Filed pursuant to Rule 424(b)(3)
                           Registration No. 333-82402


                          PROSPECTUS SUPPLEMENT NO. 10
                       (TO PROSPECTUS DATED JULY 1, 2002)

                            ATX COMMUNICATIONS, INC.
                            -------------------------
                             SHARES OF COMMON STOCK
                            -------------------------


     This Prospectus Supplement No. 10 supplements and amends the Prospectus
 dated July 1, 2002, and amended on July 2, 2002, July 16, 2002, August 2, 2002,
  August 15, 2002, August 16, 2002, November 14, 2002, April 11, 2003, May 16,
  2003 and August 14, 2003, relating to the shares of common stock, par value $
           0.01 per share, of ATX Communications, Inc., including the
 associated rights to purchase Series A Junior Participating Preferred Stock of
                            ATX Communications, Inc.

             The purpose of this Prospectus Supplement is to provide
       supplemental information that was contained in ATX Communications,
 Inc.'s quarterly report on Form 10-Q for the fiscal quarter ended September 30,
 2003.

           The Prospectus, together with all of the supplements filed
         to date (including this supplement), constitutes the prospectus
        required to be delivered by Section 5(b) of the Securities Act of
                     1933, with respect to offers and sales
                              of the Common Stock.

        Prospective investors should carefully consider matters discussed
    under the caption "RISK FACTORS" beginning on page 9 of the prospectus.

          THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
      SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
     NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
     COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
              REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

       The date of this Prospectus Supplement No. 10 is November 21, 2003.


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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






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

                                    FORM 10-Q

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              For the quarterly period ended September 30, 2003 OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


Commission File No.                     000-49899
                   -------------------------------------------------------------


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

          Delaware                                       13-4078506
--------------------------------------------------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)


50 Monument Road, Bala Cynwyd, Pennsylvania             19004
--------------------------------------------------------------------------------
(Address of principal executive offices)             (Zip Code)


                                 (610) 668-3000
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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 ___

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (As
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X

The number of shares  outstanding  of the issuer's  common stock as of September
30, 2003 was 29,958,870.





                            ATX Communications, Inc.


                                      Index



PART I.  FINANCIAL INFORMATION
                                                                                                Page

                                                                                              
Item 1.      Financial Statements
             Condensed Consolidated Balance Sheets -
                September 30, 2003 (Unaudited) and December 31, 2002 .............................2
             Condensed Consolidated Statements of Operations -
                Three and Nine months ended September 30, 2003 and 2002 (Unaudited) ..............3
             Condensed Consolidated Statement of Shareholders' Deficiency -
                Nine months ended September 30, 2003 (Unaudited) .................................4
             Condensed Consolidated Statements of Cash Flows -
                Nine months ended September 30, 2003 and 2002 (Unaudited) ........................5
             Notes to Unaudited Condensed Consolidated Financial Statements ......................6

Item 2.      Management's Discussion and Analysis of Results of
                 Operations and Financial Condition .............................................25

Item 3.      Quantitative and Qualitative Disclosures about Market Risk .........................36

Item 4.      Controls and Procedures.............................................................37


PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings...................................................................38

Item 6.      Exhibits and Reports on Form 8-K ...................................................47

SIGNATURES   ....................................................................................48




                                                  1


                                                     ATX COMMUNICATIONS, INC.


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



                                             Condensed Consolidated Balance Sheets

                                                                                    September 30, 2003      December 31, 2002
                                                                               ----------------------- -----------------------
                                                                                       (Unaudited)               (See Note)
                                                                                                             
Assets
Current assets:
  Cash and cash equivalents                                                                $ 3,396,000             $ 9,959,000
  Accounts receivable-trade, less allowance for doubtful
     accounts of  $10,704,000 (2003) and $8,755,000 (2002)                                  30,451,000              35,150,000
  Due from NTL Incorporated                                                                    457,000               1,120,000
  Other                                                                                      5,494,000               4,845,000
                                                                               ----------------------- -----------------------
Total current assets                                                                        39,798,000              51,074,000

Fixed assets, net                                                                           30,904,000              37,861,000
Goodwill                                                                                    79,558,000              79,558,000
Other, net of accumulated amortization of
     $2,766,000 (2003) and $1,871,000 (2002)                                                 8,463,000              10,570,000
                                                                               ----------------------- -----------------------
                                                                                         $ 158,723,000           $ 179,063,000
                                                                               ======================= =======================

Liabilities and shareholders' deficiency
Current liabilities:
  Accounts payable                                                                       $ 57,319,000             $ 65,799,000
  Accrued expenses                                                                         67,433,000               53,060,000
  Current portion of long-term debt, less unamortized discount                            149,775,000                1,512,000
  Current portion of capital lease obligations                                              8,866,000                9,534,000
  Deferred revenue                                                                         16,802,000               21,928,000
                                                                               ----------------------- -----------------------
Total current liabilities                                                                 300,195,000              151,833,000

Long-term debt, less unamortized discount                                                         --               145,809,000
Notes payable to NTL Europe, Inc., less unamortized discount                               19,124,000               17,632,000

Commitments and contingent liabilities

Shareholders' deficiency:
Preferred stock-- $.01 par value, authorized
     10,000,000 shares; issued and outstanding none                                                --                       --
Common stock-- $.01 par value, authorized 250,000,000
     shares; issued 30,000,000 shares; outstanding
     29,959,000 shares (2003) and 29,667,000 shares (2002)                                    300,000                  300,000
Additional paid-in capital                                                              1,030,044,000            1,030,613,000
Deficit                                                                                (1,190,864,000)          (1,166,389,000)
                                                                               ----------------------- -----------------------
                                                                                         (160,520,000)            (135,476,000)
Treasury stock at cost, 41,000 shares (2003) and 333,000 shares (2002)                        (76,000)                (735,000)
                                                                               ----------------------- -----------------------
                                                                                         (160,596,000)            (136,211,000)
                                                                               ----------------------- -----------------------
                                                                                        $ 158,723,000            $ 179,063,000
                                                                               ======================= =======================

          Note: The balance sheet at December 31, 2002 has been derived from the audited balance sheet at that date.


                                                    See accompanying notes.




                                                     ATX COMMUNICATIONS, INC.




                                        Condensed Consolidated Statements of Operations
                                                          (Unaudited)




                                               Three Months Ended September 30,           Nine Months Ended September 30,
                                                    2003                2002                  2003                2002
                                            --------------------- ------------------   ------------------- -------------------
                                                                                                  
Revenues                                        $ 68,632,000          $ 73,422,000        $  211,525,000      $  222,942,000

Costs and expenses
Operating                                         46,546,000            47,927,000           138,445,000         144,723,000
Selling, general and administrative               22,355,000            18,512,000            61,984,000          61,049,000
Corporate                                          1,528,000             1,930,000             5,451,000           5,244,000
Recapitalization costs                                    --               373,000                    --           5,825,000
Other costs                                          127,000                    --               420,000                  --
Depreciation                                       3,941,000             8,895,000            13,740,000          26,916,000
Amortization                                              --                84,000                    --             251,000
                                            --------------------- ------------------   ------------------- -------------------
                                                  74,497,000            77,721,000           220,040,000         244,008,000
                                            --------------------- ------------------   ------------------- -------------------
Operating loss                                    (5,865,000)           (4,299,000)           (8,515,000)        (21,066,000)

Other income (expense)
Interest income and other, net                       (78,000)              115,000              (180,000)            349,000
Interest expense                                  (5,758,000)           (4,503,000)          (15,780,000)        (12,143,000)
                                            --------------------- ------------------   ------------------- -------------------
Loss before income taxes                         (11,701,000)           (8,687,000)          (24,475,000)        (32,860,000)
Income tax benefit                                        --                92,000                    --              92,000
                                            --------------------- ------------------   ------------------- -------------------
Net loss                                        $(11,701,000)        $  (8,595,000)       $  (24,475,000)       $(32,768,000)
                                            ===================== ==================   =================== ===================

Basic and diluted net loss per share            $      (0.39)        $       (0.29)       $        (0.82)       $      (1.10)
                                            ===================== ==================   =================== ===================

Weighted average number of shares                 29,963,000            29,667,000            29,789,000          29,889,000
                                            ===================== ==================   =================== ===================

                                                    See accompanying notes.



                                                               3



                                                     ATX COMMUNICATIONS, INC.




                                   Condensed Consolidated Statement of Shareholders' Deficiency
                                                            (Unaudited)



                                         Common Stock                                                        Treasury Stock
                                   --------------------------     Additional                          ---------------------------
                                    Shares          Par        Paid-In Capital         Deficit            Shares         Amount
                                   ----------- -------------- ------------------- ------------------- --------------- -----------
                                                                                                  
Balance, December 31, 2002          30,000,000   $   300,000   $ 1,030,613,000   $   (1,166,389,000)       333,000     $(735,000)
Common shares returned to Treasury         --             --                --                   --          8,000        (3,000)
Issuance of shares from Treasury           --             --          (569,000)                  --       (300,000)      662,000
Net loss                                   --             --                --          (24,475,000)            --            --
                                   ----------- -------------- ------------------- ------------------- --------------- -----------
Balance, September 30, 2003         30,000,000   $   300,000   $ 1,030,044,000   $   (1,190,864,000)        41,000     $ (76,000)
                                   =========== ============== =================== =================== =============== ===========

                                                      See accompanying notes.



                                                                 4





                                                 ATX COMMUNICATIONS, INC.

                                     Condensed Consolidated Statements of Cash Flows
                                                       (Unaudited)

                                                                                     Nine Months Ended September 30,
                                                                                       2003                   2002
                                                                          ----------------------- ----------------------
                                                                                                    
Net cash (used in) provided by operating activities                                 $  (404,000)          $  1,157,000

Investing activities
Purchase of fixed assets                                                             (6,783,000)            (9,283,000)
Other                                                                                         -                470,000
                                                                          ----------------------- ----------------------
Net cash used in investing activities                                                (6,783,000)            (8,813,000)

Financing activities
Principal payments of capital lease obligations                                        (376,000)              (328,000)
Receipt of proceeds for notes receivable                                              1,000,000                      -
                                                                          ----------------------- ----------------------
Net cash provided by (used in) financing activities                                     624,000               (328,000)
                                                                          ----------------------- ----------------------
Decrease in cash and cash equivalents                                                (6,563,000)            (7,984,000)
Cash and cash equivalents at beginning of period                                      9,959,000             24,966,000
                                                                          ----------------------- ----------------------
Cash and cash equivalents at end of period                                          $ 3,396,000           $ 16,982,000
                                                                          ======================= ======================

Supplemental disclosure of cash flow information
  Cash paid for interest                                                           $  1,672,000           $  8,127,000
                                                                          ======================= ======================



                                                 See accompanying notes.



                                                            5





                            ATX Communications, Inc.

            Notes to the Condensed Consolidated Financial Statements
                                   (Unaudited)

Note 1.           Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  pursuant to the rules and  regulations of the Securities
and Exchange Commission, known as the SEC. Accordingly,  they do not include all
of 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  have been included.  Operating results for the three and nine
months ended  September 30, 2003 are not  necessarily  indicative of the results
that  may be  expected  for the year  ending  December  31,  2003.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto included in Item 8 of ATX  Communications,  Inc.'s annual report on Form
10-K for the year ended December 31, 2002.

Certain amounts have been reclassified to conform to the 2003 presentation.

Note 2.           ATX Recapitalization

In July  2002,  ATX  Communications,  Inc.,  referred  to  herein  as ATX or the
Company, completed a recapitalization, which began in December 2001. Pursuant to
the terms of the  recapitalization,  the Company  eliminated  approximately $600
million  of debt  and  preferred  stock  and more  than  $100  million  of other
liabilities and future  obligations.  The Company  incurred  additional costs in
connection  with the  recapitalization,  which  consisted  primarily of employee
incentives,  legal fees,  accounting  fees and  printing  fees,  of $373,000 and
$5,825,000,  respectively,  during the three and nine months ended September 30,
2002.

Note 3.           Significant Accounting Policies

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Such estimates and assumptions impact,  among others, the following:  the amount
of uncollectible accounts receivable, the amount to be paid to terminate certain
agreements  included in  reorganization  costs,  the amount to be paid to settle
certain toll and interconnection  liabilities, the amount to be paid as a result
of certain sales and use tax audits,  potential  liabilities  arising from other
sales tax  matters  and  estimates  related to the value of  long-lived  assets,
goodwill and other intangible  assets,  and potential  liabilities  arising from
litigation. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly   owned   subsidiaries.   Significant   intercompany   accounts  and
transactions have been eliminated in consolidation.


                                        6



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

Note 3.           Significant Accounting Policies (continued)

Contingent Liabilities

The Company's  determination of the treatment of contingent liabilities is based
on a view of the expected outcome of the applicable  contingency.  The Company's
legal counsel is consulted on matters related to litigation. Experts both within
and outside the Company are  consulted  with respect to other matters that arise
in the  ordinary  course of  business.  Examples  of  matters  that are based on
assumptions, judgments and estimates are the amount to be paid to terminate some
agreements  included in  reorganization  costs, the amounts to be paid to settle
some toll and interconnection  liabilities, the amount to be paid as a result of
some sales and use tax audits and potential liabilities arising from other sales
tax matters, and potential  liabilities arising from litigation.  A liability is
accrued if the  likelihood of an adverse  outcome is probable of occurrence  and
the amount is estimable.

Net Loss Per Share

The Company  reports its basic and diluted net loss per share in accordance with
Financial  Accounting  Standards  Board,  referred  to  as  FASB,  Statement  of
Financial  Accounting  Standards,  referred to as SFAS,  No. 128,  "Earnings Per
Share."

Revenue Recognition and Certain Cost Classifications

Revenues are  recognized  at the time the service is rendered to the customer or
the performance of the service has been completed. Charges for services that are
billed in advance are deferred and recognized when earned.

Operating costs includes  direct costs of sales and network costs.  Direct costs
of  sales   include   the  costs   directly   incurred   primarily   with  other
telecommunications  carriers in order to render  services to customers.  Network
costs  include the costs of fiber and access,  points of  presence,  repairs and
maintenance,  rent, utilities and property taxes of the telephone,  Internet and
data network, as well as salaries and related expenses of network personnel.



                                        7



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 3.           Significant Accounting Policies (continued)

Stock-Based Compensation

The Company's  employees  participate  in the ATX stock option plan. ATX applies
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees",  known  herein as APB Opinion  No. 25, and related  interpretations.
When applying APB Opinion No. 25, compensation expense for compensatory plans is
measured based on "intrinsic value" (i.e., the excess of the market price of the
stock over the exercise  price on the  measurement  date).  Under the  intrinsic
value method,  compensation is determined on the measurement  date; that is, the
first  date on which  both the  number of shares the  employee  is  entitled  to
receive and the exercise price, if any, are known. Compensation expense, if any,
generally is recognized  over the equity award's  vesting  period.  Compensation
expense  associated  with awards that  immediately are vested or attributable to
past services is recognized when granted.

Pro forma  information  regarding net loss and net loss per share is required by
SFAS No. 123, and has been  determined  as if the Company had  accounted for its
employee stock options under the fair value method of that  Statement.  The fair
value  for  these  options  was  estimated  at  the  date  of  grant  using  the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions  for 2003 and 2002:  risk-free  interest  rate of 4.00%  and  4.81%,
respectively,  dividend yield of 0%,  volatility  factor of the expected  market
price of the  Company's  common  stock of 1.234 and 1.743,  respectively,  and a
weighted-average expected life of the options of 10 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the Company's stock options have  characteristics  significantly  different from
those of traded options and because changes in the subjective input  assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options


                                        8



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

Note 3.           Significant Accounting Policies (continued)

The following table provides pro forma information  regarding net loss as if the
Company had accounted for its employee stock options under the fair value method
pursuant to SFAS No. 123 "Accounting for Stock Based  Compensation." The effects
of applying SFAS No. 123 on pro forma  disclosures of net loss for the three and
nine  months  ended   September   30,  2003  and  2002  are  not  likely  to  be
representative of the pro forma effects on net loss in future years.



                                               Three Months Ended September 30,    Nine Months Ended September 30,
                                              ----------------------------------- -----------------------------------
                                                    2003              2002               2003             2002
                                              ----------------- ----------------- ---------------- ------------------
                                                                                       
Net loss-- as reported                        $    (11,701,000)  $    (8,595,000)  $  (24,475,000) $     (32,768,000)
Stock based compensation expenses
  under SFAS No. 123                                  (914,000)         (895,000)      (2,721,000)        (2,687,000)
                                              ----------------- ----------------- ---------------- ------------------
Pro forma net loss                            $    (12,615,000)       (9,490,000)  $  (27,196,000)       (35,455,000)
                                              ================= ================= ================ ==================

Basic and diluted per share information:
Net loss-- as reported                        $          (0.39)  $         (0.29)  $        (0.82) $           (1.10)
Stock based compensation expenses
  under SFAS No. 123                                     (0.03)            (0.03)           (0.09)              (.09)
                                              ----------------- ----------------- ---------------- ------------------
Pro forma net loss per share                  $          (0.42)  $         (0.32)  $        (0.91) $           (1.19)
                                              ================= ================= ================ ==================



Note 4.           Revenues



                                               Three Months Ended September 30,    Nine Months Ended September 30,
                                                  2003               2002              2003              2002
                                            ------------------ ------------------ ---------------- ------------------
                                                                                             
Local exchange services                          $ 22,454,000       $ 24,585,000     $ 67,720,000        $ 71,695,000
Internet, data and web-related services            20,658,000         21,980,000       62,554,000          68,355,000
Toll-related telephony services                    17,976,000         16,688,000       54,093,000          52,598,000
Other (a)                                           7,544,000         10,169,000       27,158,000          30,294,000
                                            ------------------ ------------------ ---------------- ------------------
                                                 $ 68,632,000       $ 73,422,000  $   211,525,000  $     222,942,000
                                            ================== ================== ================ ==================


(a) Other includes carrier access billing,  reciprocal  compensation,  wireless,
paging and information services.


Note 5.           Fixed Assets

Fixed assets consist of:



                                                                              September 30,         December 31,
                                                                         -------------------- ---------------------
                                                                                   2003                  2002
                                                                         -------------------- ---------------------
                                                                                               
   Operating equipment                                                          $ 34,821,000     $      30,204,000
   Computer hardware and software                                                  9,394,000             6,929,000
   Other equipment                                                                 5,647,000             5,634,000
   Construction-in-progress                                                           25,000               337,000
                                                                         -------------------- ---------------------
                                                                                  49,887,000            43,104,000
   Accumulated depreciation                                                      (18,983,000)           (5,243,000)
                                                                         -------------------- ---------------------
                                                                                $ 30,904,000     $      37,861,000
                                                                         ==================== =====================



                                        9


                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 6.           Accrued Expenses

Accrued expenses consist of:



                                                                                                 
                                                                            September 30,         December 31,
                                                                         -------------------- ---------------------
                                                                                2003                  2002
                                                                         -------------------- ---------------------
Toll and interconnect                                                            $27,430,000           $23,016,000
Taxes, including income taxes                                                     11,835,000            11,473,000
Accrued interest                                                                  10,446,000             1,416,000
Payroll and related                                                                7,695,000             6,431,000
Other                                                                              5,641,000             4,997,000
Reorganization costs                                                               3,364,000             4,542,000
Professional fees                                                                  1,022,000             1,185,000
                                                                         -------------------- ---------------------
                                                                                 $67,433,000           $53,060,000
                                                                         ==================== =====================



Note 7.           Long-Term Debt

Long-term debt consists of:



                                                                                                   
                                                                             September 30,         December 31,
                                                                         ---------------------- --------------------
                                                                                 2003                  2002
                                                                         ---------------------- --------------------
Senior secured credit facility, less unamortized discount of
  $9,094,000  (2003) and $10,291,000 (2002)                                       $147,006,000         $145,809,000
6% Convertible  Notes,  less unamortized  discount of
  $1,589,000 (2003) and $2,846,000 (2002)                                            2,769,000            1,512,000
                                                                         ---------------------- --------------------
                                                                                   149,775,000          147,321,000
   Less current portion                                                           (149,775,000)          (1,512,000)
                                                                         ---------------------- --------------------
                                                                                  $       --           $145,809,000
                                                                         ====================== ====================


The Company's  consolidated  balance sheet includes CCL Historical,  Inc.'s,  6%
Convertible  Subordinated  Notes. These notes are obligations of CCL Historical,
Inc., referred to herein as CCL, and do not represent obligations of the Company
or any of its other  subsidiaries.  The semi-annual  interest payments that were
due under the  outstanding  notes since April 1, 2002 have not been made and CCL
is in default  under these notes.  As such,  the notes and the accrued  interest
thereon are currently due and payable in full.

                                       10



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

Note 7.           Long-Term Debt (continued)

On March 31, 2003,  the Company  entered into an amendment to its senior secured
credit facility.  Under this amendment, the lenders under the facility agreed to
defer interest  payments on the  outstanding  loans during the period  beginning
March 12, 2003 and ending on February 2, 2004,  during which time the loans will
accrue  interest  at a rate of 5.5% per annum plus the base  rate,  which is the
higher of the  prime  rate or the  federal  funds  effective  rate plus 0.5% per
annum.  As of September 30, 2003,  this rate was 9.5%.  The Company has recorded
accrued  interest of  $9,435,000  as of  September  30, 2003.  In addition,  the
required  principal  payments  originally  scheduled  for  2003,  which  totaled
$1,950,000,  were deferred to February 2, 2004.  The lenders have also agreed to
waive and/or amend certain financial covenants set forth in the credit agreement
until January 31, 2004, and added other financial covenants,  in order to better
reflect  the  Company's  current  operations.   The  Company  incurred  deferred
financing  costs of $557,000,  which consist  primarily of legal and  consulting
fees, in connection with this amendment.  These deferred financing costs will be
amortized  during the effective term of this  amendment.  The current portion of
long-term debt includes  principal payments due under the senior credit facility
within one year.

Based on the Company's current business plan, the Company will not have the cash
available to fund the required  deferred  interest and principal  payments on or
before  February 2, 2004.  In  addition,  the  Company  may not have  sufficient
liquidity  to  fund  operations  through  the  end of the  year.  The  Company's
continued  ability to fund  operations  could be  adversely  effected by various
circumstances,  including,  acceleration of critical operating payables, adverse
litigation results,  service  disruptions,  lower than expected  collections and
other circumstances  outside of the Company's immediate and direct control.  The
Company is in the process of seeking and considering  strategic  alternatives in
order to reduce its overall  indebtedness,  including  amounts  under the senior
secured credit facility.  Such strategic  alternatives may include,  among other
things,   debt  or  equity   financings  or   refinancings,   recapitalizations,
restructurings,  mergers and  acquisitions or other  transactions.  There are no
assurances that the Company will obtain the financing that it is seeking. In the
event that the Company cannot obtain  financing,  reduce its  indebtedness,  and
satisfactorily resolve its outstanding litigation,  the Company may need to file
for protection  under the federal  bankruptcy  laws. If the Company engages in a
Chapter 11 bankruptcy proceeding, any proposed plan of reorganization would also
be subject to confirmation by the bankruptcy court after it has been voted on by
certain  creditors whose interests would be impaired by the plan,  including the
lenders under our senior secured credit facility,  and satisfaction or waiver of
certain conditions. It is also possible that any new investor in the Company may
insist on the Company seeking  bankruptcy  protection as a precondition to or as
part of any such financing transaction.

We were not in compliance with certain of the covenants  contained in our credit
agreement for the three-month  period ending September 30, 2003. On November 14,
2003, the lenders agreed to waive  compliance with these covenants for the third
quarter of 2003.  There can be no  assurances  that the Company  will be able to
maintain  compliance  with its  covenants  during the fourth  quarter of 2003 or
obtain a waiver of those  covenants in order to avoid an event of default  under
the senior credit facility. Nor can there be any assurance that the Company will
be able to implement a strategic alternative as discussed above. Therefore,  the
Company has classified the  outstanding  amounts under its senior secured credit
facility,  less unamortized discount, as a current liability as of September 30,
2003.

All of the Company's subsidiaries have unconditionally  guaranteed payment under
the senior secured credit facility.


                                       11

                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

Note 8.           Related Party Transactions

On May 8, 2002, NTL Incorporated (then known as NTL  Communications  Corp., "New
NTL"), NTL Europe, Inc. (then known as NTL Incorporated,  "Old NTL") and certain
of  New  NTL's  and  Old  NTL's   subsidiaries,   filed  a  pre-arranged   joint
reorganization  plan (the "Plan") under Chapter 11 of the U.S.  Bankruptcy Code.
The Plan became  effective  on January 10,  2003,  at which time both  companies
emerged  from  Chapter  11  reorganization.  Pursuant  to the Plan,  the  entity
formerly known as NTL  Incorporated  and its  subsidiaries  and affiliates  were
split  into  two  separate  groups,  and New NTL and  Old NTL  each  emerged  as
independent public companies.  New NTL became the holding company for the former
NTL group's principal UK and Ireland assets.  Prior to consummation of the Plan,
New  NTL  was a  wholly-owned  subsidiary  of  the  entity  then  known  as  NTL
Incorporated,  which,  pursuant to the Plan, was renamed "NTL Europe,  Inc." and
which became the holding company for the former NTL group's continental European
and certain other assets. Some of the Company's directors were also directors of
Old NTL prior to its reorganization,  and one director was a director of New NTL
following its reorganization.

In April 2001, CCL and the Company as co-obligors  issued to Old NTL $15 million
aggregate  principal amount of 10.75% Unsecured  Convertible PIK Notes Due April
2011. At September 30, 2003 and December 31, 2002, the total amount of the notes
outstanding,   less  the   unamortized   discount  of  $298,000  and   $327,000,
respectively, was $19,124,000 and $17,632,000, respectively.

Through 2002, New NTL provided the Company with management, financial, legal and
technical  services,  access to office space and  equipment and use of supplies.
Amounts charged to the Company by New NTL consisted of salaries and direct costs
allocated to the Company where identifiable,  and a percentage of the portion of
New NTL's corporate overhead,  which could not be specifically  allocated to New
NTL. It is not practicable to determine the amounts of these expenses that would
have been incurred had the Company operated as an unaffiliated  entity.  For the
three and nine months  ended  September  30,  2002,  New NTL charged the Company
$5,000 and $177,000, respectively, which is included in corporate expenses.

A subsidiary of the Company provides billing and software  development  services
to  subsidiaries  of New NTL. For the three months ended  September 30, 2003 and
2002, the Company recognized revenues for these services,  totaling $694,000 and
$707,000,  respectively.  For the nine months  ended  September  30,  2003,  the
Company recognized revenues of $2,136,000 for these services. Prior to the third
quarter of 2002,  the Company  recorded  the  billings  for these  services as a
reduction of selling, general and administrative expenses.  Selling, general and
administrative expenses were reduced by $1,508,000 during 2002.


                                       12

                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 8.           Related Party Transactions (continued)

In 2001,  the Company and Old NTL entered into a license  agreement  whereby Old
NTL was  granted an  exclusive,  irrevocable,  perpetual  license to use certain
billing  software  developed  by  the  Company  for  telephony  rating,  digital
television events rating, fraud management and other tasks. The Company recorded
the $12.8 million received as deferred revenue to be recognized over a period of
three  years,  which was the  estimated  amount of time the Company  expected to
provide services under this arrangement.  The Company  recognized  $1,068,000 of
this revenue during each of the three-month periods ended September 30, 2003 and
2002 and  recognized  $3,205,000  during each of the  nine-month  periods  ended
September 30, 2003 and 2002.

The Company leases office space and a network facility from entities  controlled
by an individual who owns 34% of the outstanding  shares of the Company's common
stock. Rent expense for these leases was approximately $418,000 and $451,000 for
the three months ended September 30, 2003 and 2002 and approximately  $1,254,000
and  $1,352,000  for  the  nine  months  ended  September  30,  2003  and  2002,
respectively.

The Company engaged B/G Enterprises,  LLC, a company  affiliated with a director
of the Company,  to provide travel related services.  The cost of these services
totaled $81,000 during the nine months ended September 30, 2003.

The Company  inadvertently  paid certain  invoices that  included  approximately
$15,000 of  personal  expenses of one of its senior  officers  prior to the time
that such invoices were reimbursed to the Company by the senior  officer.  These
amounts  have  been  reimbursed  to the  Company  in full  and the  Company  has
implemented additional controls and procedures to prevent this from recurring.

Note 9.           Other Costs

During June 2003, the Company paid $200,000 in cash and issued 300,000 shares of
common  stock,  valued  at  $93,000,  from its  treasury  in  consideration  for
settlement  of certain  legal  matters.  The Company has  recognized  a $293,000
charge in other costs for the consideration given in this settlement.

During August 2003,  the Company  collected  $1,000,000 in cash,  received 8,560
shares of its common  stock and 319,699  shares of CCL's common stock as payment
for notes receivable due from former shareholders of the Company.  The shares of
common  stock  received  were  valued at $5,000 in the  aggregate.  The  Company
recognized a $1,005,000 gain for the amounts received on these notes,  which has
been recorded as a reduction of other costs.

During  September  2003, a  wholly-owned  subsidiary  of the Company  settled an
outstanding legal matter regarding alleged early termination liabilities,  under
a services  agreement  and a  co-location  agreement.  The Company  recognized a
$452,000  gain  for  this  settlement,  which  was the  difference  between  the
liability accrued and the amount paid. The gain has been recorded as a reduction
of other costs.

During  September  2003,  the Company  entered  into an agreement to terminate a
facility lease  obligation  with a remaining term of seven years.  The agreement
required  the  Company to permit the  landlord to retain the  $500,000  security
deposit  for the lease in October  2003 and to pay  $1,250,000  over three years
beginning  mid-November  2003.  The Company  recorded a charge of  $1,584,000 in
other costs  related to this  agreement,  which is equal to the present value of
the payments to be made under the agreement.


                                       13

                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

Note 10.          Reorganization Costs

The Company did not record any reorganization costs during the first nine months
of  2003.  In  2001,  the  Company  announced  that  it was  taking  actions  to
reorganize,  re-size and reduce  operating  costs and create  greater  operating
efficiencies.  The major actions involved in the 2001  reorganization  included:
(1) consolidation of functions such as network operations,  customer service and
finance,  (2)  initiatives  to increase  gross margins and (3)  agreements  with
vendors to reduce or eliminate purchase  commitments.  Charges for these actions
included  lease  exit  costs and  agreement  termination  charges.  All of these
actions were completed during 2002 and the remaining liability is expected to be
paid through 2005.

The Company  paid  $1,178,000  of accrued  reorganization  costs during the nine
months ended  September  30,  2003.  As of September  30,  2003,  the  Company's
remaining  accrued  reorganization  costs totaled  $3,364,000,  which  consisted
primarily of reserves for agreement terminations.

Note 11.          Commitments and Contingent Liabilities

As of September 30, 2003, the Company had purchase  commitments of approximately
$3,289,000 outstanding, all of which are due during 2003 and 2004. Additionally,
the  Company  had  standby  letters  of  credit  of   approximately   $2,204,000
outstanding  as of  September  30,  2003,  which  are  fully  collateralized  by
certificates of deposit classified as part of other long-term assets.

The Company is involved in various  disputes,  arising in the ordinary course of
its  business,  which may result in pending or  threatened  litigation.  None of
these  matters are expected to have a material  adverse  effect on the Company's
financial position, results of operations or cash flows. Some of these disputes,
regardless of their merit,  could subject the Company to costly  litigation  and
the diversion of technical and/or management personnel.  Additionally,  in light
of the  Company's  ongoing  litigation  and other  disputes  with various  local
exchange and other telecommunications carriers, some of whom the Company depends
upon for certain  services,  those  carriers  have and will  likely  continue to
threaten service  disruptions or terminations from time to time. Certain service
disruptions  or  terminations,  if actually  implemented,  could have a material
adverse effect on the Company's business, finances and/or results of operations.

Currently,  the Company has the following outstanding matters, which if resolved
unfavorably, could have a material adverse effect on the Company:

o    On August  12,  2002,  Verizon  Communications,  Inc.  and  several  of its
     subsidiaries  filed a complaint in the United States District Court for the
     District  of Delaware  against  the  Company  and  several of its  indirect
     wholly-owned  subsidiaries,  referred to herein as the defendants,  seeking
     payment of  approximately  $37  million  allegedly  owed to  Verizon  under
     various  contracts and state and federal law.  Verizon also asked the Court
     to issue a declaratory ruling that it has not violated the antitrust laws.


                                       14


                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

     The  defendants  believe  that  they  have  meritorious   defenses  to  the
     complaint,  and further,  that the amounts owed are substantially less than
     the amounts  claimed by Verizon.  For example,  the defendants  believe the
     figure  specified in the  complaint  fails to recognize  payments that have
     been made by the defendants to Verizon  (including in excess of $14 million
     paid soon after the filing of the  complaint),  credits  that  Verizon  has
     issued to the defendants since the filing of the complaint,  and additional
     disputes for which Verizon owes credits to the  defendants.  The defendants
     have filed an answer to Verizon's  complaint  denying  Verizon's claims, in
     part, and have asserted various  counterclaims  against Verizon,  including
     claims  seeking  damages  for breach of  contract  and treble  damages  for
     violating the antitrust  laws.  The  defendants  have also moved to dismiss
     Verizon's request for a declaratory  ruling on the antitrust claims,  which
     Verizon has opposed.

     On  November  18,  2002,  Verizon  filed a motion  to  dismiss  defendants'
     antitrust counterclaims, relying heavily on a decision by the United States
     Court of Appeals for the 7th Circuit in Goldwasser vs. Ameritech Corp., 222
     F.3d 390 (7th Cir. 2000) dismissing antitrust claims brought on behalf of a
     class of consumers who had purchased  services from  Ameritech in Illinois.
     On January 9, 2003,  the  defendants  filed their  opposition  to Verizon's
     motion,  noting not only that the Goldwasser case is  distinguishable  from
     the  defendants'  antitrust  claims,  but also that the  appellate  court's
     rationale in Goldwasser  had been  effectively  repudiated by the appellate
     courts of the 2nd and 11th circuits, as well as by a federal trial court in
     the  antitrust  claim raised by the Company  against  SBC/Ameritech  in the
     United States District Court for the Northern District of Ohio.

     On March  20,  2003,  the  Court  issued  an  order  denying  the  parties'
     respective  motions without  prejudice to renew,  pending a decision by the
     United States Supreme Court in Verizon Communications, Inc. vs. Law Offices
     of Curtis V. Trinko,  LLP,  Supreme Court Docket No. 02-682 (cert.  granted
     March 10, 2003). By order of the Court issued May 6, 2003, the parties have
     been  directed to proceed  with  discovery  on all issues.  On November 14,
     2003,  Verizon filed a motion with the Court seeking permission for Verizon
     to file an  amendment  to its  complaint.  A draft  of the  amendment  that
     accompanied Verizon's request indicates that Verizon intends to assert that
     defendants now owe Verizon $40 million in alleged unpaid charges. The draft
     also indicates  that Verizon  desires to amend its complaint to specify new
     claims arising out of certain alleged  misconduct  arising out of purported
     sales, billing,  revenue and other practices as more fully described in the
     amendment.  The defendants have notified Verizon that they will not consent
     to the filing of the amendment and  defendants  are currently  preparing to
     file an opposition to Verizon's motion asking the Court to reject Verizon's
     effort to supplement its claims. The Company and its subsidiaries intend to
     pursue all  available  remedies  and  counterclaims  and defend  themselves
     vigorously; however, the Company and its subsidiaries cannot be certain how
     or when these matters will be resolved or of the outcome of the litigation.


                                       15




Note 11.          Commitments and Contingent Liabilities (continued)

o    On March 7, 2002, CoreComm  Massachusetts,  Inc., an indirect  wholly-owned
     subsidiary of the Company, initiated litigation against Verizon New England
     d/b/a Verizon  Massachusetts in the Suffolk Superior Court,  Massachusetts,
     alleging  breach of  contract  and seeking a  temporary  restraining  order
     against  Verizon  Massachusetts.  Verizon  has filed its answer to CoreComm
     Massachusetts'   complaint  and  filed  counterclaims  seeking  payment  of
     approximately $1.2 million allegedly owed by CoreComm  Massachusetts  under
     the parties'  interconnection  agreement and Verizon's tariffs.  During the
     course of  discovery,  Verizon  conceded that it had  over-billed  CoreComm
     Massachusetts   by   approximately   $800,000.   As  a   result,   CoreComm
     Massachusetts  amended its complaint to include claims against  Verizon for
     unfair and deceptive acts or practices in violation of Massachusetts'  fair
     trade practice laws. Verizon  subsequently amended its complaint to specify
     a revised claim of $1.1 million.  CoreComm  Massachusetts  ceased  offering
     local telephone services in Massachusetts in December 2002 and is presently
     withdrawing  from  the  market.  CoreComm  Massachusetts'  withdrawal  from
     providing  telephone  services in  Massachusetts  has not had any  material
     adverse affect on the Company's consolidated business.

o    By letter dated April 4, 2003,  the Company  received a notice from Verizon
     claiming  that  Verizon is owed  approximately  $8.4  million by one of its
     subsidiaries,  CoreComm New York, Inc., for services allegedly purchased in
     the state of New York, including approximately $5.1 million of charges that
     Verizon  contends were mistakenly  credited to the accounts of CoreComm New
     York,  Inc. in connection with the acquisition out of bankruptcy of certain
     assets of USN Communications,  Inc. in May 1999. In response,  CoreComm New
     York, Inc. challenged the accuracy of Verizon's figures and provided formal
     written  notification  that it was disputing  Verizon's right to payment of
     the amounts specified in Verizon's April 4 letter. Subsequently,  by letter
     dated June 24, 2003,  Verizon  made a demand for payment from  CoreComm New
     York  of   approximately   $6  million  of   alleged   charges,   including
     approximately  $2.3 million of charges that have been  disputed by CoreComm
     New York and are the subject of pending  litigation  between the parties in
     the federal case in Delaware,  and  threatening  to implement an embargo on
     CoreComm New York's  accounts if the requested  payment was not received by
     July 25, 2003. In response, CoreComm New York challenged Verizon's right to
     proceed as threatened and Verizon implemented the embargo over CoreComm New
     York's  objections.  CoreComm New York intends to pursue this matter in its
     pending litigation with Verizon but is not presently able to predict how or
     when this matter will be resolved.  The  operations of CoreComm New York do
     not  represent a material  component of the Company's  revenue,  profits or
     operations and the Company does not anticipate  that an embargo of CoreComm
     New York's  accounts will have a material  adverse  affect on its business,
     finances or results of operations.

                                       16



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)

Note 11.          Commitments and Contingent Liabilities (continued)

o    By letters dated October 31, 2003, the Company's operating  subsidiaries in
     Virginia,  Maryland,  and the  District of Columbia  received  notices from
     Verizon  asserting that those  entities are in default of their  respective
     payment  obligations  under  an  August  28,  2002  Settlement   Agreement,
     demanding that those subsidiaries pay Verizon the aggregate sum of $764,000
     in order to cure the alleged payment  defaults,  and threatening to proceed
     with the  remedies set forth under  applicable  contracts in the absence of
     payment  within ten days after  receipt of the notices.  In  response,  the
     Company's  subsidiaries  notified  Verizon  that  they  are  disputing  the
     accuracy  of  Verizon  claims and  challenging  its right to payment of the
     amounts  specified in its letters.  Among other  things,  the  subsidiaries
     notified Verizon that it claims are inconsistent  with the claims made in a
     sworn affidavit from Verizon asserting that Verizon is unable to accurately
     compute the amounts allegedly owed by the Company,  that the demand letters
     fail to account for hundreds of thousands of dollars of outstanding billing
     disputes, and that Verizon has refused the Company's request for additional
     information to substantiate  Verizon's claims.  The subsidiaries  intend to
     contest  any  charges  that  they  believe  are not  properly  owed  and to
     vigorously  defend  themselves  and  pursue  all  appropriate   claims  and
     remedies.  However,  the  Company is not able to predict  how or when these
     matters will be resolved.

o    The Company and CoreComm Newco, Inc., an indirect, wholly-owned subsidiary
     of the Company, are currently in litigation with SBC Corp., Ameritech Ohio
     and other SBC subsidiaries over various billing and performance issues,
     including SBC/Ameritech's alleged violation of the antitrust laws and the
     adequacy of SBC/Ameritech's performance under a 1998 contract between
     CoreComm Newco and Ameritech Ohio. This litigation began in June 2001 when
     Ameritech threatened to stop processing new orders following CoreComm
     Newco's exercise of its right under the contract to withhold payments for
     Ameritech's performance failures. On October 9, 2001, Ameritech filed an
     amended complaint in the United States District Court, Northern District of
     Ohio seeking a total of approximately $14.4 million in alleged outstanding
     charges.

     On  December  26,  2001,  CoreComm  Newco  filed its answer to  Ameritech's
     amended complaint and simultaneously filed three counterclaims  against SBC
     Corp.,  Ameritech  Ohio and certain of their  respective  subsidiaries  and
     affiliates,   alleging  breach  of  contract,   antitrust  violations,  and
     fraudulent or negligent  misrepresentation  claims.  On July 25, 2002,  the
     Court  issued a decision  denying a motion to dismiss  from  Ameritech  and
     upholding  CoreComm Newco's right to proceed with its antitrust,  breach of
     contract and misrepresentation  claims against all  counter-defendants.  On
     January 21,  2003,  CoreComm  Newco  amended its  complaint  to include the
     Company and other affiliates as additional  claimants and to add additional
     allegations supporting its claims, and on February 17, 2003,  SBC/Ameritech
     filed its answer to the amended  complaint.  On May 22,  2003,  the parties
     entered  into a stay  agreement  pursuant  to which they  agreed to jointly
     petition the Court to suspend the litigation in all respects, including all
     claims and  counterclaims,  until 15 calendar  days after the United States
     Supreme Court issues its opinion in the Trinko case, or until further order
     of the Court. Pursuant to that agreement,  the parties subsequently filed a
     joint motion for stay of the litigation,  which was granted by the Court on
     June 19, 2003.


                                       17



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

     The  Company  believes  that  CoreComm  Newco has  meritorious  defenses to
     Ameritech's  amended  complaint  that could reduce the amount  currently in
     dispute. For example, the figure specified in Ameritech's complaint may not
     account for various  amounts that have been  properly  disputed by CoreComm
     Newco as a result of billing  errors and other  improper  charges,  various
     refunds that Ameritech contends it has already credited to CoreComm Newco's
     accounts since the filing of the complaint,  and payments that were made by
     CoreComm  Newco  in the  ordinary  course  after  the  time of  Ameritech's
     submission.  However,  the Company cannot be certain how or when the matter
     will be resolved.  The Company also believes that, to the extent  Ameritech
     prevails with respect to any of its claims, Ameritech's award may be offset
     in whole or in part by amounts  that the  Company  and  CoreComm  Newco are
     seeking to obtain from SBC/Ameritech under their counterclaims. The Company
     and CoreComm  Newco intend to pursue all  available  remedies and to defend
     themselves  vigorously.  However,  it is impossible at this time to predict
     the outcome of the litigation.

o    On April 16, 2003,  SBC Ohio (formerly  known as SBC Ameritech  Ohio) filed
     with the Public  Utilities  Commission of Ohio,  known as the PUCO, a third
     supplement  to its  application  for  review of an order  entered by a PUCO
     Hearing  Examiner  barring  SBC Ohio from  refusing  to process new service
     orders from  CoreComm  Newco  pending  the  resolution  of various  billing
     disputes at issue  between the parties.  Among other  things,  the April 16
     supplement  contends that the Hearing  Examiner's  entry provided  CoreComm
     Newco with a  competitive  advantage by allowing it to withhold  payment on
     approximately  $8.7  million of alleged  undisputed  charges  for local and
     collocation services in Ohio as of March 31, 2003. On May 2, 2003, CoreComm
     Newco submitted a reply to the April 16 supplement in which it disputed the
     accuracy of SBC Ohio's claims and explained that the outstanding balance of
     approximately  $1.9 million is consistent with common practice  considering
     SBC Ohio's billing  problems and the numerous  payment cycles at issue.  On
     June 20, 2003 CoreComm Newco and the Company's  operating  subsidiaries  in
     the states of  Illinois,  Michigan,  Indiana and  Wisconsin  entered into a
     standstill  agreement  with SBC's  operating  subsidiaries  in those states
     pursuant to which the parties agreed to refrain from taking certain actions
     against one another for a period of at least nine months  while  working to
     reconcile their respective accounts.  Pursuant to that agreement,  SBC Ohio
     asked the PUCO to place into abeyence its appeal of the Hearing  Examiner's
     Entry for the  duration of the nine month  standstill.  CoreComm  Newco has
     already  identified  and lodged  millions  of dollars  worth of billing and
     performance disputes and is continuing to identify charges that it believes
     are not  properly  owed to SBC Ohio.  Should  the PUCO  litigation  resume,
     CoreComm  Newco  intends  to defend  itself  vigorously  and to pursue  all
     available  remedies  and  counterclaims.  However,  it is not  possible  to
     predict the outcome of this matter at this time.


                                       18



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

o    By letters  dated April 23, 2003 and April 25, 2003,  SBC/Midwest  demanded
     payment from certain of the Company's  subsidiaries of  approximately  $9.5
     million of alleged  undisputed,  past due  charges for  wholesale  services
     allegedly  provided to its operating  subsidiaries  in Illinois,  Michigan,
     Indiana  and  Wisconsin,   and  threatened  to  pursue  further  collection
     activities  against  those  entities.  The letters  regarding  Michigan and
     Wisconsin  requested that the recipients pay into escrow an unspecified sum
     for Michigan and  approximately  $135,240 for Wisconsin in connection  with
     charges that SBC Midwest contends the Company's  subsidiaries have disputed
     in those  states.  In response,  the  Company's  subsidiaries  notified SBC
     Midwest  that they are  disputing  the accuracy of the figures set forth in
     its  letters  as well as its right to  request  an escrow  deposit to cover
     disputed  charges,  and  that  they  are  prepared  to  engage  in  further
     discussions regarding the various amounts at issue. As noted above, on June
     20, 2003, the Company's operating subsidiaries in Ohio, Illinois, Michigan,
     Indiana  and  Wisconsin  entered  into a  standstill  agreement  with SBC's
     operating subsidiaries in those states pursuant to which the parties agreed
     to refrain from taking certain  actions against one another for a period of
     nine months. The Company's  subsidiaries intend to contest any charges that
     they believe are not properly owed and to vigorously  pursue all claims and
     defend themselves against any collections action.  However,  the Company is
     not currently able to predict how or when these matters will be resolved or
     what amount, if any, will need to be paid at the time of resolution.

o    On December 3, 2001,  General Electric Capital Corp.,  referred to as GECC,
     filed a civil lawsuit in the Circuit Court of Cook County, Illinois against
     CCL and  MegsINet,  Inc., an indirect  subsidiary  of the Company,  seeking
     approximately  $8 million in  allegedly  past due amounts and the return of
     equipment  under a capital  equipment  lease  agreement  between Ascend and
     MegsINet.  Thereafter, on May 1, 2002, the complaint was amended to add the
     Company as an additional  defendant.  Although  neither CCL nor the Company
     are parties to the agreement  between  Ascend and  MegsINet,  the complaint
     contends  that CCL  and/or  the  Company  should  be held  responsible  for
     MegsINet's  obligations  under an "alter ego" theory of liability.  CCL and
     the  Company  are  contesting  this  claim  and do  not  believe  that  the
     obligations of MegsINet are obligations of CCL or the Company.



                                       19




                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

     Subsequent  to the  filing of its  initial  complaint,  GECC filed a second
     complaint in the Circuit Court of Cook County,  Illinois against  MegsINet,
     CCL and the Company seeking a court order allowing it to take  repossession
     of its alleged equipment.  On September 24, 2002, the Court issued an order
     granting  GECC's request for  repossession  of the equipment.  MegsINet has
     allowed GECC to take  possession  of the  equipment,  which has not had any
     material impact on the Company's business or operations. On April 23, 2003,
     GECC filed a motion for  summary  judgment  asking the Court to rule in its
     favor,  without  the need for trial,  that  MegsINet,  CCL and the  Company
     breached  their alleged  contractual  obligations  to make  required  lease
     payments to GECC and awarding GECC damages in the amount of $9,100,053 plus
     attorneys'  fees and interest.  MegsINet,  CCL and the Company have filed a
     consolidated  opposition to that motion and oral argument on the matter was
     heard by the Court on August 6,  2003.  On  November  13,  2003,  the Court
     issued a ruling on  GECC's  motion  for  summary  judgment  in which it: a)
     denied GECC's  request for summary  judgment  against all defendants on its
     contracts  claims,  b) granted GECC's request for summary  judgment against
     all  defendants  on its claims of  conversion  but  declined to rule on the
     issue of  liability  under those  claims,  c) denied the  Company's  motion
     objecting  to the court's  jurisdiction  over that  entity,  and d) granted
     defendant's  request  for  discovery  against  GECC on the issue of alleged
     damages. As a result of the Court's ruling, the defendants  anticipate that
     the litigation will proceed with additional  discovery on GECC's  contracts
     claims and  alleged  damages for  conversion,  which  defendants  intend to
     pursue vigorously. However, it is impossible at this time to predict how or
     when this matter will be resolved.  MegsINet  does not represent a material
     component  of the  Company's  revenue,  profits or  operations.  All of the
     assets of the Company and its  subsidiaries,  including  those of MegsINet,
     are subject to a first  priority  security  interest in favor of the senior
     lenders under the $156 million senior credit facility.

o    On May 25, 2001, KMC Telecom,  Inc. and some of its operating  subsidiaries
     filed an  action  in the  Supreme  Court  of New  York for New York  County
     against CCL,  Cellular  Communications  of Puerto Rico, Inc.,  CoreComm New
     York, Inc. and MegsINet.  KMC contended that it was owed  approximately  $2
     million,  primarily in respect of alleged  early  termination  liabilities,
     under a services  agreement and a co-location  agreement with MegsINet.  On
     March 27, 2002,  certain of the  defendants  initiated  litigation  against
     several  former   principals  of  MegsINet  seeking   indemnification   and
     contribution against KMC's claims for breach of various representations and
     warranties  made  under the merger  agreement  pursuant  to which  MegsINet
     became a subsidiary of the Company.  Defendants had also initiated coverage
     under an insurance  policy  designed to protect  against  such  claims.  On
     September  9, 2003,  this  matter was fully  settled  by  agreement  of the
     parties, predominantly out of proceeds from insurance.


                                       20



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

o    On October 10,  2003,  APCC  Services,  Inc.  and  several of its  clients,
     referred  to  as  APCC,   filed  a  formal   complaint   with  the  Federal
     Communications  Commission  ("FCC")  against the Company and several of its
     affiliated  companies  claiming they are responsible for payphone surcharge
     compensation  for the period between  November 1996 to the present,  in the
     amount of  $1,533,949,  as calculated  pursuant to the 5th Report and Order
     issued  by the  FCC,  currently  on  appeal  in the D.C.  Circuit  Court of
     Appeals. On October 23, 2003, the FCC directed APCC to correct deficiencies
     in its  allegations  and to refile its  complaint on or before  November 7,
     2003. In response to the  complaint,  the  defendants  expect to vigorously
     defend  against  the  asserted  claims and pursue all  available  remedies.
     However,  it is not  possible  at this time to predict  the  outcome of the
     litigation.

o    On September 24, 2002, GATX Technologies, Inc., known herein as GATX, filed
     an  action  in  the  Thirteenth   Judicial   Circuit  in  Florida   against
     CoreComm-Voyager, Inc., an indirect wholly-owned subsidiary of the Company,
     seeking  recovery  of  amounts  allegedly  owed  under an  equipment  lease
     totaling  approximately  $150,000.  On October 21,  2002,  CoreComm-Voyager
     moved to dismiss GATX's action for lack of jurisdiction.  The motion is now
     pending with the Court.  On October 28, 2002,  3Com  Corporation,  known as
     3Com,  filed an action  against the  Company in the Court of Common  Pleas,
     Montgomery County,  Pennsylvania seeking payment of approximately  $900,000
     under an equipment lease. The Company has filed  preliminary  objections to
     3Com's complaint on the basis that the Company is not a proper party to the
     dispute, and the Court has not yet ruled on those objections. Should either
     action proceed further,  the defendants will defend  themselves  vigorously
     and pursue all available claims.  However,  it is not possible at this time
     to predict how or when either of these matters will be resolved.


                                       21




                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

o    On March 1, 2002, Easton Telecom Services,  LLC initiated litigation in the
     Northern  District of Ohio against  CoreComm  Internet Group,  Inc. seeking
     payment of  approximately  $4.9  million,  primarily  in respect of alleged
     early termination  penalties for  telecommunications  services  purportedly
     provided under alleged  contracts.  On August 23, 2002, the Court issued an
     order  dismissing  approximately  $4 million of Easton's claims as invalid.
     Upon the conclusion of a jury trial that ended on November 8, 2002,  Easton
     obtained  a  judgment  against  CoreComm  Internet  Group,   Inc.,  Voyager
     Information Networks,  Inc. and MegsINet in the total amount of $1,085,000.
     On February 4, 2003, the defendants filed an appeal in this matter with the
     United States Court of Appeals for the Sixth Circuit, and the plaintiff has
     filed a cross-appeal.  Plaintiff had previously been pursuing  discovery in
     aid of  execution  on its judgment but has not been active in this area for
     some time. On November 10, 2003,  plaintiff filed a motion asking the Court
     to appoint a receiver for the purpose of marshalling defendants' assets and
     liquidating them to satisfy  plaintiff's  judgment.  The defendants believe
     that the motion is procedurally  defective and substantively  without merit
     and  defendants  are in the process of preparing to file an  opposition  to
     plaintiff's  motion seeking its denial.  Although  defendants  believe that
     Easton's motion will be denied,  it is not possible at this time to predict
     with any  certainty  how or when this matter will be  resolved.  All of the
     assets  of  the  Company  and  its  subsidiaries,  including  those  of the
     defendants,  are subject to a first priority  security interest in favor of
     the senior lenders under the $156 million senior credit facility.

o    On June 7, 2002,  the Board of Revenue and Finance of the  Commonwealth  of
     Pennsylvania  issued  an  order  granting  in part  and  denying  in part a
     petition  for  review of a  decision  by a lower  administrative  authority
     relating to the Company's  alleged  liability for sales and use tax for the
     period  September 1, 1997  through  July 31,  2000.  Pursuant to the June 7
     order,  the Company has been  assessed  sales and use tax for the period at
     issue in the amount of $631,429,  which has been  accrued in the  Company's
     consolidated  financial  statements.  On July 8, 2002,  the Company filed a
     petition  for  review of the  board's  order in the  Commonwealth  Court of
     Pennsylvania  seeking a further  reduction of the  assessment.  The Company
     believes that it has meritorious defenses and that the assessment should be
     reduced; however it is not possible at this time to predict how this matter
     will be resolved.


                                       22



                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

o    On  February  28,  2003,  Focal  Communications  Corp.  and  certain of its
     subsidiaries  initiated adversarial  proceedings in Focal's Chapter 11 case
     under the U.S.  bankruptcy  laws  against  the  Company  and certain of its
     subsidiaries  seeking payment of an aggregate of approximately  $859,514 in
     charges for interstate and intrastate  switched access  services  allegedly
     provided by Focal's  subsidiaries in Illinois,  Pennsylvania,  Delaware and
     New York. On April 7, 2003,  Focal filed a motion for summary  adjudication
     for services allegedly provided to the Company's  subsidiaries operating in
     Illinois,  and  these  subsidiaries  filed  an  opposition  to that  motion
     challenging the validity of Focal's charges as well as its right to summary
     adjudication of the issues.  On August 8, 2003, the bankruptcy court issued
     a Report and  Recommendation  finding that  Focal's  action is a "non-core"
     proceeding and issuing an advisory  opinion to the U.S.  District Court for
     the District of Delaware  recommending  that summary judgment be granted in
     favor  of  Focal  against  the  Company's  operating  subsidiaries  in  the
     aggregate   amount  of   $134,376.   The   Defendants   believe   that  the
     recommendation  reached  by the  bankruptcy  court  is  erroneous  and  the
     defendants  have filed  objections  to the  bankruptcy  court's  report and
     recommendation with the District Court. In addition, on August 21, 2003, at
     the defendants' request, the bankruptcy court granted a stay of the pending
     summary  adjudication  motions  for  services  allegedly  provided  to  the
     Company's  subsidiaries  operating in  Pennsylvania,  Delaware and New York
     pending  resolution  of the Illinois  matter by the District  Court.  Focal
     subsequently  filed a motion asking the  bankruptcy  court to lift the stay
     and asserting that its claims now stand at approximately  $2 million.  Upon
     the Company's  opposition,  the bankruptcy  court denied Focal's motion but
     authorized  it to take  additional  discovery  in  support  of its  claims.
     Although  the Company and its  subsidiaries  continue to believe  that they
     have  meritorious  defenses and arguments on appeal,  it is not possible at
     this time to predict how or when these matters will be resolved.

o    On January 3, 2003,  the Company  and its  indirect  subsidiary,  MegsINet,
     Inc., filed a complaint  against  Broadwing in the U.S.  District Court for
     the Eastern  District of Pennsylvania  seeking the return of  approximately
     $700,000 in taxes billed by  Broadwing  in alleged  violation of two Master
     Service  Agreements.  The Court  issued an order  referring  the  matter to
     arbitration  pursuant to the terms of the  contract  between  MegsINet  and
     Broadwing. A schedule for the arbitration has not yet been established.

                                       23




                            ATX Communications, Inc.

      Notes to the Condensed Consolidated Financial Statements (continued)
                                   (Unaudited)


Note 11.          Commitments and Contingent Liabilities (continued)

o    On September 9, 2003,  Electronic  Data Systems Corp.,  referred to as EDS,
     filed  a  civil  action  in  the  Common  Pleas  Court  Montgomery  County,
     Pennsylvania  alleging  breach of contract  arising out of alleged  billing
     services  provided  to  CoreComm-ATX,  Inc. in the amount of  $555,526.  On
     October  22,  2003,   CoreComm-ATX  answered  the  complaint  and  asserted
     counterclaims   against   EDS   for   breach   of   contract,    fraudulent
     misrepresentation and negligent misrepresentation.  CoreComm-ATX expects to
     vigorously defend itself against the asserted claims,  while simultaneously
     pursing its counterclaims  against EDS. However, it is not possible at this
     time to predict the outcome of the litigation.

o    On  October  8,  2003,  a  complaint  was filed by the  Wisconsin  Attorney
     General's  Office  in the  Circuit  Court,  Dane  County  against  CoreComm
     Wisconsin,  Inc.  In the  Complaint,  the  Attorney  General  alleges  that
     CoreComm  Wisconsin failed to properly  disclose to certain of its Internet
     customers  policies  relating to  subscription  cancellation  and  renewal,
     resulting in the improper billing of customers,  in violation of provisions
     of the Wisconsin  Administrative  Code.  The Attorney  General's  office is
     seeking  injunctive  relief  as well as  penalties  and  customer  refunds.
     CoreComm Wisconsin is currently reviewing these allegations and believes it
     has  meritorious  defenses to the Attorney  General's  complaint.  CoreComm
     Wisconsin  expects to vigorously defend itself against the asserted claims,
     however,  at this time it is  impossible  to  predict  the  outcome of this
     matter.

o    A subsidiary of the Company,  ATX Licensing,  Inc. ("ALI"), is presently in
     discussions with regulatory  authorities concerning a request to enter into
     an extended  payment plan in connection  with an outstanding  obligation of
     approximately  $4.8 million.  ALI is not presently  able to agree to all of
     the terms of the proposed plan in light of certain  restrictions  set forth
     in the Company's  credit  facility  with its senior  secured  lenders.  The
     Company  has  made a  request  to its  lenders  that  ALI be  permitted  to
     participate  in the  plan  under  the  terms  proposed  by  the  regulatory
     authorities and is currently  waiting for a final response to that request.
     ALI  has  been  advised  by the  regulatory  authorities  that if it is not
     accepted to participate in an extended payment plan, then the entire amount
     of the  obligation  will become due and payable within thirty days from the
     date that ALI  receives  notice that it is not able to  participate  in the
     plan.  If ALI is not able to  participate  in an  extension  plan  with the
     approval  of its  lenders,  and in the  absence  of  additional  funding to
     satisfy the obligation,  the Company does not believe that ALI will be able
     to pay the obligation within the period of time specified by the regulatory
     authorities. A failure to pay the obligation could result in the imposition
     of regulatory  penalties,  including  substantial  fines, the revocation or
     imposition  of  conditions  on  regulatory  authorizations,   and/or  other
     penalties.

                                       24







ITEM 2.    Management's Discussion and Analysis of Results of Operations and
           Financial Condition

Results of Operations

Until  December  2001,  we  were  a  direct,   wholly-owned  subsidiary  of  CCL
Historical,  Inc.  (formerly named CoreComm Limited,  known herein as CCL). As a
result of the  recapitalization  transactions  completed in December 2001 and on
July 1, 2002,  CCL has been  merged into one of our  wholly-owned  subsidiaries.
Prior  to our  recapitalization,  CCL  operated  the  same  businesses  that  we
currently operate.

In  2001,  we  significantly  revised  our  business  plan to  focus on our most
profitable businesses and geographic areas, and reduce our operational costs and
need for capital.  In 2001 and 2002, we streamlined  our strategy and operations
to focus on our two most successful and promising  lines of business.  The first
is integrated communications products and other high bandwidth/data/web-oriented
services for the business  market.  The second is bundled  local  telephony  and
Internet  products for the  residential  market,  with a focus on using Internet
interfaces,  as well as our call centers,  to  efficiently  sell and install our
products and service our  customers.  As a result of these  changes,  we are now
focused primarily in the Mid-Atlantic and Mid-West regions of the U.S.

Three Months Ended September 30, 2003 and 2002

The decrease in revenues to $68,632,000  from  $73,422,000 is  attributable to a
decrease in other revenue,  local exchange services and Internet access services
revenue  partially  offset by an increase  in  toll-related  telephony  services
revenue.

Operating  costs  include  direct cost of sales,  network costs and salaries and
related expenses of network personnel.  Operating costs decreased to $46,546,000
from $47,927,000 due to a decrease in our revenues.

Selling,  general and  administrative  expenses  increased to  $22,355,000  from
$18,512,000 due to increased payroll costs and professional fees and an increase
in our  allowance  for doubtful  accounts  relating to charges to a company that
filed for protection under bankruptcy.


                                       25



Corporate  expenses  include  the costs of some of our  officers  and  corporate
staff,  the costs of  operating  the  corporate  office and costs  incurred  for
strategic planning and evaluation of business opportunities.  Corporate expenses
decreased to $1,528,000  from  $1,930,000 due to decreases in payroll  partially
offset by increased  costs incurred for strategic  planning and other  corporate
activities.

During the three months ended September 30, 2002, we incurred  additional  costs
of $373,000 in connection with our  recapitalization,  which consisted primarily
of employee incentives, legal fees, accounting fees and printing fees.

During the three months ended  September  30, 2003,  we incurred  other costs of
$127,000,  which  consisted of charges  related to the termination of a facility
lease obligation of $1,584,000 net of gains totaling  $1,457,000  related to the
collection of notes receivable and the settlement of certain legal matters.

Depreciation  expense  decreased to $3,941,000  from  $8,895,000  primarily as a
result of the  reduction  in the carrying  value of our fixed assets  during the
fourth  quarter  of 2002 as  determined  by fair  value  analysis  performed  in
accordance  with SFAS No. 144,  "Accounting  for the  Impairment  or Disposal of
Long-Lived Assets."

Amortization expense, other than amortization associated with deferred financing
costs  included  in interest  expense,  has been  eliminated  in 2003 due to the
reduction in the carrying value of our  intangible  assets to zero as determined
by a fair value  analysis  performed on October 1, 2002 in accordance  with SFAS
No. 144.

Interest expense and other increased to $5,758,000 from $4,503,000 primarily due
to the  effect of an  increase  in the  effective  interest  rate on our  senior
secured  credit  facility.  The effective  interest  rate on our senior  secured
credit  facility  during the three months ended  September 30, 2003 and 2002 was
9.50% and 6.75%, respectively.

The income tax benefit of $92,000 during 2002 is from state and local income tax
refunds.

Nine Months Ended September 30, 2003 and 2002

The decrease in revenues to $211,525,000  from $222,942,000 is attributable to a
decrease in other revenue,  local exchange services and Internet access services
revenue  partially  offset by an increase  in  toll-related  telephony  services
revenue.

Operating  costs  include  direct cost of sales,  network costs and salaries and
related expenses of network personnel. Operating costs decreased to $138,445,000
from $144,723,000 due to a decrease in our revenue.

Selling,  general and  administrative  expenses  increased to  $61,984,000  from
$61,049,000 due increases in professional  fees and an increase in our allowance
for doubtful accounts relating to charges to a company that filed for protection
under bankruptcy.

                                       26




Corporate  expenses  include  the costs of some of our  officers  and  corporate
staff,  the costs of  operating  the  corporate  office and costs  incurred  for
strategic planning and evaluation of business opportunities.  Corporate expenses
increased to $5,451,000  from  $5,244,000  due to increased  costs  incurred for
strategic planning and other corporate  activities partially offset by decreases
in payroll.

We incurred additional costs, which consisted primarily of employee  incentives,
legal  fees,   accounting  fees  and  printing  fees,  in  connection  with  our
recapitalization of $5,825,000 during the nine months ended September 30, 2002.

During the nine months  ended  September  30, 2003,  we incurred  other costs of
$420,000,  which  consisted of charges  related to the termination of a facility
lease   obligation  and  the  settlement  of  certain  legal  matters   totaling
$1,877,000, net of gains totaling $1,457,000, related to the collection of notes
receivable and the settlement of other legal matters.

Depreciation  expense  decreased to $13,740,000 from $26,916,000  primarily as a
result of the  reduction  in the carrying  value of our fixed assets  during the
fourth  quarter  of 2002 as  determined  by fair  value  analysis  performed  in
accordance  with SFAS No. 144,  "Accounting  for the  Impairment  or Disposal of
Long-Lived Assets."

Amortization expense, other than amortization associated with deferred financing
costs  included  in interest  expense,  has been  eliminated  in 2003 due to the
reduction in the carrying value of our  intangible  assets to zero as determined
by a fair value  analysis  performed on October 1, 2002 in accordance  with SFAS
No. 144.

Interest expense and other increased to $15,780,000  from $12,143,000  primarily
due to the effect of an increase in the  effective  interest  rate on our senior
secured credit facility and the  amortization  of debt discount  associated with
CCL's 6%  Convertible  Subordinated  Notes.  The effective  interest rate on our
senior secured credit  facility  during the nine months ended September 30, 2003
and 2002 was 8.74% and 6.79%, respectively.

The income tax benefit of $92,000 during 2002 is from state and local income tax
refunds.


                                       27




Liquidity and Capital Resources

On March 31, 2003,  we entered into an  amendment to our senior  secured  credit
facility,  under  which the  lenders  agreed  to defer  interest  and  principal
payments on the outstanding  loans until February 2, 2004.  Based on our current
business plan, we will not have the cash available to fund the required deferred
interest and principal payments on or before February 2, 2004, the date on which
such  payments  become due. As of  September  30, 2003,  the  aggregate of these
required payments is $11,385,000.  Further, we may not have sufficient liquidity
to fund operations  through the end of this year, and our actual ability to fund
operations  could be  adversely  affected by various  circumstances,  including;
acceleration of critical operating payables, adverse litigation results, service
disruptions,  lower than expected  collections and other cirumstances outside of
our immediate and direct control. As previously announced, we are in the process
of seeking and considering strategic alternatives in order to reduce our overall
indebtedness,  including amounts under the senior secured credit facility.  Such
strategic   alternatives  may  include,  among  other  things,  debt  or  equity
financings  or  refinancings,  recapitalizations,  restructurings,  mergers  and
acquisitions or other transactions. Our ability to raise additional capital will
be  dependent  on a number of factors,  such as our results of  operations,  the
amount of our  indebtedness,  and also general  economic and market  conditions,
which are beyond our control. If we are unable to obtain additional financing or
to obtain it on  favorable  terms,  we may be  required  to  further  reduce our
operations,  forgo business  opportunities or take other actions,  each of which
could  adversely  affect our  business,  results  of  operations  and  financial
condition.  In addition,  we are also involved in litigation,  which if resolved
unfavorably  to us,  could  have a  material  adverse  effect  on our  business,
financial condition and results of operations, including our ability to fund our
operations.  There are no assurances  that we will obtain the financing  that we
are seeking.  In the event we cannot obtain financing,  reduce our indebtedness,
and satisfactorily resolve our outstanding  litigation,  we may need to file for
protection  under the  federal  bankruptcy  laws.  If we engage in a Chapter  11
bankruptcy proceeding, any proposed plan of reorganization would also be subject
to  confirmation  by the bankruptcy  court after it has been voted on by certain
creditors whose  interests would be impaired by the plan,  including the lenders
under our senior secured credit facility,  and satisfaction or waiver of certain
conditions.  It is also possible that any new investor in the Company may insist
on the Company seeking bankruptcy  protection as a precondition to or as part of
any such financing transaction.

As of September  30, 2003, we had long-term  debt,  which  consisted of a $156.1
million senior secured credit facility, approximately $19.4 million in principal
amount of 10.75% Unsecured Convertible PIK Notes due 2011 and approximately $8.9
million of capital leases.  In addition,  as of September 30, 2003, CCL had $4.4
million of 6% Convertible Subordinated Notes outstanding.


                                       28



Under the March 31, 2003 amendment,  the lenders under the senior secured credit
facility agreed to defer interest  payments on the outstanding  loans during the
period  beginning  March 12, 2003 and ending on February 2, 2004,  during  which
time the loans are accruing  interest at prime plus 5.5% (9.50% at September 30,
2003). In addition,  the required  principal payments  originally  scheduled for
2003,  which totaled $1.95  million,  were deferred  until February 2, 2004. The
lenders have also agreed to waive and/or amend certain  financial  covenants set
forth in the credit  agreement  until  February  2, 2004,  and also added  other
financial and operating  covenants  during 2003, in order to better  reflect our
current operations.  Although the amendment has been designed to provide us with
significant  relief  from cash  obligations  under  the  senior  secured  credit
facility  until  February 2, 2004,  there can be no assurance that the financial
and other covenants under the facility will be met or that we will be successful
in identifying or implementing one or more strategic  alternatives to reduce our
indebtedness.  In addition, based on our current business plan, we will not have
the cash available to fund the required deferred interest and principal payments
on or before  February  2, 2004,  the date on which such  payments  become  due.
Accordingly,  there  can be no  assurance  that  there  will  not be an event of
default under the credit facility at that time, or that we will be able to enter
into  additional  amendments to the senior secured credit facility by that time.
We are in the process of seeking and considering strategic alternatives in order
to reduce our overall  indebtedness,  including amounts under the senior secured
credit facility.  Such strategic  alternatives may include,  among other things,
debt or equity  financings or refinancings,  recapitalizations,  restructurings,
mergers and acquisitions,  other  transactions or bankruptcy.  It is likely that
any of such transactions,  if implemented,  would result in material dilution to
our  stockholders  or  possibly  the  elimination  of  any  recovery  to  common
stockholders.

We were not in compliance with certain of the covenants  contained in our credit
agreement for the three-month  period ending September 30, 2003. On November 14,
2003, the lenders agreed to waive  compliance with these covenants for the third
quarter of 2003.  There can be no  assurances  that we will be able to  maintain
compliance  with our covenants for the fourth quarter of 2003 or obtain a waiver
of those  covenants  in order to avoid  an event of  default  under  our  senior
secured credit facility.  Nor can there be any assurance that we will be able to
implement  a  strategic  alternative  as  discussed  above.  Therefore,  we have
classified all outstanding amounts due under our senior secured credit facility,
less unamortized discount, as a current liability as of September 30, 2003.

Taking the  amendment  into effect,  debt service on the senior  secured  credit
facility  includes  approximately  $1.7 million in cash interest expense paid in
2003,  $24.2  million due in 2004 and $8.6 million due in 2005, on an annualized
basis,  based on current  interest rates, as well as quarterly  amortization and
principal  reductions  which total $0 in 2003,  $11.7 million in 2004, and $25.4
million in 2005.  The 10.75%  Unsecured  Convertible  PIK Notes due 2011 have no
cash  interest  payments,  and are not due until 2011. As of September 30, 2003,
our current liabilities exceed our current assets by approximately $260 million.

                                       29




Total actual capital  expenditures for the nine months ended September 30, 2003,
described as cash used to purchase fixed assets in our cash flow statement, were
approximately   $6.8  million.   According  to  our  business   plans,   capital
expenditures are expected to be approximately  $2.1 million during the remainder
of 2003,  $8.9 million in 2004, and $10.2 million in 2005.  These future capital
expenditures  will depend on a number of factors  relating to our  business,  in
particular the growth level,  geographic  location and services  provided to new
customers  added during these years.  Capital  expenditures in future years will
also  depend on the  availability  of capital  and the  amount of cash,  if any,
generated  by  operations,  which may impact our capital  decisions  relating to
initiatives such as, for example,  network  expansion and the  implementation of
upgrades to our information services platforms.

For the  first  nine  months  of 2003,  cash used in  operating  activities  was
approximately  $0.4  million.  If we continue to be unable to generate cash from
operations and/or raise additional financing,  it may affect our ability to meet
our cash  requirements,  which may have an adverse affect on us, and potentially
our viability as an ongoing business.

Our cash requirements in the remainder of 2003 and thereafter will depend on the
success of the continued  execution of our business plan, and the amount of cash
required  to  fund  future  capital   expenditures  and  other  working  capital
requirements that exceed net cash provided by operating activities.  We will not
generate  sufficient  cash flow from  operations to repay at maturity the entire
principal  amount of our  outstanding  indebtedness.  In addition,  based on our
current  business plan, we will not have the cash available to fund the required
deferred interest and principal payments on or before February 2, 2004, the date
on which such payments  become due. In addition,  we  anticipate  that we may be
required to raise additional  capital in the future in order to fund the capital
expenditures  and  other  working  capital  requirements  that  exceed  net cash
provided by operating activities.

                                       30




Accordingly, we may be required to consider a number of measures, including: (1)
seeking  modifications  or  waivers to  certain  provisions  of the terms of our
indebtedness,  (2) refinancing all or a portion of our indebtedness, (3) seeking
additional debt financing,  which may be subject to obtaining  necessary  lender
consents,   (4)  seeking   additional   equity   financing,   (5)  completing  a
recapitalization or restructuring of our indebtedness, (6) filing for protection
under the federal  bankruptcy  laws or (7) a combination of the  foregoing.  The
consideration,  timing and  implementation of such measures will depend upon the
success of the execution of our business plan, the amount of capital required to
fund our  operations  in the  future  and the terms of any  financings  or other
transactions that we may consider.

         We cannot assure you that:

          (a)  actual  costs  will  not  exceed  the  amounts  estimated  in our
               business plan;

          (b)  we will prevail in our material  litigation  matters as described
               in Note 11 to the condensed consolidated financial statements;

          (c)  we and our subsidiaries will be able to generate  sufficient cash
               from  operations to meet capital  requirements,  debt service and
               other obligations when required;

          (d)  we will be in compliance  with all required  ratios and covenants
               contained in agreements governing our outstanding indebtedness or
               that we will be able to modify the  requirements or terms of such
               indebtedness;

          (e)  we will be able to refinance our indebtedness as it comes due;

          (f)  we will  be  able to sell  our  assets  or  businesses  (the  net
               proceeds  from a sale may be required to be used to repay certain
               indebtedness);

          (g)  we will not be adversely  affected by interest rate fluctuations;
               or

          (h)  we will be able to access the cash flow of our subsidiaries.


                                       31




The  following  table shows our aggregate  cash  interest  expense and principal
payments on our  existing  long-term  debt,  anticipated  capital  expenditures,
payments on capital  leases and other debt, as well as the sources of funds that
we expect to use to meet these cash requirements through 2005.




                                   Three Months     For the Year Ended
                                      Ended            December 31,
                                  December 31,
                                 ----------------------------------------
                                       2003          2004       2005                    Source of Funds
                                 ---------------------------------------- ---------------------------------------------
                                              (in millions)
                                                                  
Cash   interest    expense   on       $ 0.5          $ 24.5  $       8.9  For 2003: cash and cash  equivalents on hand
  existing long-term debt (1)                                             and  cash  from  operations;  for  2004  and
                                                                          2005:  cash  and cash  equivalents  on hand,
                                                                          cash  from  operations  and  refinancing  or
                                                                          other sources of financing (4)

Estimated  capital                     2.1              8.9         10.2  Cash and cash  equivalents  on hand and cash
  expenditures (2)                                                        from operations

Principal payments on existing          -                           25.4  Cash and  cash  equivalents  on  hand,  cash
  long-term debt (3)                                   11.7               from  operations  and  refinancing  or other
                                                                          sources of financing.  (4)

Payments on Capital Leases             8.9                -            -  Approximately  $8.0 million of these capital
                                                                          leases  are  obligations  of our  subsidiary
                                                                          MegsINet  Internet,  Inc.  and  are  not our
                                                                          obligations.  The  source  of funds  for the
                                                                          remaining    amounts:    cash    and    cash
                                                                          equivalents    on   hand   and   cash   from
                                                                          operations (5)
                                 ----------------- --------- ------------
                                      $11.5          $ 45.1       $ 44.5
                                 ================= ========= ============



(1)  During the remainder of 2003,  the only  long-term  debt that requires cash
     interest expense is CCL's $4.4 million 6% Convertible  Subordinated  Notes.
     The semi-annual interest payments that were due under the outstanding notes
     since  April 1,  2002  have not been  made and CCL is in  default  on these
     notes.

(2)  Future capital  expenditures will depend on a number of factors relating to
     our business,  in  particular  the growth  level,  geographic  location and
     services provided to new customers during these years.

(3)  Principal  payments  indicated  are principal  reductions  under our senior
     secured credit  facility.  The 2003 amount  excludes the  outstanding  $4.4
     million 6% Convertible Subordinated Notes due 2006 of CCL.

(4)  Refinancing  sources may include,  for example, a new bank facility used to
     repay these amounts;  other sources of financing may include capital raised
     through  new debt or  equity  financing  or asset  sales.  There  can be no
     assurance that we will be able to refinance our  indebtedness  or raise the
     required  funds.  Based on our current  business plan, we will not have the
     cash  available  to fund  the  required  deferred  interest  and  principal
     payments under our senior secured credit  facility on or before February 2,
     2004, the date on which such payments become due.

(5)  Approximately  $8.0 million of the capital  lease  obligations  of MegsINet
     Internet, Inc. are the subject of current litigation,  as described in Part
     II,  Item  I  of  this  Quarterly  Report  on  Form  10-Q  entitled  "Legal
     Proceedings."




                                       32



Although we believe that our plans,  intentions and expectations as reflected in
or suggested by these  forward-looking  statements are reasonable as of the date
of this quarterly  report,  we can give no assurance that our plans,  intentions
and expectations will be achieved in a timely manner if at all.

In addition, we are a holding company with no significant assets other than cash
and securities  and  investments  in and advances to our  subsidiaries.  We are,
therefore, likely to be dependent upon receipt of funds from our subsidiaries to
meet our own obligations. However, our subsidiaries' debt agreements prevent the
payment of  dividends,  loans or other  distributions  to us,  except in limited
circumstances.  However,  the limited  permitted  circumstances of distributions
from our subsidiaries  may be sufficient for our operations,  because nearly all
of the uses of funds described above are cash requirements of our subsidiaries.

Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments are summarized below, and
are more fully  disclosed in the Notes to the Condensed  Consolidated  Financial
Statements.

The  following  table  includes  aggregate  information  about  our  contractual
obligations as of September 30, 2003 and the periods in which payments are due:



                                                                          Payments Due by Period
                                                     -----------------------------------------------------------------
                                                                    Less than      1-3          4-5        After 5
Contractual Obligations                                 Total        1 Year       Years        Years        Years
---------------------------------------------------- -----------------------------------------------------------------
                                                                              (in thousands)
                                                                                             
Long-Term Debt (1)                                      $ 179,880     $ 12,158    $ 42,900     $ 85,800      $ 39,022
Capital Lease Obligations                                   8,866        8,866           -            -             -
Operating Lease Obligations                                25,210        5,863       8,845        8,271         2,231
Unconditional Purchase Obligations                              -            -           -            -             -
Other Long-Term Obligations (2)                             9,435        9,435           -            -             -
                                                     ------------- ------------ ----------- ------------ -------------
Total Contractual Cash Obligations                      $ 223,391     $ 36,322    $ 51,745     $ 94,071      $ 41,253
                                                     ============= ============ =========== ============ =============



(1)      Long-term  debt  includes  the  senior   secured  credit   facility  of
         $156,100,000,  10.75% Unsecured Convertible PIK Notes due April 2011 of
         $19,422,000  including  accrued PIK interest,  and CCL's 6% Convertible
         Subordinated Notes due 2006 of $4,358,000. The Convertible Subordinated
         Notes due 2006 of  $4,358,000  have been  reflected as due in less than
         one year because CCL is currently in default of this obligation.

(2)      Other long-term  obligations consists of the interest accrued under the
         senior secured credit facility.






                                       33





The  following  table  includes  aggregate   information  about  our  commercial
commitments  as of September 30, 2003 and the periods in which payments are due.
Commercial  commitments  are  items  that we  could be  obligated  to pay in the
future. They are not required to be included in the consolidated balance sheet.



                                                                                                    
                                                                Amount of Commitment Expiration Per Period
                                                     ------------------------------------------------------------------
                                                                    Less than 1      1 - 3       4 - 5       Over 5
Other Commercial Commitments                             Total          Year         Years       Years        Years
---------------------------------------------------- ------------------------------------------------------------------
                                                                              (in thousands)
Guarantees                                                     $ -            $ -         $ -         $ -          $ -
Lines of Credit                                                  -              -           -           -            -
Standby Letters of Credit                                    2,204          2,204           -           -            -
Standby Repurchase Obligations                                   -              -           -           -            -
Other Commercial Commitments                                 3,289          3,289           -           -            -
                                                     -------------- ------------- ------------ ----------- ------------
Total Commercial Commitments                               $ 5,493     $    5,493         $ -         $ -          $ -
                                                     ============== ============= ============ =========== ============



Consolidated Statement of Cash Flows

For the nine months ended September 30, 2003, cash used in operating  activities
was  $404,000  in  comparison  to  cash  provided  by  operating  activities  of
$1,157,000  for the nine months ended  September  30,  2002.  The change in cash
(used in) provided by operating  activities  is primarily  due to changes in our
operating   assets  and   liabilities   due  to  the  timing  of  receipts   and
disbursements.

For the nine months ended September 30, 2003, cash used to purchase fixed assets
decreased to $6,783,000  from $9,283,000 for the nine months ended September 30,
2002, which reflects decreased purchases of operating equipment.

During  August  2003,  the  Company  collected  $1,000,000  in cash  as  partial
consideration for notes receivable due from former shareholders of the Company.




                                       34





Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements contained herein constitute  "forward-looking  statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "plan," "will," "expects,"
"projects,"   "positioned,"   "strategy,"  "targeted"  and  similar  expressions
identify  such  forward-looking   statements.  Such  forward-looking  statements
involve known and unknown risks,  uncertainties and other factors that may cause
the actual  results,  performance or  achievements  of the Company,  or industry
results,  to  be  materially  different  from  those  contemplated,   projected,
forecasted,  estimated  or  budgeted,  whether  expressed  or  implied,  by such
forward-looking  statements.  Such  factors  include,  without  limitation,  the
following:  the ability of the Company to obtain trade credit and  shipments and
terms with  vendors and service  providers  for current  orders;  the  Company's
ability to maintain  contracts that are critical to its operations;  the ability
to remain in  compliance  with all required  ratios and  covenants  contained in
agreements  governing its  outstanding  indebtedness;  the Company's  ability to
identify or implement one or more strategic alternatives to reduce the Company's
indebtedness; the ability of the Company to generate sufficient cash to fund its
interest and principal payments when such payments become due; potential adverse
developments  with respect to the Company's  liquidity or results of operations;
the ability to fund and execute its business plan; the ability of the Company to
avoid  bankruptcy;  the ability of the  Company to continue as a going  concern;
potential  adverse  developments  resulting  from  litigation;  the  ability  to
attract, retain and compensate key executives and associates; the ability of the
Company  to  attract  and  retain  customers;   general  economic  and  business
conditions;  technological  developments;  the Company's  ability to continue to
design  networks,   install   facilities,   obtain  and  maintain  any  required
governmental licenses or approvals and finance construction and development, all
in a timely manner at reasonable costs and on satisfactory terms and conditions;
assumptions about customer  acceptance,  churn rates, overall market penetration
and  competition  from  providers  of  alternative   services;   the  impact  of
restructuring and integration actions; the impact of new business  opportunities
requiring  significant  up-front  investment;  interest  rate  fluctuations  and
availability, terms and deployment of capital. The Company assumes no obligation
to update the  forward-looking  statements  contained  herein to reflect  actual
results, changes in assumptions or changes in factors affecting such statements.

We  encourage  you to review the risk  factors  relating to our business and our
industry  set  forth in Item 1 of our  Annual  Report  on Form 10-K for the year
ended December 31, 2002.



                                       35




ITEM 3.           Quantitative and Qualitative Disclosure About Market Risk

The SEC's rule relating to market risk disclosure  requires that we describe and
quantify  our   potential   losses  from  market  risk   sensitive   instruments
attributable  to  reasonably  possible  market  changes.  Market risk  sensitive
instruments  include all financial or commodity  instruments and other financial
instruments,  such as investments and debt, that are sensitive to future changes
in interest rates,  currency  exchange rates,  commodity  prices or other market
factors.  We are not exposed to market  risks from  changes in foreign  currency
exchange  rates  or  commodity  prices.  We do  not  hold  derivative  financial
instruments nor do we hold securities for trading or speculative purposes. Under
our current  policies,  we do not use interest rate  derivative  instruments  to
manage our exposure to interest rate changes.

The fair  market  value of  long-term  fixed  interest  rate debt is  subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. We are
currently  pursuing  strategic  alternatives  such as  refinancings  in order to
reduce our overall  indebtedness,  including amounts due under our variable rate
senior secured credit  facility and our other fixed interest rate debt. The fair
value of our variable rate senior secured credit facility and our fixed interest
rate debt is not determinable at this time.





                                                    Interest Rate Sensitivity
                                                     As of September 30, 2003

                                              Principal Amount by Expected Maturity
                                                      Average Interest Rate

                         October 1,
                          2003 to
                        December 31,       For the Years Ending December 31,
                        ---------------------------------------------------------------
                                                                                                                       Fair
                             2003         2004         2005         2006         2007      Thereafter       Total       Value
                        --------------------------------------------------------------------------------------------------------
                                                                                                
Long-term debt,
 including
 current portion:
Fixed rate              $   4,358           $--          $--          $--          $--       $46,909(a)    $51,267      $   -
Average interest rate       6.00%                                                             10.75%
Variable rate                 $--       $11,700     $25,350       $50,700      $39,000       $29,350      $156,100      $   -

Average interest rate
                        Base rate      Libor +      Libor +      Libor +      Libor +      Libor +
                        + 5.5%(b)      4.5% or      4.5% or      4.5% or      4.5% or      4.5% or
                                       base rate    base rate    base rate    Base rate    base rate
                                       + 3.5%(b)    + 3.5%       + 3.5%       + 3.5%       + 3.5%


(a)      Represents the value at maturity of 10.75%  Unsecured  Convertible  PIK
         Notes due April 2011.
(b)      On March 31, 2003,  we entered into an amendment to our senior  secured
         credit facility.  Under this amendment,  the lenders under the facility
         agreed to defer interest  payments on the outstanding  loans during the
         period beginning March 12, 2003 and ending on February 2, 2004,  during
         which time the loans will accrue interest at the base rate plus 5.5%.






                                       36




ITEM 4.           CONTROLS AND PROCEDURES

       (a)    Disclosure  Controls and  Procedures - The  Company's  management,
              with the  participation  of the Company's Chief Executive  Officer
              and Chief Financial  Officer,  has evaluated the  effectiveness of
              the Company's  disclosure controls and procedures (as such term is
              defined in Rules  13a-15(e)  and  15d-15(e)  under the  Securities
              Exchange Act of 1934, as amended (the  "Exchange  Act")) as of the
              end  of  the  period  covered  by  this  report.   Based  on  such
              evaluation,  the  Company's  Chief  Executive  Officer  and  Chief
              Financial  Officer  have  concluded  that,  as of the  end of such
              period,  the  Company's  disclosure  controls and  procedures  are
              effective in recording, processing,  summarizing and reporting, on
              a  timely  basis,  information  required  to be  disclosed  by the
              Company in the reports that it files or submits under the Exchange
              Act.

       (b)    Internal  Control Over  Financial  Reporting - There have not been
              any  changes in the  Company's  internal  control  over  financial
              reporting  (as  such  term  is  defined  in  Rules  13a-15(f)  and
              15d-15(f)  under the  Exchange  Act) during the fiscal  quarter to
              which this report relates that have  materially  affected,  or are
              reasonably  likely to materially  affect,  the Company's  internal
              control over financial reporting.


                                       37





PART II.          OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS

Through our various operating subsidiaries,  we purchase goods and services from
a wide  variety  of  vendors  under  contractual  and  other  arrangements  that
sometimes  give rise to  litigation  in the  ordinary  course of  business.  Our
subsidiaries  also provide goods and services to a wide range of customers under
arrangements that sometimes lead to disputes over payment, performance and other
obligations. Some of these disputes, regardless of their merit, could subject us
to costly litigation and the diversion of technical and/or management personnel.
Additionally, in light of our ongoing litigation and other disputes with various
local  exchange and other  telecommunications  carriers,  some of whom we depend
upon for certain  services,  those  carriers  have and will  likely  continue to
threaten service  disruptions or terminations from time to time. Certain service
disruptions  or  terminations,  if actually  implemented,  could have a material
adverse effect on our business.  Additionally,  liabilities from litigation that
are not covered by insurance or that exceed such coverage  could have a material
adverse effect on our business, finances and/or results of operations.

Currently,  we  have  the  following  outstanding  matters,  which  if  resolved
unfavorably to us, could have a material adverse effect on us:

o    On August  12,  2002,  Verizon  Communications,  Inc.  and  several  of its
     subsidiaries  filed a complaint in the United States District Court for the
     District of Delaware  against us and several of our  indirect  wholly-owned
     subsidiaries,  referred  to herein as the  defendants,  seeking  payment of
     approximately $37 million allegedly owed to Verizon under various contracts
     and  state  and  federal  law.  Verizon  also  asked  the  Court to issue a
     declaratory ruling that it has not violated the antitrust laws.

     The  defendants  believe  that  they  have  meritorious   defenses  to  the
     complaint,  and further,  that the amounts owed are substantially less than
     the amounts  claimed by Verizon.  For example,  the defendants  believe the
     figure  specified in the  complaint  fails to recognize  payments that have
     been made by the defendants to Verizon  (including in excess of $14 million
     paid soon after the filing of the  complaint),  credits  that  Verizon  has
     issued to the defendants since the filing of the complaint,  and additional
     disputes for which Verizon owes credits to the  defendants.  The defendants
     have filed an answer to Verizon's  complaint  denying  Verizon's claims, in
     part, and have asserted various  counterclaims  against Verizon,  including
     claims  seeking  damages  for breach of  contract  and treble  damages  for
     violating the antitrust  laws.  The  defendants  have also moved to dismiss
     Verizon's request for a declaratory  ruling on the antitrust claims,  which
     Verizon has opposed.


                                       38





     On  November  18,  2002,  Verizon  filed a motion  to  dismiss  defendants'
     antitrust counterclaims, relying heavily on a decision by the United States
     Court of Appeals for the 7th Circuit in Goldwasser vs. Ameritech Corp., 222
     F.3d 390 (7th Cir. 2000) dismissing antitrust claims brought on behalf of a
     class of consumers who had purchased  services from  Ameritech in Illinois.
     On January 9, 2003,  the  defendants  filed their  opposition  to Verizon's
     motion,  noting not only that the Goldwasser case is  distinguishable  from
     the  defendants'  antitrust  claims,  but also that the  appellate  court's
     rationale in Goldwasser  had been  effectively  repudiated by the appellate
     courts of the 2nd and 11th circuits, as well as by a federal trial court in
     the antitrust claim raised by us against SBC/Ameritech in the United States
     District Court for the Northern District of Ohio.

     On March  20,  2003,  the  Court  issued  an  order  denying  the  parties'
     respective  motions without  prejudice to renew,  pending a decision by the
     United States Supreme Court in Verizon Communications, Inc. vs. Law Offices
     of Curtis V. Trinko,  LLP,  Supreme Court Docket No. 02-682 (cert.  granted
     March 10, 2003). By order of the Court issued May 6, 2003, the parties have
     been  directed to proceed  with  discovery  on all issues.  On November 14,
     2003,  Verizon filed a motion with the Court seeking permission for Verizon
     to file an  amendment  to its  complaint.  A draft  of the  amendment  that
     accompanied Verizon's request indicates that Verizon intends to assert that
     defendants now owe Verizon $40 million in alleged unpaid charges. The draft
     also indicates  that Verizon  desires to amend its complaint to specify new
     claims arising out of certain alleged  misconduct  arising out of purported
     sales, billing,  revenue and other practices as more fully described in the
     amendment.  The defendants have notified Verizon that they will not consent
     to the filing of the amendment and  defendants  are currently  preparing to
     file an opposition to Verizon's motion asking the Court to reject Verizon's
     effort to supplement its claims.  We and our subsidiaries  intend to pursue
     all available  remedies and counterclaims and defend ourselves  vigorously;
     however,  we and our  subsidiaries  cannot  be  certain  how or when  these
     matters will be resolved or of the outcome of the litigation.

o    On March 7, 2002, CoreComm  Massachusetts,  Inc., an indirect  wholly-owned
     subsidiary of ours,  initiated litigation against Verizon New England d/b/a
     Verizon  Massachusetts  in  the  Suffolk  Superior  Court,   Massachusetts,
     alleging  breach of  contract  and seeking a  temporary  restraining  order
     against  Verizon  Massachusetts.  Verizon  has filed its answer to CoreComm
     Massachusetts'   complaint  and  filed  counterclaims  seeking  payment  of
     approximately $1.2 million allegedly owed by CoreComm  Massachusetts  under
     the parties'  interconnection  agreement and Verizon's tariffs.  During the
     course of  discovery,  Verizon  conceded that it had  over-billed  CoreComm
     Massachusetts   by   approximately   $800,000.   As  a   result,   CoreComm
     Massachusetts  amended its complaint to include claims against  Verizon for
     unfair and deceptive acts or practices in violation of Massachusetts'  fair
     trade practice laws. Verizon  subsequently amended its complaint to specify
     a revised claim of $1.1 million.  CoreComm  Massachusetts  ceased  offering
     local telephone services in Massachusetts in December 2002 and is presently
     withdrawing  from  the  market.  CoreComm  Massachusetts'  withdrawal  from
     providing  telephone  services in  Massachusetts  has not had any  material
     adverse affect on our consolidated business.

                                       39




o    By letter dated April 4, 2003,  we received a notice from Verizon  claiming
     that Verizon is owed approximately $8.4 million by one of our subsidiaries,
     CoreComm New York, Inc., for services  allegedly  purchased in the state of
     New York,  including  approximately  $5.1  million of charges  that Verizon
     contends  were  mistakenly  credited to the  accounts of CoreComm New York,
     Inc. in connection with the acquisition out of bankruptcy of certain assets
     of USN  Communications,  Inc. in May 1999. In response,  CoreComm New York,
     Inc.  challenged  the  accuracy of Verizon's  figures and  provided  formal
     written  notification  that it was disputing  Verizon's right to payment of
     the amounts specified in Verizon's April 4 letter. Subsequently,  by letter
     dated June 24, 2003,  Verizon  made a demand for payment from  CoreComm New
     York  of   approximately   $6  million  of   alleged   charges,   including
     approximately  $2.3 million of charges that have been  disputed by CoreComm
     New York and are the subject of pending  litigation  between the parties in
     the federal case in Delaware,  and  threatening  to implement an embargo on
     CoreComm New York's  accounts if the requested  payment was not received by
     July 25, 2003. In response, CoreComm New York challenged Verizon's right to
     proceed as threatened and Verizon implemented the embargo over CoreComm New
     York's  objections.  CoreComm New York intends to pursue this matter in its
     pending  litigation with Verizon,  but is not presently able to predict how
     or when this matter will be resolved.  The  operations of CoreComm New York
     do not represent a material component of our revenue, profits or operations
     and we do not  anticipate  that an embargo of CoreComm New York's  accounts
     will have a material adverse affect on our business, finances or results of
     operations.

o    By letters dated October 31, 2003, our operating  subsidiaries in Virginia,
     Maryland,  and the  District  of Columbia  received  notices  from  Verizon
     asserting  that those entities are in default of their  respective  payment
     obligations under an August 28, 2002 Settlement  Agreement,  demanding that
     those  subsidiaries  pay Verizon the  aggregate sum of $764,000 in order to
     cure the alleged  payment  defaults,  and  threatening  to proceed with the
     remedies  set forth under  applicable  contracts  in the absence of payment
     within ten days after receipt of the notices. In response, our subsidiaries
     notified Verizon that they are disputing the accuracy of Verizon claims and
     challenging  its right to payment of the amounts  specified in its letters.
     Among other things,  the  subsidiaries  notified Verizon that it claims are
     inconsistent  with  the  claims  made in a  sworn  affidavit  from  Verizon
     asserting  that  Verizon  is  unable  to  accurately  compute  the  amounts
     allegedly  owed by us, that the demand letters fail to account for hundreds
     of thousands of dollars of outstanding  billing disputes,  and that Verizon
     has  refused  our  request  for  additional   information  to  substantiate
     Verizon's claims. The subsidiaries  intend to contest any charges that they
     believe are not  properly  owed and to  vigorously  defend  themselves  and
     pursue all  appropriate  claims and remedies.  However,  we are not able to
     predict how or when these matters will be resolved.

o    We and CoreComm Newco, Inc., an indirect,  wholly-owned subsidiary of ours,
     are currently in litigation  with SBC Corp.,  Ameritech  Ohio and other SBC
     subsidiaries  over  various  billing  and  performance  issues,   including
     SBC/Ameritech's alleged violation of the antitrust laws and the adequacy of
     SBC/Ameritech's  performance  under a 1998 contract  between CoreComm Newco
     and  Ameritech  Ohio.  This  litigation  began in June 2001 when  Ameritech
     threatened  to  stop  processing  new  orders  following  CoreComm  Newco's
     exercise  of  its  right  under  the  contract  to  withhold  payments  for
     Ameritech's  performance  failures.  On October 9, 2001, Ameritech filed an
     amended complaint in the United States District Court, Northern District of
     Ohio seeking a total of approximately  $14.4 million in alleged outstanding
     charges.


                                       40



     On  December  26,  2001,  CoreComm  Newco  filed its answer to  Ameritech's
     amended complaint and simultaneously filed three counterclaims  against SBC
     Corp.,  Ameritech  Ohio and certain of their  respective  subsidiaries  and
     affiliates,   alleging  breach  of  contract,   antitrust  violations,  and
     fraudulent or negligent  misrepresentation  claims.  On July 25, 2002,  the
     district Court issued a decision denying a motion to dismiss from Ameritech
     and upholding CoreComm Newco's right to proceed with its antitrust,  breach
     of contract and misrepresentation claims against all counter-defendants. On
     January 21,  2003,  CoreComm  Newco  amended its  complaint  to include the
     Company and other affiliates as additional  claimants and to add additional
     allegations supporting its claims, and on February 17, 2003,  SBC/Ameritech
     filed its answer to the amended  complaint.  On May 22,  2003,  the parties
     entered  into a stay  agreement  pursuant  to which they  agreed to jointly
     petition the Court to suspend the litigation in all respects, including all
     claims and  counterclaims,  until 15 calendar  days after the United States
     Supreme Court issues its opinion in the Trinko case, or until further order
     of the Court. Pursuant to that agreement,  the parties subsequently filed a
     joint motion for stay of the litigation,  which was granted by the Court on
     June 19, 2003.

     We believe that  CoreComm  Newco has  meritorious  defenses to  Ameritech's
     amended  complaint that could reduce the amount  currently in dispute.  For
     example, the figure specified in Ameritech's  complaint may not account for
     various  amounts that have been  properly  disputed by CoreComm  Newco as a
     result of billing errors and other improper  charges,  various refunds that
     Ameritech  contends it has already  credited to CoreComm  Newco's  accounts
     since the filing of the complaint,  and payments that were made by CoreComm
     Newco in the  ordinary  course  after the time of  Ameritech's  submission.
     However,  we cannot be certain how or when the matter will be resolved.  We
     also believes that, to the extent Ameritech prevails with respect to any of
     its claims,  Ameritech's award may be offset in whole or in part by amounts
     that CoreComm Newco and we are seeking to obtain from  SBC/Ameritech  under
     their  counterclaims.  CoreComm Newco and we intend to pursue all available
     remedies and to defend themselves vigorously.  However, it is impossible at
     this time to predict the outcome of the litigation.

                                       41




o    On April 16, 2003,  SBC Ohio (formerly  known as SBC Ameritech  Ohio) filed
     with the Public  Utilities  Commission of Ohio,  known as the PUCO, a third
     supplement  to its  application  for  review of an order  entered by a PUCO
     Hearing  Examiner  barring  SBC Ohio from  refusing  to process new service
     orders from  CoreComm  Newco  pending  the  resolution  of various  billing
     disputes at issue  between the parties.  Among other  things,  the April 16
     supplement  contends that the Hearing  Examiner's  entry provided  CoreComm
     Newco with a  competitive  advantage by allowing it to withhold  payment on
     approximately  $8.7  million of alleged  undisputed  charges  for local and
     collocation services in Ohio as of March 31, 2003. On May 2, 2003, CoreComm
     Newco submitted a reply to the April 16 supplement in which it disputed the
     accuracy of SBC Ohio's claims and explained that the outstanding balance of
     approximately  $1.9 million is consistent with common practice  considering
     SBC Ohio's billing  problems and the numerous  payment cycles at issue.  On
     June 20, 2003 CoreComm Newco and our operating  subsidiaries  in the states
     of  Illinois,  Michigan,  Indiana and  Wisconsin  entered into a standstill
     agreement with SBC's  operating  subsidiaries  in those states  pursuant to
     which the parties agreed to refrain from taking certain actions against one
     another for a period of at least nine  months  while  working to  reconcile
     their respective accounts.  Pursuant to that agreement,  SBC Ohio asked the
     PUCO to place into abeyence its appeal of the Hearing  Examiner's Entry for
     the  duration  of the nine month  standstill.  CoreComm  Newco has  already
     identified and lodged  millions of dollars worth of billing and performance
     disputes  and is  continuing  to identify  charges that it believes are not
     properly  owed to SBC Ohio.  Should the PUCO  litigation  resume,  CoreComm
     Newco  intends to defend  itself  vigorously  and to pursue  all  available
     remedies  and  counterclaims.  However,  it is not  possible to predict the
     outcome of this matter at this time.

o    By letters  dated April 23, 2003 and April 25, 2003,  SBC/Midwest  demanded
     payment  from  certain of the  Company's  subsidiaries  approximately  $9.5
     million of alleged  undisputed,  past due  charges for  wholesale  services
     allegedly  provided to our operating  subsidiaries  in Illinois,  Michigan,
     Indiana  and  Wisconsin,   and  threatened  to  pursue  further  collection
     activities  against  those  entities.  The letters  regarding  Michigan and
     Wisconsin  requested that the recipients pay into escrow an unspecified sum
     for Michigan and  approximately  $135,240 for Wisconsin in connection  with
     charges that SBC Midwest contends our  subsidiaries  have disputed in those
     states.  In response,  our subsidiaries  notified SBC Midwest that they are
     disputing  the  accuracy of the figures set forth in its letters as well as
     its right to request an escrow deposit to cover disputed charges,  and that
     they are prepared to engage in further  discussions  regarding  the various
     amounts  at  issue.  As  noted  above,  on June  20,  2003,  our  operating
     subsidiaries in Ohio,  Illinois,  Michigan,  Indiana and Wisconsin  entered
     into a standstill  agreement  with SBC's  operating  subsidiaries  in those
     states  pursuant to which the parties agreed to refrain from taking certain
     actions against one another for a period of nine months.  Our  subsidiaries
     intend to contest any charges that they  believe are not properly  owed and
     to  vigorously  pursue  all  claims  and  defend  themselves   against  any
     collections  action.  However,  we are not currently able to predict how or
     when these matters will be resolved or what amount, if any, will need to be
     paid at the time of resolution.

                                       42




o    On December 3, 2001,  General Electric Capital Corp.,  referred to as GECC,
     filed a civil lawsuit in the Circuit Court of Cook County, Illinois against
     CCL  and  MegsINet,   Inc.,  an  indirect   subsidiary  of  ours,   seeking
     approximately  $8 million in  allegedly  past due amounts and the return of
     equipment  under a capital  equipment  lease  agreement  between Ascend and
     MegsINet.  Thereafter,  on May 1, 2002, the complaint was amended to add us
     as an additional defendant.  Although neither CCL nor we are parties to the
     agreement  between  Ascend and MegsINet,  the  complaint  contends that CCL
     and/or we should be held  responsible for MegsINet's  obligations  under an
     "alter ego" theory of liability.  CCL and we are contesting  this claim and
     do not believe that the  obligations of MegsINet are  obligations of CCL or
     us.

     Subsequent  to the  filing of its  initial  complaint,  GECC filed a second
     complaint in the Circuit Court of Cook County,  Illinois against  MegsINet,
     CCL and us seeking a court order  allowing it to take  repossession  of its
     alleged  equipment.  On  September  24,  2002,  the  Court  issued an order
     granting  GECC's request for  repossession  of the equipment.  MegsINet has
     allowed GECC to take  possession  of the  equipment,  which has not had any
     material  impact on our business or  operations.  On April 23,  2003,  GECC
     filed a motion for summary  judgment asking the Court to rule in its favor,
     without  the need for trial,  that  MegsINet,  CCL and ATX  breached  their
     alleged contractual obligations to make required lease payments to GECC and
     awarding GECC damages in the amount of $9,100,053  plus attorneys' fees and
     interest. MegsINet, CCL and us have filed a consolidated opposition to that
     motion and oral  argument on the matter was heard by the Court on August 6,
     2003. On November 13, 2003,  the Court issued a ruling on GECC's motion for
     summary judgment in which it: a) denied GECC's request for summary judgment
     against all defendants on its contracts  claims,  b) granted GECC's request
     for summary judgment against all defendants on its claims of conversion but
     declined to rule on the issue of liability under those claims, c)denied our
     motion  objecting  to the court's  jurisdiction  over that  entity,  and d)
     granted  defendant's  request for  discovery  against  GECC on the issue of
     alleged  damages.  As a  result  of  the  Court's  ruling,  the  defendants
     anticipate that the litigation  will proceed with  additional  discovery on
     GECC's  contracts   claims  and  alleged  damages  for  conversion,   which
     defendants intend to pursue vigorously.  However,  it is impossible at this
     time to predict how or when this matter will be resolved. MegsINet does not
     represent a material component of our revenue,  profits or operations.  All
     of our assets and those of our  subsidiaries,  including those of MegsINet,
     are  subject  to a first  priority  security  interest  in favor the senior
     lenders under the $156 million senior credit facility.

o    On May 25, 2001, KMC Telecom,  Inc. and some of our operating  subsidiaries
     filed an  action  in the  Supreme  Court  of New  York for New York  County
     against CCL,  Cellular  Communications  of Puerto Rico, Inc.,  CoreComm New
     York, Inc. and MegsINet.  KMC contended that it was owed  approximately  $2
     million,  primarily in respect of alleged  early  termination  liabilities,
     under a services  agreement and a co-location  agreement with MegsINet.  On
     March 27, 2002,  certain of the  defendants  initiated  litigation  against
     several  former   principals  of  MegsINet  seeking   indemnification   and
     contribution against KMC's claims for breach of various representations and
     warranties  made  under the merger  agreement  pursuant  to which  MegsINet
     became a subsidiary of ours.  Defendants had also initiated  coverage under
     an insurance  policy designed to protect against such claims.  On September
     9,  2003,  this  matter  was fully  settled by  agreement  of the  parties,
     predominantly out of proceeds from insurance.


                                       43


o    On October 10,  2003,  APCC  Services,  Inc.  and  several of its  clients,
     referred  to  as  APCC,   filed  a  formal   complaint   with  the  Federal
     Communications  Commission ("FCC") against us and several of our affiliated
     companies claiming we are responsible for payphone  surcharge  compensation
     for the  period  between  November  1996 to the  present,  in the amount of
     $1,533,949,  as  calculated  pursuant to the 5th Report and Order issued by
     the FCC,  currently  on appeal in the D.C.  Circuit  Court of  Appeals.  On
     October 23, 2003,  the FCC  directed  APCC to correct  deficiencies  in its
     allegations  and to refile its complaint on or before  November 7, 2003. In
     response to the  complaint,  the  defendants  expect to  vigorously  defend
     against the asserted claims and pursue all available remedies.  However, it
     is not possible at this time to predict the outcome of the litigation.

o    On September 24, 2002, GATX Technologies, Inc., known herein as GATX, filed
     an  action  in  the  Thirteenth   Judicial   Circuit  in  Florida   against
     CoreComm-Voyager,  Inc.,  an  indirect  wholly-owned  subsidiary  of  ours,
     seeking  recovery  of  amounts  allegedly  owed  under an  equipment  lease
     totaling  approximately  $150,000.  On October 21,  2002,  CoreComm-Voyager
     moved to dismiss GATX's action for lack of jurisdiction.  The motion is now
     pending with the Court.  On October 28, 2002,  3Com  Corporation,  known as
     3Com,  filed an action  against the  Company in the Court of Common  Pleas,
     Montgomery County,  Pennsylvania seeking payment of approximately  $900,000
     under an equipment  lease. We have filed  preliminary  objections to 3Com's
     complaint on the basis that we are not a proper  party to the dispute,  and
     the Court  has not yet  ruled on those  objections.  Should  either  action
     proceed  further,  the  defendants  will defend  themselves  vigorously and
     pursue all available  claims.  However,  it is not possible at this time to
     predict how or when either of these matters will be resolved.

o    On March 1, 2002, Easton Telecom Services,  LLC initiated litigation in the
     Northern  District of Ohio against  CoreComm  Internet Group,  Inc. seeking
     payment of  approximately  $4.9  million,  primarily  in respect of alleged
     early termination  penalties for  telecommunications  services  purportedly
     provided under alleged  contracts.  On August 23, 2002, the Court issued an
     order  dismissing  approximately  $4 million of Easton's claims as invalid.
     Upon the conclusion of a jury trial that ended on November 8, 2002,  Easton
     obtained  a  judgment  against  CoreComm  Internet  Group,   Inc.,  Voyager
     Information Networks,  Inc. and MegsINet in the total amount of $1,085,000.
     On February 4, 2003, the defendants filed an appeal in this matter with the
     United States Court of Appeals for the Sixth Circuit, and the plaintiff has
     filed a cross-appeal.  Plaintiff had previously been pursuing  discovery in
     aid of  execution  on its judgment but has not been active in this area for
     some time. On November 10, 2003,  plaintiff filed a motion asking the Court
     to appoint a receiver for the purpose of marshalling defendants' assets and
     liquidating them to satisfy  plaintiff's  judgment.  The defendants believe
     that the motion is procedurally  defective and substantively  without merit
     and  defendants  are in the process of preparing to file an  opposition  to
     plaintiff's  motion seeking its denial.  Although  defendants  believe that
     Easton's motion will be denied,  it is not possible at this time to predict
     with any  certainty  how or when this matter will be  resolved.  All of our
     assets and those of our  subsidiaries,  including  those of the defendants,
     are subject to a first  priority  security  interest in favor of the senior
     lenders under the $156 million senior credit facility.

                                       44




o    On June 7, 2002,  the Board of Revenue and Finance of the  Commonwealth  of
     Pennsylvania  issued  an  order  granting  in part  and  denying  in part a
     petition  for  review of a  decision  by a lower  administrative  authority
     relating  to our  alleged  liability  for sales and use tax for the  period
     September 1, 1997 through July 31, 2000.  Pursuant to the June 7 order,  we
     have been assessed  sales and use tax for the period at issue in the amount
     of  $631,429,   which  has  been  accrued  in  our  consolidated  financial
     statements.  On July 8, 2002, we filed a petition for review of the board's
     order in the Commonwealth Court of Pennsylvania seeking a further reduction
     of the assessment.  We believe that we have  meritorious  defenses and that
     the assessment  should be reduced;  however it is not possible at this time
     to predict how this matter will be resolved

o    On  February  28,  2003,  Focal  Communications  Corp.  and  certain of its
     subsidiaries  initiated adversarial  proceedings in Focal's Chapter 11 case
     under the U.S.  bankruptcy laws against us and certain of our  subsidiaries
     seeking  payment of an aggregate of  approximately  $859,514 in charges for
     interstate and intrastate  switched access services  allegedly  provided by
     Focal's subsidiaries in Illinois,  Pennsylvania,  Delaware and New York. On
     April 7, 2003,  Focal filed a motion for summary  adjudication for services
     allegedly  provided to our  subsidiaries  operating in Illinois,  and these
     subsidiaries filed an opposition to that motion challenging the validity of
     Focal's charges as well as its right to summary adjudication of the issues.
     On August 8, 2003, the bankruptcy court issued a Report and  Recommendation
     finding  that  Focal's  action is a  "non-core"  proceeding  and issuing an
     advisory  opinion to the U.S.  District  Court for the District of Delaware
     recommending that summary judgment be granted in favor of Focal against our
     operating  subsidiaries in the aggregate amount of $134,376. The Defendants
     believe  that  the  recommendation  reached  by  the  bankruptcy  court  is
     erroneous  and the  defendants  have  filed  objections  to the  bankruptcy
     court's report and recommendation with the District Court. In addition,  on
     August 21, 2003, at the defendants' request, the bankruptcy court granted a
     stay of the pending  summary  adjudication  motions for services  allegedly
     provided to our subsidiaries  operating in  Pennsylvania,  Delaware and New
     York pending resolution of the Illinois matter by the District Court. Focal
     subsequently  filed a motion asking the  bankruptcy  court to lift the stay
     and asserting that its claims now stand at approximately  $2 million.  Upon
     our opposition,  the bankruptcy  court denied Focal's motion but authorized
     it to take additional  discovery in support of its claims.  Although we and
     our subsidiaries  continue to believe that we have meritorious defenses and
     arguments on appeal, it is not possible at this time to predict how or when
     these matters will be resolved.

o    On January 3, 2003, we and our indirect subsidiary, MegsINet, Inc., filed a
     complaint  against  Broadwing  in the U.S.  District  Court for the Eastern
     District of Pennsylvania  seeking the return of  approximately  $700,000 in
     taxes  billed by  Broadwing  in alleged  violation  of two  Master  Service
     Agreements.  The Court issued an order  referring the matter to arbitration
     pursuant to the terms of the contract  between  MegsINet and  Broadwing.  A
     schedule for the arbitration has not yet been established.

                                       45




o    On September 9, 2003,  Electronic  Data Systems Corp.,  referred to as EDS,
     filed  a  civil  action  in  the  Common  Pleas  Court  Montgomery  County,
     Pennsylvania  alleging  breach of contract  arising out of alleged  billing
     services  provided  to  CoreComm-ATX,  Inc. in the amount of  $555,526.  On
     October  22,  2003,   CoreComm-ATX  answered  the  complaint  and  asserted
     counterclaims   against   EDS   for   breach   of   contract,    fraudulent
     misrepresentation and negligent misrepresentation.  CoreComm-ATX expects to
     vigorously defend itself against the asserted claims,  while simultaneously
     pursing its counterclaims  against EDS. However, it is not possible at this
     time to predict the outcome of the litigation.

o    On  October  8,  2003,  a  complaint  was filed by the  Wisconsin  Attorney
     General's  Office  in the  Circuit  Court,  Dane  County  against  CoreComm
     Wisconsin,  Inc.  In the  Complaint,  the  Attorney  General  alleges  that
     CoreComm  Wisconsin failed to properly  disclose to certain of its Internet
     customers  policies  relating to  subscription  cancellation  and  renewal,
     resulting in the improper billing of customers,  in violation of provisions
     of the Wisconsin  Administrative  Code.  The Attorney  General's  office is
     seeking  injunctive  relief  as well as  penalties  and  customer  refunds.
     CoreComm Wisconsin is currently reviewing these allegations and believes it
     has  meritorious  defenses to the Attorney  General's  complaint.  CoreComm
     Wisconsin  expects to vigorously defend itself against the asserted claims,
     however,  at this time it is  impossible  to  predict  the  outcome of this
     matter.

o    A  subsidiary  of ours,  ATX  Licensing,  Inc.  ("ALI"),  is  presently  in
     discussions with regulatory  authorities concerning a request to enter into
     an extended  payment plan in connection  with an outstanding  obligation of
     approximately  $4.8 million.  ALI is not presently  able to agree to all of
     the terms of the proposed plan in light of certain  restrictions  set forth
     in our credit  facility  with our senior  secured  lenders.  We have made a
     request to our lenders  that ALI be permitted  to  participate  in the plan
     under the terms  proposed by the  regulatory  authorities  and is currently
     waiting for a final  response to that request.  ALI has been advised by the
     regulatory  authorities  that if it is not  accepted to  participate  in an
     extended payment plan, then the entire amount of the obligation will become
     due and payable  within thirty days from the date that ALI receives  notice
     that it is not  able to  participate  in the  plan.  If ALI is not  able to
     participate in an extension  plan with the approval of its lenders,  and in
     the  absence of  additional  funding to satisfy the  obligation,  we do not
     believe  that ALI will be able to pay the  obligation  within the period of
     time  specified  by the  regulatory  authorities.  A  failure  to  pay  the
     obligation  could  result  in  the  imposition  of  regulatory   penalties,
     including  substantial fines, the revocation or imposition of conditions on
     regulatory authorizations, and/or other penalties.


                                       46




ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

        10.1    Form of Indemnification agreement

        10.2    Waiver  dated as of November  14,  2003 to the Credit  Agreement
                dated as of April 11,  2001 (as  further  amended,  restated  or
                otherwise supplemented from time to time), among CCL Historical,
                Inc., ATX Communications,  Inc., CoreComm Communications,  Inc.,
                the   lenders   from  time  to  time  party   thereto   and  the
                administrative agent for the lenders.

        31.1    Certification  dated  November 19, 2003 pursuant to Exchange Act
                Rule  13a-14(a) or 15d-14(a) of principal  executive  officer as
                adopted  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
                2003, by Thomas J. Gravina, President - Chief Executive Officer.

        31.2    Certification  dated  November 19, 2003 pursuant to Exchange Act
                Rule  13a-14(a) or 15d-14(a) of principal  financial  officer as
                adopted  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
                2003, by Michael A.  Peterson,  Executive Vice President - Chief
                Operating Officer and Chief Financial Officer.

        32.1    Certification  dated  November  19,  2003  pursuant to 18 U.S.C.
                Section 1350 of CEO and CFO  pursuant to 18 U.S.C.  Section 1350
                as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
                2002 by Thomas J. Gravina,  President - Chief Executive Officer,
                and  Michael  A.  Peterson,  Executive  Vice  President  - Chief
                Operating Officer and Chief Financial Officer

(b) Reports on Form 8-K.

                During the quarter ended September 30, 2003, ATX  Communications
filed the following reports on Form 8-K:

                        (i)     Report dated July 2, 2003,  reporting under Item
                                9, Regulation FD Disclosure, ATX Communications,
                                Inc.  and its  subsidiaries  (collectively,  the
                                "Company")   had  engaged  Credit  Suisse  First
                                Boston LLC as and advisor in connection with the
                                Company's   ongoing   review  of  the  Company's
                                strategic alternatives

                        (ii)    Report dated August 14,  2003,  reporting  under
                                Item 12,  Results of  Operations  and  Financial
                                Condition,   that   ATX   Communications,   Inc.
                                announced its consolidated operating results for
                                the quarter ended June 30, 2003.

                  No financial statements were filed with these reports.




                                       47





                                   SIGNATURES



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




                                 ATX COMMUNICATIONS, INC.


Date: November 19, 2003     By: /s/ Michael A. Peterson
                                -----------------------------------

                                Michael A. Peterson
                                Executive Vice President -
                                Chief Operating Officer and
                                Chief Financial Officer








Date: November 19, 2003     By: /s/ Neil Peritz
                                -----------------------------

                                Neil Peritz
                                Senior Vice President - Controller and Treasurer
                                (Principal Accounting Officer)







                                       48