net Loss
     ------                                                    --------
     <S>                                                       <C>
     Year Ended December 31, 1997.............................  $  3.5 million
     Year Ended December 31, 1998.............................  $ 76.8 million
     Year Ended December 31, 1999.............................  $121.0 million
</TABLE>

   At December 31, 1999, we had an accumulated deficit of approximately $248.8
million. There can be no assurance that we will achieve profitability or
positive cash flow in the future. If we cannot achieve and sustain operating
profitability or positive cash flow from operations, we may not be able to meet
any future debt service obligations or working capital requirements, which
could have a significant adverse effect on our business.

Potential Need for Additional Capital.

   We may need substantial capital to develop and expand a new business, fund
operating losses and to provide for working capital. Our ability to raise
additional capital will depend on, among other things, our financial condition
at the time, the restrictions in our existing debt agreements and other
factors, including market conditions, that are beyond our control. There can be
no assurance that we can complete such financing or that the terms thereof
would be favorable to us. Any such inability to obtain additional funds on
acceptable terms may require us to reduce the scope or pace of our expansion,
which would have a material adverse effect on our financial condition.

Our Stock Prices May Have Wide Fluctuations.

   The market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations. Market fluctuations, as well as general
political and economic conditions, such as recession or interest rate or
currency rate fluctuations, could adversely affect the market price of our
common stock.

Regulation under the Investment Company Act

   As a result of the sales of our assets, our only significant asset is cash
and cash equivalents. Although we are subject to regulation under the
Securities Act of 1933, as amended, and the Securities Act of 1934, as amended,
management believes we are not subject to regulation under the Investment Act
of 1940, as amended (the "Investment Company Act") insofar as we are not
engaged in the business of investing or trading in securities. In the event we
engage in business combinations which result in our holding passive investment
interests in a number of entities or in the event we are unable to commence
operations in a new line of business for a substantial period of time, we could
be required to register as an investment company and be subject to registration
under the Investment Company Act. In such an event, we would be required to
register as an investment company, could incur significant registration and
compliance costs and would be subject to extensive regulation.

                                       17
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

   We believe that our exposure to market rate fluctuations on our investments
is nominal due to the short-term nature of those investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   The following financial information is included in this Report:

<TABLE>
<S>                                                                         <C>
Report of Independent Public Accountants..................................   19
Consolidated Balance Sheets--December 31, 1999 and 1998...................   20
Consolidated Statements of Operations for the years ended December 31,
 1999, 1998, and 1997.....................................................   21
Consolidated Statements of Stockholders' Equity for the years ended
 December 31, 1999,
 1998, and 1997...........................................................   22
Consolidated Statements of Comprehensive Loss for the years ended December
 31, 1999,
 1998, and 1997...........................................................   23
Consolidated Statements of Cash Flows for the years ended December 31,
 1999, 1998, and 1997.....................................................   24
Notes to Consolidated Financial Statements ...............................   25
</TABLE>

                                       18
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To WorldPort Communications, Inc.:

   We have audited the accompanying consolidated balance sheets of WorldPort
Communications, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit), comprehensive loss, and cash flows for each of
the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   As more fully discussed in Notes 1 and 2, subsequent to December 31, 1999,
the Company sold substantially all of its operating assets. Accordingly, those
net assets have been presented on the accompanying balance sheets at the lower
of their cost or estimated net realizable value as Net Assets Held for Sale.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of WorldPort
Communications, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

                                          Arthur Andersen LLP

Atlanta, Georgia
March 22, 2000

                                       19
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                    (In Thousands except per share amounts)
<TABLE>
<CAPTION>
                                                               December 31
                                                            -------------------
                                                              1999       1998
                                                            ---------  --------
<S>                                                         <C>        <C>
                          ASSETS
CURRENT ASSETS:
 Cash and cash equivalents................................  $   1,149  $  6,826
 Accounts receivable, net of allowance for doubtful
  accounts of $359 and $0, respectively...................      1,126       --
 Subscription receivable..................................        --     32,500
 Prepaid expenses and other current assets................         34       722
 Net assets held for sale.................................    101,302   111,777
                                                            ---------  --------
 Total current assets.....................................    103,611   151,825
                                                            ---------  --------
PROPERTY AND EQUIPMENT, net...............................        145       676
                                                            ---------  --------
OTHER ASSETS:
 Other assets, net........................................        532     5,963
                                                            ---------  --------
 TOTAL ASSETS.............................................  $ 104,288  $158,464
                                                            =========  ========
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
 Accounts payable.........................................  $  13,168  $  3,909
 Accrued expenses.........................................      1,056     4,662
 Current portion of obligations under capital leases......      2,932     2,203
 Note payable to related party............................     12,981       --
 Other current liabilities................................      6,071       680
 Interim loan facility....................................    147,541   110,926
                                                            ---------  --------
 Total current liabilities................................    183,749   122,380
                                                            ---------  --------
Long-term obligations under capital leases, net of current
 portion..................................................      4,021     4,689
Note payable to related party.............................        --     12,028
                                                            ---------  --------
 Total Liabilities........................................    187,770   139,097
                                                            ---------  --------
MINORITY INTEREST.........................................        --      1,845
                                                            ---------  --------
COMMITMENTS AND CONTINGENCIES (Note 5):
STOCKHOLDERS' EQUITY (DEFICIT)
 Undesignated preferred stock, $0.0001 par value,
  4,800,000 shares Authorized, no shares issued and
  outstanding.............................................        --        --
 Series A convertible preferred stock, $0.0001 par value,
  750,000 shares authorized, 0 and 493,889 shares issued
  and outstanding in 1999 and 1998, respectively..........        --        --
 Series B convertible preferred stock, $0.0001 par value,
  3,000,000 shares authorized, 965,642 and 2,931,613
  shares issued and outstanding in 1999 and 1998,
  respectively............................................        --        --
 Series C convertible preferred stock, $0.0001 par value,
  1,450,000 shares authorized, 1,416,030 and 212,405
  shares issued and outstanding in 1999 and 1998,
  respectively............................................        --        --
 Series D convertible preferred stock, $.0001 par value,
  650,000 shares authorized, 316,921 and 0 shares issued
  and outstanding in 1999 and 1998, respectively..........        --        --
 Series E convertible preferred stock, $.0001 par value,
  145,000 shares authorized, 141,603 and 0 shares issued
  and outstanding in 1999 and 1998, respectively..........        --        --
 Common stock, $0.0001 par value, 65,000,000 shares
  authorized, 28,210,280 and 18,228,916 shares issued and
  outstanding in 1999 and 1998, respectively..............          3         2
 Warrants.................................................     23,398    28,263
 Additional paid-in capital...............................    149,824    77,414
 Unearned compensation expense............................        --       (750)
 Cumulative translation adjustment........................     (7,942)   (6,747)
 Accumulated deficit......................................   (248,765)  (80,660)
                                                            ---------  --------
 Total stockholders' equity (deficit).....................    (83,482)   17,522
                                                            ---------  --------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT).....  $ 104,288  $158,464
                                                            =========  ========
</TABLE>

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

                                       20
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands except per share amounts)

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                  ----------------------------
                                                    1999       1998     1997
                                                  ---------  --------  -------
<S>                                               <C>        <C>       <C>
REVENUES........................................  $  85,967  $ 28,591  $ 2,776
COST OF SERVICES................................     57,438    21,187    2,605
                                                  ---------  --------  -------
  Gross margin..................................     28,529     7,404      171
                                                  ---------  --------  -------
OPERATING EXPENSES:
  Selling, general and administrative expenses..     62,020    39,147    2,723
  Depreciation and amortization.................     25,396    11,069      818
  Asset impairment..............................     11,902     4,842      --
                                                  ---------  --------  -------
  Operating loss................................    (70,789)  (47,654)  (3,370)
                                                  ---------  --------  -------
OTHER (EXPENSE) INCOME:
  Interest expense, net.........................    (52,076)  (24,570)    (128)
  Other (expense) income........................        --     (5,451)       6
                                                  ---------  --------  -------
                                                    (52,076)  (30,021)    (122)
                                                  ---------  --------  -------
LOSS BEFORE MINORITY INTEREST AND INCOME TAXES..   (122,865)  (77,675)  (3,492)
MINORITY INTEREST...............................      1,845       903      --
                                                  ---------  --------  -------
LOSS BEFORE INCOME TAXES........................   (121,020)  (76,772)  (3,492)
INCOME TAX PROVISION............................        --        --       --
                                                  ---------  --------  -------
NET LOSS........................................  $(121,020) $(76,772) $(3,492)
                                                  ---------  --------  -------
NET LOSS PER SHARE, BASIC AND DILUTED...........  $   (6.93) $  (4.47) $ (0.26)
                                                  =========  ========  =======
SHARES USED IN NET LOSS PER SHARE CALCULATION,
 BASIC AND DILUTED..............................     24,244    17,158   13,245
                                                  =========  ========  =======
</TABLE>


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

                                       21
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                (In Thousands)

<TABLE>
<CAPTION>
                                           Additional                       Cumulative    Unearned
                          Preferred Common  Paid-in-  Accumulated           Translation Compensation
                            Stock   Stock   Capital     Deficit   Warrants  Adjustment    Expense     Total
                          --------- ------ ---------- ----------- --------  ----------- ------------ --------
<S>                       <C>       <C>    <C>        <C>         <C>       <C>         <C>          <C>
Balance, December 31,
1996....................    $ --     $ 1    $  2,663   $    (297) $   --      $   --       $ --      $  2,367
Issuance of common
stock, net of offering
costs...................      --      --          10         --       --          --         --            10
Issuance of common stock
in connection with
conversion of promissory
note payable............      --      --         420         --       --          --         --           420
Issuance of common stock
in connection with
acquisitions............      --       1       3,862         --       --          --         --         3,863
Issuance of Series A
Preferred Stock, net of
offering costs..........      --      --         998         --       --          --         --           998
Dividends on Series A
Preferred stock.........      --      --         --          (11)     --          --         --           (11)
Net loss................      --      --         --       (3,492)     --          --         --        (3,492)
                            ----     ---    --------   ---------  -------     -------      -----     --------
Balance, December 31,
1997....................      --       2       7,953      (3,800)     --          --         --         4,155
Issuance of Series B
Preferred Stock.........      --      --      14,702         --       --          --         --        14,702
Issuance of common stock
in connection with
acquisitions............      --      --       8,162         --       --          --         --         8,162
Sale of common stock....      --      --         900         --       --          --         --           900
Exercise of stock
options.................      --      --         188         --       --          --         --           188
Issuance of Series C
Preferred Stock.........      --      --      40,000         --       --          --         --        40,000
Conversion of payables
to equity...............      --      --       2,652         --       --          --         --         2,652
Issuance of warrants....      --      --         --          --    28,263         --         --        28,263
Cumulative Translation
Adjustment..............      --      --         --          --       --       (6,747)       --        (6,747)
Issuance of stock and
stock options under
compensation
agreements..............      --      --       2,857         --       --          --        (750)       2,107
Dividend on Series A
Preferred Stock.........      --      --         --          (88)     --          --         --           (88)
Net loss................      --      --         --      (76,772)     --          --         --       (76,772)
                            ----     ---    --------   ---------  -------     -------      -----     --------
Balance, December 31,
1998....................    $ --     $ 2    $ 77,414   $ (80,660) $28,263     $(6,747)     $(750)    $ 17,522
Conversion of Series A
and B Preferred Stock...      --       1          (1)        --       --          --         --           --
Issuance of Series C
Preferred Stock.........      --      --      10,000         --       --          --         --        10,000
Issuance of Series D
Preferred Stock.........      --      --       1,030         --       --          --         --         1,030
Issuance of Series E
Preferred Stock.........      --      --       5,000         --       --          --         --         5,000
Issuance of warrants....      --      --         --          --     3,602         --         --         3,602
Exercise of warrants....      --      --       8,467         --    (8,467)        --         --           --
Exercise of stock
options.................      --      --       1,945         --       --          --         --         1,945
Settlement of escrowed
shares in conjunction
with acquisitions.......      --      --        (366)        --       --          --         --          (366)
Preferred Stock
beneficial conversion
features................      --      --      47,085     (47,085)     --          --         --           --
Cumulative Translation
Adjustment..............      --      --         --          --       --       (1,195)       --        (1,195)
Amortization of
compensation expense....      --      --        (750)        --       --          --         750          --
Net loss................      --      --         --     (121,020)     --          --         --      (121,020)
                            ----     ---    --------   ---------  -------     -------      -----     --------
Balance, December 31,
1999....................    $ --     $ 3    $149,824   $(248,765) $23,398     $(7,942)     $ --      $(83,482)
                            ====     ===    ========   =========  =======     =======      =====     ========
</TABLE>

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

                                       22
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

                        STATEMENTS OF COMPREHENSIVE LOSS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                     1999       1998     1997
                                                   ---------  --------  -------
<S>                                                <C>        <C>       <C>
Net loss.......................................... $(121,020) $(76,772) $(3,492)
Other comprehensive income:
  Foreign currency translation adjustments........    (1,195)   (6,747)     --
                                                   ---------  --------  -------
Comprehensive loss................................ $(122,215) $(83,519) $(3,492)
                                                   =========  ========  =======
</TABLE>

                                       23
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                          Year Ended
                                                  ----------------------------
                                                    1999       1998     1997
                                                  ---------  --------  -------
<S>                                               <C>        <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss........................................ $(121,020) $(76,772) $(3,492)
 Adjustments to reconcile net loss to net cash
  used by operating activities, net of the
  effects of acquisitions
 Depreciation and amortization...................    25,396    11,069      818
 Asset impairment................................    11,902     4,842      --
 Non cash interest expense.......................    40,165    23,052      --
 Non cash compensation expense...................       385     2,107      --
 Minority interest...............................    (1,845)     (903)
 Other...........................................    (1,428)     (962)     185
 Change in prepaid expenses......................       688      (722)    (624)
 (Increase) Decrease in accounts receivable,
  net............................................    (1,126)      --       --
 Increase in accounts payable, accrued expenses
  and other liabilities..........................    11,044     9,251      209
 (Increase) Decrease in net assets held for
  sale...........................................    10,475  (111,777)      --
                                                  ---------  --------  -------
   Net cash used in operating activities.........   (25,364) (140,815)  (2,904)
                                                  ---------  --------  -------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Cash paid in connection with acquisitions, net
  of cash acquired...............................       --        --    (1,230)
 Deposits paid in conjunction with new business
  alliances......................................       --     (2,854)     --
 Change in note receivable.......................       --        --     1,300
 Capital expenditures............................   (21,428)      (85)    (771)
                                                  ---------  --------  -------
   Net cash used in investing activities.........   (21,428)   (2,939)    (701)
                                                  ---------  --------  -------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from Interim Loan Facility.............       --    114,700      --
 Sale of minority interest.......................       --      2,748      --
 Proceeds from shareholder loan..................     2,000    12,028      --
 Proceeds from short-term borrowings.............       --      4,528      --
 Principal payments on short-term debt...........       --     (4,528)    (262)
 Principal payments on obligations under capital
  leases.........................................    (8,088)   (1,123)     (71)
 Principal payments on notes payable--related
  parties........................................       --       (540)     --
 Proceeds from issuance of notes payable--related
  parties........................................       --        --     1,556
 Exercise of stock options and warrants..........     1,945       188      --
 Proceeds from issuance of preferred stock, net
  of offering expenses...........................    47,500    20,966      998
 Proceeds from issuance of common stock, net of
  offering expenses..............................       --        900       10
                                                  ---------  --------  -------
   Net cash provided by financing activities.....    43,357   149,867    2,231
                                                  ---------  --------  -------
Effect of exchange rate on cash and cash
 equivalents.....................................    (2,242)      534      --
                                                  ---------  --------  -------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS.....................................    (5,677)    6,647   (1,374)
CASH AND CASH EQUIVALENTS, beginning of period...     6,826       179    1,553
                                                  ---------  --------  -------
CASH AND CASH EQUIVALENTS, end of period......... $   1,149  $  6,826  $   179
                                                  =========  ========  =======
CASH PAID DURING THE PERIOD FOR INTEREST......... $   2,636  $    808  $    73
                                                  =========  ========  =======
CASH PAID DURING THE PERIOD FOR TAXES............ $     --   $    --   $   --
                                                  =========  ========  =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
 FINANCING ACTIVITIES:
 Conversion of note payable--related party and
  accrued interest for 230,627 shares of Series B
  Preferred Stock................................ $     --   $  1,236  $   --
                                                  =========  ========  =======
 Stock issued for acquisitions................... $     --   $  8,162  $ 3,863
                                                  =========  ========  =======
 Conversion of note payable for 1,680,000 shares
  of common stock................................ $     --   $    --   $   420
                                                  =========  ========  =======
 Acquisition of property and equipment under
  capital lease.................................. $  39,241  $  8,403  $ 3,559
                                                  =========  ========  =======
 Stock issued under subscription receivable...... $     --   $ 32,500  $   --
                                                  =========  ========  =======
 Non-cash settlement of MBCP fee with the
  Company........................................ $     --   $  2,652  $   --
                                                  =========  ========  =======
 Issuance of warrants in connection with Interim
  Loan........................................... $   3,602  $ 28,263  $   --
                                                  =========  ========  =======
 Conversion of obligation for 316,921 shares of
  Series D Preferred Stock....................... $   1,030  $    --   $   --
                                                  =========  ========  =======
</TABLE>

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

                                       24
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Organization

   WorldPort Communications, Inc. (together with its subsidiaries, the
"Company"), previously known as Sage Resources, Inc., was organized as a
Colorado corporation on January 6, 1989, to evaluate, structure and complete
mergers with, or acquisitions of other entities. In October 1996, the Company
changed its domicile to Delaware and changed to its current name. The Company
is a facilities-based global telecommunications carrier offering voice, data
and other telecommunications services to carriers, internet service providers
("ISPs"), medium and large corporations and distributors and resellers.

   In order to meet its obligations under the Interim Loan Facility due
November 18, 1999, the Company sold substantially all of its operating assets
during early 2000. On November 11, 1999, the Company entered into a series of
definitive agreement with Energis plc for the sale of its 85% shareholding in
WorldPort Communications Europe Holdings, B.V., the parent of EnerTel N.V. and
associated assets ("EnerTel") for $522 million. The sale was consummated on
January 14, 2000. The Company applied a portion of the net proceeds realized
from the sale to repay this existing debt, including the Interim Loan Facility,
trade credit and other liabilities. The Company is now considering a new
strategic focus following this sale utilizing the remaining net proceeds which
are estimated to be approximately $219 million. See Note 2 for a discussion of
acquisition and disposition related activities.

 Financial Condition

   The Company has incurred losses since inception, expects to continue to
incur operating losses in the near future, and has an accumulated deficit of
approximately $248.8 million as of December 31, 1999 as well as a working
capital deficit of approximately $80.1 million.

   As discussed previously, in order to meet its obligations under the Interim
Loan Facility due November 18, 1999, the Company sold substantially all of its
material assets during early 2000 principally through the sale of EnerTel. The
Company applied a portion of the net proceeds realized from the sale to repay
existing debt, including the Interim Loan, trade credit and other liabilities.
The Company is now considering a new strategic focus following this sale
utilizing the remaining net proceeds. Funding of potential future operating
losses and execution of the Company's new strategic growth plans will require
substantial continuing capital investment. The Company's strategy has been to
fund these cash requirements through debt facilities and additional equity
financing. Although the Company has been able to arrange debt facilities or
equity financing to date, there can be no assurance that sufficient debt or
equity financing will continue to be available in the future or that it will be
available on terms acceptable to the Company. If such financing is not
obtained, the Company will have to alter its current business plan and seek
alternate financing.

 Consolidation

   The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

 Use of Estimates

   The Company's financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP"). Financial statements prepared in
accordance with GAAP require the use of management estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent

                                       25
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

assets and liabilities at the date of the financial statements. Additionally,
management estimates affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

 Cash and Cash Equivalents

   For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and all liquid investments with an original maturity of three months or
less when purchased.

 Intangible Assets

   Goodwill represents the excess of the cost of the acquired businesses over
the fair market value of their identifiable net assets. Other intangible assets
primarily represent licenses, customer bases, and customer contracts.
Amortization is provided using the straight-line method over the expected lives
of the assets as follows:

<TABLE>
       <S>                                                           <C>
       Customer base................................................   3-5 years
       Customer contracts...........................................   3-5 years
       Goodwill..................................................... 10-20 years
       Licenses.....................................................    10 years
</TABLE>

   Amortization expense for the years ended December 31, 1999, 1998, and 1997
was $4,847, $3,989, and $397, respectively. See Note 2 for further discussion.

   The Company periodically reviews its long-lived assets to determine if they
have been other than temporarily impaired. See Note 3 for discussion of
writedown of certain long-term assets. Following this writedown, management
believes its long-lived assets are appropriately valued in the accompanying
financial statements.

   As of December 31, 1999 and 1998, all intangible assets are included as net
assets held for sale on the accompanying consolidated balance sheets.

 Property and Equipment

   Property and equipment are carried at cost less writedowns for impairments
where necessary. Expenditures for additions, improvements and renewals, which
add significant value to the asset or extend the life of the asset, are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. The Company provides for depreciation of property and equipment using
the straight-line method based on the estimated useful lives of the assets
ranging from three to twenty years. Property and equipment is primarily
composed of switching and network equipment.

   Depreciation expense charged to operations was $20,549, $7,080, and $421 for
the years ended December 31, 1999, 1998, and 1997, respectively.

 Revenue Recognition

   The Company recognizes revenues as services are provided. Payments received
in advance are recorded as deferred revenues until such related services are
provided.

 Concentration of Credit Risk

   The Company is subject to significant concentrations of credit risk, which
consist primarily of trade accounts receivable. The Company sells a significant
portion of its services to other carriers and resellers and, consequently,
maintains significant receivable balances with certain customers. If the
financial condition and

                                       26
<PAGE>

                WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

operations of these customers deteriorate below critical levels, the Company's
operating results could be adversely affected. For the year ended December 31,
1999 , three customers accounted for 71% of total company revenues. For the
year ended December 31, 1998, one customers accounted for 15% of total company
revenues. For the year ended December 31, 1997, three customers accounted for
approximately 91% of total Company revenues.

 Net Loss Per Share

   For all periods presented, basic and diluted earnings per share are the same
as any dilutive securities had an antidilutive effect on earnings per share.
The following table reconciles net loss to net loss attributable to common
stockholders:
<TABLE>
<CAPTION>
                                                    1999       1998     1997
                                                  ---------  --------  -------
   <S>                                            <C>        <C>       <C>
   Net loss...................................... $(121,020) $(76,772) $(3,492)
   Preferred stock beneficial conversion.........   (47,085)      --       --
                                                  ---------  --------  -------
   Net loss available to common stockholders..... $(168,105) $(76,772) $(3,492)
                                                  =========  ========  =======
   Weighted average shares outstanding...........    24,244    17,158   13,245
                                                  =========  ========  =======
   Loss per share................................ $   (6.93) $  (4.47) $ (0.26)
                                                  =========  ========  =======
</TABLE>

 Accounting for Stock-Based Compensation

   Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," allows the Company to adopt either
of two methods for accounting for stock options. The Company has elected to
account for its stock-based compensation plans under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No.
25"). In accordance with SFAS No. 123, certain pro forma disclosures are
provided in Note 6.

 Foreign Currency

   The assets and liabilities of foreign subsidiaries are translated at year-
end rates of exchange, and income statement items are translated at the average
rates prevailing during the year. The resulting translation adjustment is
recorded as a component of stockholders' equity. Exchange gains and losses on
intercompany balances of a long-term investment nature are also recorded as a
component of stockholders' equity. All other exchange gains and losses are
recorded in income on a current basis.

   The Company does not currently use any derivative instruments to hedge its
foreign currency exposure. Accordingly, the Company is not subject to any
additional foreign currency market risk other than normal fluctuations in
exchange rates.

 Comprehensive Income

   SFAS No. 130 requires the presentation of comprehensive income in an
entity's financial statements. Comprehensive income represents all changes in
equity of an entity during the reporting period, including net income and
charges directly to equity which are excluded from net income (such as
additional minimum pension liability changes, currency translation adjustments,
unrealized gains and losses on available for sale securities, etc.).

 Certain Reclassifications

   Certain reclassifications have been made to amounts previously reported to
conform to current period presentation. Specifically, the 1998 consolidated
balance sheet has been reclassified to reflect net assets held for sale at
December 31, 1999.

                                       27
<PAGE>

(2) ACQUISITIONS AND DISPOSITIONS

 1998 Acquisitions

   In April 1998, the Company acquired the telecommunications assets and
operations of Intercontinental Exchange, Inc. ("ICX"), a licensed provider of
international telecommunications services headquartered in the San Francisco
Bay area, in exchange for 400,000 shares of the Company's common stock.

   In June 1998, the Company acquired EnerTel, which holds a national
infrastructure license and operates a telecommunications network in The
Netherlands for consideration of 186 million Dutch guilders (approximately $92
million) and the repayment of certain EnerTel indebtedness of approximately $17
million. Beginning in 1996, EnerTel deployed a nationwide backbone fiber optic
network utilizing capacity leased from its consortium members in order to
provide domestic and international long distance services to business and
residential customers in The Netherlands. EnerTel operates a network backbone
of approximately 19,000 fiber kilometers. Additionally, EnerTel has
interconnection and service agreements or arrangements with KPN Telecom,
Deutsche Telecom, Belgacom S.A., and Cable & Wireless, Plc, that provide
EnerTel with direct termination services in The Netherlands, Germany, Belgium,
and the United Kingdom, respectively. On September 11, 1998, the Company sold a
portion of the Bel 1600 division of EnerTel, which provided indirect access
services to residential subscribers, for approximately $2.8 million (the net
carrying value of the assets) as part of a strategic repositioning of EnerTel
to serve carriers, ISPs and other high volume customers. On October 21, 1998,
the Company entered into an agreement to sell a 15% interest in WorldPort
Europe, the parent of EnerTel. The transaction closed on November 20, 1998 for
consideration of a cash infusion comprising $2.8 million in equity and a 22.5
million Dutch Guilder shareholder loan. See Note 4 for further discussion on
debt and capital lease obligations. The new minority shareholders in WorldPort
Europe are three major regional Dutch utility and telecommunications services
companies who were former shareholders of EnerTel.

   In August 1998, the Company acquired the assets and operations of
International InterConnect, Inc. ("IIC"), a provider of international long
distance and private line services primarily to Latin America. The purchase
consideration was 916,520 shares of the Company's common stock (of which 38,500
are held in escrow) and $872.

   Each acquisition was accounted for under the purchase method of accounting.
The purchase price was allocated to the underlying assets purchased and
liabilities assumed based on their estimated fair market values at the
respective acquisition dates. In the fourth quarter of 1998, a comprehensive
independent appraisal of the assets acquired from EnerTel was completed.
Certain adjustments were made to the initial purchase price allocation to
reflect the results of this appraisal.

   The following table summarizes the net assets purchased in connection with
the acquisitions and the amount attributable to goodwill (in thousands):

<TABLE>
<CAPTION>
                                                        IIC    EnerTel    ICX
                                                      -------  --------  -----
   <S>                                                <C>      <C>       <C>
   Working capital................................... $   629  $   (541) $(221)
   Property, plant, and equipment....................     243    78,975    169
   Other assets......................................     209       930     28
   Non-current liabilities...........................  (2,785)  (19,221)  (100)
   Customer base.....................................   7,442     2,500    635
   License...........................................     --     19,000    --
   Goodwill..........................................   2,785    35,142    --
</TABLE>

 2000 Dispositions

   On November 11, 1999, the Company entered into a series of definitive
agreements with Energis Plc for the sale of its 85% shareholding in EnerTel for
$552 million. The sale was completed on January 14, 2000. The

                                       28
<PAGE>

Company anticipates recording a net book gain of approximately $279 million in
the first quarter of 2000. Following the repayment of the Interim Loan Facility
($147.8 million), transaction fees ($6.3 million), estimated taxes ($83.2
million), and other related costs ($7.8 million), the Company anticipates
having cash available of approximately $219 million to meet other obligations
and fund future plans.

   Additionally, as discussed in Note 3, the Company sold IIC on February 29,
2000 for $0.3 million and is currently negotiating to sell Telenational
Communications Inc. ("TNC").

 Pro Forma

   The unaudited pro forma consolidated results of operations of the Company,
as though the 2000 Dispositions had taken place on January 1, 1998, are as
follows:

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
   <S>                                                      <C>       <C>
   Revenues................................................ $  7,155  $    --
                                                            ========  ========
   Net loss................................................ $(35,204) $(23,932)
                                                            ========  ========
   Net loss per share, basic and diluted................... $  (3.39) $  (1.39)
                                                            ========  ========
</TABLE>

   Additionally, the unaudited pro forma balance sheet of the Company,
subsequent to the disposition is as follows:

<TABLE>
<CAPTION>
                                                               December 31, 1999
                                                               -----------------
     <S>                                                       <C>
     Current assets...........................................     $222,106
     Other assets.............................................          677
     Total assets.............................................      222,783
     Current liabilities......................................       23,359
     Long-term liabilities....................................        4,021
     Stockholders' equity.....................................      195,403
</TABLE>


   The pro forma financial information does not purport to represent what the
consolidated results of operations would have been if the dispositions had in
fact occurred on these dates, nor does it purport to indicate the Company's
future consolidated financial position or future consolidated results of
operations. The pro forma adjustments are based on currently available
information and certain assumptions that the Company's management believes are
reasonable.

                                       29
<PAGE>

(3) ASSET IMPAIRMENT

   In August 1999, the Company announced that it was closing its U.S. carrier
operations and initiated the process of disposing of certain assets and
subsidiaries, including TNC and IIC. On February 29, 2000, the Company sold IIC
for $0.3 million. The Company is currently negotiating the sale of TNC, but to
date does not have a definitive sale arrangement. The Company has taken an
asset impairment charge of approximately $4.8 million, $6.1 million and $1.0
million in connection with the pending sale of TNC, IIC and other U.S. based
assets, respectively, to write the net investments down to their anticipated
net realizable value. Additionally, the balance sheet accounts of EnerTel, TNC
and IIC have been collapsed in the accompanying financial statements, and are
reflected as Net assets held for sale. The following table summarizes the net
assets prior to collapsing the balance sheet accounts and the net realizable
asset write-down (in thousands) as well as certain statement of operations data
as of and for the periods ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>
1999                              TNC      IIC     Other    EnerTel    Total
----                            -------  -------  --------  --------  --------
<S>                             <C>      <C>      <C>       <C>       <C>
Working capital...............  $  (252) $   135  $      0  $(19,922) $(20,039)
Property, plant and equipment,
 net..........................    1,120      810     3,973   109,240   115,143
Intangibles...................    4,870    8,150         0    45,545    58,565
Other long-term assets
 (liabilities)................      452   (2,703)        0   (38,214)  (40,465)
Impairment loss...............   (4,840)  (6,062)   (1,000)        0   (11,902)
                                -------  -------  --------  --------  --------
Net assets held for sale......  $ 1,350  $   330  $  2,973  $ 96,649  $101,302
                                =======  =======  ========  ========  ========
Revenues......................  $ 6,111  $ 6,885  $    --   $ 65,816  $ 78,812
Operating loss................   (5,661)  (7,563)      --    (23,202)  (36,426)
Net loss......................   (6,282)  (7,575)      --    (26,263)  (40,120)
<CAPTION>
1998                              TNC      IIC    EnerTel    Total
----                            -------  -------  --------  --------
<S>                             <C>      <C>      <C>       <C>       <C>
Working capital...............  $  (659) $(1,072) $(19,782) $(21,513)
Property, plant and equipment,
 net..........................    4,992      399    85,159    90,550
Other long-term assets
 (liabilities)................      401   (2,596)  (20,106)  (22,301)
Intangible assets.............    5,592    9,554    49,895    65,041
                                -------  -------  --------  --------
Net assets held for sale......  $10,326  $ 6,285  $ 95,166  $111,777
                                =======  =======  ========  ========
Revenues......................  $ 7,982  $ 3,250  $ 17,359  $ 28,591
Operating loss................   (7,984)    (841)  (20,486)  (29,311)
Net loss......................   (8,573)    (830)  (23,370)  (32,773)
</TABLE>

   In 1998, following its acquisition of EnerTel, the Company shifted its focus
to becoming a facilities-based global telecommunications carrier with an
emphasis on European operations. In connection with this shift in strategy and
the resulting changes in asset deployment, management conducted a comprehensive
evaluation of its existing assets to determine whether they were impaired under
the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." ("SFAS No. 121"). As a
result of this evaluation, management determined that assets acquired in 1997
from WWC were impaired as defined by SFAS No. 121. A charge of approximately
$898 was recorded to reduce these assets (principally goodwill) to their net
realizable value. In addition, the Company determined that certain switching
and other network equipment it previously operated would no longer be utilized
following the EnerTel acquisition. A charge of approximately $3,944 was
recorded to write this equipment down to its net realizable value.

                                       30
<PAGE>

(4) DEBT AND CAPITAL LEASE OBLIGATIONS

   The Company's current and long-term debt as of December 31, 1999 and 1998
consists of the following:

<TABLE>
<CAPTION>
                                                             1999       1998
                                                           ---------  ---------
   <S>                                                     <C>        <C>
   Interim Loan Facility, due November 18, 1999, secured,
    variable interest rate, net of unamortized discounts
    of $0 and $17,075, respectively......................  $ 147,541  $ 110,926
   Related party loan, due February 28, 2000, unsecured,
    14% interest rate....................................      2,000        --
   EnerTel Minority Shareholder loan, due ten years after
    the repayment of the Interim Loan, variable interest
    rate.................................................     10,981     12,028
                                                           ---------  ---------
     Total...............................................    160,522    122,954
   Less current portion..................................   (160,522)  (110,926)
                                                           ---------  ---------
   Long-term, net of current portion.....................  $     --   $  12,028
                                                           =========  =========
</TABLE>

   To finance the EnerTel acquisition, the Company entered into a $120 million
Interim Loan facility with a consortium of lenders effective June 23, 1998,
the terms of which also included the issuance of warrants. The Interim Loan
Facility, which originally matured on June 23, 1999 and was extended until
November 18, 1999, includes certain negative and affirmative covenants and is
secured by a lien on substantially all of the assets of the Company and
certain of its subsidiaries and a pledge of the capital stock of certain of
the Company's subsidiaries. In order to secure the extension until November
18, 1999, the Company has agreed to pay the Lenders an amendment fee of
$600,000 at the maturity date. The amendment fee has been recorded as interest
expense in the accompanying financial statements. The Interim Loan Facility
bears interest at LIBOR (as defined in the credit agreement related to the
Interim Loan Facility) plus 6% per annum increasing by 0.5% per annum at the
end of each period of three consecutive months after June 23, 1998 (14.06% at
December 31, 1999); provided, that such interest rate shall not exceed 16% per
annum if paid in cash or 18% per annum if capitalized. As of December 31,
1999, the Interim Loan Facility holders, in aggregate, have received warrants
exercisable for 4,069,904 shares of Common Stock at a price per share of
$0.01. In addition to the warrants which the Interim Loan Facility holders had
received as of December 31, 1999, such holders are entitled to receive
additional warrants on the date the Interim Loan Facility is repaid in full,
so that all warrants issued to such holders represent 11% of the Company's
fully-diluted outstanding Common Stock on the date of such repayment. As of
December 31, 1999, the warrants issued and to be issued in connection with the
Interim Loan Facility were valued at an aggregate of approximately $31.8
million. The Company repaid the Interim Loan Facility including interest
($147.8 million) with proceeds from the sale of its European operations in
January 2000. See Notes 1 and 2 where discussed.

   On October 20, 1998, the Company entered into a loan agreement with the
purchasers of a minority interest in EnerTel in the principal amount of
approximately 22.5 million Dutch Guilders (the "Minority Shareholder Loan").
The Minority Shareholder Loan bears interest at the LIBOR rate plus 6.5% per
annum, increasing by 0.5% per annum every three months until the Interim Loan
Facility is repaid (as of December 31, 1999, the Minority Shareholder Loan
bore interest at 14.06% per annum). The Minority Shareholder Loan is secured
by a pledge of 15% of the shares of EnerTel N.V., which pledge shall be
released upon the repayment of the Interim Loan Facility. The Minority
Shareholder Loan matures 10 years after the repayment of the Interim Loan
Facility. In December 1999, a related party purchased the Minority Shareholder
Loan. In conjunction with the sale of the European operations in January 2000,
Energis repaid the Minority Shareholder Loan in full including interest.

   In December 1999, the Company entered into a loan agreement with a related
party in the principal amount of $2 million bearing interest at 14%. The note
was unsecured and matured on January 14, 2000. The note is convertible at the
option of the holder into shares of Preferred Stock at $2.00 per share. During
February 2000, the note holder exercised the option to convert the note into
1,000,000 shares of newly-created preferred stock. The Company is currently
negotiating the terms of the new preferred stock which is anticipated to
convert into Common Stock on a 1:1 basis. The note holders were also granted
warrants to purchase 25,000 shares common stock at a strike price of $0.01.
The company has recorded additional interest expense of $0.1 million related
to the fair market value of these warrants in the December 31, 1999 statement
of operations.

                                      31
<PAGE>

   The carrying value of the aforementioned debt approximates market value.

 Additional Financing

   In conjunction with unsuccessful financing activities and acquisitions, the
Company incurred $4,373 in costs in 1998, which have been recorded as a charge
against income in Other Expenses in the accompanying statement of operations.

(5) COMMITMENTS AND CONTINGENCIES

   The commitments reflected here are subsequent to the sale of the EnerTel,
IIC, and other operating equipment as substantially all of the Company's
material obligations were transferred to the related purchaser.

   In February 1999, the Company entered into an agreement with a
telecommunications carrier to sell to carrier transmission capacity throughout
various points of presence in Europe for approximately $8 million, payable upon
acceptance of the circuits by the carrier. The contract provides the purchaser
with an indefeasible right of use of this capacity for a period of 20 years.
The Company has entered into a separate agreement with a European
telecommunications company which gives the Company the right to purchase
capacity through these points of presence. This contract provides for
indefeasible rights of use for a period of 10 years. The Company is pursuing
means to satisfy the capacity commitment to the Company's customer for the
remaining 10 years of that contract. During the second quarter of 1999, the
Company recorded revenue under the contract of $2.1 million and costs,
including an estimate of future costs for years 11-20 based on an independent
third party's estimate, of $2.5 million. This represents management's best
estimate of the present value of such future costs to provide these services.
Management will monitor this estimate and adjust it as necessary when, and if,
additional information is available. The initial transaction under the contract
was negotiated in anticipation of future profitable revenues from the customer.
The Company is currently negotiating with both parties to restructure a portion
of this contract. The effects of this restructuring are not expected to have a
material impact on the financial statements.

 Leases

   The Company and its subsidiaries lease office and network facilities under
various noncancelable operating and capital lease agreements. Future minimum
commitments under the leases as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
   Year Ending December 31                                  Operating Capital
   -----------------------                                  --------- -------
   <S>                                                      <C>       <C>
   2000....................................................  $  552   $ 3,284
   2001....................................................     457     2,873
   2002....................................................     364     1,908
   2003....................................................     208       468
                                                             ------   -------
   Minimum future lease payments...........................  $1,581     8,533
                                                             ======
   Less portion related to interest........................            (1,580)
                                                                      -------
   Present value of future minimum lease obligations.......             6,953
   Less current portion of obligations under capital
    leases.................................................            (2,932)
                                                                      -------
   Non-current portion of obligations under capital
    leases.................................................           $ 4,021
                                                                      =======
</TABLE>

     Total rental expense for operating leases for the years ended December
  31, 1999, 1998, and 1997 was $2,319, $1,272, and $90, respectively.

                                       32
<PAGE>

 Legal

   On April 17, 1998, we were served with a summons and complaint from MC
Liquidating Corporation f/k/a MIDCOM Communications, Inc. ("MIDCOM"). Both the
Company and TNC, our wholly-owned subsidiary are named as defendants, as are
Telenational Communications, Limited Partnership, the former owner of the TNC
assets ("TCLP"), and Edmund Blankenau, a principal of TCLP and one of our
former directors. In its complaint, filed on April 8, 1998 in the U.S.
Bankruptcy Court for the Eastern District of Michigan, Southern Division,
MIDCOM seeks payment of over $600,000 for services allegedly provided to TCLP
and the Company, together with other damages, attorney fees and costs. The
Company believe the claims are without merit and intends to vigorously defend
against them.

   The Company is a defendant in litigation filed in the Sub-District and
District courts of The Hague, located in Rotterdam, Netherlands. The cases,
filed in January and February, 1999, by Mr. Bahman Zolfagharpour, allege that
we breached agreements with Mr. Zolfagharpour in connection with our purchase
of MathComp B.V. from Mr. Zolfagharpour, our subsequent purchase of EnerTel,
and Mr. Zolfagharpour's employment agreement with WorldPort Communications
Europe, B.V., a former European subsidiary. The litigation seeks dissolution of
the employment agreement and the non-competition clause of the agreement,
damages in an amount exceeding $20 million, and the award of 2,500,000 shares
of our common stock to Mr. Zolfagharpour. The Company intends to defend the
case vigorously.

   Since July 14, 1999, the Company and certain of its former officers have
been named as defendants in multiple shareholder class action lawsuits filed in
the United States District Court for the Northern District of Georgia. The
plaintiffs in these lawsuits seek to represent a class of individuals who
purchased or otherwise acquired Common Stock from as early as December 31, 1998
through June 25, 1999. Among other things, the plaintiffs allege that the
defendants spoke positively about the Heico financing without disclosing the
risk that non-compliance with certain Nasdaq rules in connection with the
financing might cause the Company to be delisted from Nasdaq. The plaintiffs
further allege the subsequent disclosure that the Company might be delisted
from Nasdaq adversely affected the value of Common Stock. The plaintiffs allege
violations of Sections 10(b) and 20(a) of the Exchange Act. The Company intends
to defend these lawsuits vigorously, but due to inherent uncertainties of the
litigation process and the judicial system, the Company is unable to predict
the outcome of this litigation.

   On November 9, 1999, certain former employees of the Company filed an
involuntary bankruptcy petition against the Company in the U.S. Bankruptcy
Court for the Northern District of Georgia, Atlanta Division. The petitions
alleged specific claims totaling $99,000 against the Company in their petition.
Following settlement negotiations between the parties, on November 18, 1999,
the Court entered an order dismissing the petitioner's claims. The order
contained a specific finding by the Court that consummation of the sale of
EnerTel was in the best interests of the Company, its creditors and
stockholders.

   In addition to the aforementioned claims, the Company is involved in various
other lawsuits or claims arising in the normal course of business. In the
opinion of management, none of these lawsuits or claims will have a material
adverse effect on the consolidated financial position or results of operations
of the Company.

(6) STOCKHOLDERS' EQUITY

   The Company is authorized to issue 65,000,000 shares of Common Stock, $.0001
par value per share and 10,000,000 shares of Preferred Stock, $.0001 par value
per share.

 Common Stock

   In March 1996, the Company completed a private placement offering of
3,333,333 shares of common stock for net proceeds of $2,388. In April 1998, the
Company sold 180,000 shares for net proceeds of $900.

                                       33
<PAGE>

 Series A Preferred Stock

   The Company has designated 750,000 shares of its preferred stock to be
Series A Preferred Stock ("Series A") with a par value of $0.0001 and a stated
value of $2.25. The Series A is cumulative and bears dividends at the rate of
8% per annum, payable in cash or shares of the Company's common stock at the
option of the Company. The Series A is convertible at any time, at the option
of the holder. At December 31, 1998, 493,889 shares of Series A were
outstanding. In 1999, all holders of Series A Preferred Stock converted their
shares into shares of the Company's Common Stock in accordance with the terms
of the Series A Preferred Stock agreement.

 Series B Preferred Stock Offering

   The Company has designated 3,000,000 shares of its preferred stock to be
Series B Preferred Stock ("Series B") with a par value of $0.0001 and a stated
value of $5.36. The Series B is non-cumulative and bears dividends at the rate
of 7% per annum, payable in cash or shares of the Company's common stock at the
option of the Company. The Series B is convertible at any time, at the option
of the holder, and will be mandatorily converted upon the occurrence of certain
events, at a rate of 4 shares of common stock for each share of preferred
stock. Holders of Series B have voting rights equal to 40 votes per share on
all matters submitted to a vote of the stockholders of the Company.

   In 1999, various holders of Series B Preferred Stock converted their shares
into 7,863,884 shares of the Company's Common Stock in accordance with the
terms of the Series B Preferred Stock agreement.

 Series C Preferred Stock

   The Company has designated 1,450,000 shares of its preferred stock to be
Series C Preferred Stock ("Series C") with a par value of $0.0001 per share and
a stated value of $35.31 per share. The Series C is non-cumulative and bears
dividends at the rate of 7% per annum, payable in cash or shares of the
Company's common stock at the option of the Company. The Series C is
convertible at any time, at the option of the holder, and will be mandatorily
converted upon the occurrence of certain events, into 10.865 shares of the
Company's common stock for each share of Series C stock. Holders of Series C
have voting rights equal to 40 votes per share on all matters submitted to a
vote of the stockholders of the Company. At December 31, 1999, 1,416,030 shares
of Series C were outstanding.

   As a holder of the Series C Stock, the investor is entitled to vote on all
matters submitted to a vote of the stockholders of the Company, voting together
with the holders of Common Stock as a single class. In addition to the votes
that the investor obtained through its stock purchase, the investor has also
obtained certain additional rights. Those rights include, with respect to the
Common Stock issued upon conversion or exercise of the Series C Stock, certain
demand and piggyback registration rights.

                                       34
<PAGE>

   Pursuant to the Purchase Agreement, the Company increased the size of its
Board of Directors to eight members and appointed four individuals designated
by the investor to serve as directors. The Company has also agreed to cause the
investor's designees to comprise at least one-half of the boards of directors
of each of its subsidiaries. In addition, the Company amended its Bylaws to
provide that at least one of the investor's designees and, except in certain
limited situations, one of the directors who was not designated by the investor
must approve any action put before the Board of Directors in order for such to
be properly approved by the Board of Directors.

   Additionally, in connection with the investor's purchase of Series C Stock,
on December 31, 1998, the investor, the Company, and its Chairman and Chief
Executive Officer, its Chief Financial Officer, the remaining Maroon Bells
Capital Partners, Inc. ("MBCP") stockholder, and MBCP (collectively, the
"Stockholders") also entered into a Shareholder Agreement. Pursuant to the
Shareholder Agreement, the Stockholders (i) agreed not to vote certain of their
shares of capital stock of the Company in favor of certain financing proposals
or other items without the investor's consent and (ii) granted to the investor
a proxy with respect to such capital stock for the investor's use in limited
matters. Pursuant to the Shareholder Agreement, the investor and the
Stockholders have also agreed to certain restrictions on the transfer of
certain of their shares of the Company's capital stock.

 Series D Preferred Stock

   The Company has designated 650,000 shares of its preferred stock to be
Series D Preferred Stock ("Series D") with a par value of $0.0001 per share and
a stated value of $3.25 per share. The Series D is non-cumulative. The Series D
is convertible at any time, at the option of the holder, and will be
mandatorily converted upon the occurrence of certain events, at a rate of one
share of common stock for each share of preferred stock. At December 31, 1999,
316,291 shares of Series D were outstanding.

 Series E Preferred Stock

   The Company has designated 145,000 shares of its preferred stock to be
Series E Preferred Stock ("Series E") with a par value of $0.0001 per share and
a stated value of $35.31 per share. On July 15, 1999, Heico purchased 141,603
shares of Series E convertible preferred stock for an aggregate purchase price
of $5.0 million. In connection with this investment, the Company granted Heico
a three-year option to purchase 424,809 shares of Series F convertible
preferred stock for an aggregate purchase price of $15.0 million. The Series F
would have terms and rights similar to the Series E.

   At Heico's option, it may convert these shares of preferred stock into
Common Stock at a conversion price of $3.25 per share of Common Stock. If the
Series F option is exercised, these shares of preferred stock may be converted
into Common Stock at a conversion price of $4.00 per share of Common Stock.

   Certain of the Company's preferred stock issuances have conversion
privileges which constitute beneficial conversion features under the provisions
of Emerging Issues Task Force No. 98-5, "Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios" ("EITF 98-5"). To reflect the value of such conversion features under
EITF 98-5, the Company recorded a $47.1 million charge to accumulated deficit
and an equal and offsetting credit to additional paid in capital in 1999. This
charge is also included as an increase in net loss attributable to common
shareholders in the 1999 net loss per share calculation (see Note 1).

 Long-term Incentive Plan

   The Company adopted an incentive stock option plan for employees and
consultants in September 1996. The Company has reserved 7,500,000 shares of
common stock for issuance pursuant to the plan. Options vest

                                       35
<PAGE>

over a period ranging from one to three years. Options granted to consultants
are valued using the Black-Scholes model and are recorded as compensation
expense over the period of service to which they relate. Such amounts were not
material for any of the periods presented.

 Stock Options

   A summary of the status of the Company's stock option plan at December 31,
1999 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                        Weighted
                                                                        Average
                                                                Shares   Price
                                                                ------  --------
   <S>                                                          <C>     <C>
   Outstanding at December 31, 1996............................     75   $0.08
   Granted.....................................................  1,100    1.74
   Forfeited...................................................   (250)   1.25
                                                                ------
   Outstanding at December 31, 1997............................    925    1.27
   Granted.....................................................  5,216    7.53
   Exercised...................................................    (92)   2.06
   Forfeited...................................................   (298)   1.81
                                                                ------
   Outstanding at December 31, 1998............................  5,751    6.91
                                                                ------
   Granted.....................................................  1,829    7.76
   Exercised................................................... (2,310)   7.51
   Forfeited...................................................   (914)   2.17
                                                                ------
   Outstanding at December 31, 1999............................  4,356    7.95
                                                                ------
</TABLE>

   The remaining weighted average contractual life of the options outstanding
at December 31, 1999 is 8.7 years and the weighted average price of the 3,244
exercisable options at December 31, 1999 is $8.05.

   The following table sets forth the exercise price range, number of shares,
weighted average exercise price, and remaining contractual lives of options
issued by year:

<TABLE>
<CAPTION>
                                    Weighted
                                     Average
                                    Remaining                       Weighted
           Range of    Outstanding Contractual Weighted Exercisable Average
 Year      Exercise        as         Life     Exercise    As of    Exercise
Granted     prices     of 12/31/99 (in years)   Price    12/31/99    Price
-------  ------------- ----------- ----------- -------- ----------- --------
<S>      <C>           <C>         <C>         <C>      <C>         <C>
1997     $0.75--$ 2.00      345        7.5      $0.96        338     $0.93
1998     $1.75--$14.19    2,947        8.5      $8.94      2,764     $8.94
1999     $3.56--$ 9.08    1,064        9.5      $7.47        142     $7.83
</TABLE>

   Had compensation cost for stock options been determined under SFAS No. 123,
the Company's net loss and net loss per share would have been the following pro
forma amounts:

<TABLE>
<CAPTION>
                                                    Year ended December 31,
                                                   ----------------------------
                                                     1999       1998     1997
                                                   ---------  --------  -------
   <S>                                             <C>        <C>       <C>
   Net loss
     As reported.................................. $(121,020) $(76,772) $(3,492)
     Pro forma....................................  (123,585)  (90,072)  (3,731)
   Net loss per share
     As reported.................................. $   (6.93) $  (4.47) $ (0.26)
     Pro forma....................................     (7.04)    (5.25)   (0.28)
</TABLE>

                                       36
<PAGE>

   Under SFAS No. 123, the fair value of each option grant was estimated on the
date of grant using the Black-Scholes option pricing model. The following
weighted average assumptions were used for grants:

<TABLE>
<CAPTION>
                                                     Year ended December 31,
                                                    ---------------------------
                                                     1999      1998      1997
                                                    -------  --------  --------
   <S>                                              <C>      <C>       <C>
   Risk free rate..................................     5.4%      5.3%      6.8%
   Expected dividend...............................       0%        0%        0%
   Expected lives.................................. 5 years  10 years  10 years
   Volatility......................................    80.1%     77.4%     58.1%
</TABLE>

   The Black-Scholes option pricing model and other existing models were
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation
models require the input of and are highly sensitive to subjective assumptions
including the expected stock price volatility. The Company's employee stock
options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate.

 Employee Benefit Plan

   The Company's subsidiary, EnerTel, is required by Dutch law to contribute a
certain percentage of its employees' salary, based on the employees' ages, to a
fund managed by a third-party for retirement purposes. The Company has no
obligation other than to make the contributions as defined by the law. The
Company recorded compensation expense of approximately $680 and $500 related to
contributions made during 1999 and from acquisition through December 31, 1998.

(7) RELATED PARTY TRANSACTIONS

 Advisory Agreements

   On March 7, 1997, the Company and MBCP entered into a twelve month advisory
agreement for services to be rendered in conjunction with potential
acquisitions and financings. On February 4, 1998, the Company amended the
Advisory Agreement with MBCP to ensure the continuity of services during its
expansion phase by renewing the Advisory Agreement for an additional twenty-
four months with an expiration of March 7, 2000. Under terms of the amendment,
the Company agreed to grant MBCP five-year options to purchase 250,000 shares
of the Company's common stock at an exercise price of $2.00 per share. At the
time of grant, the options were valued in accordance with SFAS No. 123 and the
related amount, $1,045 is recorded as a component of selling, general and
administrative expense in the accompanying statement of operations. All other
transactions with MBCP were not material.

   The Advisory Agreement was terminated on December 31, 1998 pursuant to a
termination agreement between the Company and MBCP. Under the termination
agreement, the Company paid to MBCP $200, agreed to issue to MBCP shares of a
new series of its preferred Stock with an aggregate liquidation value of
$1.0 million and assigned to MBCP promissory notes receivable from certain
officers of MBCP, which notes had an aggregate amount outstanding of $1.6
million (including accrued interest). Such payments reflected payment in full
for all services rendered, expenses incurred and retainer payments owing to
MBCP in 1998. The accompanying balance sheets reflect the impact of this
settlement.

 Series B Convertible Preferred Stock Purchase

   In March 1998, Anderlit, Ltd., a privately-owned investment fund
("Anderlit"), purchased 746,269 shares of the Company's Series B Convertible
Preferred Stock for an aggregate purchase price of $4,000. Anderlit is an
investment fund investing in a portfolio of emerging telecommunications
companies. The Company's Chief Executive Officer and Chief Financial Officer
are investors in Anderlit and the Company's Chief Executive Officer has
received from Anderlit an irrevocable proxy to vote all of the Company's Series
B Preferred Stock owned by Anderlit.

                                       37
<PAGE>

 Affiliated Sales

   As discussed in Note 2, the Company divested itself of its Bel 1600 unit.
The Company holds a minority interest (20%) in the company to which these
assets were transferred. During 1999 and 1998, the Company had sales of
approximately $8.0 million and $4.3 million to this new entity.

 Other Related Party Transactions

   A director of the Company, is a partner at a law firm that provided the
principal on-going legal services to the Company prior to the second quarter of
1999.

 Related Party Debt

   As discussed in Note 4, Heico, holder of Series C and E Preferred Stock,
loaned the Company $2 million in the form of a convertible note in December
1999. Additionally, they purchased the Minority Shareholder Loan in December
1999.

(8) TAXES

   Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities as of December
31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
   <S>                                                      <C>       <C>
   Deferred tax assets and (liabilities):
     Net operating loss carryforwards...................... $ 73,586  $ 27,473
     Property related......................................   16,900    18,432
     Interim Loan Warrants.................................       --    (5,083)
     Asset Impairment......................................   (4,523)   (8,349)
     Accrued liabilities...................................    1,473       295
     Other.................................................    1,220       367
                                                            --------  --------
       Total deferred tax assets, net......................   88,656    33,135
   Less: Valuation allowance...............................  (98,967)  (43,446)
                                                            --------  --------
       Net deferred tax liability.......................... $(10,310) $(10,310)
                                                            ========  ========
</TABLE>

   The net deferred tax liability is reflected in net assets held for sale as
the liability relates to EnerTel and IIC.

   The Company has incurred losses since inception. As the Company is unable to
conclude that it is more likely than not that it will be able to realize the
benefit of its deferred tax assets, it has provided a full valuation allowance
against the net amount of such assets. The deferred tax liability at December
31, 1999 and 1998 represents net deferred tax liabilities in those
jurisdictions in which net operating loss carryforwards and other deferred tax
assets are insufficient to fully offset deferred tax liabilities.

   At December 31, 1999, the Company had net operating loss carryforwards of
approximately $151 million for U.S. income tax purposes and approximately $91
million for foreign tax purposes. The U.S. carryforwards primarily expire
beginning in 2018. The foreign carryforwards do not expire.

   Section 382 of the Internal Revenue Code limits the utilization of net
operating loss carryforwards when there are changes in ownership greater than
50%, as defined. The Company has not yet made a determination

                                       38
<PAGE>

of whether a change in control under Section 382 has occurred. If such a change
has occurred, the timing of the Company's utilization of its U.S. NOL
carryforwards could be impacted.

   A reconciliation from the federal statutory rate to the Company's effective
tax rate is as follows:

<TABLE>
<CAPTION>
                                                           1999   1998   1997
                                                           ----   ----   ----
   <S>                                                     <C>    <C>    <C>
   Federal statutory rate................................. (34)%  (34)%  (34)%
   Amortization of Goodwill...............................   2      2      0
   State taxes............................................  (4)    (4)    (4)
   Other..................................................  (1)   --     --
   Valuation Allowance....................................  37     36     38
                                                           ---    ---    ---
     Total................................................   0 %    0 %    0 %
                                                           ===    ===    ===
</TABLE>

(9) SEGMENT REPORTING

   SFAS No. 131 requires the reporting of profit and loss, specific revenue and
expense items and assets for reportable segments. It also requires the
reconciliation of total segment revenues, total segment profit or loss, total
segment assets, and other amounts disclosed for segments to the corresponding
amounts in the general purpose financial statements.

   The Company views itself as participating in one business segment--a
facilities-based global telecommunications carrier. Its operations can be
viewed as European and North American. Intersegment revenues are not material.
Financial data by geographic area for 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
   1999                                      European  North American   Total
   ----                                      --------  -------------- ---------
   <S>                                       <C>       <C>            <C>
   Revenues................................. $ 65,816     $ 20,151    $  85,967
   Depreciation and amortization............   17,877        7,519       25,396
   Operating loss...........................  (22,202)     (48,588)     (70,790)
   Interest expense, net....................  (49,107)      (2,969)     (52,076)
   Net loss.................................  (69,463)     (51,557)    (121,020)
   Total assets.............................   96,649        7,639      104,288
   Net assets held for sale.................   96,649        4,653      101,302
<CAPTION>
   1998                                      European  North American   Total
   ----                                      --------  -------------- ---------
   <S>                                       <C>       <C>            <C>
   Revenues................................. $ 18,307     $ 10,284    $  28,591
   Depreciation and amortization............    8,311        7,599       15,911
   Operating loss...........................  (20,675)     (26,979)     (47,654)
   Interest expense, net....................  (23,928)        (642)     (24,570)
   Net loss.................................  (43,699)     (33,073)     (76,772)
   Total assets.............................   95,166       63,298      158,464
   Net assets held for sale.................   95,166       16,611      111,777
</TABLE>

            Prior to 1998, all operations were North American based.

                                       39
<PAGE>

(10) QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                 3 Months Ended
                                  ----------------------------------------------
                                   March
1999                                31,     June 30,  September 30, December 31,
----                              --------  --------  ------------- ------------
<S>                               <C>       <C>       <C>           <C>
Revenues......................... $ 18,275  $ 24,521    $ 22,467      $ 20,704
Operating loss................... $(11,714) $(12,880)   $(26,431)     $(19,765)
Net loss......................... $(27,001) $(31,323)   $(36,327)     $(26,370)
Loss per share................... $  (3.54) $  (1.32)   $  (1.81)     $  (1.10)
<CAPTION>
1998
----
<S>                               <C>       <C>       <C>           <C>
Revenues......................... $    948  $  1,716    $ 11,746      $ 14,181
Operating loss................... $ (2,829) $ (4,764)   $(15,105)     $(24,956)
Net loss......................... $ (3,005) $ (5,429)   $(24,465)     $(43,873)
Loss per share................... $  (0.17) $  (0.32)   $  (1.38)     $  (2.44)
</TABLE>

   The loss per share amounts for the three months ended March 31, 1999 and
September 30, 1999 have been adjusted from the previously reported amounts on
Form 10-Q to reflect the beneficial conversion charges related to certain of
the Company's 1999 preferred stock issuances. See Note 6. These non-cash
charges were $40.0 million, or $2.11 per share, and $7.1 million, or $0.30 per
share for the first and third quarters of 1999, respectively.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

   None.

                                       40
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors.

   The information concerning directors of the Company required under this Item
is incorporated herein by reference to the Company's definitive proxy statement
pursuant to Regulation 14A, to be filed with the Commission not later than 120
days after the close of the Company's fiscal year ended December 31, 1999.

Executive Officers.

   The information concerning executive officers of the Company required under
this Item is provided under Item 4A.

ITEM 11. EXECUTIVE COMPENSATION

   The information required under this Item is incorporated herein by reference
to the Company's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year ended December 31, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required under this Item is incorporated herein by reference
to the Company's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year ended December 31, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required under this Item is incorporated herein by reference
to the Company's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission within 120 days after the close of the Company's
fiscal year ended December 31, 1999.

                                       41
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)

1. FINANCIAL STATEMENTS

   Report of Independent Public Accountants
   Consolidated Balance Sheets--December 31, 1999 and 1998
   Consolidated Statements of Operations for the years ended December 31,
   1999, 1998, and 1997
   Consolidated Statements of Stockholders' Equity for the years ended
   December 31, 1999, 1998, and 1997
   Consolidated Statements of Comprehensive Income for the years ended
   December 31, 1999, 1998, and 1997
  Consolidated Statements of Cash Flows for the years ended December 31,
     1999, 1998, and 1997
   Notes to Consolidated Financial Statements

2. FINANCIAL STATEMENT SCHEDULES

   The following financial statement schedule is submitted as part of this
report:

     (i) Report of Independent Public Accountants

     (ii) Schedule II--Valuation and Qualification Accounts

   All other schedules are not submitted because they are not applicable or
are not required under Regulation S-X or because the required information is
included in the financial statements or notes thereto.

3. EXHIBITS

   The exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index hereto.

(B) REPORTS ON FORM 8-K

   None

                                      42
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          WORLDPORT COMMUNICATIONS, INC.

                                                  /s/ Carl J. Grivner
                                          By: _________________________________
                                                      Carl J. Grivner
                                                Chief Executive Officer and
                                                         President

Dated: March 28, 2000

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----
<S>                                    <C>                        <C>
         /s/ Carl J. Grivner           Chief Executive Officer,     March 28, 2000
______________________________________  President and Director
           Carl J. Grivner              (Principal Executive
                                        Officer)

          /s/ John T. Hanson           Chief Financial Officer      March 28, 2000
______________________________________  (Principal Financial and
            John T. Hanson              Accounting Officer)

     /s/ Michael E. Heisley, Sr.       Director                     March 28, 2000
______________________________________
       Michael E. Heisley, Sr.

        /s/ Stanley H. Meadows         Director                     March 28, 2000
______________________________________
          Stanley H. Meadows

         /s/ Peter A. Howley           Director                     March 28, 2000
______________________________________
           Peter A. Howley

         /s/ Andrew Sage, II           Director                     March 28, 2000
______________________________________
</TABLE>   Andrew Sage, II



                                       43
<PAGE>

            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE

   We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of WORLDPORT
COMMUNICATIONS, INC. AND SUBSIDIARIES included in this Form 10-K and have
issued our report thereon dated March 22, 2000. Our audits were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                          Arthur Andersen LLP

Atlanta, Georgia
March 22, 2000

                                       44
<PAGE>

                         WORLDPORT COMMUNICATIONS, INC.
                                AND SUBSIDIARIES

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999

<TABLE>
<CAPTION>
                                                  ADDITIONS
                                       --------------------------------
                            Balance at            Charged to            Balance at
                            Beginning  Charged to   Other                 End of
   Description              of Period    Income    Accounts  Deductions   Period
   -----------              ---------- ---------- ---------- ---------- ----------
   <S>                      <C>        <C>        <C>        <C>        <C>
   Provision for
    uncollectible accounts
     1997..................    $ 0        $ 15       $ 0        $ 0        $ 15
     1998..................    $15        $  0       $ 0         15(1)     $  0
     1999..................    $ 0        $359       $ 0        $ 0(1)     $359
</TABLE>
--------
(1) Represents write-off of accounts considered to be uncollectible, less
    recoveries of amounts previously written off.

                                       45
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
 <C>     <S>
  3.1     Certificate of Incorporation of the Company, as amended, previously
          filed as Exhibit 3.1 to Form 10-KSB/A for the fiscal year ended
          December 31, 1997, and incorporated herein by reference.
  3.2     Bylaws of the Company, as amended, previously filed as Exhibit 3.2
          to Form 10-K for the fiscal year ended December 31, 1998, and
          incorporated herein by reference.
  4.1     Certificate of Designation, Preferences and Rights of Series A
          Convertible Preferred Stock of the Company, dated November 12, 1997,
          previously filed as Exhibit 4.1 to Form 10K-SB for the fiscal year
          ended December 31, 1997, and incorporated herein by reference.
  4.2     Certificate of Designation, Preferences and Rights of Series B
          Convertible Preferred Stock of the Company, dated March 6, 1998,
          previously filed as Exhibit 4.1 to Form 10-Q for the fiscal quarter
          ended March 31, 1998, and incorporated herein by reference.
  4.3     Certificate of Designation, Preferences and Rights of Series C
          Convertible Preferred Stock of the Company, dated December 29, 1998,
          previously filed as Exhibit 4.1 to Form 8-K, dated December 31,
          1998, and incorporated herein by reference.
  4.4     Certificate of Designation, Preferences and Rights of Series D
          Convertible Preferred Stock of the Company, dated July 2, 1999,
          previously filed as Exhibit 3.1 to Form 10-Q for the fiscal quarter
          ended September 30, 1999, and incorporated herein by reference.
  4.5     Certificate of Designation, Preferences and Rights of Series E
          Convertible Preferred Stock of the Company, dated July 13, 1999,
          previously filed as Exhibit 4.2 to Form 8-K, dated July 15, 1999,
          and incorporated herein by reference.
  4.6     Certificate of Designation, Preferences and Rights of Series F
          Convertible Preferred Stock of the Company, dated July 13, 1999,
          previously filed as Exhibit 4.3 to Form 8-K, dated July 15, 1999,
          and incorporated herein by reference.
 10.1     Sale and Purchase Agreement, dated November 11, 1999, between
          WorldPort International, Inc., the Company and Energis plc,
          previously filed as Exhibit 10.1 to Form 8-K, dated January 14,
          2000, and incorporated herein by reference.
 10.2     Share Agreement, dated November 11, 1999, between WorldPort
          Communications Limited and Energis plc, previously filed as Exhibit
          10.2 to Form 8-K, dated January 14, 2000, and incorporated herein by
          reference.
 10.3     Switch Agreement, dated November 11, 1999, between WorldPort
          Communications Limited and Unisource Carrier Service USA, previously
          filed as Exhibit 10.3 to Form 8-K, dated January 14, 2000, and
          incorporated herein by reference.
 10.4     Switch Agreement, dated November 11, 1999, between the Company and
          WorldPort Communications Limited, previously filed as Exhibit 10.4
          to Form 8-K, dated January 14, 2000, and incorporated herein by
          reference.
 10.5     Master Equipment Lease Agreement by and between the Company and
          Forsythe/McArthur Associates, Inc., dated October 31, 1997,
          previously filed as Exhibit 10.6 to Form 10-QSB for the fiscal
          quarter ended September 30, 1997, and incorporated herein by
          reference.
 10.5(a)  Lease Schedule A by and between the Company and Forsythe/McArthur
          Associates, Inc., dated October 30, 1997, previously filed as
          Exhibit 10.7 to Form 10-QSB for the fiscal quarter ended September
          30, 1997, and incorporated herein by reference.
 10.6     **Master Purchase Agreement between the Company and Northern Telecom
          Inc., dated June 3, 1998, previously filed as Exhibit 10.3 to Form
          10-QSB/A for the fiscal quarter ended June 30, 1998, and
          incorporated herein by reference.
</TABLE>

                                       46
<PAGE>

<TABLE>
 <C>      <S>
 10.7      **Master Services Agreement between the Company and Northern
           Telecom Inc., dated June 3, 1998, previously filed as Exhibit 10.4
           to Form 10-QSB/A for the fiscal quarter ended June 30, 1998, and
           incorporated herein by reference.
 10.8(a)   **Atlantic Crossing/AC-1 Submarine Cable System Capacity Purchase
           Agreement between Global Telesystems Ltd and the Company, dated
           April 7, 1998, previously filed as Exhibit 10.5 to Form 10-QSB/A
           for the fiscal quarter ended June 30, 1998, and incorporated herein
           by reference.
 10.8(b)   **Amended and Restated Addendum to AC-1 Capacity Purchase Agreement
           and Inland Capacity Purchase Agreements between Atlantic Crossing
           Ltd (formerly known as Global Telesystems Ltd), the Company and the
           subsidiary grantors, dated March 9, 1999, previously filed as
           Exhibit 10.9(a) to Form 10-K for the fiscal year ended December 31,
           1998, and incorporated herein by reference.
 10.9      Series C Preferred Stock Purchase Agreement, dated December 31,
           1998, by and between The Heico Companies, LLC and WorldPort
           Communications, Inc., incorporated by reference to Exhibit 2.1 to
           Form 8-K, dated December 31, 1998.
 10.10(a)  Shareholder Agreement, dated December 31, 1998, by and among The
           Heico Companies, LLC, WorldPort Communications, Inc., Paul A.
           Moore, Phillip S. Magiera, Theodore H. Swindells and Maroon Bells
           Capital Partners, Inc., incorporated by reference to Exhibit 2.2 to
           Form 8-K, dated December 31, 1998.
 10.10(b)  Amendment to Shareholder Agreement, dated January 25, 1999, by and
           among The Heico Companies, LLC, WorldPort Communications, Inc.,
           Paul A. Moore, Phillip S. Magiera, Theodore H. Swindells and Maroon
           Bells Capital Partners, Inc., previously filed as Exhibit 2.2(a) to
           Form 8-K, dated January 25, 1999, and incorporated herein by
           reference.
 10.11     Registration Rights Agreement, dated December 31, 1998, by and
           between The Heico Companies, LLC and the Company, previously filed
           as Exhibit 2.3 to Form 8-K, dated December 31, 1998, and
           incorporated herein by reference.
 10.12     Series E Preferred Stock Purchase Agreement, dated July 15, 1999,
           by and between The Heico Companies, LLC and the Company, previously
           filed as Exhibit 2.4 to Form 8-K, dated July 15, 1999, and
           incorporated herein by reference.
 10.13     Option Agreement for Series F Preferred Stock, dated July 15, 1999,
           by and between The Heico Companies, LLC and the Company, previously
           filed as Exhibit 2.5 to Form 8-K, dated July 15, 1999, and
           incorporated herein by reference.
 10.14     Termination Agreement, dated December 31, 1998, by and between the
           Company and Maroon Bells Capital Partners, Inc., previously filed
           as Exhibit 10.15 to Form 10-K for the fiscal year ended December
           31, 1998, and incorporated herein by reference.
 10.15     *WorldPort Communications, Inc. Amended and Restated Long-Term
           Incentive Plan, as amended, effective October 1, 1996, previously
           filed as Exhibit 10.17 of form 10-K for the fiscal year ended
           December 31, 1998, and incorporated herein by reference.
 10.16     *Employment Agreement with Carl J. Grivner, dated June 25, 1999,
           previously filed as Exhibit 10.1 to Form 10-Q for the fiscal
           quarter ended June 30, 1999, and incorporated herein by reference.
 10.17     +*Employment Agreement by and between John T. Hanson and the
           Company, dated June 29, 1999.
 10.18     +*Employment Agreement by and between David Hickey and the Company,
           dated September 27, 1998.
 10.19(a)  *Employment Agreement by and between Paul A. Moore and the Company,
           dated January 1, 1998, previously filed as Exhibit 10.2 to Form 10-
           QSB for the fiscal quarter ended March 31, 1998, and incorporated
           herein by reference.
 10.19(b)  *Amendment No. 1, dated as of March 31, 1998, to the Employment
           Agreement by and between Paul A. Moore and the Company dated
           January 1, 1998, previously filed as Exhibit 10.2(a) to Form 10-QSB
           for the fiscal quarter ended March 31, 1998, and incorporated
           herein by reference.
</TABLE>

                                       47
<PAGE>

<TABLE>
 <C>      <S>
 10.19(c)  *Second Amendment to Employment Agreement between Paul A. Moore and
           the Company, dated April 1, 1998, previously filed as Exhibit 10.2
           to Form 10-QSB for the fiscal quarter ended June 30, 1998, and
           incorporated herein by reference.
 10.19(d)  Pledge Agreement made by Paul A. Moore and the Company, dated April
           1, 1998, previously filed as Exhibit 10.2(b) to Form 10-QSB for the
           fiscal quarter ended June 30, 1998, and incorporated herein by
           reference.
 10.19(e)  *Third Amendment to Employment Agreement between Paul A. Moore and
           the Company, dated September 29, 1998, previously filed as Exhibit
           10.4 to Form 10-QSB for the fiscal quarter ended September 30,
           1998, and incorporated herein by reference.
 10.19(f)  Promissory Note between Paul A. Moore and the Company, dated
           September 29, 1998, previously filed as Exhibit 10.5 to Form 10-QSB
           for the fiscal quarter ended September 30, 1998, and incorporated
           herein by reference.
 10.19(g)  *Fourth Amendment to Employment Agreement between Paul A. Moore and
           the Company, dated December 1998, previously filed as Exhibit
           10.3(f) to Form 10-K for the fiscal year ended December 31, 1998.
 10.19(h)  *Settlement Agreement between Paul A. Moore and the Company, dated
           July 15, 1999, previously filed as Exhibit 10.1 to Form 10-Q for
           the fiscal quarter ended September 30, 1999, and incorporated
           herein by reference.
 10.20(a)  *Employment Agreement by and between Phillip S. Magiera and the
           Company dated January 1, 1998, previously filed with Form 10-Q for
           the fiscal quarter ended March 31, 1998, and incorporated herein by
           reference.
 10.20(b)  *Amendment No. 1, dated as of March 31, 1998, to the Employment
           Agreement by and between Phillip S. Magiera and the Company dated
           January 1, 1998, previously filed with Form 10-Q for the fiscal
           quarter ended March 31, 1998, and incorporated herein by reference.
 10.20(c)  *Second Amendment to Employment Agreement between Phillip S.
           Magiera and the Company dated April 1, 1998, previously filed with
           Form 10-Q for the fiscal quarter ended June 30, 1998, and
           incorporated herein by reference.
 10.20(d)  Pledge Agreement made by Phillip S. Magiera and the Company dated
           April 1, 1998, previously filed with Form 10-Q for the fiscal
           quarter ended June 30, 1998, and incorporated herein by reference.
 10.20(e)  *Third Amendment to Employment Agreement between Phillip S. Magiera
           and the Company dated September 29, 1998, previously filed with
           Form 10-Q for the fiscal quarter ended June 30, 1998, and
           incorporated herein by reference.
 10.20(f)  Promissory Note between Phillip S. Magiera and the Company dated
           September 29, 1998, previously filed with Form 10-Q for the fiscal
           quarter ended June 30, 1998, and incorporated herein by reference.
 10.20(g)  *Fourth Amendment to Employment Agreement between Phillip S.
           Magiera and the Company dated December 31, 1998.
 10.21     *Employment Agreement with Daniel G. Lazarek, dated February 16,
           1998, previously filed as Exhibit 10.4 to Form 10-QSB for the
           fiscal quarter ended March 31, 1998, and incorporated herein by
           reference.
 12.1      +Statement Regarding Computation of Ratio of Earnings to Fixed
           Charges.
 21.1      +Subsidiaries of the Company
 23.1      +Consent of Arthur Andersen LLP
 27.1      +Financial Data Schedule
</TABLE>
--------

+  Filed herewith.
*  Compensation Plan or Agreement.
** Confidential treatment has been requested for portions of exhibit.

                                       48