WORLD ACCESS INC /NEW/, 10-Q, 2000-08-14

WORLD ACCESS INC /NEW/
10-Q, 2000-08-14
COMMUNICATIONS EQUIPMENT, NEC

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<PAGE> 1

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q
(MARK ONE)

<TABLE>
<C> <S>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE THREE MONTHS ENDED JUNE 30, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO
_______________.
</TABLE>

COMMISSION FILE NUMBER 0-29782

WORLD ACCESS, INC.
(Exact name of Registrant as specified in its Charter)

<TABLE>
<S> <C>
DELAWARE 58-2398004
(State of Incorporation) (I.R.S. Employer Identification No.)

945 E. PACES FERRY ROAD, SUITE 2200 30326
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive offices)
</TABLE>

(404) 231-2025
(Registrant's telephone number)

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

NONE

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

COMMON STOCK, PAR VALUE $.01 PER SHARE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 [ ]

The number of shares outstanding of the Registrant's common stock, par
value $.01 per share, at August 11, 2000 was 61,707,277.

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<PAGE> 2

PART I

FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents...................................... $ 329,279 $ 147,432
Short-term investments.................................... 160,211 --
Restricted cash........................................... 31,095 32,243
Accounts receivable....................................... 264,678 164,768
Other current assets...................................... 38,491 24,547
Net assets held for sale.................................. 41,465 244,388
---------- ----------
Total Current Assets.............................. 865,219 613,378
Property and equipment...................................... 151,609 136,033
Goodwill and other intangibles.............................. 1,080,797 830,234
Other assets................................................ 79,185 50,159
---------- ----------
Total Assets...................................... $2,176,810 $1,629,804
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................... $ 57,033 $ 83,837
Accounts payable.......................................... 246,436 182,107
Other accrued liabilities................................. 151,328 57,590
---------- ----------
Total Current Liabilities......................... 454,797 323,534
Long-term debt.............................................. 417,946 408,338
Other liabilities........................................... 10,336 633
---------- ----------
Total Liabilities................................. 883,079 732,505
---------- ----------
Stockholders' Equity
Preferred stock........................................... 6 4
Common stock.............................................. 617 523
Capital in excess of par value............................ 1,471,126 1,062,939
Accumulated other comprehensive loss...................... (12,239) (341)
Accumulated deficit....................................... (165,779) (165,826)
---------- ----------
Total Stockholders' Equity........................ 1,293,731 897,299
---------- ----------
Total Liabilities and Stockholders' Equity........ $2,176,810 $1,629,804
========== ==========
</TABLE>

See notes to consolidated financial statements.

1
<PAGE> 3

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Carrier services.................................. $281,744 $112,916 $521,000 $198,014
Retail services................................... 24,315 -- 40,600 --
-------- -------- -------- --------
Total Revenue................................ 306,059 112,916 561,600 198,014
Cost of services.................................. 266,475 102,650 490,330 182,804
Selling, general and administrative............... 27,562 4,905 51,338 8,674
Depreciation and network amortization............. 3,772 1,175 9,323 2,434
Amortization of intangibles....................... 14,981 1,185 27,189 2,163
Restructuring credit.............................. (3,995) -- (3,995) --
-------- -------- -------- --------
Total Operating Expenses..................... 308,795 109,915 574,185 196,075
-------- -------- -------- --------
Operating Income (Loss)...................... (2,736) 3,001 (12,585) 1,939
Interest and other income......................... 6,635 689 9,254 872
Interest expense.................................. 14,027 1,976 28,572 4,315
Foreign exchange gain (loss)...................... (321) -- 211 --
-------- -------- -------- --------
Income (Loss) From Continuing Operations
Before Income Taxes........................ (10,449) 1,714 (31,692) (1,504)
Income taxes (benefit)............................ 1,345 986 (2,115) 224
-------- -------- -------- --------
Income (Loss) From Continuing Operations..... (11,794) 728 (29,577) (1,728)
Net income (loss) from discontinued operations.... 225 3,539 (6,149) 8,148
Net gain (loss) on sale of discontinued
operations...................................... 35,773 (12,342) 35,773 (12,342)
-------- -------- -------- --------
Net Income (Loss)............................ 24,204 (8,075) 47 (5,922)
Preferred stock dividends......................... 531 413 1,163 413
-------- -------- -------- --------
Net Income (Loss) Available to Common
Stockholders............................... $ 23,673 $ (8,488) $ (1,116) $ (6,335)
======== ======== ======== ========
Income (Loss) Per Common Share:
Basic:
Continuing Operations................... $ (0.20) $ 0.01 $ (0.53) $ (0.06)
Discontinued Operations................. 0.60 (0.24) 0.51 (0.11)
-------- -------- -------- --------
Net Income (Loss)....................... $ 0.40 $ (0.23) $ (0.02) $ (0.17)
======== ======== ======== ========
Diluted:
Continuing Operations................... $ (0.20) $ 0.01 $ (0.53) $ (0.06)
Discontinued Operations................. 0.60 (0.24) 0.51 (0.11)
-------- -------- -------- --------
Net Income (Loss)....................... $ 0.40 $ (0.23) $ (0.02) $ (0.17)
======== ======== ======== ========
Weighted Average Shares Outstanding:
Basic........................................ 60,126 36,375 57,658 36,232
======== ======== ======== ========
Diluted...................................... 97,750 43,401 92,952 41,474
======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements.

2
<PAGE> 4

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL IN OTHER
PREFERRED COMMON EXCESS OF COMPREHENSIVE ACCUMULATED
STOCK STOCK PAR VALUE LOSS DEFICIT TOTAL
--------- ------ ---------- ------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000..... $4 $523 $1,062,939 $ (341) $(165,826) $ 897,299
Net income................... 47 47
Foreign currency translation
adjustment................. (10,959) (10,959)
Unrealized loss on marketable
securities, net of taxes... (939) (939)
----------
Total comprehensive loss..... (11,851)
Issuance of common and
preferred shares in private
offerings.................. 39 101,972 102,011
Issuance of preferred shares,
common shares and options
for acquisition of
businesses................. 2 13 261,461 261,476
Dividends on preferred
stock...................... (1,163) (1,163)
Conversion of preferred stock
into common shares......... 15 (15) --
Conversion of debt into
common shares.............. 18 24,274 24,292
Release of escrowed common
shares..................... 1,000 1,000
Issuance of common shares for
option and warrant
exercises.................. 9 10,988 10,997
Tax benefit from option and
warrant exercises.......... 2,596 2,596
Accelerated vesting of
options.................... 6,273 6,273
Other issuances of common
shares..................... 801 801
-- ---- ---------- -------- --------- ----------
Balance at June 30, 2000....... $6 $617 $1,471,126 $(12,239) $(165,779) $1,293,731
== ==== ========== ======== ========= ==========
</TABLE>

See notes to consolidated financial statements.

3
<PAGE> 5

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)......................................... $ 47 $ (5,922)
Adjustments to reconcile net income (loss) to net cash
from (used by) operating activities:
Depreciation and amortization.......................... 41,836 15,123
Net gain (loss) from sale of discontinued operations... (35,773) 13,662
Income tax benefit from stock options and warrants..... 2,596 54
Provision for inventory reserves....................... 253 680
Provision for bad debts................................ 5,072 1,453
Restructuring credit................................... (3,995) --
Stock contributed to employee benefit plan............. 248 185
Changes in operating assets and liabilities, net of
effects from businesses acquired:
Accounts receivable.................................. (59,382) (23,121)
Inventories.......................................... (14,469) (10,236)
Accounts payable..................................... 22,309 13,909
Other assets and liabilities......................... (41,795) (1,499)
-------- --------
Net Cash From (Used By) Operating Activities...... (83,053) 4,288
-------- --------
Cash Flows From Investing Activities:
Acquisition of businesses, net of cash acquired........... 27,634 (2,241)
Proceeds from sales of assets............................. 285,584 4,754
Purchase of short-term investments........................ (84,812) --
Expenditures for property and equipment................... (12,951) (4,163)
Capitalization of software development costs.............. (696) (2,452)
Loans to WorldxChange..................................... (38,192) --
-------- --------
Net Cash From (Used By) Investing Activities...... 176,567 (4,102)
-------- --------
Cash Flows From Financing Activities:
Net proceeds from sales of common stock................... 82,211 --
Net proceeds from sales of preferred stock................ 19,800 47,788
Short-term borrowings (repayments)........................ (16,392) 1,200
Long-term debt repayments................................. (6,873) (5,698)
Payment of preferred stock dividends...................... (1,410) --
Proceeds from exercise of stock options and warrants...... 10,997 480
Other..................................................... -- (136)
-------- --------
Net Cash From Financing Activities................ 88,333 43,634
-------- --------
Increase in Cash and Equivalents.................. 181,847 43,820
Cash and Equivalents at Beginning of Period............... 147,432 55,176
-------- --------
Cash and Equivalents at End of Period............. $329,279 $ 98,996
======== ========
Supplemental Schedule of Noncash Financing and Investing
Activities:
Issuance of common stock for businesses acquired.......... $ 22,185 $ 2,825
Issuance of preferred stock for businesses acquired....... 217,560 18,539
Issuance of stock options and warrants for businesses
acquired............................................... 21,731 --
Conversion of debt into common stock...................... 24,292 --
Conversion of note receivable to investment in LDI........ 4,674 --
</TABLE>

See notes to consolidated financial statements.

4
<PAGE> 6

WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A: BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the
accounts of World Access, Inc. and its majority owned and wholly owned
subsidiaries (the "Company") from their effective dates of acquisition. These
financial statements have been prepared in accordance with the instructions to
Form 10-Q and do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the results of the
interim periods covered have been included.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented in the
balance sheets herein are based on pertinent information available to management
as of the respective balance sheet dates. Although management is not aware of
any factors that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date and current estimates of fair value may
differ significantly from the amounts presented herein.

The fair values of cash equivalents, accounts receivable, accounts payable
and accrued expenses approximate the carrying values due to their short-term
nature. Short-term investments include shares of BATM Advanced Communications
Limited (see "Note C") and other securities with an original maturity of more
than three months and a remaining maturity of less than one year. The BATM
shares are recorded at fair market value based on trading in the public market,
with unrealized gains and losses being recognized as a separate component of
stockholders' equity, net of income taxes. The other short-term investments are
recorded at cost as it is the intent of the Company to hold these securities
until maturity. The fair values of long-term debt are estimated based on current
market rates and instruments with the same risk and maturities and approximate
the carrying value.

The results of operations for the three and six months ended June 30, 2000
are not necessarily indicative of the results expected for the full year.
Certain reclassifications have been made to the prior period's financial
information to conform with the presentations used in 2000.

Accounts receivable are presented net of an allowance for doubtful accounts
of $28.6 million and $18.5 million as of June 30, 2000 and December 31, 1999,
respectively.

Cost of carrier services excludes depreciation and amortization expenses
related to the services network, which are included in "Depreciation and network
amortization" on the consolidated statements of operations.

NOTE B: ACQUISITIONS

LDI ACQUISITION

In February 2000, the Company acquired substantially all of the assets and
assumed certain liabilities of Long Distance International Inc. ("LDI"),
including its wholly-owned subsidiary NETnet International S.A. ("NETnet").
NETnet(TM) provides an array of retail telecommunications services concentrating
on the needs of

5
<PAGE> 7
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

business customers in Austria, France, Germany, Italy, Norway, Spain, Sweden,
Switzerland, and the United Kingdom.

In connection with the LDI acquisition, the Company issued 185,000 shares
of Convertible Preferred Stock, Series D ("Series D Preferred Stock") to LDI's
stockholders and the holders of LDI's senior notes. The Series D Preferred
Stock, which has a $185.0 million liquidation preference, was valued at $217.6
million based on its estimated market value during the period including the
three trading days prior and the three trading days subsequent to the date
economic terms of the LDI acquisition were announced. In addition, the Company
issued 1,500,000 non-qualified options to purchase Company common stock at an
exercise price of $18.50 per share in exchange for substantially all the stock
options held by LDI's employees. The new stock options were valued at $21.7
million based on the Black-Scholes option valuation model.

The Series D Preferred Stock bears no dividend and is convertible into
shares of the Company's common stock at the option of the holder in accordance
with a conversion formula equal to the $1,000 liquidation preference per share
divided by a conversion price of $18.00 per common share, subject to adjustment
in the event of below market issuances of common stock, stock dividends and
certain other distributions with respect to common stock. If the closing trading
price of the Company's common stock exceeds $18.00 per share for 60 consecutive
trading days, the Series D Preferred Stock will automatically convert into
common stock.

The acquisition of LDI has been accounted for under the purchase method of
accounting. Accordingly, the results of LDI's operations have been included in
the accompanying consolidated financial statements from February 11, 2000. The
following summarizes the allocation of the purchase price based on information
currently available to management (in thousands):

<TABLE>
<S> <C>
Purchase price:
Preferred stock issued.................................... $217,560
Debt forgiven............................................. 4,674
Stock options issued...................................... 21,731
Fees and expenses......................................... 2,000
--------
Total purchase price.............................. 245,965
Allocation to fair value of net assets:
Cash...................................................... (42,476)
Other current assets...................................... (15,447)
Property and equipment.................................... (17,113)
Intangible assets......................................... (25,910)
Other assets.............................................. (871)
Current liabilities....................................... 80,433
Other liabilities......................................... 723
--------
Goodwill.......................................... $225,304
========
</TABLE>

Intangible assets include the estimated fair values of the NETnet
trademark, NETnet's customer base and certain European interconnection
agreements and operating licenses. These assets are being amortized over a seven
year period. The excess of purchase price over the fair value of net assets
acquired has been recorded as goodwill and is being amortized over a 20 year
period.

PRO FORMA RESULTS OF OPERATIONS

During 1999, the Company acquired several businesses including (i)
substantially all the assets of Comm/Net Holding Corporation and its wholly
owned subsidiaries (collectively referred to herein as "Comm/Net") and (ii)
FaciliCom International, Inc. ("FaciliCom").

6
<PAGE> 8
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On a pro forma, unaudited basis, as if the acquisitions of Comm/Net,
FaciliCom and LDI had occurred as of January 1, 1999, total revenue, operating
loss from continuing operations, loss from continuing operations and loss from
continuing operations per diluted common share for the six months ended June 30,
2000 and 1999 would have been approximately $570.3 million and $441.2 million;
$26.0 million and $70.3 million; $43.7 million and $83.1 million; and $0.76 and
$2.29, respectively. These unaudited pro forma results have been prepared for
comparative purposes only and are not necessarily indicative of the results of
operations which would actually have occurred had the acquisitions been in
effect on the date indicated.

NOTE C: DISCONTINUED OPERATIONS

In December 1999, in connection with the acquisition of FaciliCom, the
Company adopted a plan to divest all of its remaining equipment businesses in
order to focus on its international long distance business. As a result of this
plan, all of the Company's equipment businesses have been accounted for as
discontinued operations and, accordingly, the results of their operations have
been excluded from continuing operations in the consolidated statements of
operations for all periods presented. Discontinued operations consisted
primarily of the following businesses at December 31, 1999:

- Telco Systems Division, a provider of next generation transport and
access solutions for service providers throughout the world. Its products
include intelligent integrated access devices, multiplexers and digital
microwave radios.

- NACT Switching Division, a provider of advanced switching platforms with
integrated proprietary applications software as well as billing and
telemanagement systems.

- Wireless Local Loop ("WLL") Division, a research and development group
designing a next generation, fixed wireless local loop system.

- Cellular Infrastructure Supply ("CIS") Division, a value-added supplier
of new and refurbished cellular base stations and related equipment.

In April 2000, the Company sold its Telco Systems and WLL divisions in two
separate transactions that generated aggregate gross cash proceeds of
approximately $281.6 million. In connection with the sale of Telco Systems, the
Company also received 9,600,000 restricted shares of BATM Advanced
Communications Limited ("BATM") stock, as adjusted for a ten for one stock split
in July 2000. The shares of BATM stock, which had an initial value of
approximately $76.9 million, trade on the London Stock Exchange. Under the terms
of the sales agreement, the Company may not sell, transfer or otherwise monetize
these shares for a period of one year without the consent of BATM. As a result
of the sale of Telco Systems and WLL, the Company recorded a net gain of $35.8
million in the second quarter of 2000.

During the first four months of 2000, the Company monetized its investment
in CIS accounts receivable and inventories in the normal course of business. The
remaining assets of CIS, which were not material, were sold in a private
transaction completed in May 2000.

7
<PAGE> 9
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The assets and liabilities of the discontinued operations are reflected as
"Net assets held for sale" in the consolidated balance sheets and consisted of
the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
Accounts receivable......................................... $ 15,135 $ 58,080
Inventories................................................. 6,073 26,716
Other current assets........................................ 5,065 40,369
-------- --------
Total current assets.............................. 26,273 125,165
Property and equipment...................................... 3,787 13,198
Goodwill and other intangibles.............................. 30,258 167,295
Other assets................................................ 6,525 17,891
-------- --------
Total assets...................................... 66,843 323,549
Accounts payable............................................ 2,692 22,771
Other current liabilities................................... 16,937 40,840
Other liabilities........................................... 5,749 15,550
-------- --------
Net assets held for sale.......................... $ 41,465 $244,388
======== ========
</TABLE>

NOTE D: RESTRUCTURING

In December 1999, the Company recorded a one-time restructuring charge of
$37.8 million in connection with the acquisition of FaciliCom. The restructuring
charge included the estimated costs of (i) consolidating certain of the
Company's United States gateway switching centers and related technical support
functions into existing FaciliCom operations; (ii) consolidating certain of the
Company's United Kingdom operations into existing FaciliCom operations; (iii)
consolidating certain of the Company's administrative functions into FaciliCom's
operations; and (iv) eliminating other redundant operations and assets as a
result of combining the two entities.

FaciliCom is a multi-national long distance service carrier focused on
providing international telecommunications services to other carriers worldwide.
FaciliCom provides these services over its carrier-grade international network,
which consists of 17 gateway switches as well as a satellite earth station.
Given the duplication of network assets between FaciliCom and the Company,
including switching and transmission equipment, the Company made the decision in
late 1999 to shut down and dispose of its six gateway switches located in
Chicago, Los Angeles, Newark, Dallas, San Francisco and London. All of the U.S.
switches were effectively taken out of service as of December 31, 1999. The U.K.
switch is being utilized on a limited basis and is scheduled to be taken out of
service by September 30, 2000, three months later than the Company's initial
estimate. The ongoing costs of operating the U.K. switch continue to be charged
to current operations. The restructuring charge also provided for the write-off
of leasehold improvements at the six switch sites and lease commitments
remaining on certain facilities and equipment taken out of service.

Since installation of the six switches, the Company has experienced certain
performance issues involving the equipment. In April 2000, the Company settled
with the vendor its disputes over performance. In connection therewith, the
Company settled its approximately $19.0 million debt under the related capital
leases by agreeing to pay the lessor $15.0 million in a combination of cash and
shares of common stock. The net result of this settlement was a one-time pre-tax
gain of approximately $4.0 million, which has been recorded as a restructuring
credit.

Approximately 25 personnel whose job functions included accounting and
administrative support as well as network operations were terminated as part of
the overall restructuring. The termination benefits associated with these
personnel were included in the restructuring charge.

8
<PAGE> 10
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the amounts included in each component of
the restructuring charge (in thousands):

<TABLE>
<CAPTION>
RESTRUCTURING 1999 2000 RESERVE BALANCE
CHARGE ACTIVITY ACTIVITY AT 6/30/00
------------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Write-down of leasehold improvements............... $ 1,506 $ 1,506 $ -- $ --
Write-down of network equipment.................... 25,372 25,372 -- --
Write-down of redundant software and general
equipment........................................ 1,256 1,256 -- --
Accrual for lease and circuit cost commitments..... 8,078 1,216 1,973 4,889
Accrual for termination benefits................... 1,588 270 576 742
------- ------- ------ ------
$37,800 $29,620 $2,549 $5,631
======= ======= ====== ======
</TABLE>

The restructuring accrual is recorded in "Other accrued liabilities" on the
Company's consolidated balance sheets. The restructuring program is expected to
be completed in 2000.

NOTE E: DEBT

SUMMARY

Debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
13.25% Senior Notes due 2008................................ $285,990 $285,078
4.5% Convertible Subordinated Notes due 2002................ 115,000 115,000
Bank line of credit......................................... -- 25,000
IRU and other capital lease obligations..................... 32,548 45,380
Nortel line of credit....................................... 30,365 21,717
Term loan................................................... 11,076 --
-------- --------
Total debt........................................ 474,979 492,175
Amount due within one year.................................. 57,033 83,837
-------- --------
Long-term debt.................................... $417,946 $408,338
======== ========
</TABLE>

In connection with the LDI acquisition, the Company assumed a $10.0 million
loan with a stockholder of LDI pursuant to a term loan agreement. The loan bears
interest at 12.25% per annum and was originally scheduled to mature on July 20,
2000. In July 2000, the loan was amended to adjust the principal by the amount
of the accrued interest and extend the maturity date to July 20, 2002. At
anytime after July 20, 2001, the holder of the term loan has the right to demand
that the Company immediately repay the loan. The holder of the term loan also
has an option to exchange the debt, including accrued interest, at anytime prior
to its maturity date for shares of the Company's common stock valued at $11.50
per share.

In April 2000, the Company issued an aggregate of 936,081 shares of Company
common stock as payment in full for certain capital lease obligations assumed in
connection with the acquisitions of LDI and Resurgens Communications Group
(December 1998). These capital lease obligations amounted to approximately $22.7
million, including accrued interest.

SUMMARIZED FINANCIAL INFORMATION OF WA TELCOM PRODUCTS CO., INC.

On October 28, 1998, World Access, Inc. reorganized its operations into a
holding company structure and changed its name to WA Telcom Products Co., Inc.
("WA Telcom"). As a result of the reorganization, WA Telcom became a
wholly-owned subsidiary of WAXS INC., which changed its name to World Access,
Inc. and is the company filing this Report. Pursuant to the reorganization, the
Company exchanged each

9
<PAGE> 11
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding share of common stock of WA Telcom for one share of common stock of
the Company, converted each option and warrant to purchase shares of common
stock of WA Telcom into options and warrants to purchase a like number of shares
of common stock of the Company, and fully and unconditionally guaranteed the
payment of the $115.0 million aggregate principal amount 4.5% Convertible
Subordinated Notes dated October 1, 1997 (due 2002) previously issued by WA
Telcom.

Set forth below is summarized financial information of WA Telcom presented
for the information of its debtholders. Separate financial statements of WA
Telcom are not presented because management has determined that they would not
be material to investors. The summarized financial information presented below
includes the results of operations for the following businesses from their
respective dates of acquisitions: Discontinued operations: Cellular
Infrastructure Supply, Inc. -- January 1997; Galaxy Personal Communications
Services, Inc. -- July 1997 to December 1999; Advanced TechCom, Inc. -- January
1998; NACT Telecommunications, Inc. -- February 1998; Continuing operations:
Cherry Communications Incorporated and Cherry Communications U.K.
Limited -- December 1998; Comm/Net -- May 1999; FaciliCom -- December 1999 and
LDI -- February 2000 (in thousands):

BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
Current assets.............................................. $248,879 $108,264
Non-current assets.......................................... 235,581 448,311
Total assets................................................ 484,460 556,575
Current liabilities......................................... 113,928 112,020
Non-current liabilities..................................... 13,262 131,009
Stockholders' equity........................................ 357,270 313,546
Total liabilities and stockholders' equity.................. 484,460 556,575
</TABLE>

OPERATING STATEMENT INFORMATION

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
--------- --------
<S> <C> <C>
Total revenue from continuing operations.................... $ 137,840 $198,014
Gross profit from continuing operations..................... 11,957 15,210
Net loss from continuing operations......................... (23,816) 9,860
Net income (loss) from discontinued operations.............. (177,185) (12,395)
Net income (loss)........................................... (201,001) (2,535)
</TABLE>

10
<PAGE> 12
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE F: STOCKHOLDERS' EQUITY

Shares of common and preferred stock outstanding consisted of the
following:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
Common Stock (150,000,000 shares authorized)................ 61,706,777 52,333,832
========== ==========
Preferred Stock (10,000,000 shares authorized)
Series A.................................................. 70,000 50,000
Series B.................................................. -- 23,174
Series C.................................................. 350,260 350,260
Series D.................................................. 184,000 --
---------- ----------
604,260 423,434
========== ==========
</TABLE>

In February 2000, the Company sold 3,822,552 shares of restricted common
stock for approximately $83.1 million, or $21.75 per share, in two private
transactions with institutional and sophisticated investors.

In February 2000, the Company issued 185,000 shares of Series D Preferred
Stock in connection with its acquisition of LDI (see "Note B").

In March 2000, all of the Series B Preferred Stock outstanding was
converted into 1,448,373 shares of common stock.

In June 2000, the Company issued 20,000 shares of Series A Preferred Stock
for an aggregate amount of $20.0 million. These shares were issued to The 1818
Fund III, L.P., in connection with it's exercise of an option agreement.

As of June 30, 2000, a total of approximately 33.5 million shares of common
stock are reserved for issuance upon conversion of the Series A, C and D
Preferred Stock.

NOTE G: INCOME TAXES

The Company's provision for income taxes attributable to continuing
operations for the six months ended June 30, 2000 was a benefit of $2.1 million,
or approximately 6.7% of loss from continuing operations before income taxes.
The provision for income taxes differs from the amount computed by applying the
statutory federal and state income tax rates due to non-deductible expenses,
consisting primarily of amortization of intangibles.

NOTE H: LITIGATION

Following the Company's announcement in early 1999 regarding earnings
expectations for the quarter and year ended December 31, 1998 and the subsequent
decline in the price of the Company's common stock, 23 class action shareholder
suits were filed against the Company. The Company and certain of its then
current officers and directors were named as defendants. These suits arise from
alleged misstatements of material information in and alleged omission of
material information from some of the Company's securities filings and other
public disclosures, principally related to product development, inventory and
sales activities during the fourth quarter of 1998. These class action suits
were consolidated into a single action for all pretrial proceedings in the
United States District Court for the Northern District of Georgia. Plaintiffs
have requested damages in an unspecified amount in their complaints.

Although the Company and the individuals named as defendants deny they have
violated any of the requirements or obligations of the federal securities laws,
there can be no assurance the Company will not sustain material liability as a
result of or related to these shareholders suits. As the outcome of these class
action suits is unknown, the potential liability is not reasonably estimable.

11
<PAGE> 13
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE I: REPORTABLE SEGMENT DATA

In December 1999, the Company adopted a plan to divest all its
telecommunications equipment businesses. As a result, the Company's service
segment, "Continuing Operations" is the only reportable business segment.

Revenue is attributed to countries based on the location of customers.
Revenue by geographic region was as follows (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
United States........................................ $182,173 $112,916 $338,833 $198,014
Europe............................................... 123,886 -- 222,767 --
-------- -------- -------- --------
Consolidated total................................. $306,059 $112,916 $561,600 $198,014
======== ======== ======== ========
</TABLE>

Long-lived assets by geographic region were as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
United States............................................... $ 84,603 $ 88,695
Europe...................................................... 67,006 47,338
-------- --------
Consolidated total........................................ $151,609 $136,033
======== ========
</TABLE>

NOTE J: PENDING MERGERS AND ACQUISITIONS

STAR MERGER

In February 2000, the Company executed a definitive agreement with Star
Telecommunications, Inc. ("Star"), a publicly held multinational
telecommunications service provider, pursuant to which Star will be merged with
and into the Company. In June 2000, the parties amended the merger agreement to
modify certain closing conditions and reduce the exchange ratio. Under the terms
of the amended agreement, each share of Star common stock will be exchanged for
.386595 shares of the Company's common stock (approximately 23 million shares).
The Company has the option of paying up to 40% of the merger consideration in
cash. The Company expects the transaction to close by October 2000.

The Star merger is subject to, among other things, certain regulatory
approvals, the approval of the stockholders of the Company and Star, and the
divestiture by Star of its PT-1 subsidiary for minimum net cash proceeds in
excess of $120.0 million. The merger is intended to qualify as a tax-free
reorganization, and will be accounted for as a purchase transaction. The Company
has agreed to provide bridge financing to Star in an amount up to $35.0 million,
none of which has been funded as of the date of this Report. Star will be
entitled to elect one director to the Company's board of directors.

Upon consummation of the Star merger, WorldCom, Inc. ("WorldCom") has
agreed to convert approximately $90.0 million of trade debt owed by Star into
shares of the Company's common stock valued at $11.50 per share. After
considering this debt conversion and assuming that Star receives $120.0 million
in net cash proceeds from the sale of PT-1, the Company is expected to assume
approximately $75.0 million of net debt in connection with the Star merger.

WORLDXCHANGE MERGER

In February 2000, the Company executed a definitive merger agreement with
Communication TeleSystems International, d/b/a WorldxChange Communications
("WorldxChange"), a privately held multinational telecommunications service
provider. WorldxChange generated pro-forma revenue in 1999 of approximately
$600.0 million, through its primary operations in North America, Germany, the
United

12
<PAGE> 14
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Kingdom, France, the Netherlands, Belgium, Australia and New Zealand. Under the
terms of the agreement, each share of WorldxChange common stock will be
exchanged for .6583 shares of the Company's common stock (approximately 30
million shares). The Company expects the transaction to close by October 2000.

Upon consummation of the WorldxChange merger, WorldCom has agreed to
convert approximately $25.0 million of trade debt owed by WorldxChange into
shares of the Company's common stock valued at $11.50 per share. After
considering this debt conversion, the Company is expected to assume
approximately $225.0 million of net debt in connection with the WorldxChange
merger.

As an integral component of the WorldxChange merger agreement, the Company
agreed to provide WorldxChange up to $45.0 million in secured bridge financing,
$38.2 million of which had been advanced as of June 30, 2000. These funds are
being used to finance operating losses expected to be incurred by WorldxChange
prior to the merger date and to make permanent investments in working capital
that are required to support WorldxChange's growth. This loan is included in
"Other assets" on the Company's consolidated balance sheet. The Company intends
to fully forgive this loan in connection with the consummation of the merger and
account for the loan as additional purchase price consideration.

On August 1, 2000, the Company entered into an Executive Management
Services Agreement with WorldxChange pursuant to which the Company will manage
the operations and business affairs of WorldxChange as if the parties had
already consummated the WorldxChange merger.

TELDAFAX ACQUISITION

In June 2000, the Company agreed to acquire a majority interest in TelDaFax
AG ("TelDaFax") through the completion of several integrated transactions and to
tender for the remaining shares of TelDaFax held by public shareholders.
TelDaFax is a leading facilities-based provider of bundled fixed line, wireless,
Internet and e-commerce services to business and residential customers in
Germany. As of June 30, 2000, TelDaFax had cash and marketable securities of
approximately $26.0 million, with essentially no debt.

The Company agreed to buy the approximately 41.6% of TelDaFax's outstanding
shares owned by certain institutional shareholders and a member of TelDaFax's
management at an exchange ratio of 1.025 shares of Company common stock for each
share of TelDaFax. The Company will also contribute certain of its German
businesses to TelDaFax for newly issued TelDaFax shares. Simultaneous with the
closing of the above transactions, the Company will make a tender offer for all
the remaining shares of TelDaFax at the same 1.025 exchange ratio. The Company
expects to issue approximately 35 million shares of its common stock assuming it
is successful in acquiring all of TelDaFax's outstanding shares.

The completion of the TelDaFax transactions is subject to, among other
things, acquisition by the Company of at least 50.1% of the fully diluted shares
outstanding of TelDaFax on a pro forma basis, certain regulatory approvals in
Germany and the United States and the approval of the Company's stockholders.
The transactions are expected to close by October 2000.

13
<PAGE> 15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

This Form 10-Q Report contains information regarding the Company's
strategies, plans and future expectations that are "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. When used in this report, the words
"may," "could," "should," "would," "believe," "anticipate," "estimate,"
"expect," "intend," "plan" and similar terms and/or expressions are intended to
identify forward-looking statements. These statements reflect the Company's
assessment of a number of risks and uncertainties and actual results could
differ materially from the results anticipated in these forward-looking
statements. In light of the risks and uncertainties inherent in all such
projected operational matters, a user of this Report should not regard
forward-looking statements contained in the Report as representations by the
Company or any other person that the plans of the Company will be achieved or
that any future expectations will be realized.

Factors that could cause the Company's actual results to differ from the
results discussed in the forward-looking statements include, but are not limited
to (i) the ability to successfully integrate new acquisitions; (ii) the ability
to acquire and develop an international telecommunications network; (iii) the
ability to manage effectively the Company's rapid growth; (iv) changes in
customer rates per minute; (v) termination of certain service agreements or
inability to enter into additional service agreements; (vi) changes in or
developments under domestic or foreign laws, regulations, licensing requirements
or telecommunications standards; (vii) changes in the availability of
transmission facilities; (viii) loss of the service of key officers; (ix) loss
of a customer which provides significant revenue; (x) highly competitive market
conditions in the industry; and (xi) concentration of credit risk. Any forward
looking statement speaks only as of the date of this Report.

OVERVIEW

The Company transports international long distance voice, data and Internet
traffic for long distance carriers in the United States and Europe, regional
Bell operating companies, competitive local exchange carriers, private network
operators and other global carriers. These services are provided through a
combination of owned and leased switching, fiber and satellite network
facilities, international termination relationships and resale agreements with
other international long distance providers. Through the acquisition of
FaciliCom in December 1999 and NETnet in February 2000, the Company has expanded
its service offerings to include the sale of bundled voice, data and Internet
services directly to small and medium sized businesses located throughout
Western Europe.

Prior to December 1998, the Company was a manufacturer and seller of
telecommunications network equipment. In December 1998, in connection with the
acquisition of Resurgens Communication Group ("Resurgens"), and the appointment
of a new Chief Executive Officer, the Company reorganized into two separate
operating groups. The Telecommunications Group provided international long
distance service to other carriers through a combination of its own
international network facilities, various international termination
relationships and resale arrangements with other international long distance
service providers. The Equipment Group provided digital switches, billing and
network telemanagement systems, fixed wireless local loop systems, intelligent
multiplexers, digital microwave radio systems, cellular base stations and other
telecommunications network products. In December 1999, the Company adopted a
plan to divest the businesses comprising the Equipment Group.

In December 1998, the Company acquired Resurgens, a facilities based
provider of carrier international long distance services. In connection
therewith, a wholly owned subsidiary of WorldCom, a major customer and vendor of
Resurgens, became a significant stockholder of the Company. WorldCom currently
owns approximately 7.4% of the voting common stock of the Company. In December
1998, John D. Phillips was appointed the Company's new Chief Executive Officer.
Mr. Phillips was formerly the President and Chief Executive Officer of
Resurgens.

14
<PAGE> 16

In 1999, management adopted a strategy designed to build on the Company's
U.S.-based carrier service business and position the Company to become a
significant provider of bundled voice, data and Internet services to retail
business customers located in selected European countries. Management believes
that the European telecommunications market has become extremely fragmented in
recent years due primarily to deregulation and significant forecasted growth. As
a result, management expects that a significant consolidation of carriers
operating in Europe will occur in the next few years, not unlike that which
occurred in the United States telecommunications market during the late 1980's
and 1990's. The strategy is to establish a pan-European telecommunications
network and gain significant market share during this period of consolidation by
playing a leading role in the consolidation of this market. To execute this
strategy, management intends to aggressively pursue the acquisition of
businesses, with a particular emphasis on those that provide retail services to
small and medium sized businesses operating in Europe.

To support its retail services strategy, the Company acquired FaciliCom in
December 1999. FaciliCom had invested in excess of $200.0 million over the past
few years to establish an intercountry network in the U.S. and 13 European
countries. Although the vast majority of its revenue was derived from
transporting traffic for other carriers, similar to the Company's base business,
FaciliCom's network was readily capable of supporting retail traffic and related
services. This acquisition effectively doubled the size of the Company's carrier
service revenue, provided a significant amount of European originated revenue
and lowered the combined company's costs of terminating international traffic in
Europe.

The Company entered 2000 with an annual pro forma revenue base in excess of
$1.0 billion, almost all of which relates to transporting traffic for other
carriers. In February 2000, the Company acquired NETnet International, a
subsidiary of LDI. NETnet, which had revenues of approximately $83.0 million in
1999, provides an array of telecommunications services to small and medium sized
business customers in Austria, France, Germany, Italy, Norway, Spain, Sweden,
Switzerland and the United Kingdom.

The acquisition of NETnet gave the Company approximately 20,000 retail
customers, an experienced retail sales force and a foundation for the offering
of bundled voice, data and Internet services to its targeted market in Europe.
It also provided the Company with a strong retail trade name, which management
currently expects to use for all of the Company's retail product offerings in
Europe. Management hopes to substantially improve the historical gross margins
realized by NETnet by terminating selected NETnet traffic over the Company's
network and eliminating the costs of redundant network facilities.

With the addition of NETnet, the Company now has an annual pro forma
revenue base in excess of $1.1 billion, approximately eight percent of which is
derived from retail services and the remainder from its base carrier business.
Of the total revenue, approximately 60% results from traffic originated in the
United States and 40% from traffic originated in Europe.

In February 2000, the Company entered into agreements to merge with Star
and WorldxChange. These two companies are expected to increase annual revenue by
an additional $1.0 billion, approximately $400.0 million of which is expected to
be generated from traffic originated in Europe. After completing these mergers,
the Company's revenue mix is expected to be approximately 20% retail and 80%
carrier.

In addition to an improved retail/carrier revenue mix, the Star and
WorldxChange mergers are expected to provide the Company with substantial
benefits in the areas of network coverage, network capacity and reduced
operating costs. In combining the networks and operations of all three
companies, management expects that there will be redundant switching equipment,
facilities and personnel. Management expects to eliminate these redundant assets
and significantly reduce the headcount of the combined company in an effort to
realize cost synergies. As a result, the Company expects to record a one-time
restructuring charge upon the completion of the Star and WorldxChange mergers.
The restructuring charge is expected to include the write-down of switching and
transmission equipment taken out of service, the write-off of certain leasehold
improvements, a provision for lease commitments remaining on certain facilities
and equipment taken out of service, employee termination benefits and other
related costs. Although management has not yet finalized the restructuring
program, it is expected to be approved in its final form and adopted immediately
following the mergers. Management has not yet determined the actual
restructuring charge to be recorded but expects that it will be significant.
15
<PAGE> 17

The Star and WorldxChange mergers will give the Company substantial
operations and network capacity in Germany and the United Kingdom, which
represent the two largest segments of the European telecommunications market.
Management expects to leverage these operations to further grow the Company's
retail business in these two key countries. WorldxChange has also developed
Internet-based information management systems that incorporate all key aspects
of retail telecommunications services, including billing, fraud protection and
customer care. These information systems are expected to serve as the platform
for supporting all retail operations conducted by World Access in Europe.

In June 2000, the Company agreed to acquire all or a majority of TelDaFax,
a leading provider of bundled fixed line, wireless, Internet and e-commerce
services to business and residential customers in Germany. In 1999, TelDaFax
produced revenue of approximately $329.0 million.

TelDaFax currently operates nine switches and has 170 interconnection
points within Germany. It is also in the process of deploying a 2,800-kilometer
fiber optic network between selected German cities that will provide the
foundation for future growth in its service offerings. The TelDaFax network,
together with the existing network assets of the Company and Star, will give the
Company one of the most extensive telecommunications networks in Germany. In
addition, TelDaFax has a dedicated sales force that consists of approximately
350 direct sales personnel and over 1,000 non-exclusive sales agents.

Although the STAR, WorldxChange and TelDaFax acquisitions are expected to
provide significant benefits to the Company, they also dramatically increase the
business and financial risks the Company must overcome to execute its strategy.
Star, WorldxChange and TelDaFax all have a history of significant net operating
losses, and the Company is expected to assume approximately $300.0 million in
debt upon the consummation of the acquisitions. For a detailed discussion of
specific risk factors, refer to the Company's Registration Statements on Form
S-3 (No. 333-79097) and Form S-4 (No. 333-37750).

The Company has used its common stock and new series of its preferred stock
as the primary forms of consideration paid for the companies acquired in 1999
and the first half of 2000. These forms of consideration will also be the
primary forms utilized in the pending acquisitions of Star, WorldxChange and
TelDaFax.

The sale of $70.0 million of Series A Preferred Stock, the sale of $158.1
million of common stock in private placement transactions and approximately
$270.0 million of net cash proceeds from the sale of two equipment businesses in
April 2000 have significantly enhanced the financial strength of the Company and
improved its liquidity. Management believes that existing cash and short-term
investments in excess of $500.0 million, available borrowings under a $100.0
million revolving bank line of credit and additional cash expected to be
generated from the sale of remaining World Access Equipment Group assets will
provide the Company with sufficient financial resources to support the cash
requirements of World Access, Star, WorldxChange and TelDaFax for at least the
next 12 months.

QUARTERLY OPERATING RESULTS

The Company's quarterly operating results are difficult to forecast with
any degree of accuracy because a number of factors subject these results to
significant fluctuations. As a result, the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.

Carrier service revenue, costs and related expenses have fluctuated
significantly in the past and are likely to continue to fluctuate significantly
in the future as a result of numerous factors. The Company's revenue in any
given period can vary due to factors such as call volume fluctuations,
particularly in regions with relatively high per-minute rates; the addition or
loss of major customers, whether through competition, merger, consolidation or
otherwise; the loss of economically beneficial routing options for the
termination of the Company's traffic; financial difficulties of major customers;
pricing pressure resulting from increased competition; and technical
difficulties with or failures of portions of the Company's network that impact
the Company's ability to provide service or to bill its customers. The Company's
operating expenses in any given period can vary due to factors such as
fluctuations in rates charged by carriers to terminate traffic; increases in bad
debt expense and reserves; the timing of capital expenditures, and other costs
associated with acquiring or

16
<PAGE> 18

obtaining other rights to switching and other transmission facilities; and costs
associated with changes in staffing levels of sales, marketing, technical
support and administrative personnel. In addition, the Company's operating
results can vary due to factors such as changes in routing due to variations in
the quality of vendor transmission capability; loss of favorable routing
options; the amount of, and the accounting policy for, return traffic under
operating agreements; actions by domestic or foreign regulatory entities; the
level, timing and pace of the Company's expansion in international and
commercial markets; and general domestic and international economic and
political conditions. Further, a substantial portion of transmission capacity
used by the Company is obtained on a variable, per minute and short-term basis,
subjecting the Company to the possibility of unanticipated price increases and
service cancellations. Since the Company does not generally have long-term
arrangements for the purchase or resale of long distance services, and since the
rates fluctuate significantly over short periods of time, the Company's future
quarterly operating results may vary significantly.

RESULTS OF CONTINUING OPERATIONS

The following table sets forth certain financial data expressed as a
percentage of total revenue from continuing operations:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ----------------
2000 1999 2000 1999
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Carrier services....................................... 92.1% 100.0% 92.8% 100.0%
Retail services........................................ 7.9 -- 7.2 --
----- ----- ----- -----
Total revenue..................................... 100.0 100.0 100.0 100.0
Cost of services....................................... 87.1 90.9 87.3 92.3
Selling, general and administrative.................... 9.0 4.3 9.1 4.4
Depreciation and network amortization.................. 1.2 1.0 1.7 1.2
Amortization of intangibles............................ 4.9 1.1 4.8 1.1
Restructuring credit................................... (1.3) -- (.7) --
----- ----- ----- -----
Total operating expenses.......................... 100.9 97.3 102.2 99.0
----- ----- ----- -----
Operating income (loss)........................... (.9) 2.7 (2.2) 1.0
Interest and other income.............................. 2.2 .5 1.6 .4
Interest expense....................................... 4.6 1.7 5.1 2.2
Foreign exchange gain (loss)........................... (.1) -- -- --
----- ----- ----- -----
Income (loss) from continuing operations income
taxes........................................... (3.4) 1.5 (5.7) (.8)
Income taxes (benefit)................................. .5 .9 (.4) .1
----- ----- ----- -----
Income (loss) from continuing operations.......... (3.9)% .6% (5.3)% (.9)%
===== ===== ===== =====
</TABLE>

SECOND QUARTER 2000 CONTINUING OPERATIONS COMPARED TO SECOND QUARTER 1999
CONTINUING OPERATIONS

Revenue. Total revenue increased $193.1 million, or 171.1%, to $306.1
million in the second quarter of 2000 from $112.9 million in the second quarter
of 1999. The increase was due to both the acquisitions of Comm/Net in May 1999,
FaciliCom in December 1999 and NETnet in February 2000 (the "Acquisitions") and
organic growth. On a pro forma basis, giving effect to the Acquisitions as if
completed on January 1, 1999, second quarter 2000 revenue increased by
approximately $71.0 million, or 30.0%, as compared to the second quarter of
1999.

As a result of the FaciliCom and NETnet acquisitions, the Company began
providing telecommunications services to retail European customers in the first
quarter of 2000, primarily to small and medium sized businesses. The Company's
long-term strategy is focused on growing European retail revenues, primarily
through acquisitions. Retail revenue was $24.3 million, or 7.9% of total revenue
in the second quarter of 2000.

During the second quarter of 2000, approximately 40.0% of the Company's
total revenue was from traffic originated in Europe. The strengthening of the
U.S. dollar versus the Euro and other major European currencies negatively
impacted the Company's European revenue by approximately $12.0 million, or 9.0%.

17
<PAGE> 19

During the first half of 2000, approximately 39.0% of the Company's total
revenue was from traffic originated in Europe. The strengthening of the U.S.
dollar versus the Euro and other major European currencies negatively impacted
the Company's European revenue by approximately $17.0 million, or 7.0%.

Pursuant to a Carrier Services Agreement with WorldCom, the Company
recorded approximately $63.0 million of revenue and related gross profit of
$27.6 million during the second quarter of 2000. This represented approximately
20.6% and 69.7% of the Company's total revenue and gross profit from continuing
operations, respectively. The Company expects the percentage of its total
revenue and gross profit contributed by WorldCom to decrease during the second
half of 2000 in connection with its acquisitions of Star, WorldxChange and
TelDaFax.

Gross Profit. Gross profit increased $29.3 million, or 285.6%, to $39.6
million in the second quarter of 2000 from $10.3 million in the second quarter
of 1999. Gross profit margin increased to 12.9% in the second quarter of 2000 as
compared to 9.1% in the second quarter of 1999.

This increase in gross profit was due to several factors, including
favorable margins on WorldCom traffic, the inclusion of retail revenue and
overall economies of scale associated with the significant increase in total
revenue. The economies of scale include benefits from access to larger carrier
vendors, lower purchasing rates due to increases in minute traffic volumes and
greater utilization of fixed network facilities. The Company expects that a
reduced overall dependency upon WorldCom traffic and pricing pressures due to
increased competition may adversely affect its gross profit margin in the
future, particularly in the carrier services business. Management expects to
offset these pressures through increased retail services revenue, the
realization of cost synergies from the Acquisitions and direct termination
reductions realized through new direct transit agreements.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $22.7 million, or 461.9%, to $27.6 million in
the second quarter of 2000 from $4.9 million in the second quarter of 1999,
primarily due to the Acquisitions. As a percentage of total revenue, these
expenses increased to 9.0% in the second quarter of 2000 as compared to 4.3% in
the second quarter of 1999. The percentage increase relates primarily to the
costs of operating FaciliCom's businesses in 13 European countries and the
inclusion of retail services, which typically have general and administrative
expenses greater than 20.0% of retail revenue.

Depreciation and Network Amortization. Depreciation and network
amortization increased $2.6 million, or 221.0%, to $3.8 million in the second
quarter of 2000 from $1.2 million in the second quarter of 1999, primarily due
to the depreciation and amortization of FaciliCom's European network.

Amortization of Intangibles. Amortization of intangibles increased $13.8
million to $15.0 million in the second quarter of 2000 from $1.2 million in the
second quarter of 1999. The increase relates to goodwill and other intangibles
recorded in connection with the Acquisitions.

The Company amortizes goodwill to expense on a straight-line basis over a
20-year period and other intangibles over a seven year period. Management
reviews the net carrying value of intangibles on a regular basis, and, if deemed
necessary, charges are recorded against current operations for any impairment in
the value of these assets. Such reviews include an analysis of current results
and take into consideration the discounted value of projected operating cash
flows. There was no impairment incurred in the second quarter of 2000.

Operating Income (Loss). Operating loss was $2.7 million in the second
quarter of 2000 as compared to $3.0 million of income in the second quarter of
1999. This variance was a direct result of increased amortization expense
related to Acquisition intangibles. Operating loss margin was 0.9% of total
revenue in the second quarter of 2000 as compared to operating income of 2.7% of
total revenue in the second quarter of 1999.

Earning Before Interest, Taxes, Depreciation and Amortization
("EBITDA"). EBITDA increased $10.7 million, or 198.8%, to $16.0 million in the
second quarter of 2000 from $5.4 million in the second quarter of 1999.
Excluding a one-time restructuring credit, EBITDA in the second quarter of 2000
was $12.0 million, or 3.9% of total revenue.

18
<PAGE> 20

EBITDA from continuing operations is earnings (loss) before net interest
expense (income), income taxes, foreign exchange gains or losses, depreciation
and amortization and is presented because the Company believes that such
information is commonly used in the telecommunications industry as one measure
of a company's operating performance and historical ability to service debt.
EBITDA from continuing operations is not determined in accordance with generally
accepted accounting principles, is not indicative of cash provided by operating
activities, should not be used as a measure of operating income and cash flows
from operations as determined under generally accepted accounting principles and
should not be considered in isolation or as an alternative to, or to be more
meaningful than, measures of performance determined in accordance with generally
accepted accounting principles. EBITDA, as calculated by the Company, may not be
comparable to similarly titled measures reported by other companies and could be
misleading unless all companies and analysts calculated EBITDA in the same
manner.

Interest and Other Income. Interest and other income increased $5.9
million to $6.6 million in the second quarter of 2000 from $689,000 in the
second quarter of 1999 due to an increase in invested cash balances of the
Company and higher market rates of return.

Interest Expense. Interest expense increased $12.1 million to $14.0
million in the second quarter of 2000 from $2.0 million in the second quarter of
1999. The increase was primarily due to interest expense associated with the
$300.0 million of 13.25% Senior Notes issued in December 1999 in exchange for
FaciliCom's Senior Notes and other debt assumed by the Company in connection
with the Acquisitions.

Foreign Exchange Gain (Loss). The Company reported a $321,000 foreign
exchange loss in the second quarter of 2000. All of this loss was unrealized and
related to the conversion of special drawing rights, or SDRs, into monetary
units other than U.S. dollars (see "Quantitative and Qualitative Disclosures
about Market Risks").

FIRST HALF OF 2000 CONTINUING OPERATIONS COMPARED TO FIRST HALF OF 1999
CONTINUING OPERATIONS.

Revenue. Total revenue increased $363.6 million, or 183.6%, to $561.6
million in the first half of 2000 from $198.0 million in the first half of 1999.
The increase was due to both the Acquisitions and organic growth. On a pro forma
basis, giving effect to the Acquisitions as if completed on January 1, 1999,
first half 2000 revenue increased by approximately $129.1 million, or 29.3%, as
compared to the first half of 1999.

As a result of the FaciliCom and NETnet acquisitions, the Company began
providing telecommunications services to retail European customers in the first
quarter of 2000, primarily to small and medium sized businesses. The Company's
long-term strategy is focused on growing European retail revenues, primarily
through acquisitions. Retail revenue was $40.6 million, or 7.2% of total revenue
in the first half of 2000.

During the first half of 2000, approximately 40.0% of the Company's total
revenue was from traffic originated in Europe. The strengthening of the U.S.
dollar versus the Euro and other major European currencies negatively impacted
the Company's European revenue by approximately $17.0 million, or 7.0%.

Pursuant to a Carrier Services Agreement with WorldCom, the Company
recorded approximately $116.0 million of revenue and related gross profit of
$45.6 million during the first half of 2000. This represented approximately
20.7% and 64.0% of the Company's total revenue and gross profit from continuing
operations, respectively. The Company expects the percentage of its total
revenue and gross profit contributed by WorldCom to decrease during the second
half of 2000 in connection with its acquisitions of Star, WorldxChange and
TelDaFax.

Gross Profit. Gross profit increased $56.1 million, or 368.6%, to $71.3
million in the first half of 2000 from $15.2 million in the first half of 1999.
Gross profit margin increased to 12.7% in the first half of 2000 as compared to
7.7% in the first half of 1999.

19
<PAGE> 21

expects that a reduced overall dependency upon WorldCom traffic and pricing
pressures due to increased competition may adversely affect its gross profit
margin in the future, particularly in the carrier services business. Management
expects to offset these pressures through increased retail services revenue, the
realization of cost synergies from the Acquisitions and direct termination
reductions realized through new direct transit agreements.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $42.7 million, or 491.9%, to $51.3 million in
the first half of 2000 from $8.7 million in the first half of 1999, primarily
due to the Acquisitions. As a percentage of total revenue, these expenses
increased to 9.1% in the first half of 2000 as compared to 4.4% in the first
half of 1999. The percentage increase relates primarily to the costs of
operating FaciliCom's businesses in 13 European countries and the inclusion of
retail services, which typically have general and administrative expenses
greater than 20.0% of retail revenue.

Depreciation and Network Amortization. Depreciation and network
amortization increased $6.9 million, or 283.0%, to $9.3 million in the first
half of 2000 from $2.4 million in the first half of 1999, primarily due to the
depreciation and amortization of FaciliCom's European network.

Amortization of Intangibles. Amortization of intangibles increased $25.0
million to $27.2 million in the first half of 2000 from $2.2 million in the
first half of 1999. The increase relates to goodwill and other intangibles
recorded in connection with the Acquisitions.

Operating Income (Loss). Operating loss was $12.6 million in the first
half of 2000 as compared to $1.9 million of income in the first half of 1999.
This variance was a direct result of increased amortization related to
Acquisition intangibles. Operating loss margin was 2.2% of total revenue in the
first half of 2000 as compared to operating income of 1.0% of total revenue in
the first half of 1999.

Earning Before Interest, Taxes, Depreciation and Amortization
("EBITDA"). EBITDA increased $17.4 million, or 266.1%, to $23.9 million in the
first half of 2000 from $6.5 million in the first half of 1999. Excluding a
one-time restructuring credit, EBITDA in the first half of 2000 was $19.9
million, or 3.5% of total revenue.

Interest and Other Income. Interest and other income increased $8.4
million to $9.3 million in the first half of 2000 from $872,000 in the first
half of 1999 due to an increase in invested cash balances of the Company and
higher market rates of return.

Interest Expense. Interest expense increased $24.3 million to $28.6
million in the first half of 2000 from $4.3 million in the first half of 1999.
The increase was primarily due to interest expense associated with the $300.0
million of 13.25% Senior Notes issued in December 1999 in exchange for
FaciliCom's Senior Notes and other debt assumed by the Company in connection
with the Acquisitions.

Foreign Exchange Gain (Loss). The Company reported a $211,000 foreign
exchange gain in the first half of 2000. All of this gain was unrealized and
related to the conversion of special drawing rights, or SDRs, into monetary
units other than U.S. dollars (see "Quantitative and Qualitative Disclosures
about Market Risks").

RESTRUCTURING

international network, which consists of 17 gateway switches as well as a
satellite earth station. Given the duplication of network assets between
FaciliCom and the Company, including switching and transmission equipment, the
Company made the decision in late 1999 to shut down and dispose of its six
gateway switches located in Chicago, Los Angeles, Newark, Dallas, San Francisco
and London. All of the U.S. switches were effectively taken out of service as of
December 31, 1999. The U.K. switch is being utilized on a limited basis and is
scheduled to be taken out of service by September 30, 2000, three months later
than the Company's initial estimate. The ongoing costs of operating the U.K.
switch continue to be charged to current operations. The restructuring charge
also provided for the write-off of leasehold improvements at the six switch
sites and lease commitments remaining on certain facilities and equipment taken
out of service.

The fourth quarter 1999 restructuring charge was recorded net of the $1.6
million fair value of these six switches, the amount the Company estimated it
would receive from the sale of these assets in the secondary equipment market.
As of the date of this Report, the Company has sold two of the switches for
approximately $600,000. The remaining assets continue to be offered for sale.

The following table summarizes the amounts included in each component of
the restructuring charge (in thousands):

The restructuring accrual is recorded in "Other accrued liabilities" on the
Company's consolidated balance sheets. The restructuring program is expected to
be completed in 2000.

21
<PAGE> 23

DISCONTINUED OPERATIONS

In December 1999, in connection with the acquisition of FaciliCom, the
Company adopted a plan to divest all of its remaining equipment businesses in
order to focus on its international long distance business. As a result of this
plan, all of the Company's equipment businesses have been accounted for as
discontinued operations and, accordingly, the results of their operations have
been excluded from continuing operations in the consolidated statements of
operations for all periods presented. Results of discontinued operations were as
follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Sales....................................................... $ 24,646 $137,004
Cost of sales............................................... 17,492 87,302
Research and development.................................... 5,599 8,772
Selling, general and administrative......................... 9,477 17,572
Goodwill amortization....................................... 1,635 4,474
Other (income) expense, net................................. (713) 6,307
-------- --------
Income (loss) before income taxes......................... (8,844) 12,577
Income taxes (benefit)...................................... (2,695) 4,429
-------- --------
Net income (loss) from operations......................... (6,149) 8,148
Net gain (loss) on sale..................................... 35,773 (12,342)
-------- --------
Net income (loss)......................................... $ 29,624 $ 4,194
======== ========
</TABLE>

First half 1999 results include sales and income before income taxes of
$7.8 million and $2.6 million, respectively, for the Galaxy Engineering Services
Division, which was sold by the Company in December 1999. Discontinued
operations consisted of the following businesses as of December 31, 1999:

- Telco Systems Division (acquired November 1998), a provider of next
generation transport and access solutions for service providers
throughout the world. Its products include intelligent integrated access
devices, multiplexers and digital microwave radios.

- NACT Switching Division (acquired February 1998), a provider of advanced
switching platforms with integrated proprietary applications software as
well as billing and telemanagement systems.

- Wireless Local Loop ("WLL") Division, a research and development group
designing a next generation, fixed wireless local loop system.

- Cellular Infrastructure Supply ("CIS") Division (acquired March 1997), a
value-added supplier of new and refurbished cellular base stations and
related equipment.

22
<PAGE> 24

The assets and liabilities of the discontinued operations are reflected as
"Net assets held for sale" in the consolidated balance sheets and consisted of
the following (in thousands):

In April 2000, the Company sold its Telco Systems Division to BATM for
$268.6 million in cash and 9,600,000 restricted shares of BATM stock, as
adjusted for a ten for one stock split in July 2000. In April 2000, the Company
also sold its WLL Division to Nera ASA, a Norwegian-based technology company,
for $13.0 million of cash. Selling expenses for these two transactions were
approximately $11.0 million and consisted of investment banking fees, legal
fees, other professional fees and incentive bonuses earned by Telco Systems and
WLL management. As of June 30, 2000, approximately $8.0 million of these
expenses have been paid.

In connection with the sales of these two businesses and certain other
Equipment Group transactions, the Company recorded a pre-tax gain in the second
quarter of $124.5 million. After income taxes and a charge to write-down
remaining Equipment Group assets to estimated net realizable value, the net gain
recorded was $35.8 million. The income tax provision related to this gain was
71.3%, significantly higher than statutory tax rates primarily due to the
non-deductibility of Telco Systems goodwill written-off in connection with the
sale. The actual taxes to be paid in cash by the Company as a result of these
two transactions is expected to be significantly less than the book provision
due to the tax basis of these assets and net operating loss carryforwards
available to the Company.

The shares of BATM stock held by the Company, which had an estimated value
of $76.9 million at the time of the Telco Systems sale, trade on the London
Stock Exchange. Under the terms of the sales agreement, the Company may not
sell, transfer or otherwise monetize these shares until April 5, 2001 without
the consent of BATM. The BATM shares are included in "Short-term investments" on
the Company's consolidated balance sheet and have been recorded by the Company
at fair market value, based on trading in the public market, less a ten percent
discount to reflect the trading restrictions. During the second quarter, the
Company recognized a $1.5 million unrealized loss on the value of these
securities. This loss, net of income taxes, is included in a separate component
of stockholders' equity.

During the first four months of 2000, the Company monetized the majority of
its investment in CIS, which consisted primarily of trade accounts receivable
and inventories. The cash realized from these activities approximated the
carrying values of these assets at December 31, 1999. The remaining assets of
CIS, which were not material, were sold in a private transaction completed in
May 2000.

The Company's only remaining discontinued operation is its NACT Switching
Division. The Company has not yet been offered a sales price for this business
that management feels appropriately measures its inherent value. In the first
half of 2000, NACT had sales and EBITDA of $13.4 million and $1.6 million,
respectively. Management expects NACT to continue to generate positive operating
results and introduce significant new products and technology during the second
half of 2000.

23
<PAGE> 25

LIQUIDITY AND CAPITAL RESOURCES

Overview. Cash management is a key element of the Company's operating
philosophy and strategic plans. Acquisitions to date have been structured to
minimize the cash element of the purchase price and ensure that appropriate
levels of cash are available to support the increased network capacity,
marketing programs and working capital normally associated with the growth
initiatives of acquired businesses. As of June 30, 2000, the Company had $520.6
million of cash and short-term investments and $92.5 million in borrowings
available under its bank credit line to support its current working capital
requirements and strategic growth initiatives.

Operating Activities. Cash used by operating activities was $83.1 million
for the first half of 2000 as compared to cash provided from operations of $4.3
million for the first half of 1999.

Accounts receivable increased $99.9 million to $264.7 million at June 30,
2000 from $164.8 million at December 31, 1999. The increase in accounts
receivable was primarily due to the LDI acquisition completed in February 2000
and the $50.5 million increase in the Company's total revenue for the second
quarter of 2000 as compared to the first quarter of 2000. In addition, WorldCom,
the Company's largest customer, began paying for its carrier services under
standard credit terms during the first quarter of 2000. WorldCom had
traditionally prepaid for services provided by the Company under a Carrier
Service Agreement entered into in mid-1998.

Average days sales outstanding at June 30, 2000 were approximately 79 days
as compared to 59 days at December 31, 1999. The increase related primarily to
the change in WorldCom payment terms and a net $22.3 million increase in
accounts payable during the first half of 2000. In its carrier service business,
the Company will frequently buy selected termination capacity, routes and
services from certain carriers and sell these same carriers different
termination capacity, routes and services. When the timing impact of these
offsetting receivables and payables is excluded, management believes its
normalized average days sales outstanding currently approximates 60 days.

Investing Activities. Cash from investing activities was $176.6 million in
the first half of 2000 as compared to cash used by investing activities of $4.1
million in the first half of 1999.

The net cash impact of business acquisitions and related transactions
completed in the first half of 2000 was the generation of $27.6 million of cash,
consisting of the following (in thousands):

<TABLE>
<S> <C>
Cash balance of acquired companies.......................... $44,151
Cash portion of purchase price.............................. (3,500)
Fees and expenses paid...................................... (13,017)
-------
$27,634
=======
</TABLE>

In February 2000, the Company acquired substantially all of the assets and
assumed certain liabilities of LDI, including its wholly-owned subsidiary
NETnet. In connection with the LDI acquisition, the Company issued 185,000
shares of Series D Preferred Stock to LDI's stockholders and the holders of
LDI's senior notes. The Series D Preferred Stock, which has a $185.0 million
liquidation preference, was valued at $217.6 million based on its estimated
market value during the period including the three trading days prior and the
three trading days subsequent to the date economic terms of the LDI acquisition
were announced.

LDI had historically maintained significant cash balances in escrow
pursuant to the Indenture governing its $225.0 million senior notes. As an
integral component of the LDI acquisition, the senior note holders waived their
rights to the remaining $36.7 million of restricted cash. This cash was received
by the Company free of restriction at the acquisition date.

The $13.0 million of fees and expenses paid in the first half of 2000
related primarily to the FaciliCom acquisition completed in December 1999 and
the LDI acquisition.

24
<PAGE> 26

In the first half of 2000, the Company invested its excess cash reserves in
short-term investments consisting of U.S. government securities, certificates of
deposit, high-grade commercial paper and bank acceptances. As of June 30, 2000,
the Company had short-term investments of $84.8 million.

During the first half of 2000, the Company invested $13.0 million in
property and equipment. Of this amount, $12.0 million related to continuing
operations and was primarily spent on upgrading the Company's European
telecommunication network.

In February 2000, the Company executed a definitive agreement with Star,
pursuant to which Star will be merged with and into the Company. Under the terms
of the agreement, each share of Star common stock will be converted into .386595
shares of the Company's common stock. The Company has the option of paying up to
40% of the merger consideration in cash. In addition, the Company will assume
approximately $75.0 million in Star debt. The Company expects the transaction to
close by October 2000.

The Star merger is subject to, among other things, certain regulatory
approvals, the approval of the stockholders of the Company and Star, and the
divestiture by Star of certain business segments for specified minimum net cash
proceeds. The merger is intended to qualify as a tax-free reorganization, and
will be accounted for as a purchase transaction. The Company has agreed to
provide bridge financing to Star in an amount up to $35.0 million, none of which
has been funded as of the date of this Report.

In February 2000, the Company executed a definitive merger agreement with
WorldxChange. Under the terms of the agreement, each share of WorldxChange
common stock will be exchanged for .6583 shares of the Company's common stock.
In addition, the Company will assume approximately $225.0 million in
WorldxChange debt. The Company expects the transaction to close by October 2000.

The WorldxChange merger is subject to, among other things, certain
regulatory approvals and the approval of the stockholders of the Company and
WorldxChange. The merger is intended to qualify as a tax-free reorganization,
and will be accounted for as a purchase transaction. The Company has agreed to
provide bridge financing to WorldxChange in an amount up to $45.0 million, $38.2
million of which was funded in the first half of 2000. The loans to WorldxChange
are included in "Other Assets" in the consolidated balance sheets.

Financing Activities. Cash provided from financing activities was $88.3
million and $43.6 million for the first half of 2000 and 1999, respectively.

In February 2000, the Company sold an aggregate of 3,822,552 shares of
restricted common stock for approximately $83.1 million, or $21.75 per share, in
two private transactions with a group of institutional and sophisticated
investors. The share price was based on the average closing price of the
Company's common stock during the five days prior to the offering dates.

In December 1998, the Company entered into a $75.0 million revolving line
of credit facility (the "Facility"), with a banking syndicate group led by Bank
of America. The Facility consists of a 364-day revolving line of credit which
may be extended under certain conditions and provides the Company the option to
convert existing borrowings to a three year term loan. In December 1999, the
Company amended the Facility to increase the line of credit to $100.0 million
and extend the credit for another 364-day term. Borrowings under the line are
secured by a first lien on substantially all the assets of the Company.

The Facility, which expires in December 2001, contains standard lending
covenants including financial ratios, restrictions on dividends and limitations
on additional debt and the disposition of Company assets. Interest is paid at
the rate of prime plus 1 1/4% or LIBOR plus 2 1/4%, at the option of the
Company. The Facility restricts distributions from the Company's consolidated
subsidiaries. Accordingly, the assets and cash flows of such subsidiaries,
including WA Telcom, the primary obligor on the Company's 4.5% Convertible
Notes, may not be used to pay any dividends to World Access, Inc.

25
<PAGE> 27

As of December 31, 1999, borrowings of $25.0 million were outstanding under
the Facility, which represented the amount drawn on the Facility in December
1999 to repay $25.0 million owed by FaciliCom at the time of its acquisition
under its revolving line of credit. In January 2000, the Company repaid the
$25.0 million outstanding under the Facility. As of June 30, 2000, there were no
borrowings and $7.5 million of letters of credit outstanding under the Facility.

During the first half of 2000, the Company received approximately $11.0
million in cash from the exercises of stock options and warrants by the
Company's employees and directors.

Commitments and Contingencies. Pursuant to the terms of the Indenture
governing the Company's $300.0 million of 13.25% Senior Notes due 2008, the
Company has an obligation to utilize the net cash proceeds (as defined in the
Indenture) from the sale of certain of the Company's equipment businesses (see
"Discontinued Operations") to make a one-time tender offer for all or a portion
of the 13.25% Senior Notes outstanding. Based on transactions completed as of
the date of this Report, the Company is currently obligated to tender for
approximately $160.0 million of the 13.25% Senior Notes by January 2, 2001. Upon
the sale of NACT and the monetization of the BATM shares held by the Company,
the obligatory tender amount will increase accordingly.

The actual price of this tender is defined as the face value of the 13.25%
Senior Notes, plus accrued and unpaid interest, less the current market value of
$15.0 million, or five points, of Company common stock paid to the noteholders
as exchange consideration in December 1999. Since by definition the tender price
will be below face value and these notes carry what management believes to be an
attractive interest rate, the Company is not currently able to forecast how much
of the 13.25% Senior Notes will actually be tendered to the Company. Management
has not yet made any determination as to when the $160.0 million tender offer
will be made, but will likely delay this offer until such time as the Company's
common stock trades at a level management believes to be more appropriate than
current trading ranges.

In the normal course of business, the Company enters into certain
sales-type lease arrangements with equipment customers. These leases are
generally sold to third-party financing institutions. A portion of these
arrangements contains certain recourse provisions under which the Company
remains liable. The Company's maximum exposure under the recourse provisions,
net of related reserves, was approximately $6.5 million at June 30, 2000. A
portion of this contingent obligation is collateralized by security interests in
the related equipment. The fair value of the recourse obligation at June 30,
2000 was not determinable as no market exists for these obligations.

Income Taxes. The Company's provision for income taxes attributable to
continuing operations for the first half of 2000 was a benefit of $2.1 million,
or approximately 6.7% of loss from continuing operations before income taxes.
The provision for income taxes differs from the amount computed by applying the
statutory federal and state income tax rates due to non-deductible expenses,
consisting primarily of amortization of intangibles.

As a result of the exercises of non-qualified stock options and warrants by
the Company's employees and directors, the Company realized federal income tax
benefits during the first half of 2000 of approximately $2.0 million. Although
these tax benefits do not have any effect on the Company's provision for income
tax expense, they represent a significant cash benefit to the Company. This tax
benefit is accounted for as a decrease in current income taxes payable and an
increase in capital in excess of par value.

Summary. The sale of $70.0 million of Series A Preferred Stock in April
1999 and June 2000, the sale of $158.1 million of common stock in private
placement transactions in the fourth quarter of 1999 and first quarter of 2000
and approximately $270.0 million of net cash proceeds received from the sales of
the Telco Systems and WLL divisions in April 2000 have significantly enhanced
the financial strength of the Company and improved its liquidity. The Company
believes that existing cash balances, available borrowings under the Company's
$100.0 million bank line of credit and additional cash expected to be generated
from the sale of Equipment Group assets will provide the Company with sufficient
capital resources to support its current working capital requirements and
business plans, and those of its acquired companies, for at least the next 12
months.

26
<PAGE> 28

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
In June 1999, SFAS No. 133 was amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of SFAS 133. As a result of this amendment, SFAS No. 133 shall be effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. In
accordance with SFAS No. 133, an entity is required to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. SFAS No. 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gain and losses to offset related results on the hedged
item in the income statement and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company does not expect the adoption of this standard to have a
material effect on its consolidated financial position or results of operations.

In December 1999, the Securities and Exchange Commission staff issued SAB
No. 101, Revenue Recognition in Financial Statements. The SAB spells out four
basic criteria that must be met before companies can record revenue. These are:
(a) persuasive evidence that an arrangement exists; (b) delivery has occurred or
services have been rendered; (c) the seller's price to the buyer is fixed or
determinable; and (d) collectibility is reasonably assured. Many of the examples
in the SAB address situations that give rise to the potential for recording
revenue prematurely. They include transactions subject to uncertainties
regarding customer acceptance, including rights to refunds and extended payment
terms, and require continuing involvement by the seller.

In March 2000, the SEC issued SAB 101A -- Amendment: Revenue Recognition in
Financial Statements, that delays the implementation date of certain provisions
of SAB 101. Under the amendment, the Company is not required to restate its
prior financial statements provided that the Company reports a change in
accounting principle no later than the second fiscal quarter (ending June 30,
2000) in accordance with FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements. In accordance with SFAS 3, for companies that
adopt SAB 101 in the second quarter, financial information for the first quarter
would be restated by including a cumulative effect adjustment in the quarter
(i.e., the first quarter). Management believes the adoption of SAB 101 may
result in an increase in the deferral of revenue for certain sales by the
Company's NACT business. Management does not believe the adoption of SAB 101
would have a material impact on the Company's continuing operations.

In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25. The Interpretation poses
and answers 20 separate questions dealing with APB 25 implementation practice
issues.

The Interpretation will be applied prospectively to new awards,
modifications to outstanding awards, and changes in employee status on or after
July 1, 2000, except as follows: (i) requirements related to the definition of
an employee apply to new awards granted after December 15, 1998; (ii)
modifications that directly or indirectly reduce the exercise price of an award
apply to modifications made after December 15, 1998; and (iii) modifications to
add a reload feature to an award apply to modifications made after January 12,
2000. Financial statements for periods prior to July 1, 2000 will not be
affected. Management does not expect the adoption of Interpretation No. 44 to
have a material effect on its consolidated financial position or results of
operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Although the Company's reporting currency is the U.S. dollar, an increasing
percentage of the Company's revenue will be generated from international
operations. Accordingly, changes in currency exchange rates may have a
significant effect on the Company's future results of operations. For example,
the accounting rate under certain European operating agreements is often defined
in monetary units other than

27
<PAGE> 29

U.S. dollars, such as "special drawing rights" or "SDRs." To the extent that the
U.S. dollar declines relative to units such as SDRs, the dollar equivalent
accounting rate would increase. In addition, as the Company expands into foreign
markets, its exposure to foreign currency rate fluctuations is expected to
increase. Although the Company does not currently engage in exchange rate
hedging strategies, management may choose to limit the Company's exposure by
purchasing forward exchange contracts or other similar hedging strategies.
Specific hedging contracts, if any, will be subject to approval by specified
officers acting within the Company's board of directors' overall policies and
limits. Management intends to limit the Company's hedging activities to the
extent of its foreign currency exposure. There can be no assurance that any
currency hedging strategy will be successful in avoiding currency
exchange-related losses.

Management invests cash balances in excess of operating requirements in
short-term securities, generally with maturities of 90 days or less, in
accordance with internal investment policies. These investments are limited
primarily to U.S. Treasury securities, certain time deposits, and high quality
repurchase agreements and commercial paper (with restrictions on the rating of
the companies issuing these instruments). Management does not invest in any
derivative or commodity type instruments. In addition, the restricted cash
balance available to fund the next two scheduled interest payments on the
Company's 13.25% Senior Notes is invested in U.S. Treasury securities.
Accordingly, the Company is subject to minimal market risk on any of its
investments.

The majority of the Company's debt, which consists of $300.0 million of
13.25% Senior Notes and $115.0 million of 4.5% Convertible Notes, bears interest
at a fixed rate. Although the actual service requirements of this debt are
fixed, changes in interest rates generally could put the Company in a position
of paying interest that differs from then existing rates. The Company's
revolving line of credit agreements with a banking syndicate group and Nortel
Networks, Inc. provide for borrowings which bear interest at variable rates
based on either the prime rate or the London Interbank Offered Rates. The
Company had approximately $30.4 million outstanding pursuant to these revolving
line of credit agreements at June 30, 2000. Management believes that the effect,
if any, of reasonably possible near-term changes in interest rates on the
Company's financial position, results of operations and cash flows should not be
material.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is involved in various legal proceedings
relating to claims arising in the ordinary course of business. Other than as
discussed below, neither World Access, Inc. nor any of its subsidiaries is party
to any legal proceeding, the outcome of which is expected to have a material
adverse effect on the Company's financial condition or results of operations.

Plaintiffs have filed 23 class action shareholder suits against the Company
and some of its current and former officers alleging violations of the federal
securities laws. These suits arise from alleged misstatements of material
information in and alleged omissions of material information from some of the
Company's securities filings and other public disclosures, principally related
to product development, inventory and sales activities during the fourth quarter
of 1998. Plaintiffs have requested damages in an unspecified amount in their
complaints. These class action suits were consolidated into a single action for
all pretrial proceedings in the United States District Court for the Northern
District of Georgia under the caption In re: World Access, Inc. Securities
Litigation (File No. 1:99-CV-43-ODE). The plaintiffs filed an amended
consolidated complaint for this action on or about May 28, 1999. The Company
filed a motion to dismiss the amended consolidated complaint on June 28, 1999.
The court denied this motion to dismiss in an order dated March 28, 2000. The
Company filed an answer on May 5, 2000. On July 21, 2000, competing plaintiffs
filed Motions for Class Certification, Appointment of Lead Plaintiffs and
Appointment of Lead Counsel. Although the Company denies that it violated any of
the requirements or obligations of the federal securities laws, there can be no
assurance that the Company will not sustain material liability as a result of or
related to these suits.

On February 14, 2000 and March 1, 2000 identical class action complaints
were filed against Star Telecommunications and certain of its directors and
executive officers which, among other things, sought to enjoin that company's
merger into the Company. On May 5, 2000, the court granted the defendants'
demurrer. On July 14, 2000, the plaintiffs appealed the court's order granting
demurrer.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

1. On April 1, 2000, the Company issued 20,044 shares of common stock to
Long Aldridge & Norman LLP in payment of $411,215 in legal fees.

2. On April 11, 2000, the Company issued 200,065 shares of common stock to
Ericsson GmbH as payment for accounts payable and expenses totaling
approximately $3.8 million owed to Ericsson by NETnet and Televersa NETnet
Telekommunicationssysteme GmbH, both of which were acquired by the Company in
connection with its acquisition of substantially all of the assets of LDI.

3. On April 25, 2000, the Company issued 736,016 shares of common stock to
Alcatel USA Sourcing, L.P. as payment for the settlement of capital lease
obligations owed to Alcatel by the Company for a total amount of approximately
$8.4 million.

4. On May 1, 2000, the Company issued 10,131 shares of common stock to Long
Aldridge & Norman LLP in payment of $143,106 in legal fees.

5. On May 11, 2000, the Company issued 55,555 shares of common stock to
NETnet International S.A. upon the conversion of 1,000 shares of the Company's
Convertible Preferred Stock, Series D, held by NETnet.

6. On June 9, 2000, the Company issued 681,818 shares of common stock to
PrimeTEC International, Inc. in connection with the Company's acquisition of
substantially all of the assets of PrimeTEC valued at $15.0 million. The Company
also issued 14,545 shares of common stock to C. Michael Moehle and 7,273 shares
of common stock to each of Jeffrey T. Seal, James Meadows, Jr. and Stuart W.
King. Each of these

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individuals is a member of PrimeTEC's management who received shares in exchange
for their agreement to provide services to the Company and to be bound by
non-competition and non-solicitation covenants.

7. On June 30, 2000, the Company issued 20,000 shares of 4.25% Cumulative
Senior Perpetual Convertible Preferred Stock, Series A, to The 1818 Fund III,
L.P. upon The 1818 Fund's exercise of an option to purchase such shares for
total consideration of $20.0 million. The Series A preferred stock pays
dividends on a quarterly basis and is convertible into shares of the Company's
common stock at a conversion price equal to $11.50 per share of common stock. If
the closing trading price of the Company's common stock on the Nasdaq Stock
Market exceeds $30.00 per share for 45 consecutive trading days, the Series A
preferred stock will automatically be converted into common stock. The Series A
preferred stock ranks, as to dividend and liquidation rights, senior to the
World Access common stock.

No underwriters were involved in the issuances of theses securities. The
issuances of these securities were deemed to be exempt from registration under
the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering. The recipients of
securities in these transactions represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution of the securities, and appropriate legends were affixed to
the stock certificates issued in theses transactions. All recipients represented
that they had adequate access to information regarding the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

<TABLE>
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated February 11, 2000 among
the Company, STI Merger Co., a Delaware corporation and
wholly-owned subsidiary of the Company, and STAR
Telecommunications, Inc., a Delaware corporation
(incorporated by reference to Exhibit 2.1 to the Company's
Form 10-Q for the quarter ended March 31, 2000, filed with
the Commission on May 22, 2000, as amended on August 4,
2000). The following is a list of omitted schedules and
other attachments which the Company agrees to furnish
supplementally to the Commission upon request:
</TABLE>

<TABLE>
<C> <C> <S>
SCHEDULES TO MERGER AGREEMENT:
3.1 (a) -- Organization
3.1 (b) -- Capital Structure
3.1 (c) -- No Conflict
3.1 (d) -- Reports and Financial Statements
3.1 (g) -- Required World Access Stockholder Vote
3.1 (j) -- Litigation; Compliance with Laws
3.1 (k) -- Absence of Certain Changes or Events
3.1 (o) -- Tax Matters
3.1 (p) -- Certain Contracts
3.2 (a) -- Organization; Standing and Power; Subsidiaries
</TABLE>

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<TABLE>
<C> <C> <S>
3.2 (b) -- Capital Structure
3.2 (c) -- Authority; No Conflicts
3.2 (h) -- Litigation
3.2 (i) -- Absence of Certain Changes or Events
3.2 (j) -- Employee Benefits Matters
3.2 (k) -- Intellectual Property
3.2 (n) -- Taxes
3.2 (o) -- Certain Contracts
4.2 (f) -- Sales
4.2 (h) -- Compensation
4.2 (l) -- Litigation
</TABLE>

<TABLE>
<C> <C> <S>
2.2 -- Agreement and Plan of Merger, dated February 11, 2000 among
the Company, CTI Merger Co., a Delaware corporation and
wholly-owned subsidiary of the Company, and Communication
TeleSystems International d/b/a WORLDxCHANGE Communications,
a California corporation (incorporated by reference to
Exhibit 2.2 to the Company's Form 10-Q for the quarter ended
March 31, 2000, filed with the Commission on May 22, 2000,
as amended on August 4, 2000). The following is a list of
omitted exhibits, schedules and other attachments which the
Company agrees to furnish supplementally to the Commission
upon request:
</TABLE>

<TABLE>
<C> <C> <S>
EXHIBITS TO MERGER AGREEMENT:
A -- Form of Escrow Agreement
B -- Form of Opinion of O'Melveny & Myers LLP
C -- Form of Opinion of Long Aldridge & Norman LLP
SCHEDULES TO MERGER AGREEMENT:
3.1 (b) -- Organization and Authorization
3.2 -- Authorized and Outstanding Stock
3.4 -- Financial Statements
3.5 -- Undisclosed Liabilities
3.6 -- Legal Issues
3.7 -- Property
3.10(a) -- Intellectual Property
3.10(b) -- Computer Software and Databases
3.10(c) -- Year 2000 Compliance
3.11 -- Litigation
3.12(a) -- Benefit Plans
3.12(d) -- Benefit Plans
3.12(h) -- Benefit Plans
3.13 -- Collective Bargaining
3.15 -- Investments
3.16 -- Tax Matters
3.18 -- Contracts and Commitments
3.19 -- No Conflict
3.20 -- Agreements in Full Force and Effect
3.21 -- Required Consents and Approvals
</TABLE>

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<TABLE>
<C> <C> <S>
3.22 -- Certain Changes and Events
4.1 -- Organization
4.3 -- No Conflict
4.5 -- Capital Structure
4.6 -- Reports and Financial Statements
4.10 -- Required World Access Stockholder Vote
4.13 -- Litigation; Compliance with Laws
4.14 -- Absence of Certain Changes or Events
4.15 -- Tax Matters
5.1 (b) -- Dividends; Changes in Share Capital
5.1 (c) -- Issuance of Securities
5.1 (e) -- Acquisitions
5.1 (f) -- Sales
5.1 (g) -- Investments; Indebtedness
5.1 (h) -- Compensation
5.1 (j) -- Material Agreements
</TABLE>

<TABLE>
<C> <C> <S>
2.3 -- Purchase and Transfer Agreement, dated June 14, 2000, among
the Company, TelDaFax AG, Dr. Henning F. Klose, Apax Germany
II L.P., Apax Funds Nominees Ltd. fur "B" Account, Apax
Funds Nominees Ltd. fur "D" Account, AP Vermogensverwaltung
Gesellschaft burgerlichen Rechts and A&M GmbH & Co
Vermogensverwaltung KG. The following is a list of omitted
schedules and other attachments which the Company agrees to
furnish supplementally to the Commission upon request:
</TABLE>

<TABLE>
<S> <C> <C>
EXHIBITS TO AGREEMENT:
4.1.2 -- Contribution/Exchange Agreement
5.3 -- Form of Agreement on Transfer of Title to Sold Shares
5.5 -- Registration Rights Term Sheet
8.2 -- Resolutions of Supervisory Board of TelDaFax
9.3.2 -- Letter from Custodian Bank
10.2.1 -- Information Regarding TelDaFax
11.2.3.2 -- Trade Marks and Patents
11.3.1.7 -- Shares on Subsidiaries Not Paid In
11.3.1.8 -- Satzung der TelDaFax Aktiengesellschaft
11.3.1.9 -- Shareholders' Agreements
11.3.1.10 -- Letter of Intent Regarding Dacotec GmbH
11.3.1.12 -- Noch night eingetragene Gesellschafterbeschlusse
11.3.3.2 -- Technologies
11.3.4.1 -- Ruckstellungsproblematik (TMI)
11.3.5.4 -- CSN-Contract DTAG
11.3.6.1 -- Anhangige Rechtsstrei tigk eiten der TelDaFax
11.3.7.1 -- Anstellungsvertrag
</TABLE>

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<TABLE>
<S> <C> <C>
11.3.7.4 -- Employees
11.3.7.5 -- Key Employees
11.3.10 -- Sondereinflusse auf Personalkosten 2000
11.4.6 -- Necessary Consents
11.4.7 -- U.S. Governmental Approvals
</TABLE>

<TABLE>
<C> <C> <S>
3.1 -- Certificate of Incorporation of the Company and Amendments
to Certificate of Incorporation (incorporated by reference
herein to Exhibit 3.1 to the Company's Form S-4, filed with
the Commission on October 6, 1998, Registration No.
333-65386; Amendment to Certificate of Incorporation
incorporated by reference herein to Exhibit 3.2 to Form 8-K
of the Company's predecessor, World Access, Inc., filed with
the Commission on October 28, 1998).
3.2 -- Amendment to Certificate of Incorporation (incorporated by
reference to Exhibit 3.2 to the Company's Form 10-K for the
year ended December 31, 1998, filed with the Commission on
April 9, 1999).
3.3 -- Certificate of Designation of 4.25% Cumulative Senior
Perpetual Convertible Preferred Stock, Series A
(incorporated by reference herein to Exhibit 4 to the
Company's Form 8-K, filed with the Commission on May 3,
1999).
3.4 -- Certificate of Designation of 4.25% Cumulative Junior
Convertible Preferred Stock, Series B (incorporated by
reference herein to Exhibit 4.1 to the Company's Form 8-K,
filed with the Commission on July 14, 1999).
3.5 -- Certificate of Designation of Convertible Preferred Stock,
Series C (incorporated by reference to Exhibit 1.7(b) to
Appendix A to the Company's Proxy Statement dated November
5, 1999 relating to the Special Meeting of Stockholder held
on December 7, 1999).
3.6 -- Certificate of Designation of Convertible Preferred Stock,
Series D (incorporated by reference to Exhibit 4 to the
Company's Form 8-K, filed with the Commission on February
28, 2000).
3.7 -- Certificate of Designation of Convertible Preferred Stock,
Series E.
3.8 -- Bylaws of the Company (incorporated by reference herein to
Exhibit 3.2 to the Company's Form S-4, filed with the
Commission on October 6, 1998, Registration No. 333-65389).
4.1 -- Certificate of Designation of 4.25% Cumulative Senior
Perpetual Convertible Preferred Stock, Series A
(incorporated by reference herein to Exhibit B to the
Company's Form 8-K, filed with the Commission on May 3,
1999).
4.2 -- Certificate of Designation of 4.25% Cumulative Junior
Convertible Preferred Stock, Series B (incorporated by
reference herein to Exhibit 4.1 to the Company's Form 8-K,
filed with the Commission on July 14, 1999).
4.3 -- Certificate of Designation of Convertible Preferred Stock,
Series C (incorporated by reference to Exhibit 1.7(b) to
Appendix A to the Company's Proxy Statement dated November
5, 1999 relating to the Special Meeting of Stockholders held
on December 7, 1999).
4.4 -- Certificate of Designation of Convertible Preferred Stock,
Series D (incorporated by reference to Exhibit 4 to the
Company's Form 8-K, filed with the Commission on February
28, 2000).
4.5 -- Certificate of Designation of Convertible Preferred Stock,
Series E (incorporated by reference to Exhibit 3.7 hereto).
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>

(b) Reports on Form 8-K

On April 18, 2000, the Company filed a Current Report on Form 8-K
announcing the completion of the sale of its Telco Systems, Inc. subsidiary to
BATM Advanced Communications Limited.

On April 26, 2000, the Company filed a Current Report on Form 8-K/A to
amend its Current Report on Form 8-K filed on February 28, 2000 related to the
acquisition of substantially all of the assets and assumption of substantially
all of the liabilities of LDI by World Access Telecommunications Group, Inc., a
subsidiary of the Company.

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On June 26, 2000, the Company filed a Current Report on Form 8-K announcing
that it had entered into a definitive agreement under which it agreed to acquire
a majority share in TelDaFax AG in a series of transactions.

On June 26, 2000, the Company filed a Current Report on Form 8-K announcing
that the Company and STAR Telecommunications, Inc. had amended the agreement and
plan of merger between the companies.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

<TABLE>
<S> <C>
WORLD ACCESS, INC.

Dated: August 14, 2000 By: /s/ BRYAN D. YOKLEY
----------------------------------------------------
Bryan D. Yokley
Executive Vice President and Chief Financial Officer
</TABLE>

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[World Access, Inc., LOGO]