U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB
                                   -----------

(Mark One)
(X)  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934 For the fiscal year ended December 31, 2001


( )  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF
     1934 (No Fee Required) For the transition period from         to
                                                           -----      -----
                         Commission File Number 0-28330
                                                -------

                             TALK VISUAL CORPORATION
          -----------------------------------------------------------
          (Name of small business issuer as specified in its charter)

            NEVADA                                   95-4561156
--------------------------------          ---------------------------------
(State or other jurisdiction of           (IRS Employer Identification No.)
 incorporation or organization)

3550 BISCAYNE BLVD STE 704 Miami FL                      33137
----------------------------------------               ----------
(Address of principal executive offices)               (Zip Code)

      (305) 572-0575                             (305) 572-0576
---------------------------                 ---------------------------
(Issuer's telephone number)                 (Issuer's facsimile number)

Securities registered under Section 12 (b) of the Exchange Act:

Title of each class                      Name of each exchange on which
None                                     registered None
--------------------                     -------------------------------

Securities registered under Section 12(g) of the Exchange Act:
Common stock,  par value $.001
---------------------------------------------------------------
                       (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15 (d) of the  Exchange Act during the past 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( )


     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated  by  reference  in Part  III of this  Form
10-KSB. [ ]

<PAGE>


State issuer's  revenues for its most recent fiscal year.  $5,218,956  State the
aggregate  market value of the voting stock held by  non-affiliates  computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such  stock,  as of a  specified  date  within the past 60 days.  (See
definition of affiliate in Rule 12b-2 of the Exchange Act). Note: If determining
whether a person  is an  affiliate  will  involve  an  unreasonable  effort  and
expense,  the issuer may  calculate  the  aggregate  market  value of the common
equity held by  non-affiliates  on the basis of reasonable  assumptions,  if the
assumptions are stated.  The aggregate  market value of the voting stock held by
non-affiliates of the Company as of March 19, 2002 was: $1,971,229


                (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date. Common Stock,$.001 par value;
150,614,664 shares as of March 28, 2001.

                      DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference,  briefly describe them
and identify the part of the Form 10-KSB (e.g. Part I, Part II,  etc.)into which
the document is incorporated  (1)any annual report to security holders;  (2) any
proxy or information  statement;  and (3) any prospectus  filed pursuant to Rule
424(b) or (c) of the  Securities  Act of 1933  ("Securities  Act").  The  listed
documents should be clearly described for  identification  purposes (e.g. annual
report to security holders for fiscal year ended December 24, 1990).


                      Documents incorporated by reference:

     Document                                  Item (s) Into Which Incorporated
  -------------                                --------------------------------

    None



Transitional Small Business Disclosure Format  (Check one) :  Yes [ ]  No [X]


                                       2
<PAGE>


                            TALK VISUAL CORPORATION

                                  Form 10-KSB

Table of Contents

                                                                     Page No.
                                                                     --------
Part I.
   Item 1.         Business                                                 4
   Item 2.         Facilities                                              10
   Item 3.         Legal proceedings                                       11
   Item 4.         Submission of matters to a vote of security holders     11


Part II.
   Item 5.         Market for registrants' common equity and related       11
                   stockholder matters
   Item 6.         Management's discussion and analysis of financial       15
                   condition and results of operations
   Item 7.         Financial statements                                    25
                   (see table of contents, page 24)
   Item 8.         Changes in and disagreements with accountants           47


Part III.
   Item 9.         Directors, executive officers,and promoters; compliance
                   with Section 16 (a) of the Exchange Act of the
                   registrant                                              47
   Item 10.        Executive compensation                                  48
   Item 11.        Security ownership of certain beneficial owners and     51
                   management
   Item 12.        Certain relationships and related transactions          53
   Item 13.        Exhibits and reports on Form 8-K                        55


                                       3
<PAGE>

                                     PART I

Introductory Statement
----------------------

Except for historical information contained herein, the statements in the report
(including  without  limitation,   statements  indicating  that  the  registrant
"expects",  "estimates",  "anticipates",   "believes",  "plans",  "projects"  or
"intends" and all other statements concerning future financial results,  product
offerings  or other  events  that  have not yet  occurred)  are  forward-looking
statements  that are made pursuant to the safe harbor  provisions of the Private
Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange  Act"), and Section 27A of the Securities
Act of 1933, as amended.  Forward-looking  statements  involve known and unknown
factors, risks and uncertainties,  and actual results may differ materially from
forecasted results.  Those factors, risks and uncertainties include, but are not
limited to:

  - The registrant's  ability to effectively  manage its various businesses in a
    rapidly changing environment;
  - the  timing  of  new  product   introductions;   retail  acceptance  of  the
    registrant's products;
  - the registrant's ability to adapt and expand its product offerings; the cost
    of, and demand for, customer service and technical support;
  - price pressures in the competitive environment; the consummation of possible
    acquisitions; and
  - the registrant's ability to integrate acquired operations into its existing
    business and manage growth.

Additional  information on these and other risk factors are included under "Risk
Factors" beginning on page 22 and elsewhere in this Report on Form 10-KSB.

ITEM 1.  BUSINESS

                               BACKGROUND
General

Our  company,  Talk  Visual  Corporation  (referred  to  herein  as "we" or "the
Company"),  is a provider of voice  telecommunications  services to key business
and consumer market segments in the United States. These market segments consist
of multiple  sub-segments which include the Latin American  expatriate  business
and consumer communities. Our Retail Operations Division generates sales through
our 11  stores  in the  greater  New York  City/New  Jersey  area and our  Sales
Division  based in Miami,  Florida  generates  sales  through a variety of means
including direct sales and agent partnerships.

The principal  services that we provide through our Retail  Operations  Division
are  long-distance  telephone  calling in  private  booths in our  stores,  with
payment for such  services  collected  by a cashier  after  calls are  completed
("call-shop  services"),  pre-paid calling cards,  videocalling services,  money
transfer services and international package delivery.

The  principal   services  that  we  provide  through  our  Sales  Division  are
international and domestic long distance  services,  domestic toll-free services
and various  pre-paid  services.  Our Sales  Division,  in conjunction  with our
finance and accounting department, has developed systems, processes,  procedures
and rate  tables  to resell  international  and  domestic  long  distance  voice
services to business  and  residential  clients.  In January  2001,  we began to
provide commercial business clients with these services.

                                       4
<PAGE>

Based on recent  changes  within the  telecommunications  industry  and previous
investment,  we believe that we will be able to continue to generate  sales from
our Retail Operations Division as well as provide both cost-competitive  pricing
and superior quality service to business customers through our Sales Division on
a cost effective basis. First, the capital  expenditure  required to efficiently
run a telephony network has greatly decreased due to excess equipment  available
in the  market.  Second,  the  systems  currently  installed  by the  Company or
generally available allow the Company to operate extremely  efficiently.  Third,
the  telephone  call-shop  business  is  extraordinarily  sensitive  to quality;
problems are visible to the call-shop managers  instantly,  and this feedback is
communicated to the switching  operation in Miami, which can immediately address
quality  problems.  Fourth,  our volume of voice  minutes  allows for  effective
negotiations with suppliers on voice product pricing.  Management  believes that
we are well  positioned  to  generate  high  growth  in  sales  as a  successful
commercial telecommunications sales operation.

We were  organized as a Florida  corporation in 1998 and merged with Talk Visual
Corporation (formerly Legacy Software,  Inc.), a Delaware corporation,  pursuant
to a  merger  agreement  in  1999.  As part of the  merger,  we  became a Nevada
corporation. We began selling videocalling and other telecommunications services
in early  1999 with the  launch of our first  corporate  retail  locations.  Our
principal  executive office is located at 3550 Biscayne  Boulevard,  Suites 704,
705 and 706, Miami, Florida 33137 and our telephone number is (305) 572-0575.


DESCRIPTION OF BUSINESS

Overview
--------

Our first products and services in 1999 were the sale of  videocalling  services
and  the  resale  of  videocalling  equipment.  During  2000,  we  expanded  our
videocalling network internationally,  increased the number of shops we operated
to 4 and increased our customer base and product offering  primarily through the
acquisition of 11 telephone  call shops in the greater New York City/New  Jersey
area. During 2001, we closed all but the 11 call shops operating in the New York
City/New Jersey area (our Retail Operations Division),  discontinued most of our
agreements  with our  international  videocalling  partners  and  began to focus
heavily  on the Latin  expatriate  community's  requirements  for  business  and
residential telecommunication services (our Sales Division).

Retail Operations Division
--------------------------

We introduced our first retail stores in early 1999 and began providing  service
to Company-owned  locations by July 1999. We acquired 11 telephone call shops in
the greater New York City/New Jersey area in June 2000.  During fiscal year 2001
we enabled most of our greater New York City/New Jersey shops with  videocalling
capability. Additionally, during 2001, we closed all Company-owned locations not
located  in the  greater  New  York/New  Jersey  area in an effort  to  increase
profitability.

We sell some or all of the  following  products  and  services  at our 11 retail
stores:

o        Telephone calls ("call-shop services"),
o        International package delivery,
o        Money transfer services,
o        Videocalls (domestic and international), and
o        Prepaid phone cards and prepaid residential services.


                                       5
<PAGE>


Our retail stores are connected to our Miami hub via a frame relay network. This
network design allows each store to operate independently with the center of the
network  located  at the Miami  switch.  This  design  will also allow us to add
additional  client  locations in the New York  City/New  Jersey area and connect
them to our  Miami  switch  via the  frame  relay  network.  This  flexible  and
practical  design notion will allow us to serve up to an additional 90 telephone
call shops.

In  addition  to selling our own prepaid  phone  cards,  we purchase  and resell
prepaid phone cards from a few selected vendors.  We have carefully examined and
tested the  quality  of  suppliers,  and we now use only  premier  products.  In
addition,  we have  adopted  measures to attempt to ensure that only phone cards
with full value are provided to our customers in the retail stores.

The stores  acquired in June 2000 are located in expatriate  communities  in New
York City (in the boroughs of Manhattan  and Queens) and in nearby towns such as
Union City, New Jersey.

Sales Division
--------------

Our Sales  Division  consists of a Direct  Sales Group and a Dealer Sales Group.
Each sales group  represents  specific  products and target  markets  within the
telecommunications  market. Our network design allows us to provide domestic and
international  long  distance  service  to  businesses,   residential  accounts,
independent  call  shops and resale  carriers  for use of our  service  anywhere
within the continental United States. Descriptions of the Direct Sales Group and
the Dealer Sales Group are as follows:

o        Direct Sales: Sales are generated by an internal sales force that sells
         directly to  businesses,  residential  customers  and call shops.  This
         group  consists of individual  employees with monthly sales targets who
         are compensated with a base salary plus commission.  New customer sales
         are generated  through cold calling efforts,  direct  marketing,  trade
         shows and  existing  client  referrals.  The  primary  service  sold is
         domestic  and  international  long  distance,  with  specific  focus on
         business  customers with substantial  international  traffic and ethnic
         residential customers.  Additionally,  our Direct Sales force sells our
         EZ-Global Call and Pre-Paid Calling Card services.

o        Dealer Sales: Dealers are independent  contractors that provide us with
         a  low-cost,  professional  and highly  effective  sales  force.  These
         contractors  have  industry  background  and existing  customer  bases.
         Dealers  receive  commissions  based on revenue  generated by customers
         obtained for us by the dealer. The dealers are geographically dispersed
         within our sales regions and typically  focus on residential  customers
         and small  and  medium-sized  businesses.  The  services  sold to their
         clients  consist  of  domestic  and  international  long  distance  and
         EZ-Global Call.

Services offered through our Direct Sales and Dealer Sales Groups include:

o        International and Domestic Long Distance,
o        Domestic Toll-Free Services, and
o        Domestic Cellular and Residential Pre-Paid Services (EZ-Global Call).

Calls are routed and rated using software which is available from the Company or
from  "off the  shelf"  providers.  We began  reselling  the  international  and
domestic  services to independent  telephone call shops during the third quarter
of 2001.  Although gross margins are lower than other retail customers,  volumes


                                       6
<PAGE>

are significant  since the typical  telephone call shop produces  between $8,000
and  $20,000 in monthly  carrier  billings.  At the end of  December  2001,  the
Company was generating  approximately  $270,000 per month in additional  revenue
from call shops in the New York and Miami areas as compared to December 2000.

MANAGEMENT INFORMATION AND BILLING SYSTEMS
------------------------------------------

As the volume of minutes  carried over our network grows, it is necessary for us
to  upgrade,  modify and  enhance  our  ability  to  produce a larger  volume of
accurate  billing   statements,   traffic   management   reports  and  financial
statements. Our continuing growth and success depend upon our ability to do this
in a cost effective and timely manner.  To accomplish this task, we are focusing
our efforts on streamlining  and automating our in-house  processes for customer
billing,  provisioning,  network  troubleshooting and account  management.  As a
result of "off the shelf"  software tools  available in today's  marketplace and
the low cost of capital  expenditure  required for these activities,  we believe
that our ability to maintain financial reporting and billing systems is adequate
to meet our needs in the short term.

SALES, MARKETING AND DISTRIBUTION
---------------------------------

Our  agreement  with  a  major  carrier  provides  us  with  national  transport
capability and enables us to transport calls from any  origination  point in the
continental  United States via Pseudo CIC (Carrier  Interexchange  Code), to our
switch in Miami.  This transport  method  substantially  enhances our ability to
expand our geographic sales market and acquire new call shop customers, business
customers and residential customers.  We have created new competitive rate plans
for  business  and  residential  customers  to  help  us  compete  in  a  highly
competitive market while securing above-average margins.

Our current and potential target markets are outlined below:

o    Busines:  Our business marketing targets small and medium-sized  businesses
     with  significant  international  long  distance  traffic.  We believe that
     businesses  will  continue  to be  attracted  to  our  services  due to our
     competitive pricing,  quality international routes,  simplified billing and
     multilingual customer service.

o    Residential:  Our residential marketing strategy targets ethnic residential
     customers who generate high international long distance traffic. We believe
     these  customers  are  attracted  to our  residential  service  because  of
     significant price savings, quality international routes, easy-to-understand
     billing and multilingual customer service.

o    Call  Shops:  Our call shop  marketing  strategy  targets  retail call shop
     locations  and money  transfer  companies  located  primarily in the ethnic
     communities  of South  Florida,  New York and New Jersey.  We believe these
     customers  will  continue  to be  attracted  to our  specialized  call shop
     service  because of our solid  reputation  within  this  specialized  area,
     market understanding,  competitive pricing, quality routes and multilingual
     staff.

o    Wireless:  Our wireless marketing targets personal wireless users and small
     and  medium-sized  businesses that make  international  long distance calls
     from their wireless phones.  We believe  customers will continue to use and
     be attracted to our service due to  significant  price  savings per minute,
     convenience,  ease of use and  access,  quality  international  routes  and
     multilingual customer service.


                                       7
<PAGE>


Our  distribution  channels can be expanded and benefit  directly from these new
access  methods.  Our Direct  Sales Group will be able to target new markets and
clients while our Dealer Sales Group will be able to target  clients  throughout
the continental United States.

Our plans to expand our Sales Division in 2002 involve the  introduction  of two
new sales groups.

o    Our Carrier  Sales Group will pursue the  acquisition  of a small number of
     customers who currently resell international long distance services through
     switchless  methods  and have the need for quality  routes and  competitive
     international  pricing to reduce their underlying costs. Our network design
     and  transport  agreement  give  resellers the ability to access our switch
     directly,  purchase  minutes and utilize our network and rates.  We believe
     that with proper accounting  controls in place, this area has the potential
     to  generate  high  revenue  customers  without  the bad debt risk  usually
     associated with this type of sales.

o    Our Web Sales Group will  enhance our ability to reach  customers  in areas
     where we do not have a direct or dealer sales presence. Our Web Sales Group
     will offer  customers  the option of accessing the Company and our services
     via a new web  site.  Ordering  via a web  site  is a low  cost  method  of
     acquisition  and will offer an easy,  informative  and  convenient  way for
     existing and  potential  customers to order our products and  services.  We
     also believe the new web site will also help expedite the order process for
     dealers and customers who sign up via the web.

We plan in 2002 to enter the Los Angeles  marketplace and other geographic areas
with high expatriate concentrations.

CUSTOMERS
---------

Retail Operations Division - Our Retail Operations  Division's customers consist
primarily of ethnic  customers  who generate  high  international  long distance
traffic  volumes.  We believe our pricing,  network  quality and location in and
around the greater  New York  City/New  Jersey  area will help us  increase  the
number of customers and revenue from these stores.

Sales Division - Our Sales Division targets  business and residential  customers
with high volume traffic to international destinations.  These customers include
call  shops  in  specific  markets  as  well  as  international  businesses  and
residential  accounts.  We believe that businesses and residential accounts will
continue to be attracted  to our  services due to the quality and price  savings
that we offer over our competition.

For the year  ended  December  31,  2001,  our  sales  totaled  $5,218,956, with
$3,843,254  attributable  to  our  Retail  Operations  Division  and  $1,375,702
attributable to our Sales Division.

COMPETITION
-----------

The  international  market  for  telecommunications  is highly  competitive  and
subject to items such as regulatory change,  new technological  advances and the
sales plans of several large  industry  carriers.  Many of our  competitors  are
significantly  larger  than  us  and  have  significantly  greater  network  and
financial resources than we do.

Additionally,   as   deregulation   continues   within  the  United  States  and
internationally,  we will face  competition  from the  regional  Bell  operating
companies  as well as foreign  entrants  into the U.S.  marketplace.  The United


                                       8
<PAGE>

States  marketplace is the most  competitive and deregulated  telecommunications
market in the world,  with  competition  based  primarily  on price and  network
quality.  AT&T is the largest supplier of long distance,  with  MCI/WorldCom and
Sprint being the next largest  carriers.  We also face  competition from smaller
companies who target the same type of customer.  This type of competition can be
from small  companies  with a switch or from  switchless  resellers who purchase
minutes from larger carriers.

Our ability to compete also depends in part on a number of  competitive  factors
out of our  control,  including  our ability to hire and retain  employees,  the
development  by others of products and services  that are  competitive  with our
products and services,  the price at which others offer comparable  products and
services and the extent of our  competitors'  responsiveness  to customer needs.
There  can be no  assurance  that  we  will  be  able  to  continue  to  compete
successfully with our existing competitors or with new competitors.

GOVERNMENT REGULATION
---------------------


As a telecommunications company, we are subject to varying degrees of regulation
wherever we provide services.  Such regulations can and do differ  significantly
from  jurisdiction  to  jurisdiction.  There  can be no  assurance  that  future
regulatory,  judicial and legislative  changes will not have a material  adverse
effect on the Company.

Regulation of the  telecommunications  industry is constantly  changing.  We are
unable to predict what new  regulations  the FCC and other  regulatory  agencies
will enact  that may affect us.  Although  we believe  that  present  regulatory
decisions are directed at increasing  deregulation and will create opportunities
for new entrants in the  telecommunications  service  industry,  there can be no
assurance that they will be implemented in a manner that would benefit us.

Within the United  States,  our  services are subject to the  provisions  of the
Communications  Act  of  1934,  FCC  regulations  thereunder,  as  well  as  the
applicable  laws and  regulations  of the  various  states and state  regulatory
commissions.

As a non-dominant  carrier required to obtain authority under Section 214 of the
Communications  Act,  we must comply with the  requirements  of common  carriage
under the Communications  Act. These requirements  include the filing of tariffs
containing rates, the offering of service on a non-discriminatory  basis at just
and  reasonable  rates,  and obtaining FCC approval  prior to any  assignment of
authorizations or any transfer of control of the company. We are not required to
obtain  specific  prior FCC approval to initiate or expand  domestic  interstate
services.

Our costs of providing long distance services will be affected by changes in the
access charge rates imposed by incumbent local exchange carriers for origination
and  termination  of calls  over  local  facilities.  The FCC has  significantly
revised  its  access  charge  rules in recent  years to permit  incumbent  local
exchange  carriers  greater pricing  flexibility  and relaxed  regulation of new
switched  access  services in those markets  where there are other  providers of
access  services.  The FCC recently  granted  local  exchange  carriers  pricing
flexibility.  As such, the carriers may offer volume  discounts that may benefit
larger long distance carriers.

Our  intrastate  long distance  operations are subject to various state laws and
regulations,  including, in most jurisdictions,  certification and tariff filing
requirements.  Some states also  require  the filing of  periodic  reports,  the
payment of various fees and surcharges,  and compliance  with service  standards
and consumer  protection  rules.  State  requirements  may also require  various
pricing and asset sale or financing  approval.  Certificates  of  authority  can

                                       9
<PAGE>

generally be conditioned,  modified,  canceled,  terminated, or revoked by state
regulatory  authorities  for  failure to comply with state law and/or the rules,
regulations, and policies of the state regulatory authorities.


REAL ESTATE OPERATIONS
----------------------

As more fully described below under "Item 2. Facilities", we continue to own and
operate,  through one of our wholly owned  subsidiaries,  a real estate property
located in Sacramento,  California.  In 2001, we decided to sell all of our real
estate properties. We sold our real estate property located in Toronto, Ontario,
Canada in June 2001, and we decided in December 2001 to look for a buyer for our
real estate property located in Sacramento. Our Sacramento property is leased to
commercial tenants.

EMPLOYEES
---------

As of December 31,  2001,  we had a total of 59  full-time  employees  and seven
part-time  employees.  Our employees are not covered by a collective  bargaining
agreement  and we have  experienced  no work  stoppages.  We  believe  that  our
relationship with our employees is good.

ITEM 2. FACILITIES

We lease  space at 13 retail  locations  and at our  principal  headquarters  in
Miami,  Florida.  The Miami  location  serves  as the core  sales,  support  and
marketing  facility  headquarters for our executive,  engineering,  sales, human
resources and finance  personnel.  The following is a listing of the significant
leased facilities:


         Location                      Square Footage       Expiration Date
--------------------------------       --------------       ---------------

Miami, Florida - Headquarters              5,702             June 30, 2002

Miami, Florida - 2 Retail stores           2,326           various through
                                                           August 31, 2005

New York, New York and
 Hudson County, New Jersey                                 various through
 11 Retail Stores                         12,300           September 30, 2005

Through one of our wholly  owned  subsidiaries,  we also own a  commercial  real
estate  property.  In 1999, we acquired a 119,100 square foot, two story,  strip
center retail and office  complex  located in  Sacramento,  California  with the
acquisition of Sacramento Results, Inc.

The  Sacramento  property  has an  occupancy  rate of 90% and is composed of 28%
office rental and 72% retail  stores.  Three of the 26 tenants  occupy more than
ten percent of the rentable square footage - a U. S. Post Office branch,  a U.S.
Social  Security  Administration  branch and a bingo hall  operator.  Michael J.
Zwebner, the Chairman of the Board of Directors of Talk Visual Corporation, is a
stockholder  and an  officer  of  one of the  tenants.  See  "Item  12.  Certain
Relationships and Related Transactions" for additional information.  The average
effective  annual rental per square foot for the entire  property is $12.88 with
an  estimated  annual  rental  income  of $1.3  million.  All  existing  leases,
excluding renewal  provisions and the U. S. Post office,  will expire within the
next ten years.  Management believes that the property is stable and the current
occupancy rate will be maintained.


                                       10
<PAGE>


For federal tax  purposes,  the basis in the property is the  acquisition  price
paid by Sacramento Results,  Inc., the subsidiary in which the property is held.
The property is being  depreciated over 39 years under the straight line method.
Real estate taxes for 2001 totaled $56,072.

This property is encumbered by three loans, as follows:

1. Mortgage note,  secured by a lien on the land and building,  including a deed
of trust on rents and  fixtures,  bearing  interest  at 12%,  payable in monthly
installments with the entire principal due January,  2004. The December 31, 2001
balance on this mortgage was $3,840,000.

2. 12.5% Mortgage note, secured by a lien on the land and building,  including a
deed of trust  on  rents  and  fixtures,  payable  in  monthly  installments  of
principal and interest for 60 months. The balance on the mortgage was $68,704 at
December 31, 2001.

3. 9% Mortgage note, secured by a lien on the land and building,  with a maximum
funding of  $1,000,000  due January 1, 2002.  Interest is payable  monthly.  The
balance at December 31, 2001, including accrued interest, is $572,033.

Management believes that the Company and/or its subsidiaries  carries sufficient
and adequate insurance on all properties.

In January  2002,  we entered into a listing  agreement  to sell the  Sacramento
property.

ITEM 3. LEGAL PROCEEDINGS

We are not  currently  involved  in any  litigation  that is  expected to have a
material adverse effect on our business or financial  position.  There can be no
assurance,  however,  that third parties will not assert  infringement  or other
claims against us in the future which,  regardless of the outcome, could have an
adverse  impact on us as a result of  defense  costs,  diversion  of  management
resources and other factors.


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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year covered by this report.

                                    PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common  stock is traded on the OTC  Bulletin  Board  under the symbol  TVCP.
Prior to May 14, 1996,  there was no public trading market for our common stock.
After we began  public  trading on May 14,  1996,  and until April 7, 1999,  our
common stock was quoted on the Nasdaq SmallCap  Market(SM) under the symbol LGCY
(from May 14, 1996  through  February  28, 1999) and under the symbol TVCP (from
March 1, 1999 through April 7, 1999).  The following  table sets forth the range
of high and low closing bid prices for each period indicated as reported by Pink
Sheets LLC (formerly the National Quotation Bureau, LLC):


                                       11
<PAGE>


Price Range for Common Stock
----------------------------

YEAR ENDED DECEMBER 31, 2001        High                Low
                                    ------             ------
   First Quarter                    $0.174             $0.047
   Second Quarter                    0.085              0.038
   Third Quarter                     0.085              0.030
   Fourth Quarter                    0.061              0.032

YEAR ENDED DECEMBER 31, 2000        High                Low
                                    ------             ------
   First Quarter                    $3.875             $0.395
   Second Quarter                    1.750              0.410
   Third Quarter                     0.840              0.355
   Fourth Quarter                    0.325              0.060

YEAR ENDING DECEMBER 31, 2002        High                Low
                                    ------             ------
   First Quarter
     (through March 26,2002)        $0.042             $0.011


The closing bid price of our common stock on the OTC Bulletin  Board was $0.0135
on March 26, 2002.

The quotations  noted above,  with respect to  transactions  on the OTC Bulletin
Board,  represent  prices  between  dealers and do not include  retail  markups,
markdowns or commissions.


HOLDERS
-------

As of March  28,  2002,  there  were  150,614,664  shares  of our  common  stock
outstanding, representing approximately 14,600 beneficial holders.


TRANSFER AGENT AND REGISTRAR
----------------------------
The Nevada  Agency and Trust  Company,  Suite 880,  Valley Bank  Plaza,  50 West
Liberty,  Reno,  NV 89501,  is the Transfer  Agent and  Registrar for our common
stock.


DIVIDENDS
---------
We have not paid any cash  dividends on our common  stock to date.  We currently
anticipate  that we will  retain all  future  earnings,  if any,  for use in the
business and do not anticipate paying any cash dividends on our capital stock in
the  foreseeable  future.  In  addition,  the payment of cash  dividends  may be
limited by financing agreements we may enter into in the future.

                                       12
<PAGE>

Sale and Issuance of Unregistered Securities
--------------------------------------------

We have issued and sold unregistered  securities during 2001 as set forth below.
An underwriter was not utilized in any of these transactions.  The recipients of
securities  in each  transaction  represented  their  intention  to acquire  the
securities  without  a view to  distribution.  All the  issued  securities  were
restricted  securities  under Rule 144, or Regulation S under the Securities Act
of 1933, and appropriate  restrictive  legends were affixed to the securities in
each transaction.

Between  January 2, 2001 and January 16, 2001, we sold  3,853,740  shares of our
common  stock to  Evertrend  Holdings  Limited at an average  purchase  price of
$0.073 per share  pursuant  to a common  stock  purchase  agreement  between the
Company  and  Evertrend.  Ladenburg  Thalmann & Co.,  Inc.  received  $22,613 in
placement fees, a warrant to purchase 3,514,889 shares of our common stock at an
exercise  price of $0.0687  per share  until  February  16,  2001 and $30,000 in
non-accountable  expense  fees  in  connection  with  this  transaction.   These
securities  were  issued in a  transaction  exempt from  registration  under the
Securities  Act of 1933 in reliance  on Section  4(2) of the  Securities  Act of
1933.

Between  February 15, 2001 and March 19, 2001, we sold  4,480,250  shares of our
common  stock to  Evertrend  at an average  purchase  price of $0.0558 per share
pursuant to a common stock purchase agreement between the Company and Evertrend.
Ladenburg  Thalmann & Co.  received  $20,000 in placement  fees and a warrant to
purchase  2,240,125  shares of our common stock at an exercise  price of $0.0687
per share  until  April 18,  2001 in  connection  with this  transaction.  These
securities  were  issued in a  transaction  exempt from  registration  under the
Securities  Act of 1933 in reliance  on Section  4(2) of the  Securities  Act of
1933.

On June 7,  2001,  we sold  2,000,000  shares of  restricted  common  stock in a
private  placement to Overseas  Communications,  Ltd., a foreign  corporation in
which Michael Zwebner, the Chairman of the Board, is a 33% shareholder. The sale
price for the  shares  sold under this  private  placement  was $0.03 per share.
These securities were issued in a transaction exempt from registration under the
Securities  Act of 1933 in reliance on Regulation S under the  Securities Act of
1933.

On June 22, 2001, we satisfied our obligation pursuant to a consulting agreement
with Overseas Communications,  Ltd., for open invoices in the amount of $90,000,
representing  fees  for  consulting  and  management  services  provided  by Mr.
Zwebner, with the issuance of 2,482,759 shares of common stock. The market price
on the date of issue was $.036 per  share.  These  securities  were  issued in a
transaction  exempt  from  registration  under  the  Securities  Act of  1933 in
reliance on Regulation S under the Securities Act of 1933.

                                       13
<PAGE>


Between  July 30,  2001 and August 28,  2001,  we sold  6,201,835  shares of our
common  stock to  Evertrend  at an average  purchase  price of $0.0322 per share
pursuant to a common stock purchase agreement between the Company and Evertrend.
Ladenburg  Thalmann & Co.  received  $16,000 in placement  fees and a warrant to
purchase  3,100,918  shares of our common stock at an exercise  price of $0.0322
per share  until  October 2, 2001 in  connection  with this  transaction.  These
securities  were  issued in a  transaction  exempt from  registration  under the
Securities  Act of 1933 in reliance  on Section  4(2) of the  Securities  Act of
1933.

Between September 10, 2001 and October 15, 2001, we sold 3,185,439 shares of our
common  stock to  Evertrend  at an average  purchase  price of $0.0345 per share
pursuant to a common stock purchase agreement between the Company and Evertrend.
Ladenburg  Thalmann & Co.  received  $8,800 in  placement  fees and a warrant to
purchase  1,592,720  shares of our common stock at an exercise  price of $0.0345
per share until  November 14, 2001 in connection  with this  transaction.  These
securities  were  issued in a  transaction  exempt from  registration  under the
Securities  Act of 1933 in reliance  on Section  4(2) of the  Securities  Act of
1933.

Between October 29, 2001 and November 28, 2001, we sold 6,159,594  shares of our
common  stock to Evertrend  at an average  purchase  price of $0.03705 per share
pursuant to a common stock purchase agreement between the Company and Evertrend.
Ladenburg  Thalmann & Co.  received  $18,259 in placement  fees and a warrant to
purchase  3,079,797  shares of our common stock at an exercise  price of $0.0345
per share until  December  28, 2001 in  connection  with this  transaction.  The
Company paid $1,500 in escrow fees in connection  with this  transaction.  These
securities  were  issued in a  transaction  exempt from  registration  under the
Securities  Act of 1933 in reliance  on Section  4(2) of the  Securities  Act of
1933.

During December 2001, we issued 8,241,600 shares of our common stock for 202,758
shares of the  common  stock of Yak  Communications,  Inc.  The  202,758  shares
received  by us  represent  5% of the  total  outstanding  common  shares of Yak
Communications,   Inc.   See  Note  12:   Certain   Relationships   and  Related
Transactions.  These  securities  were  issued  in  a  transaction  exempt  from
registration  under the Securities Act of 1933 in reliance on Regulation S under
the Securities Act of 1933.


Other Matters
-------------

On February 5, 2001, our Board of Directors  authorized a one-for-three  reverse
split  of  our  common  stock,  effective  at the  discretion  and  judgment  of
Management.  As of March 28, 2002,  Management has not  implemented  the reverse
split.


ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

We were organized as Legacy Software,  Inc. ("Legacy") in California in December
1989, as a successor to a partnership formed in 1986, reincorporated in Delaware
in March  1996,  and  reincorporated  in Nevada in June 1999.  We  completed  an
initial public offering of 1,150,000 shares of our common stock, par value $.001
per share,  in May 1996.  In September  1998,  we effected a one for three (1:3)
reverse split of our common stock. From our inception until October 1998, Legacy
primarily developed and sold educational  entertainment  software.  On September
14, 1998, a merger was announced  between  Videocall  International  Corporation
("Videocall") and Legacy. By December 31, 1998, Legacy had ceased developing and
marketing  software  products and began  focusing on the business  activities of
Videocall.  On  March  1,  1999,  Legacy's  name  was  changed  to  Talk  Visual
Corporation ("Talk Visual").

Prior to August 24, 1999, we were  considered a development  stage  company.  On
August 24, 1999, we launched our telecommunication services through wholly owned
retail stores in the United States and joint venture partners in Europe, Israel,
Canada, Asia and South America.


                                       14
<PAGE>


In July 2000, we purchased,  through a wholly owned subsidiary, the assets of 11
retail  telephone  call shop stores  operating in the New York  City/New  Jersey
market.   This   acquisition   added  45  employees  to  our   organization  and
approximately three million dollars in annual revenue.

In 2001, among other things, Talk Visual

o        Decided to sell all non-telecommunications  assets consisting primarily
         of  the  real  estate  properties  held  in  Toronto,   Canada  and  in
         Sacramento,  California.  As a result,  all  results  relating  to real
         estate activities are treated as "Discontinued Operations";

o        Closed or sold all retail shops except for the 11 shops  located in New
         York City/New Jersey general market;

o        Terminated all joint venture  partnerships in Europe,  Israel,  Canada,
         Asia and South America;

o        Focused  on   delivering   telecommunication   services  to  the  Latin
         expatriate market in key areas such as South Florida and New York;

o        Purchased a  telecommunication  switch and peripheral  equipment at our
         headquarters   in  Miami  to  effectively   and   efficiently   deliver
         telecommunication services to our existing and future customers; and

o        Began  targeting key business and  residential  customers  with a heavy
         concentration  of  telecommunication  traffic to key countries in Latin
         and South America.

Currently,  revenues are primarily generated from the reselling of long distance
services. The majority of our revenue comes from our company-owned stores in the
New York City/New Jersey market. Additionally, we sell long distance services to
call shops in the greater Miami area and telephone call shops within  economical
transport  range to our frame  relay  systems  in the New York  City/New  Jersey
market.

RESULTS OF OPERATIONS

Fiscal Year Ended December 31, 2001,  compared to Fiscal Year Ended December 31,
2000

Revenue  increased  $3.3  million or 172.5% to $5.2  million for the year ending
December  31,  2001,  from $1.9  million for the year ending  December 31, 2000.
Approximately  $1.5 million of this  increase is  attributable  to the 11 stores
acquired in July 2000 which were owned by the  Company for all of 2001,  and the
remaining  increase  of  $1.8  million  is due to the  growth  of the  Company's
telecommunication  sales in Miami  and New York.  Approximately  75% of the $3.3
million  increase  in  revenue  is due to  sales  made to the  Latin  expatriate
community.

Cost of Sales  increased  $1.2  million  or 43.6% to $3.9  million  for the year
ending  December  31, 2001,  from $2.7 million for the year ending  December 31,
2000.  Almost all of this increase is directly  attributable  to the increase in
traffic volume in 2001 over 2000.

Gross Profit increased $2.1 million to $1.3 million for the year ending December
31,  2001,  from a gross loss of $0.8  million for the year ending  December 31,
2000.  This  increase  is due to the  changes  discussed  in Revenue and Cost of
Sales.

                                       15
<PAGE>

Selling,  General &  Administrative  (SG&A)  expenses as a percentage of revenue
decreased to 85.2% for the year ending  December 31, 2001 compared to 168.9% for
the year  ending  December  31,  2000.  The  amount  of SG&A  expenses  incurred
increased $1.2 million or 32.6% to $4.4 million for the year ending December 31,
2001,  from $3.2  million  for the year  ending  December  31,  2000.  The major
elements of SG&A are as follows:

                                                  2001            2000
                                                 ------         ---------
          Salaries and benefits               $1,908,015       $  916,170
          Travel                                 182,295          331,900
          Office, computer and maintenance       712,476          364,941
          Rents, licenses and other expenses     816,147          456,398
          Consultants                            270,452          255,978
          Legal and other professional           216,360          475,987
          Marketing and public relations         338,934          432,726
                                               ---------      -----------
                     Total                    $4,444,679       $3,234,100
                                               =========      ===========

Salaries and benefits have increased as a result of additional employees related
to the  acquisition of 11 stores in the New York City/New Jersey area as well as
the additional  activities  relating to the switch operation and  administrative
support for the new store operations. Additional expenses incurred by the stores
such as rent also increased in 2001 over 2000.

Depreciation and Amortization  expenses increased $232,000 or 106.6% to $449,000
for the year  ending  December  31,  2001,  from  $217,000  for the year  ending
December 31, 2000.  Approximately  80% of this  increase is due to new equipment
purchased  in 2001  that  allowed  the  Company  to  begin  offering  additional
telecommunication  services in 2001.  The new  equipment  purchased  during 2001
included  a  telecommunication  switch  and other  equipment  required  to run a
telecommunications network.

Write-down of Software  Development expenses decreased to $0 for the year ending
December  31, 2001 from  $163,000 for the year ending  December  31,  2000.  The
Company  ceased  developing  and marketing  software  products in 1998 and began
focusing on videoconferencing and  telecommunications.  With respect to the year
ended December 31, 2000, the Company expensed the remaining capitalized software
development  costs in the amount of  $163,000  as a result of our  determination
that these capitalized costs had no further realizable value.

Provision  for Losses on Advances  decreased  by $0.01  million or 3.4% to $0.37
million for the year ending  December  31, 2001 from $0.38  million for the year
ending December 31, 2000.  During 2001, we fully reserved all remaining  amounts
owed to the Company from foreign entities engaged by the Company to help deliver
video calling  services.  The provision for losses on advances  represents  this
reserve  against those funds.  See "ITEM 12. Certain  Relationships  and Related
Transactions" for additional information.

Loss from  Operations  decreased  $0.8  million or 17.6% to $4.0 million for the
year ending  December 31, 2001,  from $4.8 million for the year ending  December
31, 2000 due to the increases in revenue and gross profit.

Other  Expenses  increased  $0.7  million or 75.2% to $1.6  million for the year
ending  December  31, 2001,  from $0.9 million for the year ending  December 31,
2000.  Included in other expenses for 2001 was a write down of equity securities


                                       16
<PAGE>


of $963,000 which  represented an increased  expense of $119,000 over 2000. Also
included in other  expenses was a loss on the disposal of equipment  during 2001
in the amount of $577,000.

Loss from Discontinued Operations increased $3.0 million to $3.1 million for the
year ending December 31, 2001 from $0.1 million for the year ending December 31,
2000. The loss from discontinued  operations is due to the sale of the Company's
real estate property in Toronto,  Canada, and the proposed sale of the Company's
real estate  property  in  Sacramento,  California.  The loss on the sale of the
Toronto  property  and the  impairment  reserve on the  Sacramento  property  is
$493,000 and $2,581,000, respectively.

Net Loss  applicable to Common Shares  increased $2.85 million or 48.9% to $8.68
million for the year ending  December 31, 2001,  from $5.83 million for the year
ended December 31, 2000 primarily due to the loss from  discontinued  operations
recorded in 2001.

At December  31,  2001,  the Company  had federal and state net  operating  loss
carryforwards of approximately $22,273,605 and $15,364,163,  available to offset
taxable  income  expiring at various times through the year 2016. The Tax Reform
Act of 1986  contains  provisions  which limit the federal  net  operating  loss
carryforwards  available  that  can be used in any  given  year in the  event of
certain occurrences, which include significant ownership changes.

RESULTS OF OPERATIONS

Fiscal Year Ended December 31, 2000,  compared to Fiscal Year Ended December 31,
1999

Revenue from telecommunications  sales and services increased by $1.8 million to
$1.8 million for the year ended  December 31, 2000,  from $0.008 million for the
year ended  December 31, 1999.  Approximately  $1.5 million of this increase was
attributable to the 11 stores acquired in June 2000, and the remaining  increase
of $0.3 million is due to the growth of the Company's telecommunication sales in
Miami.  The Company's  predecessor,  Videocall,  was in development  stage until
August 1999.  Therefore,  revenues did not commence  until the fourth quarter of
1999.

Cost of Sales for  telecommunications  sales and retail operations  increased by
$2.3  million to $2.7 million for the year ended  December  31, 2000,  from $0.4
million for the year ended  December 31, 1999.  The majority  this  increase was
directly  attributable  to the  increase in  operating  expenses  for the retail
stores acquired in June 2000.

Selling,  General & Administrative  (SG&A) expenses decreased by $1.3 million to
$3.7 million for the year ended  December 31, 2000  compared to $5.0 million for
the year ended  December  31, 1999.  This  decrease  was due to a  reduction  in
consultants,  legal and other  professional  services in the amount of amount of
$2.0 million. The major elements of SG&A were as follows:

                                       17
<PAGE>


                                                  2000           1999
                                                 ------         ------
          Salaries and benefits               $1,073,168       $719,943
          Travel                                 331,900        295,286
          Office, computer and maintenance       407,983        372,927
          Rents, licenses and other expenses     478,773        304,344
          Consultants                            255,978      1,652,453
          Legal and other professional           519,947      1,178,418
          Marketing and public relations         596,722        459,782
                                               ---------      ---------
                     Total                    $3,664,471     $4,983,153
                                               =========      =========

Salaries and benefits  increased as a result of additional  employees related to
the  acquisition of 11 stores in the New York City/New Jersey area.   Additional
expenses incurred by the stores such as rent also increased in 2000 over 1999.

Depreciation and Amortization expenses increased by $166,000 to $465,000 for the
year ended  December 31,  2000,  from  $299,000 for the year ended  December 31,
1999.  This increase is due to new equipment  purchased in 2000 that allowed the
Company to begin offering additional telecommunication services.

Write-down of Software Development:  We ceased developing and marketing software
products in 1998 and began focusing on videoconferencing and telecommunications.
With  respect to the year ended  December 31,  2000,  we expensed the  remaining
capitalized  software development costs in the amount of $163,000 as a result of
our determination that these capitalized costs had no further realizable value.

Provision  for Losses on  Advances:  During 1999 and 2000,  we  advanced  funds,
provided  administrative,  technical  and  operational  support and  transferred
equipment  in the total  amount of $676,852 to foreign  entities,  some of which
were managed and/or owned by stockholders of the Company.  After  evaluating the
ability of these entities to repay these advances,  we reserved $386,396 against
those total funds. The provision for losses on advances  represents this reserve
against  those  funds.   See  "ITEM  12.  Certain   Relationships   and  Related
Transactions" for additional information.

Loss from  Operations  decreased $0.5 million to $4.6 million for the year ended
December 31, 2000, from $5.1 million for the year ending December 31, 1999.

Other Expenses:  Videocall,  as part of its formation  capital,  received common
stock in other publicly traded companies.  These  securities,  with a historical
cost of  $849,375,  were stated at their fair value of $132,880 at December  31,
1999,  with the  decline in value of  $716,495  included  in  Accumulated  Other
Comprehensive Loss as of that date. In the fourth quarter of 2000, we determined
that the decline in value of this equity  security was other than temporary and,
accordingly,  recognized a loss of $843,335 to write down the carrying  basis of
this security to fair value.

Extraordinary  Item: On March 23, 2000, we issued 100,000 shares of common stock
along with a payment of $450,000 in satisfaction  of a note payable  relating to
the  acquisition of the Sacramento  real estate,  with an adjusted book value of
$844,993.  The price of the common  stock on the date of issue was  $2.6865  per
share,  for a total value of $268,650.  The gain realized in  extinguishment  of
this debt of $126,343 was reflected as extraordinary income for 2000.


                                       18
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

As of  December  31,  2001,  we had  $323,928 of cash on hand.  We will  require
additional cash to finance continuing revenue growth, new product  introduction,
the working capital deficit and other activities.

Net cash  outflows  from  operating  activities  was $843,870 for the year ended
December 31, 2001,  and  $3,355,404  for the year ended  December 31, 2000.  The
decrease  in net  outflows  resulted  from the  increase  in gross  profit  from
operations  in  2001.  The  total  net cash  outflow  of  $843,870  for 2001 was
comprised  primarily of the net loss from operations of $3,970,365  adjusted for
non-cash items from continuing  operations in the amount of $912,101 and changes
in current assets and current liabilities totaling $2,214,394.

Cash outflows from investing  activities of $665,036 for the year ended December
31,  2001  resulted   primarily   from  purchases  of  equipment  and  leasehold
improvements  aggregating $120,077,  advances to related parties of $172,163 and
cash  required for the YAK  Communications,  Inc.  acquisition  in the amount of
$462,840.

Net cash provided by financing  activities was  $1,762,838 in 2001.  These funds
were  obtained  from the proceeds of common  stock  transactions  consisting  of
common stock in the amount of $1,254,798,  warrants and options exercised in the
amount of $524,127, and common shares issued in private placements in the amount
of $58,000.  These  amounts  were offset by payments on debt and payment of fees
totaling $74,087.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Principles of Consolidation
---------------------------

The  consolidated  financial  statements  include  the  accounts  of Talk Visual
Corporation and its wholly owned active subsidiaries,  Sacramento Results,  Inc.
and Mundo Express of NY, Ltd. All intercompany  balances and  transactions  have
been eliminated.

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  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Significant estimates that could be subject to change in the near future include
the value of the net asset held for sale and the Company's  investment in equity
securities. Actual results could differ from those estimates.


                                       19
<PAGE>


Cash Equivalents
----------------

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid debt  instruments  purchased with an initial  maturity of three months or
less to be cash equivalents.

Concentrations of Credit Risk
-----------------------------

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally  of cash and  temporary  cash  investments.  At
times, cash balances held at financial  institutions were in excess of federally
insured  limits.   The  Company  places  its  temporary  cash  investments  with
high-credit, quality financial institutions and, by policy, limits the amount of
credit  exposure  to any one  financial  institution.  The  Company  believes no
significant  concentration  of credit  risk  exists  with  respect to these cash
investments.

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

Property and equipment is stated at cost less accumulated depreciation.

Depreciation  on property  and  equipment  is computed  using the  straight-line
method over the estimated useful lives of the assets,  which range from three to
seven years for furniture, fixtures and equipment and fifteen to forty years for
real estate.

Impairment of goodwill and other long-lived assets
--------------------------------------------------

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that the  carrying  amount  of such  assets  may not be
recoverable.  These  indicators  may  be  a  significant  industry  downturn,  a
significant  decline  in  the  market  value  of  the  Company,  or  significant
reductions  in projected  future cash flows of operating  segments.  Pursuant to
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of Long-Lived Assets to be Disposed of" ("SFAS 121"),  recoverability
of long-lived  assets is based on an estimate of future  undiscounted cash flows
to initially  determine whether  impairment  should be measured.  Measurement of
impairment  charges  for  long-lived  assets  is based on the fair  value of the
assets. If quoted market prices for the assets are not available, the fair value
is calculated  using the present value of estimated  expected future cash flows.
The cash flow  calculations  are based on  management's  best  estimates,  using
appropriate  assumptions and  projections.  When  impairments are assessed,  the
Company records charges to reduce goodwill or other  long-lived  assets based on
the amount by which the  carrying  amounts  of these  assets  exceed  their fair
values.

Income Taxes
------------

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting  for Income Taxes." Under the asset and liability  method,  deferred
income taxes are recognized for the tax consequences of "temporary  differences"
by  applying  enacted   statutory  tax  rates  applicable  to  future  years  to
differences  between the financial  statement carrying amounts and the tax bases
of existing assets and liabilities.

Under SFAS 109, deferred tax assets may be recognized for temporary  differences
that will result in deductible amounts in future periods. A valuation  allowance
is recognized,  if on the weight of available  evidence,  it is more likely than
not that some portion or all of the deferred tax asset will not be realized.


                                       20
<PAGE>


Investments
-----------

Other  investments  primarily  consist  of equity  investments  of less than 20%
equity interest in private  companies.  The Company does not have the ability to
exercise significant influence over any of these companies and therefore account
for the  investments  as  available-for-sale  securities  under  SFAS  No.  115,
"Accounting for Certain Investments in Debt and Equity Securities."  Investments
in privately held companies, which are recorded at cost, are accounted for under
the cost method of  accounting.  Realized  gains and losses are recorded in gain
(loss)  on  investment  when the  related  investments  are  sold and  temporary
fluctuations in values are recorded in other comprehensive income.

Revenue Recognition
-------------------

Revenue is recognized upon completion of the service or delivery of equipment.

Loss Per Share
--------------

SFAS No. 128  requires  presentation  of basic and diluted  earnings  per share.
Basic  earnings  per share is computed by dividing  income  available  to common
stockholders by the weighted average number of common shares outstanding for the
reporting  period.  Diluted  earnings per share reflects the potential  dilution
that could occur if securities or other  contracts,  such as stock  options,  to
issue common stock were  exercised or converted  into common stock.  All amounts
have been adjusted for the September 8, 1998 one for three  reverse  split.  For
the years ended December 31, 2001 and 2000,  diluted earnings per share have not
been included as it would be antidilutive.

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

The Company accounts for its stock option awards under the intrinsic value based
method of accounting  prescribed by Accounting  Principles Board Opinion No. 25,
"Accounting  for Stock Issued to  Employees."  Under the  intrinsic  value based
method,  compensation  cost is the excess, if any, of the quoted market price of
the stock at grant date or other  measurement  date over the amount an  employee
must pay to acquire the stock.  The Company makes pro forma  disclosures  of net
income and earnings  per share as if the fair value based  method of  accounting
had been  applied as  required  by SFAS No.  123,  "Accounting  for  Stock-Based
Compensation".

Reclassification and Restatement
--------------------------------

The  Company has  reclassified  or restated  certain  prior year  amounts on the
Consolidated Balance Sheet, Consolidated Statements of Operations,  Consolidated
Statements of Cash Flows and Notes to the Consolidated  Financial  Statements to
conform to the current year presentation.  Specifically,  all amounts related to
discontinued  operations have been reclassified and a restatement for accounting
inconsistencies in the amount of $117,356 has been made.

Recent Accounting Pronouncements
--------------------------------

The EITF has reached a consensus  on Issue No.  00-14,  "Accounting  for Certain
Sales Incentives".  This consensus addresses when sales incentives and discounts
should be recognized,  as well as where the related revenues and expenses should
be  classified  in a  registrant's  financial  statements.  Issue No. 00-14 will
become  effective  during 2002.  The Company does not  anticipate  the impact of
adoption of the EITF to have an impact on its consolidated financial results.


                                       21
<PAGE>


The  EITF  has  reached  a  consensus  on  issue  No.  00-25,   "Accounting  for
Consideration  from a Vendor to a Retailer in  Connection  with the  Purchase or
Promotion of the Vendor's  Products".  The  consensus  provides  guidance on the
income statement  classification of consideration from a vendor to a retailer in
connection with the retailer's  purchase of the vendor's  products or to promote
sales of the vendor's  products.  Issue No. 00-25 will become  effective  during
2002. The Company does not anticipate the impact of adoption of the EITF to have
an impact on its consolidated financial results.

In July 2001, the FASB issued SFAS No. 141,  Business  Combinations and No. 142,
Goodwill and Other Intangible Assets ("FAS 142"). SFAS 141 requires all business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase method.  Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer  amortized but are reviewed  annually (or more frequently if
impairment  indicators arise) for impairment.  Separable  intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful lives (but with no maximum life). The amortization provisions of SFAS 142
apply to goodwill and  intangible  assets  acquired  after June 30,  2001.  With
respect to goodwill and  intangible  assets  acquired prior to July 1, 2001, the
Company is required to adopt SFAS 142  effective  April 1, 2002.  The Company is
currently evaluating the effect that adoption of the provisions of SFAS 142 that
are  effective  in 2002 will have on its  results of  operations  and  financial
position.

In August 2001, the Financial  Accounting  Standards  Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". This statement
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived  assets.  SFAS No. 144 will be effective for financial  statements of
fiscal years  beginning  after December 15, 2001.  The Company  expects to adopt
this statement during 2002, and does not anticipate that it will have a material
impact on the Company's consolidated financial results.

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain  Transactions   involving  Stock  Compensation,"  an  interpretation  of
Accounting  Principles Board Opinion No. 25 ("Opinion 25"). FIN 44 clarifies (a)
the  definition  of  "employee"  for  purposes of  applying  Opinion 25, (b) the
criteria for determining  whether a plan qualifies as a  non-compensatory  plan,
(c) the  accounting  consequence  of  various  modifications  to the  terms of a
previously  fixed stock option or award,  and (d) the accounting for an exchange
of stock  compensation  awards in a business  combination.  FIN 44 was effective
July 1, 2000,  and did not have a  material  impact on the  Company's  financial
position, results of operations or cash flows.

RISK FACTORS

As of  December  31,  2001 we have never  achieved  operating  profits.  We will
continue to be  dependent  on our retail and  telecommunication  product  sales,
revenues from our real estate  operations  including the sale of our  investment
property in Sacramento,  California, collection of all related party receivables
and short term and long term  borrowings for working  capital  needs,  until the
operating  activities  generate sufficient cash flow to fund our needs. There is
no assurance of  profitability  and, even if achieved,  that such  profitability
will be  consistent  on a  quarterly  or  annual  basis.  We may  need to  raise
additional  funds to fund our  working  capital  deficit,  to pursue  additional
acquisitions,  or to  undertake  new product  development,  or if we  experience
operating losses that exceed expectations.  If we raise additional funds through
the issuance of equity or debt  securities,  these  securities  may have rights,


                                       22
<PAGE>


preferences or privileges senior to those of the rights of the common stock, and
our stockholders may experience  additional dilution.  We cannot be certain that
additional  financing will be available on favorable terms when required,  or at
all.

On July 27,  2000,  we  entered  into a common  stock  purchase  agreement  with
Evertrend  Holdings  Limited.  Evertrend  has  committed  to  purchase up to $15
million of our common  stock,  subject to the  effectiveness  of a  Registration
Statement  on form  SB-2,  which  was filed  with the  Securities  and  Exchange
Commission,  and became  effective  October 31, 2000. The issuance of the common
stock to Evertrend under the common stock purchase  agreement was not registered
under the Securities Act of 1933. The Registration  Statement covered the resale
of the shares by Evertrend.  Sales under the common stock purchase agreement may
be in  increments  of up to $1.5  million.  At December  31,  2001,  we had sold
38,405,344  shares of common stock under the stock  purchase  agreement  for net
proceeds of $1,524,373 after payment of commissions and expenses.

The Company has an agreement with Michael Zwebner,  the Chairman of the Board of
Directors,  pursuant to which Mr. Zwebner is required to repay amounts currently
due by him and by parties he controls  to the  Company or to provide  sufficient
alternative  funds as required to cover  short-term  capital needs.  The Company
also expects to generate  proceeds from the sale of its real estate  property in
Sacramento.  Based upon the current cash utilization rate and Management's  plan
for increased revenues and positive cash flow from operations in the second half
of 2002,  together  with the  commitment  of funding  from Mr.  Zwebner  and the
proceeds from the sale of its real estate  operations in Sacramento,  Management
believes that there should be sufficient  capital  reserves to meet the needs of
the Company for the next twelve  months.  While we believe that our results from
operations  will  generate  positive  cash flow  during the second half of 2002,
there can be no assurance that changing market conditions,  a decline in revenue
growth or an increase in operating  expenses will not prevent us from  obtaining
positive cash flow from operations.

We have  pursued,  are  currently  pursuing  and, in the future may pursue,  new
technologies and businesses internally and through acquisitions and combinations
which  involve  significant  risks.  Any such  acquisition  or  combination  may
involve,  among other things, the issuance of equity securities,  the payment of
cash, the incurrence of contingent  liabilities and the amortization of expenses
related to goodwill and other intangible  assets,  and transaction  costs, which
have  adversely  affected,  or may adversely  affect,  our business'  results of
operations  and financial  condition.  Our ability to integrate and organize any
new businesses  and/or  products,  whether  internally  developed or obtained by
acquisition or  combination,  will likely require  significant  expansion of our
operations.  There is no  assurance  that we will have or be able to obtain  the
necessary resources to satisfactorily effect such expansion,  and the failure to
do so could have a material adverse effect on our business,  financial condition
and results of operations.  In addition future  acquisitions and or combinations
by the  Company  involve  risks of,  among  other  things,  entering  markets or
segments in which we have no or limited prior experience,  the potential loss of
key employees of the acquired company and/or difficulty, delay or failure in the
integration of the  operations,  management,  personnel and business of any such
new business with our business and operating and financial  difficulties  of any
new or newly combined  operations,  any of which could have a materially adverse
effect on our business, financial condition and results of operations. Moreover,
there  can be no  assurance  that  the  anticipated  benefits  of  any  specific
acquisition  or of any  internally  developed  new business  segment or business
combination will be realized.

                                       23
<PAGE>

Item 7.  Financial statements and supplementary data
         -------------------------------------------


                                   Contents



Report of Independent Auditors.........................................      25
Consolidated Balance Sheet.............................................   26-27
Consolidated Statements of Operations..................................      28
Consolidated Statements of Stockholders' Equity........................      29
Consolidated Statements of Cash Flows..................................   30-32
Notes to Consolidated Financial Statements.............................   33-44

                                       24
<PAGE>

                         Report of Independent Auditors


To the Stockholders of
Talk Visual Corporation
Miami, Florida

We have  audited  the  accompanying  consolidated  balance  sheet of Talk Visual
Corporation as of December 31, 2001, and the related consolidated  statements of
operations, stockholders' equity and cash flows for each of the two years in the
period  ended   December  31,  2001.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial  statements.  We believe
that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of Talk Visual
Corporation  at  December  31,  2001,  and the  consolidated  results  of  their
operations  and their cash  flows for each of the two years  ended in the period
ended  December 31, 2001, in conformity  with  accounting  principles  generally
accepted in the United States.

As more fully described in Note 2 to the financial statements, there are certain
liquidity  matters  concerning  the Company.  Management's  plans with regard to
these liquidity matters are discussed in Note 2.


/s/ Mayer Rispler & Company,P.C.
--------------------------------
    Mayer Rispler & Company,P.C.

    Brooklyn, New York
    March 19, 2002

                                       25
<PAGE>

                             TALK VISUAL CORPORATION
                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2001


                                     ASSETS
                                     ------


CURRENT ASSETS
   Cash                                                          $   323,928
   Accounts receivable, net of allowances
    for doubtful accounts of $8,050                                  261,489
   Advances to related parties                                       345,714
   Other current assets                                              117,905
   Assets held for sale, net of reserve
    for impairment of $2,581,986                                   1,948,077
                                                                  ----------
   Total current assets                                            2,997,113

PROPERTY AND EQUIPMENT, net                                          839,155

INVESTMENT IN EQUITY SECURITIES                                      823,364

GOODWILL, net                                                        663,750

OTHER ASSETS                                                          83,483
                                                                  ----------
   TOTAL ASSETS                                                  $ 5,406,865
                                                                  ==========

                 See notes to consolidated financial statements.


                                       26
<PAGE>


                             TALK VISUAL CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                   (continued)

                                DECEMBER 31, 2001


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------


CURRENT LIABILITIES
    Note payable                                                 $   500,000
    Accounts payable                                               1,704,627
    Accrued expenses                                                 366,155
    Other current liabilities                                         39,970
                                                                  ----------
    Total current liabilities                                      2,610,752

LONG-TERM DEBT,                                                      439,700
                                                                   ---------
   TOTAL LIABILITIES                                               3,050,452
                                                                   ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Series A Convertible redeemable preferred stock,
     par value $.001 per share, 25,000,000 shares
     authorized; none issued or outstanding

   Common Stock, par value $.001 per share,
     500,000,000 shares authorized; 136,895,987
     shares issued and outstanding                                   136,896
   Additional paid in capital                                     23,959,558
   Accumulated deficit                                           (21,740,041)
                                                                  ----------
   TOTAL STOCKHOLDERS' EQUITY                                      2,356,413
                                                                  ----------
       TOTAL                                                     $ 5,406,865
                                                                  ==========

                  See notes to consolidated financial statements.

                                       27
<PAGE>

                             TALK VISUAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    YEARS ENDED DECEMBER 31,
                                                    ------------------------
                                                    2001                2000
                                                 ----------          ---------
REVENUE
 Sales and services                              $5,218,956         $1,915,158

COSTS OF SALES AND SERVICES                       3,922,535          2,731,125
                                                 ----------          ---------
GROSS PROFIT (LOSS)                               1,296,421           (815,967)
                                                 ----------          ---------
COSTS AND EXPENSES
 Selling, general and administrative              4,444,679          3,234,100
 Depreciation and amortization                      448,812            217,222
 Write-down software development costs                 -               163,000
 Write-off advances to foreign corporations         373,295            386,396
                                                 ----------          ---------
Total costs and expenses                          5,266,786          4,000,718
                                                 ----------          ---------
LOSS FROM OPERATIONS                             (3,970,365)        (4,816,685)
                                                 ----------          ---------
OTHER INCOME (EXPENSE)
  Interest expense, net                             (41,532)           (59,553)
  Write down of equity securities                  (963,060)          (843,335)
  Loss on disposal of property and equipment       (576,997)              -
                                                 ----------         ----------
                                                 (1,581,589)          (902,888)

LOSS FROM CONTINUING OPERATIONS                  (5,551,954)        (5,719,573)

LOSS FROM DISCONTINUED OPERATIONS                (3,132,808)          (114,145)
                                                 ----------         ----------
NET LOSS                                        $(8,684,762)       $(5,833,718)
                                                 ==========         ==========

NET LOSS PER COMMON SHARE - BASIC AND DILUTED
  CONTINUING OPERATIONS                         $    (0.058)       $    (0.112)

  DISCONTINUED OPERATIONS                            (0.033)            (0.002)
                                                 ----------         ----------
  NET LOSS                                      $    (0.091)       $    (0.114)
                                                 ==========         ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD                    94,669,011         51,110,571
                                                 ==========         ==========

                 See notes to consolidated financial statements

                                       28
<PAGE>

<TABLE>
<CAPTION>

                             Talk Visual Corporation
                 Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 2001 and 2000
                                  SPLIT TABLE

                                                      Preferred Shares                Common Shares                Stock
                                                   Shares         Amount         Shares           Amount         Subscribed
                                                   ------         ------         ------           ------         ----------
<S>                                               <C>        <C>               <C>           <C>             <C>
Balance January 1, 2000                           975,000    $        975      32,060,977    $     32,061    $      4,241

Year Ended December 31, 2000:
     Common Shares issued in Acquisitions            --              --         4,066,718           4,067            --
     Collections on subscriptions                    --              --         4,241,322            --            (4,241)
     Common Shares issued for services               --              --         2,028,989           2,029            --
     Common Shares issued in
     exchange for debt                               --              --           100,000             100            --
     Sales of common stock                           --              --         7,337,423           7,337            --
     Conversions of preferred
     shares to commo                             (925,000)           (925)     15,865,991          15,866            --
     Cancellation of prio
     issuance, other                                 --              --              --              --              --
     Common shares issued in
     private placement                               --              --         7,829,735          12,071            --
     Issued pursuant to stock plans                  --              --         1,750,000            --              --
     Issued to employees                             --              --            12,750              13            --
     Warrant and Options exercised                   --              --         1,941,935           3,692            --
     Offering Expenses                               --              --              --              --              --
     Net Loss                                        --              --              --              --              --
     Other comprehensive loss
      - unrealized loss on
        marketable securities
        and currency exchange                        --              --              --              --              --


                                                     --              --              --              --              --

Balance December 31, 2000                          50,000    $         50      77,235,840    $     77,236    $       --

Year Ended December 31, 2001:
     Common Shares issued in Acquisitions            --              --         8,241,600           8,242            --
     Common Shares issued for services               --              --         8,037,759           8,038            --
     Sales of common stock                           --              --        28,747,167          28,747            --
     Conversions of preferred
     shares to common                             (50,000)            (50)        848,190             848            --
                                                  -----------------------------------------------------------------------
     Cancellation of prior issuance, other           --              --        (1,750,000)         (1,750)           --
     Common shares issued
     in private placement                            --              --         2,000,000           2,000            --
     Issued to employees                             --              --         1,600,000           1,600            --
     Warrant and Options exercised                   --              --        11,935,431          11,935            --
     Offering Expenses and other                     --              --              --              --              --
     Common stock granted to officers                --              --              --              --              --
     Common stock to be surrendered                  --              --              --              --              --
     Cancellation of stock subscriptions             --              --              --              --              --
     Comprehensive loss adjustment                   --              --              --              --              --
     Other adjustments                               --              --              --              --              --
     Net Loss                                        --              --              --              --              --

                                                     --              --              --              --              --
                                                  -----------------------------------------------------------------------
Balance December 31, 2001                            --              --       136,895,987    $    136,896            --
                                                  =======================================================================
</TABLE>


                 See notes to consolidated financial statements


                                       29
<PAGE>

<TABLE>
<CAPTION>

                             Talk Visual Corporation
                 Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 2001 and 2000
                             SPLIT TABLE (CONTINUED)


                                                                              Accumulated
                                              Additional                        Other          Stock        Total
                                               Paid In      Accumulated     Comprehensive  Subscription  Stockholder  Comprehensive
                                               Capital         Deficit          Loss        Receivable     Equity          loss
                                               -------         -------       -------------   ----------   ---------    ------------
<S>                                         <C>             <C>             <C>          <C>              <C>
Balance January 1, 2000                     $ 16,409,119    $ (7,221,561)   $ 688,537)   $ (1,061,976)    7,474,322

Year Ended December 31, 2000:
     Common Shares issued in Acquisitions      1,462,403            --           --              --       1,466,470
     Collections on subscriptions                   --              --           --         1,028,643     1,024,402
     Common Shares issued for services           245,082            --           --              --         247,111
     Common Shares issued in
     exchange for debt                           268,650            --           --              --         268,750
     Sales of common stock                       820,027            --           --              --         827,364
     Conversions of preferred
     shares to commo                             (14,941)           --           --              --            --
     Cancellation of prio
     issuance, other                            (474,445)           --           --              --        (474,445)
     Common shares issued in
     private placement                         2,622,171            --           --              --       2,634,242
     Issued pursuant to stock plans                 --              --           --          (765,625)     (765,625)
     Issued to employees                           5,237            --           --              --           5,250
     Warrant and Options exercised             1,352,933            --           --              --       1,356,625
     Offering Expenses                          (386,132)           --           --              --        (386,132)
     Net Loss                                       --        (5,951,074)        --              --      (5,951,074)   (5,951,074)
     Other comprehensive loss
      - unrealized loss on
        marketable securities
        and currency exchange                       --              --        668,012            --         668,012       668,012


                                                    --              --           --              --            --      (5,283,062)
                                            -------------------------------------------------------------------------------------
Balance December 31, 2000                   $ 22,310,104    $(13,172,635)   $ (20,525)   $    (79,958)    8,395,272

Year Ended December 31, 2001:
     Common Shares issued in Acquisitions        321,422            --           --              --         329,664
     Common Shares issued for services           317,852            --           --              --         325,890
     Sales of common stock                     1,254,798            --           --              --       1,283,545
     Conversions of preferred
     shares to common                               (800)           --           --              --              (2)
     Cancellation of prior issuance, other      (763,875)           --           --              --        (765,625)
     Common shares issued
     in private placement                         58,000            --           --              --          60,000
     Issued to employees                          62,400            --           --              --          64,000
     Warrant and Options exercised               524,127            --           --              --         536,062
     Offering Expenses and other                (145,770)           --           --              --        (145,770)
     Common stock granted to officers            300,000            --           --              --         300,000
     Common stock to be surrendered             (278,700)           --           --              --        (278,700)
     Cancellation of stock subscriptions            --              --           --           798,958       798,958
     Comprehensive loss adjustment                  --              --         20,525            --          20,525        20,525
     Other adjustments                              --           117,356         --              --         117,356       117,356
     Net Loss                                       --        (8,684,762)        --              --      (8,684,762)   (8,684,762)

                                                    --              --           --              --            --      (8,546,881)
                                            -------------------------------------------------------------------------------------
                                            $ 23,959,558    $(21,740,041)   $    --      $       --    $  2,356,413
                                            =====================================================================================
</TABLE>

                                       30

<PAGE>


<TABLE>
<CAPTION>

                           TALK VISUAL CORPORATION
                     CONSOLIDATED STATEMENT OF CASH FLOWS

                                                           YEAR ENDED DECEMBER 31,
                                                           -----------------------
                                                             2001            2000
                                                           ---------     ----------
<S>                                                      <C>            <C>
Cash Flows From Operating Activities:

Net Loss                                                 $(8,684,762)   $(5,833,718)

Adjustments to reconcile net loss to net cash
    used in operating activities:
  Depreciation and amortization                              448,812        217,222
  Depreciation and amortization
    from discontinued operations                             190,568        248,259
  Amortization of product development costs                     -           163,000
  Provision for uncollectable accounts receivable             (8,625)        13,658
  Provision for losses on advances                           373,295        386,396
  Write down of investments                                  963,060        843,335
  Gain on sale of investments                                   -           (18,828)
  Loss on disposition of property and equipment              576,997         55,796
  Write off of intangibles                                      -            47,736
  Additional non-cash charges
    from discontinued operations                             162,141           --
  Cancellation of prior common stock issuance               (763,875)          --
  Issuance of common stock in exchange
    for services and obligations                             680,252        252,360
  Gain on debt extinguishment                                (72,068)      (126,343)
  Loss from discontinued operations                        3,075,941           --

Increase (decrease) in cash from changes in:
  Accounts receivable                                       (154,148)       (66,343)
  Other current assets (a)                                   307,067        202,961
  Other assets                                             1,113,270           --
  Accounts payable                                           831,092        188,678
  Accrued expenses                                           194,162         (8,817)
  Other current liabilities and other liabilities            (77,049)        79,244
                                                           ---------     ----------
    Net Cash from Operating Activities                      (843,870)    (3,355,404)
                                                           ---------     ----------
Cash Flows From Investing Activities:

  Purchase of property and equipment                        (120,077)    (1,155,708)
  Advances - related parties                                (172,163)      (391,169)
  Purchase of equity securities                             (462,840)      (350,000)
  Proceeds from sale of available for sale securities           -            51,553
  Acquisition or disposition of other assets                  90,044       (101,455)
                                                           ---------     ----------
    Net Cash from Investing Activities                      (665,036)    (1,946,783)
                                                           ---------     ----------
</TABLE>

                See notes to consolidated financial statements

                                       31
<PAGE>

<TABLE>
<CAPTION>

                             TALK VISUAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (continued)

                                                           YEAR ENDED DECEMBER 31,
                                                           -----------------------
                                                             2001           2000
                                                           ---------     ----------
<S>                                                        <C>           <C>
Cash Flows from Financing Activities:

  Borrowings on debt                                            --          111,533
  Payments on notes payable and long-term debt               (29,849)      (628,081)
  Net proceeds from common stock transactions              1,792,687      5,571,278
                                                           ---------     ----------
    Net Cash from Financing Activities                     1,762,838      5,054,730
                                                           ---------     ----------
Effect of exchange rate changes on cash                         --           30,293
                                                           ---------     ----------

Increase (decrease) in cash and cash equivalents             253,932       (217,160)
Cash and cash equivalents at beginning of period              69,996        287,156
                                                           ---------     ----------
Cash and cash equivalents at end of period                $  323,928     $   69,996
                                                           =========     ==========

                See notes to consolidated financial statements

Supplemental disclosure of cash flow information:

a. Does not include assets held for sale

b. Cash paid during the period for:

       interest                                           $     -        $   35,946
                                                           ---------     ----------
       income taxes                                       $    1,885     $      800
                                                           ---------     ----------
</TABLE>

c. Noncash investing and financing transactions:

For the year ended December 31, 2001

         The Company  purchased a 10% interest in Yak  Communications,  Inc. The
Company converted $462,840 of debt and exchanged  8,241,600 shares of its common
stock for 405,516 shares of Yak  Communications,  Inc.,  which represents 10% of
the outstanding common stock of Yak Communications, Inc.

         Issuance  of  5,555,000  shares  of  common  stock in  cancellation  of
accounts payable in the amount of $247,090.

         Cancellation  of notes  receivable  in the amount of  $765,625  and the
return to  treasury  of  1,750,000  shares from the  cancellation  of  exercised
options.


                                       32
<PAGE>



                             TALK VISUAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (continued)

c. Noncash investing and financing transactions (continued):

For the year ended December 31, 2001 (continued):

         Issuance  of  2,482,759  shares  of  common  stock in  cancellation  of
accounts  payable to the  Chairman  of the Board of  Directors  in the amount of
$90,000.

         Issuance of 1,600,000 shares of common stock to employees in the amount
of $52,800.

         Issuance of  10,000,000  shares of common stock to certain  officers of
the Company under the Stock Compensation Plan in the amount of $300,000.

For the year ended December 31, 2000:

         Conversion of the Convertible Discounted Loan Notes into 495,000 shares
of common stock,  previously issued, for the outstanding  balance of the note in
the amount of $386,100.

         Cashless  exercise  of an Option to purchase  900,000  shares of common
stock at $0.25  per  share,  at a market  price of $3.875  for a total  issue of
841,935 shares.

         Exercise of Options to  purchase  1,750,000  shares of common  stock at
$0.4375 per share in exchange for notes receivable in the amount of $765,625.

         Issuance  of  3,000,000  shares of  common  stock  pursuant  to a joint
venture  agreement with EnterTech Media Group for 3,333,333  shares of EnterTech
Media common stock at a total value of $916,470.

         Issuance  of  1,066,718  shares of common  stock under the terms of the
acquisition  of eleven  retail  stores in New York and New Jersey  from  Various
Business Management Corporation at a total value of $550,000.

                See notes to consolidated financial statements

                                       33
<PAGE>

                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Description of Business
-----------------------

The  Company  is  in  the  business  of  providing  international  and  domestic
telecommunication  services  including long distance and video calling  services
focusing largely on the Latin American expatriate  community.  On July 20, 2000,
the  Company  acquired  eleven  retail  call  shops in the New York City and New
Jersey areas  through its wholly  owned  subsidiary,  Mundo  Express of NY, Ltd.
During  2001,  the  Company  began  utilizing a direct  sales  force  selling to
business  and  residential  customers  as well as  instituting  an  agent  sales
program.  The  Company  also  owns  and  operates,   through  its  wholly  owned
subsidiary,   Sacramento  Results,   Inc.,  a  commercial  property  located  in
Sacramento, California (See Note 3: Discontinued Operations).

Principles of Consolidation
---------------------------

The  consolidated  financial  statements  include  the  accounts  of Talk Visual
Corporation and its wholly owned active subsidiaries,  Sacramento Results,  Inc.
and Mundo Express of NY, Ltd. All intercompany  balances and  transactions  have
been eliminated.

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  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Significant estimates that could be subject to change in the near future include
the value of the net asset held for sale and the Company's  investment in equity
securities. Actual results could differ from those estimates.

Cash Equivalents
----------------

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid debt  instruments  purchased with an initial  maturity of three months or
less to be cash equivalents.

Concentrations of Credit Risk
-----------------------------

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally  of cash and  temporary  cash  investments.  At
times, cash balances held at financial  institutions were in excess of federally
insured  limits.   The  Company  places  its  temporary  cash  investments  with
high-credit, quality financial institutions and, by policy, limits the amount of
credit  exposure  to any one  financial  institution.  The  Company  believes no
significant  concentration  of credit  risk  exists  with  respect to these cash
investments.

                                       34
<PAGE>


                             TALK VISUAL CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

Property and equipment is stated at cost less accumulated depreciation.

Depreciation  on property  and  equipment  is computed  using the  straight-line
method over the estimated useful lives of the assets,  which range from three to
seven years for furniture, fixtures and equipment and fifteen to forty years for
real estate.

Impairment of goodwill and other long-lived assets
--------------------------------------------------

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that the  carrying  amount  of such  assets  may not be
recoverable.  These  indicators  may  be  a  significant  industry  downturn,  a
significant  decline  in  the  market  value  of  the  Company,  or  significant
reductions  in projected  future cash flows of operating  segments.  Pursuant to
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of Long-Lived Assets to be Disposed of" ("SFAS 121"),  recoverability
of long-lived  assets is based on an estimate of future  undiscounted cash flows
to initially  determine whether  impairment  should be measured.  Measurement of
impairment  charges  for  long-lived  assets  is based on the fair  value of the
assets. If quoted market prices for the assets are not available, the fair value
is calculated  using the present value of estimated  expected future cash flows.
The cash flow  calculations  are based on  management's  best  estimates,  using
appropriate  assumptions and  projections.  When  impairments are assessed,  the
Company records charges to reduce goodwill or other  long-lived  assets based on
the amount by which the  carrying  amounts  of these  assets  exceed  their fair
values.

Income Taxes
------------

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting  for Income Taxes." Under the asset and liability  method,  deferred
income taxes are recognized for the tax consequences of "temporary  differences"
by  applying  enacted   statutory  tax  rates  applicable  to  future  years  to
differences  between the financial  statement carrying amounts and the tax bases
of existing assets and liabilities.

Under SFAS 109, deferred tax assets may be recognized for temporary  differences
that will result in deductible amounts in future periods. A valuation  allowance
is recognized,  if on the weight of available  evidence,  it is more likely than
not that some portion or all of the deferred tax asset will not be realized.

Investments
-----------

Other  investments  primarily  consist  of equity  investments  of less than 20%
equity interest in private  companies.  The Company does not have the ability to
exercise significant influence over any of these companies and therefore account


                                       35
<PAGE>


                             TALK VISUAL CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)
Investments (continued)
-----------

for the  investments  as  available-for-sale  securities  under  SFAS  No.  115,
"Accounting for Certain Investments in Debt and Equity Securities."  Investments
in privately held companies, which are recorded at cost, are accounted for under
the cost method of  accounting.  Realized  gains and losses are recorded in gain
(loss)  on  investment  when the  related  investments  are  sold and  temporary
fluctuations in values are recorded in other comprehensive income.

Revenue Recognition
-------------------

Revenue is recognized upon completion of the service or delivery of equipment.

Loss Per Share

SFAS No. 128  requires  presentation  of basic and diluted  earnings  per share.
Basic  earnings  per share is computed by dividing  income  available  to common
stockholders by the weighted average number of common shares outstanding for the
reporting  period.  Diluted  earnings per share reflects the potential  dilution
that could occur if securities or other  contracts,  such as stock  options,  to
issue common stock were  exercised or converted  into common stock.  All amounts
have been adjusted for the September 8, 1998 one for three  reverse  split.  For
the years ended December 31, 2001 and 2000,  diluted earnings per share have not
been included as it would be antidilutive.

Stock Based Compensation

The Company accounts for its stock option awards under the intrinsic value based
method of accounting  prescribed by Accounting  Principles Board Opinion No. 25,
"Accounting  for Stock Issued to  Employees."  Under the  intrinsic  value based
method,  compensation  cost is the excess, if any, of the quoted market price of
the stock at grant date or other  measurement  date over the amount an  employee
must pay to acquire the stock.  The Company makes pro forma  disclosures  of net
income and earnings  per share as if the fair value based  method of  accounting
had been  applied as  required  by SFAS No.  123,  "Accounting  for  Stock-Based
Compensation".

Reclassification and Restatement

The  Company has  reclassified  or restated  certain  prior year  amounts on the
Consolidated Balance Sheet, Consolidated Statements of Operations,  Consolidated
Statements of Cash Flows and Notes to the Consolidated  Financial  Statements to
conform to the current year presentation.  Specifically,  all amounts related to
discontinued  operations have been reclassified and a restatement for accounting
inconsistencies in the amount of $117,356 has been made.

Recent Accounting Pronouncements

The EITF has reached a consensus  on Issue No.  00-14,  "Accounting  for Certain
Sales Incentives".  This consensus addresses when sales incentives and discounts
should be recognized,  as well as where the related revenues and expenses should


                                       36
<PAGE>


                             TALK VISUAL CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

Recent Accounting Pronouncements (continued)
--------------------------------

be  classified  in a  registrant's  financial  statements.  Issue No. 00-14 will
become  effective  during 2002.  The Company does not  anticipate  the impact of
adoption of the EITF to have an impact on its consolidated financial results.

The  EITF  has  reached  a  consensus  on  issue  No.  00-25,   "Accounting  for
Consideration  from a Vendor to a Retailer in  Connection  with the  Purchase or
Promotion of the Vendor's  Products".  The  consensus  provides  guidance on the
income statement  classification of consideration from a vendor to a retailer in
connection with the retailer's  purchase of the vendor's  products or to promote
sales of the vendor's  products.  Issue No. 00-25 will become  effective  during
2002. The Company does not anticipate the impact of adoption of the EITF to have
an impact on its consolidated financial results.

In July 2001, the FASB issued SFAS No. 141,  Business  Combinations and No. 142,
Goodwill and Other Intangible Assets ("FAS 142"). SFAS 141 requires all business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase method.  Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer  amortized but are reviewed  annually (or more frequently if
impairment  indicators arise) for impairment.  Separable  intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful lives (but with no maximum life). The amortization provisions of SFAS 142
apply to goodwill and  intangible  assets  acquired  after June 30,  2001.  With
respect to goodwill and  intangible  assets  acquired prior to July 1, 2001, the
Company is required to adopt SFAS 142  effective  April 1, 2002.  The Company is
currently evaluating the effect that adoption of the provisions of SFAS 142 that
are  effective  in 2002 will have on its  results of  operations  and  financial
position.

In August 2001, the Financial  Accounting  Standards  Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". This statement
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived  assets.  SFAS No. 144 will be effective for financial  statements of
fiscal years  beginning  after December 15, 2001.  The Company  expects to adopt
this statement during 2002, and does not anticipate that it will have a material
impact on the Company's consolidated financial results.

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain  Transactions   involving  Stock  Compensation,"  an  interpretation  of
Accounting  Principles Board Opinion No. 25 ("Opinion 25"). FIN 44 clarifies (a)
the  definition  of  "employee"  for  purposes of  applying  Opinion 25, (b) the
criteria for determining  whether a plan qualifies as a  non-compensatory  plan,
(c) the  accounting  consequence  of  various  modifications  to the  terms of a
previously  fixed stock option or award,  and (d) the accounting for an exchange
of stock  compensation  awards in a business  combination.  FIN 44 was effective
July 1, 2000,  and did not have a  material  impact on the  Company's  financial
position, results of operations or cash flows.


                                       37
<PAGE>


                             TALK VISUAL CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 2 - LIQUIDITY

As reflected in the  accompanying  financial  statements,  the Company  incurred
significant  net losses for the years 2001 and 2000,  and expects to continue to
incur losses and have negative  working capital for the first six months of 2002
after which the Company expects to generate  positive cash flow from operations.
The Company is dependent  on  telecommunication  product  sales,  proceeds  from
discontinued operations,  the collection of related party receivables and equity
draws  under  the  stock  purchase  agreement  dated  July 27,  2000,  until the
operating activities generate sufficient cash flow to fund the Company.

The Company has an agreement with a major shareholder to repay amounts currently
due to the  Company or to provide  sufficient  alternative  funds as required to
cover short-term  capital needs.  The Company also expects to generate  proceeds
from the sale of its real estate property in Sacramento.  Based upon the current
cash utilization rate and Management's plan for increased  revenues and positive
cash flow from operations in the second half of 2002,  Management  believes that
together  with  the  commitment  of  funding  from a major  shareholder  and the
proceeds from the sale of its real estate operations in Sacramento, there should
be  sufficient  capital  reserves  to meet the needs of the Company for the next
twelve months.


NOTE 3 - DISCONTINUED OPERATIONS

In the fourth quarter of 2001,  the Board of Directors of the Company  committed
to a plan to exit its real  estate  operations  and to focus the  Company on its
telecommunication sector as its sole operating unit.

Included in the 2001 results of  operations  is a loss of $493,955 from the July
2001 sale of the  Company's  real  estate  property  in  Toronto,  Canada.  Also
included in the 2001 results of  operations  is an estimated  loss of $2,638,853
which  includes  an  estimated  asset  impairment  of  $2,581,986  based  on the
Company's  estimate of net proceeds from the sale of its real estate property in
Sacramento, California.

Excluding the loss and estimated loss from discontinued operations, revenues and
expenses from discontinued  operations for the year ended December 31, 2001 were
$1,244,844 and 1,302,900. Revenues and expenses from discontinued operations for
the year ended December 31, 2000 were $1,284,878 and $1,399,023.

Following is summarized financial information for the discontinued operations:

Current assets                                             $    -0-
Total assets                                                6,200,000
Current liabilities                                           340,732
Total liabilities                                           4,251,923
Net assets of discontinued operations                       1,948,077

                                       38
<PAGE>


                              TALK VISUAL CORPORATION


                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:


          Equipment, Machinery and Automobiles        $  873,727
          Furniture and Fixtures                          40,034
          Leasehold Improvements                         263,632


                                                      -----------
                                                       1,177,393
          Less accumulated depreciation                 (338,238)
                                                      -----------
          Net                                        $   839,155
                                                      ===========

Depreciation expense on property and equipment was $269,812 and $370,180 for the
years ended December 31, 2001 and 2000, respectively.


NOTE 5 - PRODUCT DEVELOPMENT COSTS

The Company ceased developing and marketing  software products in 1998 and began
focusing on videoconferencing and  telecommunications.  With respect to the year
ended December 31, 2000, the Company expensed the remaining capitalized software
development  costs  in the  amount  of  $163,000  as a  result  of  management's
determination that these capitalized costs had no further realizable value.

NOTE 6 - DEBT

The Company's debt is as follows:

Unsecured note payable to a vendor                                  150,000

Convertible loan note                                               289,700

9% Mortgage note, secured by a lien on the Sacramento land and
building, maximum funding of $1,000,000 due January 1, 2002
Interest payable monthly                                            500,000

                                                                 ----------
Total Debt                                                       $  939,700
Less current maturity                                               500,000
                                                                 ----------
Long term debt                                                   $  439,700
                                                                 ==========

There are no definite maturity dates for the remaining long-term debt.


                                       39
<PAGE>


                             TALK VISUAL CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)


NOTE 7 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company  leases  certain  equipment and real estate under various  operating
leases which expire at various dates through August, 2005. Future minimum rental
payments required under operating leases that have initial or remaining terms in
excess of one year at December 31, 2001 are as follows:

        2002                         411,519

        2003                         290,718

        2004                         210,605

2005     140,593
                                   ---------
  Total future minimum rentals    $1,053,435
                                   =========

Rent  expense for the years ended  December  31, 2001 and 2000 was  $576,315 and
$420,623, respectively.

Legal Proceedings

There  are  no  material  legal  proceedings,   other  than  routine  litigation
incidental to the business, to which the Company or any of its subsidiaries is a
party to or which any of their property is subject.


NOTE 8 - ACQUISITIONS

On July 20, 2000, the Company purchased,  through a wholly owned subsidiary, the
net assets of eleven retail telephone call shop stores operating in the New York
City and New Jersey  areas for $900,000 in cash and stock.  The  purchase  price
consisted  of $350,000 in cash  payments  and  $550,000  worth of common  stock,
equaling 1,066,718 shares.

This  acquisition has been accounted for as an asset purchase,  and accordingly,
the  operations  of the  acquired  stores have been  included  in the  Company's
consolidated  operating  results from the date of acquisition.  The cost of this
acquisition  has been allocated on the basis of the estimated fair market values
of the assets acquired.  There were no liabilities  assumed in this acquisition.
The purchase price consisted primarily of goodwill which is being amortized over
six years.

                                       40
<PAGE>

                             TALK VISUAL CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 9 - STOCKHOLDERS' EQUITY

The  Company's  authorized  capital  stock  was  increased  on July 25,  2002 to
500,000,000 shares of common stock, par value of $0.001 and 25,000,000 shares of
non-voting  preferred stock, par value $0.001. At December 31, 2001, the Company
has 136,895,987 issued and outstanding Common shares.

Warrants Outstanding
--------------------

On June 18, 1999, the Company issued warrants to purchase  15,308,475  shares of
common stock at $1.00 per share with a three year expiration period.

Under the terms of the stock purchase agreement dated July 27, 2000, the Company
issued  warrants to the buyer to purchase  1,271,186  shares of common  stock at
$0.6785  per share,  expiring  four years from the date of issue.  Additionally,
warrants were issued to Ladenburg Thalmann in the same amount and under the same
terms for services  rendered in  connection  with the stock  purchase  agreement
placement.

As of December 31, 2001,  warrants and options to purchase  17,895,847 shares of
common stock were outstanding.

Capital Stock Transactions
--------------------------

On various dates during 2000, the Company issued a total of 7,829,735  shares of
common  stock  under  various  private  placement  subscriptions  pursuant  to a
preferred  shareholder's  agreement.  Included  in the total  subscription,  was
1,137,656 shares to Overseas Communications Ltd., a foreign corporation which is
33% owned by the Chairman of the Company.

During 2000, the Company issued an aggregate  2,141,739  shares of common stock,
for various  services and  obligations.  At issuance,  the stock ranged in price
from $0.3594 per share to $2.6865 per share.  These issuances were recorded at a
total expense of $521,010. Included in this amount is 1,828,989 shares of common
stock  issued for  consulting  and  management  services  valued at  $100,000 to
Overseas  Communications,  Ltd., a foreign  corporation in which the Chairman of
the Company is a 33% shareholder.

During  2000,  the  Company  issued  3,691,935  shares of common  stock from the
exercise  of options and  warrants,  at prices  ranging  from $0.25 to $2.07 per
share.

On July 20, 2000, as discussed in Note 7, the Company issued 1,066,718 shares of
common  stock in the  acquisition  of eleven  retail  stores in New York and New
Jersey.

On August 28, 2000, the Company issued 1,750,000 shares of common stock upon the
exercise of options,  at $0.4375 per common share. The options were exercised by
two officers of the Company,  in exchange for notes  receivable in the amount of
$765,625,  bearing interest at 6% per year. This  transaction was  retroactively
cancelled during 2001.

                                       41
<PAGE>


                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)


NOTE 9 - STOCKHOLDERS' EQUITY (continued)

On September 27, 2000,  the Company issued  3,000,000  shares of common stock in
exchange for 3,666,000  shares of common stock of EnterTech  Media Group,  Inc.,
pursuant to a joint venture agreement dated April 1, 2000.

On various dates during 2001, the Company issued a total of 40,682,598 shares of
common stock under the terms of a stock purchase  agreement dated July 27, 2000.
The shares were issued at various prices ranging from $0.032 per share to $0.073
per share.

During 2001, the Company issued an aggregate  7,155,000  shares of common stock,
for various  services and  obligations.  At issuance,  the stock ranged in price
from $0.033 per share to $0.044 per share.  These  issuances  were recorded at a
total expense of $290,252. Included in this amount is 1,600,000 shares of common
stock to employees and associates as additional compensation.

On January 23, 2001,  holders of the Company's  Series A Convertible  Redeemable
Preferred  Stock  exchanged  the  remaining  balance  of  49,649  shares  of the
Company's Series A Convertible  Redeemable Preferred Stock for 848,190 shares of
the Company's common stock.

On June 7, 2001, the Company sold 2,000,000 shares of restricted common stock in
a private placement to Overseas  Communications,  Ltd., a foreign corporation in
which the Chairman of the Company is a 33% shareholder.  The share price for the
shares sold under this private placement was $0.03 per share.

On  June  22,  2001,   the  Company   satisfied   its   obligation  to  Overseas
Communications, Ltd., a foreign corporation in which the Chairman of the Company
is a 33% shareholder,  for open invoices in the amount of $90,000,  representing
consulting and management  services provided by the Chairman,  with the issuance
of 2,482,759  shares of common  stock.  The value on the date of issue was $.036
per share.

During 2001, the Company purchased a 10% interest in Yak Communications,  Inc. a
Company  in  which  the  Chairman  and  certain  members  of his  family  have a
controlling  interest.  The Company  converted  $462,840  of debt and  exchanged
8,241,600  shares of its common stock for 405,516 shares of Yak  Communications,
Inc.

NOTE 10 - STOCK OPTION AND PURCHASE PLAN

The Talk Visual  Corporation 1995 Stock  Option/Stock  Issuance Plan, as amended
(the  "Plan"),  is a tax  qualified  stock option plan for employees and certain
non-employees,  that provided for the granting of stock  options and  authorizes
the issuance of common stock.

Under the Plan, options fall into two categories: (i) the Incentive Stock Option
Plan  under  which  qualified  employees  can,  at the  discretion  of the  Plan
administrator,  be granted  options  to  purchase  shares of Common  Stock at an
exercise price of not less than 85% of their fair market value on the grant date
or at the Plan  Administrator's  discretion,  be issued  shares of Common  Stock
directly,  through the  purchase of shares at a price not less than 85% of their

                                       42
<PAGE>

                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 10 - STOCK OPTION AND PURCHASE PLAN (continued)

fair market value at the time of issuance or as a bonus tied to the  performance
of services;  and (ii) the  Automatic  Option Grant  Program  under which option
grants will automatically be made at periodic intervals to eligible non-employee
Board members to purchase  shares of Common Stock at an exercise  price equal to
100% of the fair market value on the grant date.

On December 27, 2000, the Board of Directors granted options to purchase 100,000
shares of common stock to each of the two non-employee  Directors at an exercise
price of $0.1057 per share, expiring five years from the date of issue.

Option activity within each plan was as follows:
                                                                   Weighted
                                         Incentive     Directors    Average
                                       Stock Option   Stock Option   Price
                                           Plan          Plan      Per Share
                                       ------------   ------------ ---------
Balance outstanding, December 31, 1999    133,333        -0-         $  2.85

  Options granted                       3,100,000                    $0.4375

  Options expired range from
        $2.07 to $4.14 per share         ( 33,333)                   $  2.85

  Options exercised range from
        $0.4375 to $2.07 per share     (1,800,000)                   $0.4828
                                        ---------
Balance outstanding, December 31, 2000  1,400,000        -0-         $  0.55

   Options Granted                                       -0-

   Options Cancelled                   (1,400,000)                   $  0.55
                                       ----------
Balance outstanding, December 31, 2001     -0-           -0-
                                       ==========    =========

All stock options  issued to employees  have an exercise  price of not less than
85% of the fair market  value of the  Company's  common stock on the date of the
grant,  and in  accordance  with  accounting  for  such  options  utilizing  the
intrinsic value method there is a related  compensation  expense recorded in the
Company's  financial  statements  representing 15% of the fair market value. Had
the compensation cost for stock-based  compensation been determined based on the
fair  value of the grant  dates  consistent  with the  method  of SFAS 123,  the
Company's net loss and loss per share for the years ended  December 31, 2001 and
2000  would not have been  increased.  Accordingly,  pro forma  amounts  are not
presented.



                                       43
<PAGE>


                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 11 - STOCK COMPENSATION PLAN

The Talk Visual  Corporation 1999 Stock  Compensation  Plan, (the  "Compensation
Plan"), is a stock  compensation  plan for employees and certain  non-employees,
that  provides for the  granting of common  stock as an  increased  incentive to
contribute to the future success of the Company.  The administration of the plan
and grants issued under the plan are done at the full and sole discretion of the
Board of  Directors  of Talk Visual  Corporation.  There are  20,000,000  common
shares available for issue under the plan.

In December 2001, the Board of Directors authorized the issuance to the Chairman
of the Board  and  certain  officers  of the  Company  of  10,000,000  shares of
restricted  common stock under the  Compensation  Plan at a fair market value of
$0.03 per share.  These  shares  were  issued in January  2002.  Pursuant  to an
employment  agreement  with the Chairman and separation  agreements  with former
officers,  the  restrictions on the sale of this common stock were lifted during
January 2002.

NOTE 12 - GENERAL, ADMINISTRATIVE AND MARKETING EXPENSES

General,  administrative  and marketing  expenses are comprised of the following
items:

                                                  2001           2000
                                               ---------      ---------
          Salaries and benefits               $1,908,015     $  916,170
          Consultants                            270,452        255,978
          Legal and other professional           216,360        475,987
          Marketing and public relations         338,934        432,726
          Rents                                  816,147        456,398
          Travel                                 182,295        331,900
          Office and other expenses              712,475        364,941
                                               ---------      ---------
                     Total                    $4,444,679     $3,234,100
                                               =========      =========

Of the total $4,444,679 expense in 2001,  $380,252 was paid in common stock. For
the year ended December 31, 2000, of the total $3,234,100 expense,  $169,149 was
paid in common stock.


NOTE 13 - INCOME TAXES

At December  31,  2001,  the Company  had federal and state net  operating  loss
carryforwards of approximately $22,273,605 and $15,364,163,  available to offset
taxable  income  expiring at various times through the year 2016. The Tax Reform
Act of 1986  contains  provisions  which limit the federal  net  operating  loss
carryforwards  available  that  can be used in any  given  year in the  event of
certain occurrences, which include significant ownership changes.

At December 31, 2001 and 2000,  the Company's  net deferred tax asset  consisted
primarily of net operating  losses.  The Company  established  a 100%  valuation
allowance equal to the net deferred tax asset, as the Company could not conclude
that it was more likely than not that the deferred tax asset would be realized.


                                       44
<PAGE>


                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 14 - RELATED PARTY TRANSACTIONS

The Company  engages the  services of Michael J.  Zwebner,  the  Chairman of the
Board of Directors of the Company,  under a consulting  agreement  with Overseas
Communications,  Ltd.,  an Israeli  corporation.  Annual  payments  to  Overseas
Communications  under this  agreement are $120,000.  Mr. Zwebner owns 33% of the
capital stock and is a director of Overseas Communications. In 2001, the Company
issued 2,482,759 shares of common stock to Overseas Communications in payment of
$90,000 of the  Company's  obligations  under the  consulting  agreement.  As of
December 31,  2001,  no amounts  were due to Overseas  Communications  under the
consulting  agreement.  In January  2002,  Mr.  Zwebner  agreed to waive  future
amounts  due  under  the  consulting   agreement  in  exchange  for  release  of
restrictions on stock granted to Mr. Zwebner in December of 2001.

The Company has  provided  certain  administrative,  technical  and  operational
support and loan advances  totaling $715,950 to TV  Telecommunications,  Ltd., a
United Kingdom corporation,  Videocall of Canada, Inc., a Canadian  corporation,
Videocall Israel, Ltd., an Israeli corporation,  and Videocall of Belgium, Ltd.,
a Belgian corporation. These entities are directly or indirectly associated with
Michael Zwebner or members of his family.  As of December 31, 2000,  $386,396 of
this amount and had been  reserved and at December  31,  2001,  all balances due
from these entities had been fully reserved and expensed as the Company does not
expect these entities to continue as going  concerns.  Accordingly,  the Company
recorded a charge of $373,295 in the results from operations for the year ending
December 31, 2001.

During 2000,  Eugene Rosov,  a director and the  President  and Chief  Executive
Officer of the Company,  exercised  options to purchase  1,000,000 shares of our
common stock by tendering notes issued by the Company in the amount of $436,406.
During 2000,  Clinton Snyder, a director and the Chief Financial  Officer of the
Company,  exercised  options to purchase  750,000  shares of our common stock by
tendering  notes in the amount of $329,219.  These notes accrued  interest at an
annual rate of 6%. These notes were included in the Company's balance sheet as a
reduction in Stockholders'  Equity,  under the category of "stock  subscriptions
receivable." In July 2001, the Company  retroactively  cancelled the issuance of
these shares to Mr. Rosov and Mr. Zwebner.

Sacramento  Results,  Inc.  (SRI),  a wholly  owned  subsidiary  of the Company,
entered into a lease  agreement with Hard Disk Cafe,  Inc. during November 2000,
pursuant to which Hard Disk Cafe rents commercial space from SRI at its property
in  Sacramento,  California.  Messrs.  Zwebner,  Rosov and Snyder and  Alexander
Walker, Jr., a director of the Company,  are stockholders of Hard Disk Cafe, and
Mr.  Zwebner  is a  director  and the  President  of Hard Disk  Cafe.  The lease
agreement  provided for $41,600 in rental  payments in 2001.  As of December 31,
2001,  Talk Visual had directly  and through SRI advanced  $189,081 to Hard Disk
Cafe,  Inc.,  including  $189,091 in advances in 2001,  had  received $0 in rent
payments from Hard Disk Cafe, and had recorded $41,600 in rental income in 2001.
Mr. Zwebner has agreed to repay these amounts during 2002 and to cause Hard Disk
Cafe to become current on its rental obligation to SRI.

In December 2001, the Company completed the purchase of 405,516 shares of common
stock of Yak  Communications  (USA)  Inc.,  for a  purchase  price  of  $793,205
consisting of 8,241,600 shares of our common stock and conversion of $462,840 of
debt.  Following  the  consummation  of the  transaction,  we  owned  10% of the
outstanding  capital  stock  of Yak  Communications.  Mr.  Zwebner  and  Charles
Zwebner,   Mr.   Zwebner's   brother,   are  significant   stockholders  of  Yak
Communications.

                                       45
<PAGE>

                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

In December  2001,  the Board of Directors  authorized the issuance of 4,000,000
shares  of  restricted  common  stock to Mr.  Zwebner  and  3,000,000  shares of
restricted  common stock to each of Mr. Rosov and Mr. Snyder.  These shares were
issued in January  2002. In connection  with an  employment  agreement  with Mr.
Zwebner  and  separation   agreements  with  Mr.  Rosov  and  Mr.  Snyder,   the
restrictions  on the sale of this  common  stock were  lifted  during  2002.  In
connection with this transaction,  the Company recorded a non-cash charge in the
amount of $300,000 during 2001.

As of December  31,  2001,  the  Company had  advanced a total of $26,000 to Mr.
Snyder  (including  $6,000 in 2001),  $40,467 to Mr. Rosov (including  $6,050 in
2001),  and  $93,094 to Mr.  Zwebner  (including  $15,562 in 2001).  Pursuant to
separation agreements with Mr. Snyder and Mr. Rosov, amounts advanced to them by
the Company were forgiven.  Accordingly,  the Company has recorded an expense in
the  amount of  $66,467  in its  results  from  operations  for the year  ending
December  31,  2001.  Mr.  Zwebner has agreed to repay  amounts  advanced by the
Company on his behalf in 2002.

Mr. Walker is the Chairman of the Board and a  shareholder  of Nevada Agency and
Trust  Company,  the Company's  transfer  agent.  During 2001,  the Company paid
$4,247 in transfer agent and related fees to Nevada Agency and Trust Company.

NOTE 15 - EARNINGS PER SHARE

The following is a reconciliation  of the weighted average number of shares used
to compute basic and diluted earnings per share:

                                                         2001            2000
                                                      ----------      ----------
Basic weighted average shares outstanding             94,669,011      51,110,571
Dilutive effect of options                                --              --
                                                      ----------      ----------
Diluted weighted average shares outstanding           94,669,011      51,110,571
                                                      ==========      ==========

Options  and  warrants  to  purchase   18,095,847  and  22,170,647  shares  were
outstanding during the years ended December 31, 2001 and 2000, respectively, but
these  amounts were not included in the  computation  of diluted loss per common
share because the effect would be antidilutive.

NOTE 16 - SEGMENT INFORMATION

The Company's continuing operations consist primarily of providing long distance
services  for its retail and sales  division.  Accordingly,  the  Company is not
required to disclose segment information.

                                       46
<PAGE>

                             TALK VISUAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 17 - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

                                                       2001            2000
                                                    -----------     -----------

   Write down of equity securities (a)              $  (963,060)     $(843,335)

   Provision for losses on advances (b)             $   -0-          $(386,396)

   Write down of Assets Held for Sale (c)           $(2,581,986)        -0-

   Disposal of property (d)                         $  (576,997)        -0-

(a) In the fourth quarter of 2001 and 2000, management determined that a decline
in value of its equity  securities was other than  temporary  and,  accordingly,
recognized  a loss of $963,060  and  $843,335,  respectively,  to write down the
carrying basis of its securities to estimated fair value.

(b) As more fully described in Note 14,  management  determined that a provision
should be made against advances to certain foreign entities.

(c) As more fully described in Note 3, management  decided in the fourth quarter
of 2001 to sell its remaining real estate property in Sacramento, California.

(d) In the fourth quarter of 2001, management disposed of assets previously used
in the Company's operations.


                                       47
<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS


None

                                 PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT


Certain biographical information concerning the Directors and Executive Officers
of the Company as of March 31, 2002, is set forth below.  Such  information  was
furnished by them to the Company.

Michael J. Zwebner
Michael Zwebner - Age 48, is our founder and has served as Chairman of the Board
of Directors of the Company since September  1998. Mr. Zwebner also serves on
the Board of Directors  for Sector  Communications,  Inc.,  World Wide  Wireless
Communications,  Inc. and Entertainment  Internet,  Inc. Mr. Zwebner is also the
President of International Catalyst Ventures,  Inc. (Canada) and Chief Executive
Officer  of World  Wide  Communications,  Inc.  From 1974 to 1986,  Mr.  Zwebner
founded and ran a travel and tourism company and a charter airline, specializing
in the areas of air charter travel, wholesale ticketing and general business and
tourist travel.  From 1986 to 1990, Mr. Zwebner owned and operated  several real
estate  companies  and  managed a chain of five family  restaurants  and related
catering services in England.  From 1991 to 1997, Mr. Zwebner founded and served
as Vice  President of Cardcall  International  Holdings Inc. (USA) and Operating
Manager  of  Cardcall   (UK)  Ltd.,   for  which  he  designed   and   developed
telecommunications  and marketing  concepts and organized the prepaid phone card
operations.  Mr.  Zwebner also  coordinated  corporate  finance  activities  for
Cardcall.  In February 1997, Mr. Zwebner  negotiated and secured the sale/merger
of the Cardcall Group to DCI  Telecommunications  Inc., a publicly-held  company
based in Connecticut.  In addition, in February 1998, Mr. Zwebner negotiated the
creation of a multi-million  dollar joint venture between Cardcaller Canada Inc.
with Datawave Systems Inc. of Vancouver, Canada.

Alexander H. Walker, Jr.
Mr.  Walker - Age 75, has served as a director  of the Company  since  September
1998.  Mr.  Walker  served  as a  director  and  General  Counsel  of  Videocall
International  Corporation  from July 1998 to September  1998. He also serves on
the Board of Directors of World Wide Wireless Communications,  Inc., Film World,
Inc.  and  Entertech  Media  Group,  Inc.  Since  1968 Mr.  Walker has served as
Chairman of the Board of the Nevada Agency and Trust Company in Reno,  Nevada, a
licensed and registered trust company and transfer agent in business since 1903.
He  received  his B.A.  from  Waynesburg  College in 1950 and his J.D.  from the
University  of  Pittsburgh  School  of Law in 1952.  From  1956 to date,  he has
maintained a private practice as an attorney.

Clinton H. Snyder
Clinton H. Snyder,  CPA - Age 47, has served as a director of the Company  since
November  1998,  and  served as Chief  Financial  Officer  of the  Company  from
November  1998 to  January  2002.  From 1975 to 1982 he served  as  auditor  and
business  consultant  with the public  accounting  firm of Stegman & Associates.
From 1982 to 1985 he served as Finance Officer for a multi-national construction
products and real estate development firm in Baltimore,  Maryland.  From 1985 to
1990 he served as Executive  Officer for Finance and  Administration  with North


                                       48
<PAGE>


American  Beauty  Services,  Inc., a wholesale and retail  distributor of beauty
products.  From 1990 to 1992, he served as VP of Finance for Innovative  Telecom
Company, Inc., a telecommunications  provider. From 1992 to 1998, he served as a
business  consultant,  financial and tax strategist for companies throughout the
New England  area.  Mr.  Snyder is currently a consultant to World Wide Wireless
Communications, Inc.

Andrew Silber
Andrew Silber - Age 31, has served as a director and as Director of Sales of the
Company since October 2001.  In 1992 Mr. Silber  co-founded  Business  Advantage
Group,  a  telecommunications  consulting  firm. He served as Vice  President of
Operations  until  July  1998.  From  July 1999 to  September  2001 he served as
Director of Sales of IDS Telcom in Miami,  Florida, a competitive local exchange
and  long  distance  carrier.  Mr.  Silber  received  a  BS  in  Management  and
International Finance from the University of Miami.

Mike Rollins
Mike  Rollins - Age 30,  has  served as a director  and as  President  and Chief
Executive  Officer  since  February 2002 and as Chief  Financial  Officer of the
Company since  January  2002.  From 1993 to 1995 he worked as an auditor and tax
associate for Deloitte and Touche LLP. From 1995 to 1996,  Mr. Rollins served as
Director  of  Finance  and SEC  Reporting  at  TresCom  International,  Inc.,  a
publicly-traded  international  telecommunications  company. From August 1996 to
May 1997,  Mr.  Rollins  was the  Director  of Finance,  Treasury  and  External
Reporting for US One  Communications  Corporation,  a competitive local exchange
carrier.  From May 1997 to March 2001,  Mr.  Rollins  served as Chief  Financial
Officer  of  Technology  Control  Services,  Inc.  (TCS),  a  telecommunications
software provider. During his tenure at TCS, Mr. Rollins also served as Managing
Director  of  Interglobe  Telecommunications,  Ltd.,  a  London,  England  based
telecommunications  provider.  Mr. Rollins is a partner with Tatum CFO Partners,
LLP.

Section 16(a) Beneficial Ownership Reporting Compliance

Section  16(a) of the  Securities  Exchange Act of 1934  requires our  executive
officers,  directors,  and persons who own more than ten percent of a registered
class of our equity securities to file reports of security ownership and changes
in such ownership with the SEC. Executive  officers,  directors and greater than
ten percent  stockholders  are  required by SEC  regulations  to furnish us with
copies of all Section  16(a) forms they file.  Based solely on our review of the
copies of such forms  received by us and written  representations  received from
those   reporting   persons   recognized  by  us  as  being  subject  to  filing
requirements,  we believe that the following required Section 16(a) reports were
not timely filed during 2001.

Four  reports on Form 4 were not  timely  filed in  connection  with the sale by
Eugene  Rosov of a total of 901,581  shares of our common  stock in 12  separate
transactions.  A Form 4 reporting  these  transactions  was filed on November 6,
2001.

ITEM 10.  EXECUTIVE COMPENSATION

Compensation of Directors

We have no standard  arrangements pursuant to which directors of the Company are
compensated  for any services  provided as a director  except for the  Automatic
Option Grant Program component of the 1995 Stock Option/Stock Issuance Plan (the
"1995  Plan").   Directors  who  are  not  current   employees  of  the  Company


                                       49
<PAGE>


("non-employee  directors") are eligible for the Automatic  Option Grant Program
component of the 1995 Plan under which option grants will  automatically be made
at periodic intervals to eligible  non-employee Board members to purchase shares
of our common  stock at an  exercise  price  equal to 100% of their fair  market
value on the  grant  date.  Under  the  Automatic  Option  Grant  Program,  each
individual who is first elected or appointed as a non-employee Board member will
receive a 3,333 share option grant on the date of such election or  appointment,
provided  such  individual  has not been in the prior employ of the Company.  In
addition,  at each Annual Meeting,  beginning with the 1997 Annual Meeting, each
individual who is to continue to serve as a non-employee  Board member after the
meeting  will receive an  additional  option grant to purchase 833 shares of our
common stock whether or not such  individual has been in the prior employ of the
Company.

Each automatic grant will have a term of ten (10) years,  subject to the earlier
termination  following the optionee's cessation of Board service. Each automatic
option will be  immediately  exercisable;  however,  any shares  purchased  upon
exercise  of the  option  will be subject to  repurchase  should the  optionee's
service as a non-  employee  Board  member cease prior to vesting in the shares.
The  initial  3,333 share  grant will vest in four equal and  successive  annual
installments  over the optionee's  period of Board service.  Each additional 833
share  grant  will  vest  upon the  optionee's  completion  of one year of Board
service  measured from the grant date.  However,  each  outstanding  option will
immediately  vest upon (1) certain  changes in the  ownership  or control of the
Company or (2) the death or disability of the optionee  while serving as a Board
member.

The  following  options have been granted under the  Discretionary  Option Grant
Program in effect under the 1995 Plan (as amended) to non-employee Directors:

                         Number of
                        Securities
                        Underlying      Exercise or   Expiration     Vested
Name                  Options Granted  Base Price(1)     Date         Date
---------------       ---------------   -----------   -----------  -----------

David Hurwitz(2)           100,000        $0.1057     12/28/05      12/31/01
Alexander Walker, Jr.      100,000        $0.1057     12/28/05      12/31/01

--------
(1)      The  exercise  price per share for these  options was equal to the fair
         market value of our Common Stock on the date of grant.

(2)      Mr. Hurwitz resigned from the Board of Directors on September 26, 2001

Compensation of Executive Officers

The  following   table  sets  forth  certain  summary   information   concerning
compensation paid or accrued by the Company on behalf of (i) the Chief Executive
Officer and (ii) the other most  highly  compensated  executive  officers of the
Company  whose  total  annual  salary  and bonus for fiscal  year 2001  exceeded
$100,000 (the "Named Executive Officers"),  with respect to services rendered by
such  persons to the Company and its  subsidiaries  for each of the fiscal years
ended December 31, 2001 and 2000:


                                       50
<PAGE>

<TABLE>
<CAPTION>

Summary Compensation Table
--------------------------
                                                                          Long-Term Compensation
                                                        Other Annual              Awards
                                           Salary       Compensation         ---Securities---
Name and Principal Position     Year        ($)              ($)           Underlying Options(#)
---------------------------     ----       ------       ------------      ----------------------
<S>                             <C>          <C>          <C>                   <C>
Michael J. Zwebner              2001        -0-           $120,000(1)           4,000,000(2)
   Chairman of the Board        2000        -0-           $120,000(1)              -0-
   of Directors

Eugene A. Rosov (3)             2001     $200,000            -0-                3,000,000(4)
   Chief Executive Officer,     2000     $150,000            -0-                1,350,000
   President and Director

Clinton H. Snyder, CPA (5)      2001     $132,000            -0-                3,000,000(6)
   Chief Financial Officer,     2000     $120,000            -0-                   -0-
   Director and Secretary

Pedro Sanchez (7)               2001     $104,250            -0-                  500,000
   Chief Technical Officer      2000     $ 59,846
</TABLE>

-----------
(1)      Mr.  Zwebner's  compensation  is paid  under a contract  with  Overseas
         Communications, Ltd., an Israeli corporation. For 2001, $90,000 of this
         amount was paid by the issuance of 2,482,759  shares of common stock at
         .036  per  share  on  December  21,  2000 and for  2000,  $100,000  the
         obligation  was paid for by the issuance of  1,828,989  shares at .0547
         per share on November 4, 1999.
(2)      In December  2001,  the Board  authorized  the  issuance  of  4,000,000
         restricted  shares of common stock to Mr.  Zwebner  under the Company's
         stock compensation  plan. In exchange for waiving future  consideration
         as  Chairman  of the Board of the  Company,  the  restriction  on these
         shares was lifted. These shares were issued in January 2002.
(3)      Mr. Rosov resigned as Chief Executive  Officer,  President and director
         on February 13, 2002.
(4)      In December  2001,  the Board  authorized  the  issuance  of  3,000,000
         restricted  shares of common  stock to Mr.  Rosov  under the  Company's
         stock compensation  plan. As part of his separation  agreement with the
         Company,  the restriction on these shares was lifted. These shares were
         issued in January 2002.
(5)      Mr. Snyder resigned as Chief Financial Officer on January 18, 2002.
(6)      In December  2001,  the Board  authorized  the  issuance  of  3,000,000
         restricted  shares of common stock to Mr.  Snyder  under the  Company's
         stock compensation  plan. As part of his separation  agreement with the
         Company,  the restriction on these shares was lifted. These shares were
         issued in January 2002.
(7)      Mr.  Sanchez joined the company as Chief  Technical  Officer on June 1,
         2000. Mr. Sanchez  resigned as Chief  Technical  Officer on January 22,
         2002.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee was formed in January 1996 to establish salary, bonus
and  other  forms  of  compensation   for  officers  of  the  Company,   provide
recommendations for the salaries and incentive compensation of the employees and
consultants  of the Company and make  recommendations  to the Board of Directors
regarding such matters.


                                       51
<PAGE>


The principal objectives of the Company's executive compensation are to:

- support the achievement of the desired Company performance;
- align the executive  officer's  interests  with the success of the Company and
  with the interests of the Company's stockholders; and
- provide  compensation  that will attract and retain  qualified  management and
  reward performance.

These objectives are principally  achieved  through  compensation in the form of
annual base salaries, discretionary bonuses and equity investment opportunities,
such as stock  option  grants.  Prior to January  1996,  the Board of  Directors
performed the functions of the Compensation  Committee. We have not historically
linked executive compensation directly to corporate performance.

During the 2001 fiscal year, until David Hurwitz's resignation from the Board of
Directors in September 2001, the Compensation  Committee was composed of Messrs.
Hurwitz,  Rosov and Zwebner. After September 2001, the Committee was composed of
Messrs.  Rosov and  Walker  and  Curtis  Orgil, CPA, an  outside  advisor to the
Company.  No  interlocking  relationship  exists between the Company's  Board of
Directors or  Compensation  Committee and the board of directors or compensation
committee  of any  other  company,  nor has any such  interlocking  relationship
existed in the past.

Audit Committee

The Audit  Committee  was formed in 1999 to assist the Board of Directors in the
general  oversight and monitoring of management's and the independent  auditor's
participation in the Company's  financial reporting process and of the Company's
procedures for compliance  with legal and regulatory  requirements.  The primary
objective of the Audit Committee is to promote and preserve the integrity of the
Company's  financial  statements  and the  independence  and  performance of the
Company's external auditor.

The principal activities of the Audit Committee are to:

-        periodically review the Company's audit charter
-        annually Review the overall audit plan and the  accompanying  financial
         statements
-        review  and  Discuss  the  Company's   quarterly   unaudited  financial
         statements
-        recommend   action   relating  to  the   selection,   performance   and
         independence of the Company's independent auditor; and
-        periodically review the independence of the Company's audit committee.

From  January  2001 until July 2001,  the Audit  Committee  consisted of Messrs.
Rosov,  Walker and Snyder.  After July 2001, the Audit Committee was composed of
Messrs.  Rosov and Walker  and  Curtis  Orgil,  CPA,  an outside  advisor to the
Company.

Stock Options

The Company did not grant  options to the  Company's  Named  Executive  Officers
during fiscal year 2001.

Aggregated Option Exercises in Fiscal 2001 and Value of Options at End of Fiscal
2001.

There were no option  exercises made by the Company's Named  Executive  Officers
during  2001.  At December  31,  2001,  none of the  Company's  Named  Executive



                                       52
<PAGE>


Officers  owned any  unexercised  stock  options.  The Company did not grant any
stock  appreciation  rights  during  fiscal  year 2000 and no such  rights  were
outstanding as of the end of such fiscal year.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth, as of March 19, 2002, the number and percentage
of shares of Common Stock  beneficially  owned (as defined in Rule 13d-3 adopted
under  the  Exchange  Act)  by (a)  all  persons  known  to the  Company  to own
beneficially  more than 5% of any class of voting  security of the Company,  (b)
each of the Company's directors, (c) the Company's officers named in the Summary
Compensation Table set forth herein and (d) all directors and executive officers
of the Company as a group.

<TABLE>
<CAPTION>

                                                                 Common Stock
                                                            -----------------------
                                                              Number    Percentage
                                                            of Shares    of Shares
                                                          Beneficially  Beneficially
Name and Address (1)                                       Owned(2)(3)   Owned(2)(3)
----------------------------------------------            ------------  ------------

<S>                                                          <C>             <C>
Overseas Communications, Ltd. (4)
46/11 Diskin St
Jerusalem, Israel                                            8,472,128       5.6%

Clinton H. Snyder, CPA
   Secretary and Director                                    3,500,000       2.3%

Alexander Walker, Jr. (5)
   Director                                                    450,000      0.03%

Michael J. Zwebner (6)
   Chairman of the Board of Directors                        11,265,953      7.4%

All directors and executive officers as a
   Group (6 persons) (7)                                     23,688,081    15.33%
</TABLE>

______________
(1) Unless  otherwise  indicated,  the  stockholder's  address is the  Company's
    principal executive offices.
(2) Percentage  ownership  is  based  on  150,614,664  shares  of  common  stock
    outstanding  as of March 28,  2002,  plus any shares  issuable  pursuant  to
    options or  warrants  held by the person or class in  question  which may be
    exercised  within 60 days of March 28, 2002. Only those shares  beneficially
    owned by the person  holding such  options are  included in the  outstanding
    shares for purposes of computing the percentage  beneficially  owned by that
    person;  such  shares  are not  deemed to be  outstanding  for  purposes  of
    computing any other person's percentage.
(3) Except  as  indicated  in the  footnotes  to  this  table  and  pursuant  to
    applicable community property laws, each stockholder named in this table has
    sole  voting  and  investment  power  with  respect  to the shares set forth
    opposite such stockholder's name.
(4) Michael J. Zwebner  owns 33% of this  entity,  and all other owners own less
    than 10%. The shares listed include options to purchase  2,000,000 shares of
    common stock.
(5) Includes options to purchase 100,000 shares of common stock.
(6) Includes options to purchase  2,488,667 shares of common stock and 2,157,376
    shares beneficially owned through Overseas Communications, LTD.
(7) Includes options to purchase 4,038,667 shares of common stock.


                                       53
<PAGE>



Agreements with potential for change in control.

We have registered 56,018,307 shares of our common stock for sale by the selling
stockholders under the registration statement which became effective October 31,
2000.  Under the terms of our common stock  purchase  agreement  with  Evertrend
Holdings Limited, we may not issue shares of our common stock to Evertrend which
would  result in  ownership  by  Evertrend  of more than 9.9% of our  issued and
outstanding common stock. However, if all of the shares that were registered are
issued  under the terms of the common  stock  purchase  agreement  and resold by
Evertrend and the other selling stockholder, third party investors could acquire
a significant  percentage of our common stock.  The  acquisition  by third party
investors  of a  significant  percentage  of our common  stock could enable such
investors to influence or direct the policies,  decisions and composition of our
Board of Directors and management.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We engage the  services  of Michael J.  Zwebner,  the  Chairman  of the Board of
Directors  of  the  Company,   under  a  consulting   agreement   with  Overseas
Communications,  Ltd.,  an Israeli  corporation.  Annual  payments  to  Overseas
Communications  under this  agreement are $120,000.  Mr. Zwebner owns 33% of the
capital stock and is a director of Overseas  Communications.  In 2001, we issued
2,482,759  shares of common  stock to  Overseas  Communications  in  payment  of
$90,000 of our obligations  under the consulting  agreement.  As of December 31,
2001,  no  amounts  were due to  Overseas  Communications  under the  consulting
agreement. In January 2002, Mr. Zwebner agreed to waive future amounts due under
the  consulting  agreement  in  exchange  for release of  restrictions  on stock
granted to Mr. Zwebner in December of 2001.

From 1998 to 2001, we provided certain administrative, technical and operational
support and loan advances  totaling $715,950 to TV  Telecommunications,  Ltd., a
United Kingdom corporation,  Videocall of Canada, Inc., a Canadian  corporation,
Videocall Israel, Ltd., an Israeli corporation,  and Videocall of Belgium, Ltd.,
a Belgian corporation. These entities are directly or indirectly associated with
Michael Zwebner or members of this family. As of December 31, 2000,  $386,396 of
this amount and had been  reserved and at December  31,  2001,  all balances due
from these  entities  had been fully  reserved  and expensed as we do not expect
these entities to continue as going concerns.  Accordingly, we recorded a charge
of $373,295 in our results  from  operations  for the year ending  December  31,
2001.

During 2000,  Eugene Rosov,  a director and the  President  and Chief  Executive
Officer of the Company,  exercised  options to purchase  1,000,000 shares of our
common stock by tendering notes issued by the Company in the amount of $436,406.
During 2000,  Clinton Snyder, a director and the Chief Financial  Officer of the
Company,  exercised  options to purchase  750,000  shares of our common stock by
tendering  notes in the amount of $329,219.  These notes accrued  interest at an
annual rate of 6%. These notes were included in our balance sheet as a reduction
in Stockholders' Equity, under the category of "stock subscriptions receivable."
In July 2001, the Company  retroactively  cancelled the issuance of these shares
to Mr. Rosov and Mr. Zwebner.

Sacramento  Results,  Inc.  (SRI),  a wholly  owned  subsidiary  of the Company,
entered into a lease  agreement with Hard Disk Cafe,  Inc. during November 2000,
pursuant to which Hard Disk Cafe rents commercial space from SRI at its property
in  Sacramento,  California.  Messrs.  Zwebner,  Rosov and Snyder and  Alexander
Walker, Jr., a director of the Company, are stockholders of Hard Disk



                                       54
<PAGE>


Cafe,  and Mr.  Zwebner is a director and the  President of Hard Disk Cafe.  The
lease agreement  provided for $41,600 in rental payments in 2001. As of December
31, 2001,  Talk Visual had  directly  and through SRI advanced  $189,081 to Hard
Disk Cafe, Inc., including $189,091 in advances in 2001, had received $0 in rent
payments from Hard Disk Cafe, and had recorded $41,600 in rental income in 2001.
Mr. Zwebner has agreed to repay these amounts during 2002 and to cause Hard Disk
Cafe to become current on its rental obligation to SRI.

In December 2001, we completed the purchase of 405,516 shares of common stock of
Yak  Communications  (USA) Inc., for a purchase price of $793,205  consisting of
8,241,600  shares  of our  common  stock and  conversion  of  $462,840  of debt.
Following the consummation of the  transaction,  we owned 10% of the outstanding
capital  stock of Yak  Communications.  Mr.  Zwebner  and Charles  Zwebner,  Mr.
Zwebner's brother, are significiant stockholders of Yak Communications.

In December  2001,  the Board of Directors  authorized the issuance of 4,000,000
shares  of  restricted  common  stock to Mr.  Zwebner  and  3,000,000  shares of
restricted  common stock to each of Mr. Rosov and Mr. Snyder.  These shares were
issued in January  2002. In connection  with an  employment  agreement  with Mr.
Zwebner  and  separation   agreements  with  Mr.  Rosov  and  Mr.  Snyder,   the
restrictions  on the sale of this  common  stock were  lifted  during  2002.  In
connection with this transaction,  the Company recorded a non-cash charge in the
amount of $300,000 during 2001.

As of December  31,  2001,  the  Company had  advanced a total of $26,000 to Mr.
Snyder  (including  $6,000 in 2001),  $40,467 to Mr. Rosov (including  $6,050 in
2001),  and  $93,094 to Mr.  Zwebner  (including  $15,562 in 2001).  Pursuant to
separation agreements with Mr. Snyder and Mr. Rosov, amounts advanced to them by
the Company were forgiven.  Accordingly,  the Company has recorded an expense in
the  amount of  $66,467  in its  results  from  operations  for the year  ending
December  31,  2001.  Mr.  Zwebner has agreed to repay  amounts  advanced by the
Company on his behalf in 2002.

Mr. Walker is the Chairman of the Board and a  shareholder  of Nevada Agency and
Trust  Company,  the Company's  transfer  agent.  During 2001, we paid $4,247 in
transter agent and related fees to Nevada Agency and Trust Company.


                                       55
<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits
1.1(1)   Common Stock Purchase  Agreement dated July 27, 2000 between Registrant
         and Evertrend Holdings Limited
1.2(1)   Amendment  dated July 28, 2000 to the Common Stock  Purchase  Agreement
         dated July 27, 2000 between Registrant and Evertrend Holdings Ltd.
3.1(2)   Articles of Incorporation
3.2(2)   By-Laws
4.1(1)   1995 Stock Option/Stock Issuance Plan
4.2(3)   1999 Stock Compensation Plan (as amended)
4.3(1)   Stock Purchase Warrant dated July 27, 2000 issued to Evertrend Holdings
         Ltd.
4.4(1)   Form of Stock Purchase Warrants to be issued to Evertrend Holdings Ltd
4.5(1)   Stock Purchase Warrant dated July 27, 2000 issued to Ladenburg Thalmann
         & Co. Inc.
4.6(1)   $3,840,000 Note dated September 24, 1998 issued by Sacramento  Results,
         Inc. to Bar K, Inc.
10.1(1)  Registration  Rights  Agreement dated July 27, 2000 between  Registrant
         and Evertrend Holdings  Limited
10.2(1)  Escrow  Agreement  dated  July 27,  2000  among  Registrant,  Evertrend
         Holdings Limited, and Epstein, Becker & Green, P.C.
10.3(1)  OEM Agreement  dated as of February 11, 2000 between the Registrant and
         Motion Media Technology Limited
10.4(1)  Joint Venture  Agreement dated April 1, 2000 between the Registrant and
         EnterTech Media Group
10.5(1)  Lease  Agreement  dated July 30, 1999 between Lucky  Capital,  Inc. and
         Talk Visual Corporation
10.6(1)  Lease Agreement dated February 1, 2000 between Lucky Capital,  Inc. and
         Talk Visual Corporation
10.7(1)  Agreement  dated as of June 22, 2000 by and between Talk Visual  Retail
         Acquisitions, Inc. and Various Business Management
10.8(4)  Agreement  and Plan of Merger dated as of September  14, 1998 among the
         Registrant,   Legacy   Software   Acquisition,   Inc.,   and  Videocall
         International Corporation
10.9(4)  Amendment No. 1 to Agreement and Plan of Merger dated as of December 1,
         1998 among the  Registrant,  Legacy  Software  Acquisition,  Inc.,  and
         Videocall International Corporation
10.10    Share  Purchase  Agreement  with YAK  Communications,  (USA) Inc. dated
         December 24, 2002
10.11    Employment  Settlement  Agreement  dated  February 12, 2002 between the
         Registrant and Eugene Rosov
10.12    Employment  Settlement  Agreement  dated  January 25, 2002  between the
         Registrant and Clinton Snyder
21       Subsidiaries of Talk Visual Corporation
23       Consent of Independent Auditors
24       Power of Attorney
------------------

(1)  Incorporated  herein by reference to exhibits  filed with the  Registrant's
Registration  Statement on Form SB-2 (File No. 333-43806)  declared effective by
the SEC on October 31, 2000.
(2)  Incorporated  herein by reference to exhibits  filed with the  Registrant's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
(3)  Incorporated  herein by reference to exhibits  filed with the  Registrant's
Registration Statement on Form S-8 (File No. 333-73518) dated November 16, 2001.
(4)   Incorporated   herein   by   reference   to   Annex   A   to   the   Proxy
Statement/Prospectus/Notification   of  Merger,  included  in  the  Registrant's
Registration  Statement on Form S-4 (File No. 333-79597)  declared  effective by
the SEC on June 1, 1999.


                                       56
<PAGE>


REPORTS ON FORM 8-K.

No reports were filed during the fourth quarter of 2001.


                                       57
<PAGE>


                              SIGNATURES

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


                                            TALK VISUAL CORPORATION
                                            By:  /s/  HARLEY L. ROLLINS
                                                 ----------------------------
                                                      Harley L. Rollins
                                                      Chief Executive Officer
March 28, 2002