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

FORM 10-Q

(Mark One)

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2000

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

For the transition period from to

Commission file number 0-9728

GST NETWORK FUNDING, INC.
(Exact name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		13-4001870 (IRS Employer Identification Number)
4001 Main Street, Vancouver, WA (Address of Principal Executive Offices)		98663 (Zip Code)

(360) 356-7100
Registrant's Telephone Number, Including Area Code

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT CONTEMPLATED THEREBY

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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At ~~August~~November 14, 2000, there were outstanding 100 shares of common stock, $.01 par value per share, of the Registrant.

GST NETWORK FUNDING, INC.
INDEX

		Page(s)
~~PART I: Financial Information~~	PART I: Financial Information
ITEM 1.	FINANCIAL STATEMENTS:
	Balance Sheets—June 30, 2000 and December 31, 1999	2
	Balance Sheets—September 30, 2000 and December 31, 1999	2
	Statements of Operations —Three and Six Months Ended June 30, 2000 and 1999	3
	Statements of Operations—Three and Nine Months Ended September 30, 2000 and 1999	3
	Statements of Cash Flows —Six Months Ended June 30, 2000 and 1999	4
	Statements of Cash Flows—Nine Months Ended September 30, 2000 and 1999	4
	Notes to Financial Statements	5-7
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (REDUCED DISCLOSURE NARRATIVE)	76-9
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9
~~PART II: Other Information~~	PART II: Other Information
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	109
SIGNATURES		1110

~~Item~~ITEM 1. ~~Financial~~FINANCIAL ~~Statements~~ STATEMENTS GST NETWORK FUNDING, INC. BALANCE SHEETS (In thousands, except share and per share amounts) (Unaudited)

GST NETWORK FUNDING, INC. BALANCE SHEETS (In thousands, except share amounts) (Unaudited)

ASSETS				September 30, 2000			December 31, 1999(1)
Current assets—
	Cash and cash equivalents				—			—
Restricted investments					3,510			9,848
Notes receivable from parent (see Note 6)					341,431			319,336
Commitment fees receivable from parent (see Note 6)					27,511			24,942
Interest receivable from parent (see Note 6)					2,001			6,851
Other receivable from parent (see Note 6)					1,322			—
Deferred financing costs, net					8,356			9,182

		Total assets		$	384,131		$	370,159

LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities not subject to compromise:
	Accrued liabilities			$	12		$	18
	Accrued income taxes payable to parent				29,318			22,827
	Other payable to parent				—			4,306

		Total current liabilities not subject to compromise			29,330			27,151

Liabilities subject to compromise (see Note 3)					369,499			—

Long-term debt					—			355,587

Shareholder's deficit:
	Common stock:
		Authorized—1,000 of $.01 par common shares; issued and outstanding—100 shares			—			—
	Additional paid-in capital				2,000			2,000
	Accumulated deficit				(16,698	)		(14,579	)

			Total shareholder's deficit		(14,698	)		(12,579	)

			Total liabilities and shareholder's deficit	$	384,131		$	370,159

(1)

The information in this column was derived from GST Network Funding, Inc.'s audited financial statements as of December 31, 1999.

				June 30, 2000			December 31, 1999(1)
ASSETS
		Restricted investments			3,457			9,848
		Notes receivable from parent			341,431			319,336
		Commitment fees receivable from parent			27,513			24,942
		Interest receivable from parent			2,001			6,851
		Other receivable from parent			1,332			—
		Deferred financing costs, net			8,632			9,182
			Total assets	$	384,366		$	370,159
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities not subject to compromise:
	Accrued liabilities			$	6		$	18
	Accrued income taxes payable to parent				29,304			22,827
	Other payable to parent				—			4,306
			Total current liabilities not subject to compromise		29,310			27,151
Liabilities subject to compromise (see Note 3)					369,505			—
Long-term debt not subject to compromise					—			355,587
Shareholder's deficit:
	Common stock:
		Authorized—1,000 of $.01 par common shares; issued and outstanding—100 shares			—			—
	Additional paid-in capital				2,000			2,000
	Accumulated deficit				(16,449	)		(14,579	)
			Total shareholder's deficit		(14,449	)		(12,579	)
			Total liabilities and shareholder's deficit	$	384,366		$	370,159

See accompanying notes to financial statements.

GST NETWORK FUNDING, INC.
Statements of Operations
(In thousands)
(Unaudited)

				Three Months Ended June 30 ,						Six Months Ended June 30 ,
					Three Months Ended September 30,						Nine Months Ended September 30,
				~~2000~~	2000		~~1999~~	1999		~~2000~~	2000		~~1999~~	1999
Revenues:
	Interest income			$	~~5,597~~$	40	$	~~7,358~~	8,553	$	~~16,481~~	16,521	$	~~12,846~~	21,400
	Commitment fee income				~~583~~	—		~~3,360~~	2,267		~~2,571~~	2,571		~~6,978~~	12,461
		~~Total revenues~~	Total revenues		~~6,180~~	40		~~10,718~~	10,820		~~19,052~~	19,092		~~19,824~~	33,861
Operating costs and expenses:
	Interest expense (contractual interest of $4,776 not recorded for the three- and six-month periods ended June 30, 2000)				4,995			9,083			14,445			18,046
	Interest expense (contractual interest of $9,655 and $14,431 not recorded for the three- and nine-month periods ended September 30, 2000)					275			9,414			14,720			27,461
	Income before reorganization expenses and income taxes				1,185			1,635			4,607			1,778
			Income before reorganization expense and income taxes			(235	)		1,406			4,372			6,400
Reorganization expenses (see Note 4)	~~Reorganization expenses (see Note 4)~~				—	—		—	—		—	—		—	—
		Income before income taxes			1,185			1,635			4,607			1,778
			Income (loss) before income taxes			(235	)		1,406			4,372			6,400
Income tax (benefit) expense:
Income tax expense:
	Current				~~2,101~~	14		~~3,644~~	3,679		~~6,477~~	6,491		~~6,740~~	11,513
	Deferred				—	—		—	—		—	—		—	—
					2,101			3,644			6,477			6,740
						14			3,679			6,491			11,513
		Net income (loss)		$	(916	)	$	(2,009	)	$	(1,870	)	$	(4,962	)
			Net loss		$	(249	)	$	(2,273	)	$	(2,119	)	$	(5,113	)

See accompanying notes to financial statements.

GST NETWORK FUNDING, INC.
Statements of Cash Flows
(In thousands)
(Unaudited)

				Six Months Ended June 30,
				Nine Months Ended September 30,
				2000			1999
Operations:
	Net income (loss)			$	(1,870	)	$	(4,962	)
	Net loss			$	(2,119	)		(5,113	)
	Items not involving cash:
		Amortization of deferred financing costs			~~550~~826			~~552~~827
		Accretion of interest			13,894			1625,~~853~~568
	Changes in non-cash operating working capital:
		Commitment fee receivable from parent			(2,571	)		(612,~~979~~461	)
		Interest receivable from parent			4,850			(310,~~119~~629	)
		Other accrued liabilities			(6—	)		~~241~~(22	)
		Accrued interest payable			—			~~(396~~291	)
		Accrued income taxes payable to parent			6,477			6,740
		Pre-petition accounts payable and accrued liabilities			(6	)
		Other payable to parent			(5,620	)		172
		Accrued income taxes payable to parent			6,491			11,513
			Cash provided by operations		15,704			9,102
		Other payable to parent			(5,608	)		201
			Cash provided by operations		15,757			10,175
Investing:
	Change in investments restricted for fixed assets purchases				6,~~391~~338			~~110~~173,~~304~~909
	Notes receivable from parent				(22,095	)		(~~119~~184,~~406~~084	)
			Cash used in investing activities		(15,~~704~~757	)		(910,~~102~~175	)
			Increase in cash and cash equivalents		—			—
Cash and cash equivalents, beginning of period					—			—
Cash and cash equivalents, end of period				$	—		$	—
Supplemental disclosure of cash flow information:
	Cash paid for interest			$	—		$	—

See accompanying notes to financial statements.

GST NETWORK FUNDING, INC. Notes to Financial Statements (Unaudited)

Notes to Financial Statements

(Unaudited)

1. BANKRUPTCY PROCEEDINGS

On May 17, 2000, GST Telecommunications, Inc. ("GST" or the "Company"), and its subsidiaries, including GST Network Funding, Inc. ("GST Network") and GST USA, Inc. ("GST USA"), filed voluntary petitions for protection from creditors under Chapter 11 of the United States Bankruptcy Code in the District of Delaware ("Bankruptcy Code"). The Company and its subsidiaries (collectively the "Debtors") are currently operating as debtors-in-possession under the supervision of the United States ~~Bankruptcy~~District Court for the District of Delaware (the "Bankruptcy Court"). The Chapter 11 cases have been consolidated for the purpose of joint administration under Case No. 00-1982 (GMS).

On May 17, 2000, the Debtors also commenced ancillary proceedings under the Companies' Creditors Arrangement Act in Canada in the Ontario Superior Court of Justice.

Under the proceedings, substantially all liabilities, litigation and claims pending against the Debtors in existence at the filing date are stayed unless the stay is modified or lifted or payment has been otherwise authorized by the Bankruptcy Court.

On May 11, 2000, we obtained a commitment letter from Heller Financial, Inc. ("Heller") which will provide us, subject to satisfying certain conditions, debtor-in-possession financing for $50 ~~million~~,000 and the potential for up to an additional $75,000 ~~million~~ in cash. On May 26, 2000, the Bankruptcy Court entered an order approving the initial $30,000 ~~million~~ of this financing. On July 26, 2000, the Bankruptcy Court entered an order providing a superpriority interest for Heller over the secured debt of existing bondholders, upon ~~the~~ the consent of a majority of the secured bondholders, which will in turn permit Heller to provide approximately $40 ~~million~~,000 of the $50 ~~million~~,000 in financing mentioned above. Based upon current unencumbered assets, the additional $10 ~~million~~,000 is available without the consent of the bondholders. To date, we have not drawn on the Heller credit facility, or sought bondholder consent.

~~Under~~On ~~the~~June 13, ~~Bankruptcy Code~~2000, we opened the ~~rights~~bidding ~~and~~procedures ~~treatment~~with the approval of ~~pre-petition~~the ~~creditors~~Bankruptcy ~~and~~Court ~~shareholders~~in ~~may~~an beauction format for substantially ~~altered~~all of our assets. AtAfter ~~this~~an ~~time~~extension of the original bid and auction dates, itqualified isbuyers ~~not~~were ~~possible~~required to ~~predict~~submit ~~the~~their ~~outcome~~bids as of ~~the~~ ~~Chapter~~August 11, 2000. On September 11, ~~cases~~2000, inthe ~~general~~Company orand Time Warner Telecom Inc. executed a definitive asset purchase agreement which provides for the ~~effect~~purchase of substantially all of the ~~cases~~Company's onassets, ~~its~~excluding ~~business~~certain assets in Hawaii and certain non-core businesses, orfor $690,000. onOn September 21, 2000, the ~~interests~~Bankruptcy ofCourt ~~creditors~~approved the definitive asset purchase agreement between the Company and ~~shareholders~~Time Warner Telecom Inc. ~~Management~~Closing ~~believes~~of ~~that~~the itsale is ~~highly~~anticipated in ~~unlikely~~the ~~that~~last ~~current~~quarter ~~equity security~~of ~~holders~~2000, ~~will~~or ~~receive~~first ~~any~~quarter ~~distribution~~of ~~under~~2001, ~~any~~subject ~~reorganization~~to orregulatory ~~liquidation~~approvals and other customary terms and conditions. In addition, the Company is seeking purchasers for certain of ~~our~~its remaining assets.

OnUnder ~~May 16,~~the ~~2000~~Bankruptcy Code, wethe ~~signed~~rights aand ~~letter~~treatment of ~~intent~~pre-petition ~~with~~creditors ~~Time~~and ~~Warner~~shareholders ~~Telecom, Inc.,~~may ~~for~~be ~~the sale of~~ substantially ~~all~~altered. ofAt ~~our~~this ~~assets~~time, ~~for~~it ~~$450~~is ~~million~~not inpossible ~~cash.~~to Onpredict ~~June 12, 2000, we announced that~~ the ~~letter~~outcome of ~~intent~~the ~~with~~Chapter ~~Time~~11 ~~Warner~~cases ~~Telecom,~~in ~~Inc.,~~general ~~for~~or the ~~sale~~effect of ~~substantially~~the ~~all~~cases ofon our ~~assets~~business, ~~would~~or ~~not~~on bethe ~~proceeding~~interests of creditors.

On June 13, 2000, we opened the bidding procedures, with the approval of the Bankruptcy Court, in an auction format for substantially all of our assets. After an extension of the original bid and auction dates, qualified buyers were required to submit their bids prior to August 11, 2000. The bids are currently being evaluated. An auction will occur on August 22, 2000, and if such auction results in a bid or series of bids for the assets of GST satisfactory to the Company and its creditors, then we anticipate a Bankruptcy Court hearing on August 25, 2000 to result in an order confirming a sale, with such sale expected to close prior to the end of the year. If such a sale is consummated, it is highly unlikely that our current equity security holders would receive any distribution upon our subsequent liquidation and the interest of both secured creditors and unsecured creditors may be substantially impaired. If a sale of all or a portion of the Company's assets is not completed, we will either reorganize our remaining operations or liquidate the unsold assets.

2. BASIS OF PRESENTATION

The accompanying financial statements of GST Network ~~Funding, Inc. ("GST Network")~~ have been prepared in conformity with generally accepted accounting principles. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or for subsequent periods. These financial statements should be read in conjunction with GST Network's audited financial statements for the year ended December 31, 1999, as included in GST Network's Report on Form 10-K for the year ended December 31, 1999.

presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or for subsequent periods. These financial statements should be read in conjunction with the GST Network's audited financial statements for the year ended December 31, 1999, as included in GST Network's Report on Form 10-K for the year ended December 31, 1999.

3. LIABILITIES SUBJECT TO COMPROMISE

As of ~~June~~ September 30, 2000, liabilities subject to compromise consist of the following:

Accounts payable		$	18	$	18
Accrued liabilities			6
Long-term debt					369,481
Long-term debt			369,481
		Total		$	369,499
	Total	$	369,505

4. REORGANIZATION EXPENSES

No reorganization expenses related to the Chapter 11 filing, were recorded by GST Network for the three- and ~~six~~nine-month periods ended ~~June~~ September 30, 2000. All recorded expenses for those periods are included in GST ~~and GST USA~~'s financial statements.

5. NET LOSS PER SHARE AND SHAREHOLDER'S DEFICIT

GST Network does not have equity instruments that are considered common stock equivalents, and, as weighted average common shares total only 100 for the periods presented, all of which are owned by GST USA, ~~Inc.~~ ~~("GST USA"),~~ loss per share data is meaningless and is not presented in the accompanying financial statements.

6. ~~INTERCOMPANY~~IMPAIRMENT ~~RECEIVABLES~~OF ASSETS AND ~~IMPAIRMENT~~COLLECTABILITY OF ~~ASSETS~~INTERCOMPANY RECEIVABLES

~~The~~As ~~bidding~~a ~~and~~result ~~auction~~of ~~processes~~entering ~~described~~into ~~in Note 1 could ultimately result in~~ the ~~sale~~definitive ofasset ~~substantially~~purchase ~~all~~agreement ofwith ~~the~~Time ~~Company's~~Warner ~~assets~~Telecom Inc. ~~Although~~in the ~~Company~~ ~~and~~amount ~~its~~of ~~creditors are not required to accept any offer~~$690,000 itand isanticipated ~~possible~~proceeds from ~~that~~ the ~~Company's~~sale ~~creditors~~or ~~would~~sales ~~accept~~of ~~an offer to purchase substantially~~ all ofremaining ~~the Company's~~ assets, ~~for~~GST ~~less~~USA ~~than the~~recorded ~~current book value of those assets. Such a transaction could result in~~ an impairment ~~of assets. Until the auction has been completed~~charge, ~~the Company cannot predict the values of the final bid(s) or whether those bids will be acceptable to the creditors. The Company has determined that~~ pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," ~~no impairment~~ of ~~assets~~$256,000 ~~existed~~during asthe ofthree-months ~~June~~ended September 30, 2000.

~~Total~~As ~~revenue~~a ~~includes~~result ~~$6,201~~of ~~and~~GST ~~$9,044~~USA's decision to sell its assets for ~~the~~less ~~three~~than ~~months~~the ~~ended~~book ~~June 30,~~value ~~2000~~of ~~and~~those ~~1999~~assets, ~~respectively,~~the ~~and~~collectability ~~$19,012~~of ~~and~~GST ~~$16,132~~Network's ~~for~~receivables ~~the~~from ~~six~~GST ~~months~~USA, ~~ended~~which ~~June~~total $372,265 at September 30, 2000 ~~and 1999~~, ~~respectively,~~is ofin ~~interest~~doubt. ~~and~~While ~~commitment~~it ~~fee~~is ~~income~~likely ~~due~~that ~~from~~these ~~GST~~receivables ~~Network's~~are ~~parent~~impaired, ~~GST~~the ~~USA.~~extent As of, ~~June 30,~~impairment ~~2000,~~is ~~receivables~~not ~~from~~currently ~~GST~~measurable. ~~USA,~~The ~~including~~amount ~~notes~~collected ~~receivable,~~by ~~commitment~~GST ~~fees~~Network will be ~~receivable~~determined ~~and~~upon ~~accrued~~the ~~interest~~completion ~~receivable,~~of ~~totaled~~all ~~$370,945.~~asset ~~The~~sales ~~degree~~and tothe ~~which~~allocation ~~such~~of ~~amounts~~proceeds ~~are~~via ~~collectible~~the bybankruptcy ~~GST~~process.

Network would be impacted by an impairment of fixed assets associated with the equipment purchased with proceeds from GST Network's $500.0 million principal amount at maturity 10.5% Senior Secured Discount Notes.

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

This Quarterly Report contains "forward-looking statements" within the meaning of the securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements included in this Quarterly Report, other than statements of historical facts, are forward-looking statements, including the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding GST Network ~~Funding, Inc.'s ("GST Network" or the "Company")~~ strategy, future operations, financial position, projected costs, prospects, plans and objectives of management.

Certain statements contained in this Quarterly Report, including without limitation, statements containing the words "will," "anticipate," "believe," "intend," "estimate," "expect," "project" and words of similar import, constitute forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, among others, the following:

•: the uncertainty of our future as a result of filing for protection under bankruptcy law;
•: the significant amount of our indebtedness;
•: our limited operating history and expectation of operating losses;
•: the availability and terms of the significant additional capital required to fund our expansion;
•: the extensive competition we expect to face in each of our markets;
•: our dependence on sophisticated information and processing systems;
•: our ability to manage growth;
•: our ability to access markets and obtain any required governmental authorizations, franchises and permits, in a timely manner, at reasonable costs and on satisfactory terms and conditions;
•: technological change; and
•: changes in, or the failure to comply with, existing government regulations.

All forward-looking statements speak only as of the date of this Quarterly Report. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this Quarterly Report are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.

Overview

GST Network was formed on April 16, 1998, for the purpose of issuing $500.0 million principle amount at maturity of 10.5% Senior Secured Discount ~~Notes~~ Notes (the "Senior Secured Notes") and financing the purchase of telecommunications equipment. GST Network acts as purchasing agent for GST USA, and sells to GST USA the equipment it purchases with the proceeds from the Senior Secured Notes Offering. GST Network has only a limited operating history.

7 As of September 30, 2000, GST Network had purchased approximately $303.3 million of equipment and held restricted investments of approximately $3.5 million restricted for the purchase of equipment. All of the equipment has been sold to GST USA in exchange for intercompany notes. Ultimately, such equipment is leased by GST USA to the various operating subsidiaries of GST.

GST USA, Inc. ("GST USA") and sells to GST USA the equipment it purchases with the proceeds from the Senior Secured Notes offering. GST Network has only a limited operating history.

As of June 30, 2000, GST Network had purchased approximately $303.3 million of equipment and held restricted investments of approximately $3.5 million restricted for the purchase of equipment. All of such equipment has been sold to GST USA in exchange for intercompany notes. Ultimately, such equipment is leased by GST USA to the various operating subsidiaries of GST Telecommunications, Inc. ("GST").

Recent Developments

On May 17, 2000, GST and its subsidiaries, including GST Network and GST USA, filed voluntary petitions for protection from creditors under Chapter 11 of the ~~U.S.~~United States Bankruptcy Code in the District of Delaware. WeThe Company and its subsidiaries (collectively the "Debtors") are currently operating as debtors-in-possession under the supervision of the United States ~~Bankruptcy Court for the~~ District ~~of Delaware (the "Bankruptcy~~ Court~~").~~ ~~The Chapter 11 cases have been consolidated~~ for the ~~purpose of joint administration under Case No. 00-1982 (GMS).~~

~~On May 17, 2000, we also commenced ancillary proceedings under the Companies' Creditors Arrangement Act in Canada in the Ontario Superior Court of Justice.~~ 7

District of Delaware (the "Bankruptcy Court"). The Chapter 11 cases have been consolidated for the purpose of joint administration under Case No. 00-1982 (GMS).

On May 17, 2000, the Debtors also commenced ancillary proceedings under the Companies' Creditors Arrangement Act in Canada in the Ontario Superior Court of Justice.

On May 11, 2000, we obtained a commitment letter from Heller Financial, Inc. ("Heller") which will provide us, subject to satisfying certain conditions, debtor-in-possession financing for $50.0 million and the potential for up to an additional $75 .0 million in cash. On May 26, 2000, the Bankruptcy Court entered an order approving the initial $30 .0 million of this financing. On July 26, 2000, the Bankruptcy Court entered an order providing a superpriority interest for Heller over the secured debt of existing bondholders, upon the consent of a majority of the secured bondholders, which will in turn permit Heller to provide approximately $40.0 million of the $50.0 million in financing mentioned above. Based upon current unencumbered assets, the additional $10.0 million is available without the consent of the bondholders. To date, we have not drawn on the Heller credit facility, or sought bondholder consent.

~~Under~~On ~~the~~June 13, ~~Bankruptcy Code~~2000, we opened the ~~rights~~bidding ~~and~~procedures ~~treatment~~with the approval of ~~pre-petition~~the ~~creditors~~Bankruptcy ~~and~~Court ~~shareholders~~in ~~may~~an beauction format for substantially ~~altered~~all of our assets. AtAfter ~~this~~an ~~time~~extension of the original bid and auction dates, itqualified isbuyers ~~not~~were ~~possible~~required to ~~predict~~submit ~~the~~their ~~outcome~~bids as of ~~the~~ ~~Chapter~~August 11, 2000. On September 11, ~~cases~~2000, inthe ~~general~~Company orand Time Warner Telecom Inc. executed a definitive asset purchase agreement which provides for the ~~effect~~purchase of substantially all of the ~~cases~~Company's onassets, ~~our~~excluding ~~business~~certain assets in Hawaii and certain non-core businesses, orfor $690.0 million. onOn September 21, 2000, the ~~interests~~Bankruptcy ofCourt ~~creditors~~approved the definitive asset purchase agreement between the Company and ~~shareholders.~~Time ~~Management~~Warner ~~believes~~Telecom Inc. ~~that~~Closing itof the sale is ~~highly~~anticipated ~~unlikely~~in ~~that~~the ~~current~~last ~~equity security~~quarter ~~holders~~of ~~will~~2000, ~~receive~~or ~~any~~first ~~distribution~~quarter ~~under~~of ~~any~~2001, ~~reorganization~~subject orto ~~liquidation~~regulatory approvals and other customary terms and conditions. In addition, the Company's seeking purchasers for certain of ~~our~~its remaining assets.

On ~~May~~July 1626, 2000, wethe ~~signed~~Bankruptcy aCourt ~~letter~~approved the modification of ~~intent~~existing ~~with~~construction ~~Time~~and ~~Warner~~capacity ~~Telecom~~contracts between us and 360networks, Level (3) ~~Inc~~Communications ("Level (3)"), and Williams Communications ("Williams"). ~~for~~We ~~the~~agreed ~~sale~~to assume certain of ~~substantially~~our ~~all~~contracts with the three companies within the meaning of ~~our~~the ~~assets~~Bankruptcy Code and to make other commitments, in return for ~~$450~~which ~~million~~360networks, Level (3), and Williams agreed to various changes in ~~cash~~their relationships with us. OnThe ~~June~~commitments 12by 360networks, ~~2000~~Level (3), we ~~announced~~and ~~that~~Williams resulted in the acceleration ~~letter~~of cash paid to us for our provision of ~~intent~~conduits ~~with~~or ~~Time~~fiber ~~Warner~~to ~~Telecom~~the three companies and reduce the near-term cash paid by us for certain construction obligations, resulting in a net cash flow benefit of approximately $26.0 ~~Inc~~million, of which approximately $20.0 million had been realized as of September 30, ~~for~~2000. These modifications, in addition to the Heller ~~sale~~credit offacility, ~~substantially~~should ~~all~~enable ofus ~~GST's~~to ~~assets~~finance ~~would~~our ~~not~~operations bepending ~~proceeding~~disposition of our assets.

OnFor ~~June~~the three-months ended September 1330, 2000, weGST ~~opened~~USA ~~the~~recorded ~~bidding procedures, with the approval of the Bankruptcy Court, in~~ an ~~auction~~impairment ~~format for substantially all~~ of ~~our~~ assets. ~~After~~charge ~~an extension~~ of ~~the~~ ~~original bid and auction dates, qualified buyers were required to submit their bids no later than August~~$256.0 ~~11, 2000~~million. ~~The~~As ~~bids~~a ~~are~~result ~~currently~~of ~~being~~GST ~~evaluated.~~USA's Andecision ~~auction~~to ~~will~~sell ~~occur~~its onassets ~~August 22,~~for ~~2000,~~less ~~and~~than ifthe ~~such~~book ~~auction~~value ~~results in a bid or series~~ of ~~bids~~those ~~for~~assets, the ~~assets~~collectability of GST ~~satisfactory~~Network's toreceivables ~~the~~from ~~Company~~GST ~~and its creditors~~USA, ~~then~~which wetotal ~~anticipate~~$372,265 aat ~~Bankruptcy Court hearing on August~~September 2530, 2000, tois ~~result~~ in andoubt. ~~order~~While ~~confirming~~it ais ~~sale,~~likely ~~with~~that these ~~such~~receivables ~~sale~~are ~~expected~~impaired, ~~to close prior to~~ the ~~end~~extent of ~~the~~impairment ~~year. If a sale of our assets~~ is ~~consummated,~~not itcurrently ismeasurable. ~~highly~~The ~~unlikely~~amount ~~that~~collected ~~our current~~by ~~equity~~GST ~~security~~Network ~~holders~~will ~~would~~be ~~receive~~determined ~~any~~upon ~~distribution~~the ~~upon~~completion ~~our~~of ~~subsequent~~all ~~liquidation~~asset sales and the ~~interest~~ allocation of ~~both~~proceeds ~~secured~~via ~~creditors~~the ~~and~~bankruptcy ~~unsecured~~process.

Under the Bankruptcy Code, the rights and treatment of pre-petition creditors and shareholders may be substantially altered. At this time, it is not possible to predict the outcome of the Chapter 11 cases in general or the effect of the cases on our business, or on the interests of creditors.

creditors may be substantially impaired. If a sale of all or a portion of the Company's assets is not completed, we will either reorganize our remaining operations or liquidate the unsold assets.

The bidding and auction processes could ultimately result in the sale of substantially all of our assets. Although the Company and its creditors are not required to accept any offer, it is possible that the Company's creditors would accept an offer or offers to purchase substantially all of our assets for less than the current book value of those assets. Such a transaction could result in an impairment of assets. Until the auction has been completed, the Company cannot currently predict the values of the final bid(s) or if those bids will be acceptable to the creditors. The Company has determined that no impairment of assets existed as of June 30, 2000.

Operations

The operations of GST Network are limited to (i) purchasing equipment, (ii) selling equipment to GST USA, (iii) receiving payments under intercompany notes, (iv) making payments of interest and principal on the Senior Secured Notes, and (v) fulfilling its obligations under the indenture relating to the Senior Secured Notes, the pledge agreement relating to the security interest in the Senior Secured Notes and the registration rights agreement relating to the Senior Secured Notes. GST Network satisfied its obligations under such registration rights agreement in September 1999, upon the consummation of an exchange offer for the Senior Secured Notes.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Market Risk

GST Network has fixed income investments consisting of cash equivalents and short-term investments in U.S. government debt instruments.

Interest income earned on GST Network's investment portfolio is affected by changes in the general level of U.S. interest rates. GST Network believes that it is not exposed to significant changes in fair value because such investments are composed of Government debt instruments and the maturities are short term. The fair value of each investment approximates amortized cost, and long term securities have maturities of less than three months.

GST Network does not use derivative financial instruments to manage its interest rate risk. GST Network's long-term debt had a book value of $369,481 and a market value of ~~approximately~~ $245,000 at ~~June~~September 30, 2000.

PART II: OTHER INFORMATION

Item ~~ITEM~~ 6. ~~EXHIBITS~~ ~~AND~~Exhibits ~~REPORTS~~and ONReports ~~FORM~~on Form 8-K.

~~Exhibit 27 Financial~~(a) Exhibits ~~Data Schedule~~

2(a): Asset Purchase Agreement by and among Time Warner Telecom Inc., GST Telecommunications, Inc., GST USA, Inc. and other parties identified therein, dated September 11, 2000, incorporated by reference to Exhibit 99.1 to the Company's Form 8-K dated September 12, 2000.
27: Financial Data Schedule (filed herewith)

~~Reference~~(b) Reports ~~is made to the report~~ on Form 8-K ~~filed on May 24, 2000, on which we reported the following:~~

OnReference ~~May 17,~~is ~~2000,~~made ~~we filed a voluntary petition for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the District of Delaware. Pursuant~~ to the ~~bankruptcy~~report ~~filing,~~on weForm 8-K ~~have~~filed ~~remained~~on ~~in possession of our assets and properties~~September 12, ~~and our business and affairs will continue to be managed by our directors and officers~~2000, ~~subject~~ inon ~~each~~which ~~case~~we toreported the ~~supervision~~following: ~~of the Bankruptcy Court.~~

On ~~May~~September 1711, 2000, wethe ~~issued~~Company aand ~~press~~Time ~~release,~~Warner ~~addressing our voluntary petition for bankruptcy under Chapter 11 of the U~~Telecom Inc.S. ~~Bankruptcy~~executed ~~Code,~~a ~~our~~definitive ~~letter~~asset ofpurchase ~~intent~~agreement ~~with~~which ~~Time~~provides ~~Warner Telecom, Inc.~~ for the ~~sale~~purchase of substantially all of the ~~our~~Company's assets, ~~and~~excluding ~~our~~certain ~~receipt~~assets ofin aHawaii ~~commitment~~and ~~for~~certain ~~debtor~~non-~~in-possession~~core ~~financing~~businesses for ~~up to~~ $~~50 million in cash and potential for up to an additional $75~~690.0 million ~~in cash (subject to certain restrictions and court approval) to continue day-to-day operations~~.

WeReference ~~postponed~~is ~~our~~made ~~annual~~to ~~shareholders'~~the ~~meeting~~report ~~that~~on ~~had been scheduled for June~~Form 8,-K ~~2000.~~filed ~~Our~~on ~~plan is to hold an annual shareholders' meeting in the course of our restructuring. On May~~October 244, 2000, weon ~~issued~~which awe ~~press~~reported ~~release~~the ~~regarding~~following: ~~this matter.~~

~~Reference~~On isSeptember 21, ~~made~~2000, tothe Company announced the ~~report~~U.S. onDistrict ~~Form~~Court ~~8-K~~for ~~filed~~the onDistrict ~~June~~of ~~12,~~Delaware ~~2000,~~approved onthe ~~which~~definitive weasset ~~reported~~purchase agreement between the ~~following:~~Company and Time Warner Telecom Inc. Closing of the purchase is subject to regulatory approvals and other customary terms and conditions.

On June 12, 2000, we issued a press release, stating that we will not be proceeding pursuant to the letter of intent with Time Warner Telecom, Inc., for the sale of substantially all of our assets. Also, it stated that we would seek approval of an open bidding process from the Bankruptcy Court with jurisdiction over our bankruptcy proceedings. 9

On June 13, 2000, we announced that approval from the Bankruptcy Court was received to start an open bidding process for the sale of substantially all of our assets. The bidding procedures stipulate that qualified buyers were required to submit their bids no later than July 31, 2000, and that an auction would be conducted on August 4, 2000. (These dates were later extended to August 11, 2000, and August 22, 2000, respectively.)

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 of the undersigned thereunto duly authorized.

Date: August 18, 2000 GST NETWORK FUNDING, INC. (Registrant) /s/ DONALD A. BLOODWORTH Donald A. Bloodworth, (Senior Vice President and Chief Financial Officer)

Date November 20, 2000		GST NETWORK FUNDING, INC.
		(Registrant)
		/s/ DONALD A. BLOODWORTH Donald A. Bloodworth (Senior Vice President and Chief Financial Officer)

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ITEM 1. FINANCIAL STATEMENTS GST NETWORK FUNDING, INC. BALANCE SHEETS (In thousands, except share and per share amounts) (Unaudited)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
PART II: OTHER INFORMATION
SIGNATURES

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