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, 2002

( )  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.  $7,409,593

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 28, 2003 was: $1,715,732.

                (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;
148,725,141 shares as of March 28, 2003.

                      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

Part I.                                                              Page No.
                                                                     --------

   Item 1.         Description of business                                  4
   Item 2.         Description of property                                 10
   Item 3.         Legal proceedings                                       11
   Item 4.         Submission of matters to vote of security holders       11

Part II.
   Item 5.         Market for registrant's common equity and related
                     stockholder matters                                   11
   Item 6.         Management's discussion and analysis of financial
                     condition and results of operations                   13
   Item 7.         Financial statements                                    26
                     (see table of contents, page 23)
   Item 8.         Changes in and disagreements with accountants on
                     accounting and financial disclosure                   49

Part III.
   Item 9.         Directors and executive officers of the registrant      49
   Item 10.        Executive compensation                                  50
   Item 11.        Security ownership of certain beneficial owners and
                     management                                            53
   Item 12.        Certain relationships and related transactions          54
   Item 13.        Exhibits and reports on Form 8-K                        56
   Item 14.        Controls and procedures                                 57

                                       3
<PAGE>




                                     PART I

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

Except for  historical  information  contained  herein,  the  statements in this
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:

  - our ability to effectively manage its various businesses in a rapidly
    changing environment;
  - the timing of new product introductions;
  - retail acceptance our products;
  - our  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
  - our ability to integrate acquired  operations into our existing business and
    manage growth.

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

ITEM 1.  DESCRIPTION OF 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 nine  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") as well as, pre-paid calling cards,  internet  services,
money  transfer  services,   money  order  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.

                                       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.  This is due to several  factors.  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,  our volume of voice minutes allows for
effective  negotiations  with  suppliers  on  voice  product  pricing.  Finally,
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.

Overview
--------

Our first  products and services  offered 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 and 2002,  we closed or sold several of our call shops except
for nine  stores  operating  in the New York  City/New  Jersey  area (our Retail
Operations  Division),   discontinued  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.  During 2002, we sold two stores that were unprofitable and began
to look at  opportunities  to divest our Retail  Operations  Division  and focus
squarely on our Sales Division.

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

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

                                       5
<PAGE>


Our retail stores are connected to our Miami, Florida hub via a network of local
T-1's and interstate transport. This network design allows each store to operate
independently with the center of the network located at the Miami switch.

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 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).

                                       6
<PAGE>

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,  business  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 adequate margins.

Our current and potential target markets are outlined below:

o    Business: 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 competitive  pricing,  quality routes,  multilingual
     staff, market understanding and reputation within this specialized area.

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>


o       Our Carrier  Sales  focuses on 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.

o       Our Web Sales give us the ability to reach  customers  in areas where we
        do not have a direct  or dealer  sales  presence.  Our Web  Sales  Group
        offers  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  offers an easy,  informative  and  convenient  way for
        existing and potential customers to order our products and services.

During  2002,  we entered  the Los Angeles  marketplace  and plan to enter other
geographic areas with high expatriate concentrations.

CUSTOMERS
---------

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.

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  maintain  the
number of customers and revenue from these stores.

For the year  ended  December  31,  2002,  our sales  totaled  $7,409,593,  with
$2,907,115  attributable  to  our  Retail  Operations  Division  and  $4,502,478
attributable to our Sales Division.

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

The  international  market  for  telecommunications  is highly  competitive  and
subject to factors 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
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 customers we do. This type of  competition
can be from  small  companies  with a switch or from  switchless  resellers  who
purchase minutes from larger carriers.

                                       8
<PAGE>


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 Federal  Communications  Commission
("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
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.

                                       9
<PAGE>



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

As more fully  described below under "Item 2.  Description of Property",  during
2002  we  continued  to  own  and  operate,  through  one  of  our  wholly-owned
subsidiaries, certain real estate 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 property  located in  Sacramento.  On
February 26, 2003, we completed the sale of our property in Sacramento.

EMPLOYEES
---------

As of December 31,  2002,  we had a total of 51  full-time  employees  and three
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. DESCRIPTIOM OF PROPERTY

We lease space at nine 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, 2007

Miami, Florida - 1 Retail store            2,326           August 31, 2005

New York, New York and
 Hudson County, New Jersey                                 various through
 9 Retail Stores                          12,300        September 30, 2007

Through one of our  wholly-owned  subsidiaries,  we also own certain  commercial
real estate. 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. In 2001,  we decided to look for a buyer for this
property and completed the sale on February 26, 2003.

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.

At December 31, 2002, this property was 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 December 2003. At December 31, 2002
the balance on this  mortgage was  $3,840,000.  With the sale of the  Sacramento
property on February  26, 2003,  all accrued  interest was paid and the mortgage
was assigned to the buyer.

                                       10
<PAGE>


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 $34,290 at
December  31,  2002.  With the sale of the  Sacramento  property on February 26,
2003, the principal balance and accrued interest were paid in full.

3. 9% Mortgage note, secured by a lien on the land and building,  with a maximum
funding of $1,000,000  originally due January 1, 2002; extended on September 30,
2002 to the earlier of December 31, 2002 or the sale of the Sacramento  property
with the interest  increased  to 18%  effective  December 15, 2002.  Interest is
payable monthly.  The balance at December 31, 2002,  including accrued interest,
is $620,783.  The Company defaulted on this agreement in December 2002 and cured
this default by fully  repaying the  obligation in February 2003 using  proceeds
from the sale of the Sacramento property.

Management  believes  it  carries  sufficient  and  adequate  insurance  on  all
properties.

ITEM 3. LEGAL PROCEEDINGS

On January 9, 2003, the Yak  Communications  (USA), Inc. ("Yak") filed an action
in the  Circuit  Court for the 11th  Circuit of  Florida  in and for  Miami-Dade
County, Florida, against the Company. The complaint alleged, among other things,
that the Company had  breached  certain  agreements  entered  into with Yak with
respect to,  among other  things,  the  purchase by Yak of 405,516  share of its
common  stock  owned by the  Company.  On March 5, 2003,  this legal  action was
settled.  In  connection  with the  settlement,  Yak agreed to purchase  400,000
shares of its common stock owned by the Company for a price of $2.00 per share.

Other than described above, 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 REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common  stock is traded on the OTC  Bulletin  Board  market 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):

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

                                       11
<PAGE>


YEAR ENDED DECEMBER 31, 2002         High               Low
                                    ------             ------
   First Quarter                    $0.0390            $0.0120
   Second Quarter                    0.0300             0.0110
   Third Quarter                     0.0145             0.0095
   Fourth Quarter                    0.0165             0.0090

YEAR ENDING DECEMBER 31, 2003        High                Low
                                    ------             ------
   First Quarter
     (through March 28,2003)        $0.0130             $0.0077

The Closing bid price of our common stock on the OTC Bulletin  Board was $0.0125
on March 28, 2003.

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,  2003,  there  were  148,725,141  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.

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

We have issued and sold  unregistered  securities  that have not been previously
reported as set forth below.

Between January 11, 2002 and February 12, 2002, we sold 2,320,754  shares of our
common stock to Evertrend  Holdings Limited  ("Evertrend")at an average purchase
price of $0.0269 per share pursuant to a common stock purchase agreement between
us and Evertrend. Ladenburg Thalmann & Co., Inc. received $5,000.00 in placement
fees and Evertrend received a warrant to purchase 1,160,377 shares of our common
stock at an  exercise  price of $0.0269  exercisable  through  March 15, 2002 in
connection  with this  transaction.  We paid $1,000 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)
thereof.

We have issued and sold unregistered  securities during 2002 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.

                                       12
<PAGE>

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

In December 2002, the Company  issued  3,183,400  shares of its common stock for
services comprised of the following:  2,000,000 issued shares in connection with
the  extension of the 9% mortgage  note that should have been issued at the time
of  the  original  loan   consummation   in  1999,   500,000  shares  issued  as
compensation,  350,000  shares  issued to  individuals  serving  on our Board of
Directors as director's fees and 333,400 shares issued for consulting services.

In December  2002,  the Company  returned  to treasury  3,675,000  shares of its
common  stock.  The Company had  requested  the return of 3,175,000  shares from
entities,  involving its former Chairman,  Michael  Zwebner,  as the agreed upon
consideration  was never  received for such shares.  The Board voted in December
2002 to cancel the 500,000  shares that had been awarded to Mr.  Pedro  Sanchez,
the Company's former chief technical officer.

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.  On  August  12,  2002,  the  Company's  shareholders'  approved  an
amendment to the Company's by-laws allowing management to effect a reverse split
of the Company's Common Stock if and when it is deemed appropriate.  As of March
28,  2003,  management  has not  and  currently  does  not  have  any  plans  to
implemented a 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.

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.

                                       13
<PAGE>

In 2002, among other things, the Company has

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

o        Purchased a  telecommunication  switch and  peripheral  equipment,  and
         installed SS7  capability at our  headquarters  in Miami to effectively
         and efficiently deliver telecommunication  services to our existing and
         future customers;

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

o        Completed the implementation of our new billing and switch system which
         allows us to more efficiently add new customers and effectively invoice
         our growing customer base, and

o        Increased our customer base of residential,  business and call shops to
         approximately to 2,600.

Currently, revenues primarily consist of the reselling of long distance services
to business and residential customers, and call shops in the greater Miami area.
Additional  revenues  come  from our nine  Company-owned  stores in the New York
City/New  Jersey  market.  Long distance  services to  residential  and business
customers is our most rapidly  growing and  developing  source of customers  and
revenues.

RESULTS OF OPERATIONS

Fiscal Year Ended  December 31, 2002 compared to Fiscal Year Ended  December 31,
2001

Revenue  increased  $2.2  million or 42.0% to $7.4  million  for the year ending
December 31, 2002, from $5.2 million for the year ending December 31, 2001. This
increase is attributable to the growth of the Company's  telecommunication sales
in Miami and New York in the residential and business sectors.

Cost of Sales  increased  $1.5  million  or 42.0% to $5.2  million  for the year
ending  December  31, 2002,  from $3.7 million for the year ending  December 31,
2001.  This increase is directly  attributable to the increase in traffic volume
and associated line costs in 2002 over 2001.

Gross Profit increased $0.7 million to $2.2 million for the year ending December
31, 2002,  from a gross profit of $1.5 million for the year ending  December 31,
2001.  This  increase  is due to the  changes  discussed  in Revenue and Cost of
Sales.

Selling,  General &  Administrative  (SG&A)  expenses as a percentage of revenue
decreased to 49.4% for the year ending December 31, 2002,  compared to 90.0% for
the year  ending  December  31,  2001.  The  amount  of SG&A  expenses  incurred
decreased $1.0 million or 22.1% to $3.7 million for the year ending December 31,
2002,  from $4.7  million  for the year  ending  December  31,  2001.  The major
elements of our SG&A were as follows:

                                                  2002             2001
                                               ---------        ---------
          Salaries and benefits               $1,455,069       $2,354,824
          Travel                                  90,668          182,295
          Office, computer and maintenance       616,175          618,476
          Rents, licenses and other expenses     564,522          715,316
          Consultants                            315,370          270,452
          Legal and other professional           131,200          216,360
          Marketing and public relations         486,366          338,934
                                               ---------      -----------
                     Total                    $3,659,370       $4,696,657
                                               =========      ===========

                                       14
<PAGE>


Salaries and benefits decreased as a result of the sale of two stores in the New
York  City/New  Jersey  area,  as well as,  ancillary  expenses  incurred by the
stores, such as rent,  decreased in 2002 over 2001. Overall,  expenses decreased
due to cost reduction measures implemented by new management in 2002.

Depreciation and Amortization  expenses  decreased $134,000 or 29.8% to $315,000
for the year  ending  December  31,  2002,  from  $449,000  for the year  ending
December 31, 2001.  This decrease is primarily due to the change in amortization
of goodwill in accordance with SFAS No. 142 and the sale of unprofitable stores.

Loss from  Operations  decreased  $2.2  million or 54.7% to $1.8 million for the
year ending  December 31, 2002,  from $4.0 million for the year ending  December
31, 2001 due to the increases in revenue and operational cost reductions.

Other Expenses decreased $1.6 million or 104.2% to other income of $0.07 million
for the year ended  December  31,  2002,  from $1.6  million  for the year ended
December 31,  2001.  Included in other  expenses  for 2001 was a  write-down  of
equity  securities  of $963,000  and a loss on the  disposal of equipment in the
amount of $577,000.

Loss from Discontinued Operations decreased $2.1 million to $1.0 million for the
year ending December 31, 2002 from $3.1 million for the year ending December 31,
2001. The loss from discontinued  operations is due to the sale of the Company's
property in Toronto,  Canada, and the proposed sale of the Company's property in
Sacramento,  California.  The loss on the sale of the Toronto  property  and the
impairment loss on the Sacramento  property in 2001 was $493,000 and $2,581,000,
respectively. The Sacramento property was sold on February 26, 2003.

Net Loss  applicable to Common Shares  decreased $5.65 million or 65.1% to $3.03
million for the year ending  December 31, 2002,  from $8.68 million for the year
ended  December 31, 2001  primarily due to increased  revenues,  cost  reduction
activities,  elimination of equity security write downs, and equipment  disposal
loss.

At December  31,  2002,  the Company  had federal and state net  operating  loss
carryforwards of approximately  $26,232,000,  available to offset taxable income
expiring  at various  times  through  the year 2022.  The Tax Reform Act of 1986
contains  provisions  which limit the federal net operating  loss  carryforwards
available  to 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, 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.

Cost of Sales  increased  $1.0  million  or 37.0% to $3.7  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 $2.3 million to $1.5 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 90.0% 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 $1.5 million or 46.9% to $4.7 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               $2,354,824       $  916,170
          Travel                                 182,295          331,900
          Office, computer and maintenance       618,476          364,941
          Rents, licenses and other expenses     715,316          456,398
          Consultants                            270,452          255,978
          Legal and other professional           216,360          475,987
          Marketing and public relations         338,934          432,726
                                               ---------      -----------
                     Total                    $4,696,657       $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.

Provision  for Losses on Advances  decreased  to $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.

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
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
property in Toronto,  Canada, and the proposed sale of the Company's 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.

                                       16
<PAGE>

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.

LIQUIDITY AND CAPITAL RESOURCES

As of  December  31,  2002,  we had  $104,101 of cash on hand.  We will  require
additional cash in the first half of 2003 to finance  continuing revenue growth,
new product introduction, the working capital deficit and other activities.

Net cash outflows  from  operating  activities  were $469,799 for the year ended
December 31,  2002,  and  $843,870  for the year ended  December  31, 2001.  The
decrease in net outflows  resulted from the decrease in net loss from  operation
in 2002.  The  total  net cash  outflow  of  $469,799  for 2002  were  comprised
primarily  of the net  loss of  $3,031,074  adjusted  for  non-cash  items  from
continuing operations in the amount of $740,718, additional impairment of assets
held for sale in the  amount of  $759,998  and  changes  in  current  assets and
current liabilities totaling $1,060,559.

Cash outflows from investing  activities of $214,054 for the year ended December
31, 2002 resulted primarily from purchases of equipment aggregating $213,963.

Net cash provided by financing activities was $464,026 in 2002. These funds were
obtained from the acquisition of new debt instruments in the amount of $500,000,
and the  proceeds of common  stock  transactions  consisting  of $56,500.  These
amounts were offset by payments on debt totaling $92,474.

As reflected in the accompanying financial statements,  the Company has incurred
significant  net losses since  inception and expects to continue to incur losses
and have negative  working  capital through June 2003, at which time the Company
expects  to  generate  positive  cash flow from  operations.  Until the  Company
generates  positive cash flow the Company is dependent on proceeds from the sale
of certain  assets,  collection of receivables  from a major  stockholder and in
their absence an infusion of debt or sale of equity.

Subsequent  to December  31,  2002,  the Company has  completed  the sale of the
Sacramento,  California  property,  resulting  in a reduction  of  approximately
$5,100,000  of debt,  related  interest  and  accrued  liabilities  and has sold
principally  all of its  investment in marketable  securities  reducing debt and
accounts  payable by  approximately  $800,000.  In  addition,  the  Company  has
negotiated and continues to negotiate settlement agreements with several vendors
reducing accounts payable by approximately  $1,125,000,  and negotiated a letter
of intent to sell the net assets of our wholly-owned subsidiary Mundo Express of
NY, Ltd.,. It had reached a verbal agreement with the former  Chairman,  Michael
Zwebner, to repay  approximately  $245,000 plus accrued interest during 2003. As
negotiations  have  reached an impasse  the  balance  has been  reclassified  to
noncurrent  assets.  However,  management  has  initiated  and  believes it will
prevail in any action required to collect this outstanding balance.

Based upon the above events and  management's  projected  operations and related
cash flows,  it believes  that there will be  sufficient  cash flows to meet the
needs of the Company for 2003.

                                       17
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  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. Actual results could differ from those estimates.

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

The Company considers all highly liquid investments with original  maturities 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 recorded at cost.  Expenditures for major improvements
and additions are charged to the asset accounts while replacements,  maintenance
and repairs  which do not improve or extend the lives of the  respective  assets
are charged to expense currently.

Depreciation   of  property  and   equipment  and   amortization   of  leasehold
improvements are computed using the straight-line  method at various rates based
on the estimated useful lives of the assets, which range from 5 to 31 years.

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

The Company  accounts  for income  taxes  according  to  Statement  of Financial
Accounting Standards No. 109, which requires a liability approach to calculating
deferred income taxes.  Under this method,  the Company  records  deferred taxes
based on temporary differences between the tax bases of the Company's assets and
liabilities  and their  financial  reporting  bases.  A valuation  allowance  is
established when it is more likely than not that some or all of the deferred tax
assets will not be realized.

                                       18
<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.

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

SFAS No. 128,  Earnings  Per Share  requires  presentation  of basic and diluted
earnings  per share.  Basic  earnings  per share is  calculated  on the weighted
average  number of shares  outstanding  and diluted EPS  includes  the effect of
dilutive outstanding options and warrants. For the years ended December 31, 2002
and 2001,  no effect was given to  outstanding  options and  warrants  since the
effect would have been anti-dilutive.

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

Certain  amounts  in  the  2001  consolidated  financial  statements  have  been
reclassified to conform with the 2002 consolidated financial statements.


                                       19
<PAGE>

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

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  142,  "Goodwill  and  Other
Intangible  Assets." SFAS No. 142 is effective for fiscal years  beginning after
December 15, 2001, except goodwill and intangible assets acquired after June 30,
2001 are subject immediately to the non-amortization and amortization provisions
of this statement. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized, but will be subject to annual
impairment tests in accordance with the statement.  Other intangible assets will
continue to be amortized over their useful lives.  The Company  adopted  certain
provisions  of these  pronouncements  effective  July 1,  2001 as  required  for
goodwill  and  intangible  assets  acquired  in purchase  business  combinations
consummated after June 30, 2001. The Company adopted the remaining provisions of
SFAS 141 and SFAS 142 effective  January 1, 2002.  SFAS 141 and SFAS 142 require
the Company to perform the following as of January 1, 2002: (i) review  goodwill
and intangible assets for possible reclassification;  (ii) reassess the lives of
intangible  assets; and (iii) perform a transitional  goodwill  impairment test.
The Company reviewed the balances of goodwill and identifiable intangible assets
and  determined  that the Company  does not have amounts that are required to be
re-classed from goodwill to identifiable intangibles, or vice versa. The Company
also  reviewed  the  useful  lives of its  identifiable  intangible  assets  and
determined  that the original  estimated lives remain  appropriate.  The Company
completed the  transitional  goodwill  impairment  test and determined  that the
Company had as a  cumulative  effect of a change in  accounting  principle as of
January 1, 2002  impairment of goodwill and recognized an adjustment of $339,208
upon  adoption as of January 1, 2002.  The Company  believes  that the new value
fairly represents goodwill in the consolidated financial statements. The Company
is required to perform an impairment test no less than every twelve months.

In October 2001, the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived  Assets.  This statement replaces FASB Statement No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed  Of. This  statement  also  replaces  APB Opinion No. 30,  Reporting
Results  of  Operations-Reporting  the  Effects  of  Disposal  of a Segment of a
Business.  This statement requires that those long-lived assets be valued at the
lower of carrying amount or fair value less costs to sell,  whether  reported in
continuing operations or in discontinued operations.  The provisions of SFAS No.
144 are effective for fiscal years beginning after December 15, 2001. Management
has  determined the impact of the transition to SFAS No. 144 was not material to
the consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145,  Rescission of FASB  statements No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections. This
statement,  among other things,  eliminates an  inconsistency  between  required
accounting for certain sale-leaseback  transactions and provides other technical
corrections.  Adoption of this  statement did not have a material  effect on the
consolidated financial statements of the Company.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal  Activities.  This statement addresses accounting and reporting
for costs  associated with exit or disposal  activities and nullifies EITF Issue
No. 94-3. This statement is effective for exit or disposal costs initiated after
December  31,  2002,  with early  adoption  encouraged.  The Company has not yet
adopted this  statement,  and  management  has not determined the impact of this
statement on the consolidated financial statements of the Company.

                                       20
<PAGE>

In  November  2002,  the FASB  issued  FASB  Interpretation  No.  45  ("FIN45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the  guarantor's  balance sheet upon issuance of a guarantee.  In
addition,  FIN 45 requires  disclosures  about the guarantees that an entity has
issued,  including a reconciliation  of changes in the entity's product warranty
liabilities.  The initial recognition and initial measurement  provisions of FIN
45 are applicable on a prospective  basis to guarantees issued or modified after
December  31,  2002,  irrespective  of  the  guarantor's  fiscal  year-end.  The
disclosure  requirements  of FIN 45 are effective  for  financial  statements of
interim or annual  periods  ending after December 15, 2002. The adoption of this
Statement  did  not  have  a  material  impact  on  the  consolidated  financial
statements.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation,  Transition  and  Disclosure."  SFAS No. 148 provides  alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for  stock-based  employee  compensation.  SFAS No. 148 also requires
that  disclosures  of the pro forma  effect of using  the fair  value  method of
accounting for stock-based  employee  compensation be displayed more prominently
and in a tabular format.  Additionally,  SFAS No. 148 requires disclosure of the
pro forma effect in interim  financial  statements.  The  transition  and annual
disclosure  requirements  of SFAS No. 148 are  effective  for fiscal years ended
after December 15, 2002. The interim  disclosure  requirements are effective for
interim  periods  beginning  after  December 15,  2002.  The Company has not yet
adopted this  statement,  and  management  has not determined the impact of this
statement on the consolidated financial statements of the Company.

RISK FACTORS

As of  December  31,  2002 we have  not  generated  operating  profits.  We will
continue to be dependent on our retail and telecommunication product sales, sale
of assets,  collection  of all  receivables  and as well as short 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,  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,  preferences or privileges  senior to those of
the rights of our 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. There is no assurance that sources of
funds from debt or equity will be available

On July 27, 2000, we signed a common stock  purchase  agreement  with  Evertrend
Holdings  Limited  ("Evertrend").  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.  Through  December 31, 2002, we had sold
43,046,852  shares of common stock under the stock  purchase  agreement  for net
proceeds of $1,580,873 after payment of commissions and expenses.


                                       21
<PAGE>

We have pursued,  are currently pursuing and expect in the future to pursue, the
development  of  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.

                                       22
<PAGE>

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
        -------------------------------------------



                                   Contents



Reports of Independent Auditors........................................  24-25

Consolidated Balance Sheet.............................................  26-27

Consolidated Statements of Operations..................................     28

Consolidated Statements of Stockholders' Deficiency
    and Comprehensive Loss.............................................     29

Consolidated Statements of Cash Flows..................................  30-32

Notes to Consolidated Financial Statements.............................  33-48

                                       23
<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  and   Subsidiaries  as  of  December  31,  2002,  and  the  related
consolidated   statements   of   operations,    stockholders'   deficiency   and
comprehensive  loss and cash flows for the year then ended.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial position of Talk
Visual  Corporation and Subsidiaries as of December 31, 2002, and the results of
their  operations  and their cash flows for the year then ended,  in  conformity
with accounting principles generally accepted in the United States of America.

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


/s/ Kaufman Rossin & Co., P.A.
----------------------------------
    Kaufman Rossin & Co., P.A.


    Miami, Florida
    March 20, 2003


                                       24
<PAGE>


Report of Independent Auditors


To the Stockholders of
Talk Visual Corporation
Miami, Florida


We have audited the accompanying  consolidated statements of operations for Talk
Visual  Corporation  and  Subsidiaries,   their  stockholders'   deficiency  and
comprehensive  loss and cash flows for the year ended  December 31, 2001.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations for
Talk Visual  Corporation and Subsidiaries,  their  stockholders'  deficiency and
comprehensive  loss and cash  flows for the year ended  December  31,  2001,  in
conformity with accounting principles generally accepted in the United States of
America.


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

    Brooklyn, New York
    March 19, 2002

                                       25
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2002


                                     ASSETS
                                     ------


CURRENT ASSETS
   Cash                                                          $   104,101
   Accounts receivable, net of allowance
    for doubtful accounts of $80,625                                 400,194
   Other current assets                                              133,536
   Assets held for sale, net of impairment of $3,341,984           1,012,363
                                                                  ----------
   Total current assets                                            1,650,194

DUE FROM FORMER OFFICER                                              245,209

PROPERTY AND EQUIPMENT, net                                          795,948

GOODWILL, net                                                        226,575

MARKETABLE SECURITIES                                                793,204

OTHER ASSETS                                                         118,574
                                                                  ----------
   TOTAL ASSETS                                                  $ 3,829,704
                                                                  ==========


                 See notes to consolidated financial statements.

                                       26
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (continued)

                                DECEMBER 31, 2002


                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                    ----------------------------------------


CURRENT LIABILITIES
   Accounts payable                                              $ 2,541,001
   Accrued liabilities                                               594,290
   Notes payable                                                     941,667
   Other current liabilities                                          49,373
                                                                  ----------
    Total current liabilities                                      4,126,331

LONG-TERM DEBT                                                       289,700
                                                                  ----------
   TOTAL LIABILITIES                                               4,416,031
                                                                  ----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
   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;
    148,725,141
    shares issued and outstanding                                    148,725
   Additional paid in capital                                     24,036,063
   Accumulated deficit                                           (24,771,115)
                                                                  ----------
   STOCKHOLDERS' DEFICIENCY                                         (586,327)
                                                                  ----------
    TOTAL                                                        $ 3,829,704
                                                                  ==========


                  See notes to consolidated financial statements.


                                       27
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    YEARS ENDED DECEMBER 31,
                                                    ------------------------
                                                    2002                2001
                                                 ----------          ---------

REVENUE
  Telecommunication sales and services           $7,409,593         $5,218,956

COSTS OF SALES AND SERVICES                       5,232,052          3,670,557
                                                 ----------          ---------
GROSS PROFIT                                      2,177,541          1,548,399
                                                 ----------          ---------
OPERATING EXPENSES
  Selling, general and administrative             3,659,370          4,696,657
  Depreciation and amortization                     315,142            448,812
  Write-off of advances to foreign corporations      --                373,295
                                                 ----------          ---------
Total operating expenses                          3,974,512          5,518,764
                                                 ----------          ---------
LOSS FROM OPERATIONS                             (1,796,971)        (3,970,365)
                                                 ----------          ---------
OTHER INCOME (EXPENSE)
  Interest expense, net                             (59,140)           (41,532)
  Write down of equity securities                      --             (963,060)
  Loss on disposal of property and equipment         (4,996)          (576,997)
  Other income                                      131,647               --
                                                 ----------         ----------
Total other income (expenses)                        67,511         (1,581,589)
                                                 ----------         ----------
LOSS FROM CONTINUING OPERATIONS                  (1,729,460)        (5,551,954)

LOSS FROM DISCONTINUED OPERATIONS                  (962,406)        (3,132,808)
                                                 ----------         ----------
LOSS BEFORE CUMULATIVE EFFECT OF
  ACCOUNTING CHANGE                              (2,691,866)        (8,684,762)
                                                 ----------         ----------
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
  (GOODWILL IMPAIRMENT)                            (339,208)              --
                                                 ----------         ----------
NET LOSS                                        $(3,031,074)       $(8,684,762)
                                                 ==========         ==========

NET LOSS PER COMMON SHARE - BASIC AND DILUTED
  CONTINUING OPERATIONS                         $    (0.012)       $    (0.059)

  DISCONTINUED OPERATIONS                            (0.006)            (0.033)

  CUMULATIVE EFFECT OF ACCOUNTING CHANGE             (0.002)              --
                                                 ----------         ----------
  NET LOSS                                      $    (0.020)       $    (0.092)
                                                 ==========         ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD                   148,825,179         94,669,011
                                                 ==========         ==========


                 See notes to consolidated financial statements


                                       28
<PAGE>

<TABLE>
<CAPTION>

Talk Visual Corporation and
Subsidiaries
Consolidated Statements of Stockholders' Deficiency
 and Comprehensive Loss
Years Ended December 31, 2002 and 2001
(Split Table)
                                                 Preferred Shares        Common Shares                         Additional
                                                 ----------------        -------------         Stock            Paid In
                                                Shares     Amount      Shares      Amount   Subscribed          Capital
                                                ------     ------      ------      ------   ----------          -------
<S>                                            <C>        <C>       <C>           <C>        <C>             <C>
 Balance December 31, 2000                     50,000     $  50     77,235,840    $ 77,236   $   -           $ 22,310,104

 Year Ended December 31, 2001:
  Common Shares issued in Acquisition
 of Marketable Securities                                            8,241,600       8,242                        321,422

  Common Shares issued for services
 and obligations                                                     8,037,759       8,038                        317,852

  Sales of common stock                                             28,747,167      28,747                      1,254,798
  Conversions of preferred shares to
 common                                       (50,000)      (50)       848,190         848                           (800)

  Cancellation of prior issuance                                    (1,750,000)     (1,750)                      (763,875)

  Common shares issued in private
 placement                                                           2,000,000       2,000                         58,000

  Issued to employees                                                1,600,000       1,600                         62,400

  Warrant and Options exercised                                     11,935,431      11,935                        524,127

  Offering Expenses and other                                                                                    (145,770)

  Common stock granted to officers                                                                                300,000

  Common stock to be surrendered                                                                                 (278,700)

  Cancellation of stock subscriptions

  Comprehensive loss adjustment

  Net Loss


                                              -----------------------------------------------------------------------------
 Balance December 31, 2001                          -         -    136,895,987    $136,896       -           $ 23,959,558

 Year Ended December 31, 2002:
  Common shares issued to former
 officers                                                           10,000,000      10,000                        (10,000)

  Sales of common stock                                              2,320,754       2,321                         54,179

  Common Shares issued for services                                  2,333,400       2,333                         21,001

  Common Shares issued to directors                                    850,000         850                          7,650

  Common Shares to former officers                                  (3,675,000)     (3,675)                         3,675
   cancelled

 Net Loss


                                              -----------------------------------------------------------------------------
 Balance December 31, 2002                          -         -    148,725,141    $148,725   $   -           $ 24,036,063
                                              =============================================================================
</TABLE>
                                       29a
<PAGE>
<TABLE>
<CAPTION>

Talk Visual Corporation and
Subsidiaries
Consolidated Statements of Stockholders' Deficiency
 and Comprehensive Loss
Years Ended December 31, 2002 and 2001
(Continued)
                                                                Accumulated
                                                                   Other         Stock          Total
                                                 Accumulated   Comprehensive  Subscriptions  Stockholders'        Comprehensive
                                                   Deficit          Loss       Receivable     Deficiency              Loss
                                                   -------          ----       ----------     ----------              ----
<S>                                             <C>                <C>         <C>           <C>                   <C>
 Balance December 31, 2000                      $ (13,055,279)     $ (20,525)  $ (798,958)   $  8,512,628

 Year Ended December 31, 2001:
  Common Shares issued in Acquisition
 of Marketable Securities                                                                         329,664

  Common Shares issued for services
 and obligations                                                                                  325,890

  Sales of common stock                                                                         1,283,545
  Conversions of preferred shares to
 common                                                                                                (2)

  Cancellation of prior issuance                                                                 (765,625)

  Common shares issued in private
 placement                                                                                         60,000

  Issued to employees                                                                              64,000

  Warrant and Options exercised                                                                   536,062

  Offering Expenses and other                                                                    (145,770)

  Common stock granted to officers                                                                300,000

  Common stock to be surrendered                                                                 (278,700)

  Cancellation of stock subscriptions                                             798,958         798,958

  Comprehensive loss adjustment                                       20,525                       20,525               20,525

  Net Loss                                         (8,684,762)                                 (8,684,762)          (8,684,762)
                                                                                                                  ----------------
                                                                                                                   $(8,664,237)
                                              --------------------------------------------------------------------================
 Balance December 31, 2001                      $ (21,740,041)     $       -   $        -    $  2,356,413

 Year Ended December 31, 2002:
  Common shares issued to former
 officers                                                                                               -

  Sales of common stock                                                                            56,500

  Common Shares issued for services                                                                23,334

  Common Shares issued to directors                                                                 8,500

  Common Shares to former officers                                                                      -
   cancelled

 Net Loss                                          (3,031,074)                                 (3,031,074)          (3,031,074)
                                                                                                                 -----------------
                                                                                                                   $ 3,031,074
                                              -------------------------------------------------------------------=================
 Balance December 31, 2002                      $ (24,771,115)     $       -   $        -    $   (586,327)
                                              ===================================================================
</TABLE>

                 See notes to consolidated financial statements

                                       29b

<PAGE>

<TABLE>
<CAPTION>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                           YEAR ENDED DECEMBER 31,
                                                           -----------------------
                                                             2002            2001
                                                           ---------      ---------

<S>                                                      <C>            <C>
Cash Flows From Operating Activities:

Net Loss                                                 $(3,031,074)   $(8,684,762)

Adjustments to reconcile net loss to net
  cash used in operating activities:
  Depreciation and amortization                              315,142        639,380
  Impairment of goodwill                                     339,208           --
  Impairment of assets held for sale                         759,998      2,581,986
  Provision for uncollectible accounts                       169,379         (8,625)
  Provision for losses on advances                              --          373,295
  Write down of investments                                   30,159        963,060
  Loss on disposal of property and equipment                   4,996        576,997
  Additional charges from discontinued operations               --          656,096
  Cancellation of prior common stock issuance                   --         (763,875)
  Issuance of common stock in exchange
    for services and obligations                              31,834        680,252
  Reduction of note payable                                 (150,000)       (72,068)

Increase (decrease) in cash from changes in:
  Accounts receivable                                       (207,580)      (154,148)
  Other assets                                               (15,632)     1,420,337
  Accounts payable                                         1,046,232        831,092
  Accrued liabilities                                        228,135        194,162
  Other liabilities                                            9,404        (77,049)
                                                           ---------      ---------
    Net Cash used in Operating Activities                   (469,799)      (843,870)
                                                           ---------      ---------
Cash Flows From Investing Activities:

  Purchase of property and equipment                        (213,963)      (120,077)
  Advances to former officer                                    --         (172,163)
  Purchase of equity securities                                 --         (462,840)
  Proceeds from sales of call shops                           35,000           -
  Payments of deposits                                       (35,091)          -
  Acquisition or disposition of other assets                    --           90,044
                                                           ---------      ---------
    Net Cash used in Investing Activities                   (214,054)      (665,036)
                                                           ---------      ---------
</TABLE>


                See notes to consolidated financial statements

                                       30
<PAGE>

<TABLE>
<CAPTION>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (continued)


                                                           YEAR ENDED DECEMBER 31,
                                                           -----------------------
                                                             2002           2001
                                                           ---------      ---------

<S>                                                          <C>         <C>
Cash Flows from Financing Activities:

  Borrowings on debt                                         500,000           --
  Payments on notes payable and long-term debt               (92,474)       (29,849)
  Net proceeds from common stock transactions                 56,500      1,792,687
                                                           ---------      ---------
    Net Cash provided by Financing Activities                464,026      1,762,838
                                                           ---------      ---------

Increase (decrease) in cash                                 (219,827)       253,932
Cash at beginning of period                                  323,928         69,996
                                                           ---------     ----------
Cash at end of period                                     $  104,101     $  323,928
                                                           =========     ==========
</TABLE>


                See notes to consolidated financial statements


                                       31
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (continued)


Supplemental disclosure of cash flow information:

a. Cash paid during the year for:

   Interest, excluding discontinued operations        $   10,561     $     --
                                                       ---------     ----------
   Income taxes, excluding discontinued operations    $    3,228     $    1,885
                                                       ---------     ----------

b. Noncash investing and financing transactions:

For the year ended December 31, 2002

         Issuance of 3,183,400 shares of common stock for services in the amount
of $31,834 comprised of the following:  $20,000 in connection with the extension
of a mortgage note,  $5,000 for  compensation,  $3,500 for  director's  fees and
$3,334 for consulting services.

For the year ended December 31, 2001

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

         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.

         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.


                See notes to consolidated financial statements


                                       32
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation
----------------------

The  consolidated  financial  statements  include  the  accounts  of Talk Visual
Corporation (Parent) and its wholly-owned subsidiaries, Sacramento Results, Inc.
(Sacramento) and Mundo Express of NY, Ltd. (Mundo) (collectively "the Company").
All significant  intercompany  balances and transactions have been eliminated in
consolidation.

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

The Company is a provider of voice  telecommunication  services to business  and
consumer  market  segments  throughout the United States.  The Company  operates
retail call shops in the New York City and New Jersey  areas  through its wholly
owned  subsidiary,  Mundo.  The  Company  also owns and  operates,  through  its
wholly-owned   subsidiary,   Sacramento,   a  commercial   property  located  in
Sacramento, California (See Note 3: Discontinued Operations).

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America 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. Actual results could differ from those estimates.

The allowance for doubtful accounts is an estimate which is established  through
charges to earnings for estimated  uncollectible amounts.  Management's judgment
in  determining  the adequacy of the  allowance  is based upon several  factors,
which  include,  but are not limited  to, the nature and volume of the  accounts
receivable,  review of problem or non-performing  receivables,  and management's
judgment  with respect to current  economic  conditions  and their impact on the
receivable balances.  Based on these factors, it is reasonably possible that the
Company's  estimate of the allowance for doubtful  accounts  could change in the
near term.

The Company has recorded a deferred tax asset of  approximately  $12,065,000  at
December  31,  2002,  which  is  completely  offset  by a  valuation  allowance.
Realization  of the deferred tax asset is  dependent  on  generating  sufficient
taxable  income in the future.  The amount of the deferred tax asset  considered
realizable  could change in the near term if estimates of future  taxable income
are modified.

Cash
----

From  time  to  time,  the  Company   maintains  cash  balances  with  financial
institutions in excess of federally insured limits.

                                       33
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable
----------------
Accounts receivable are  uncollateralized  customer obligations due under normal
trade  terms.  The  carrying  amount of  accounts  receivable  are reduced by an
allowance that reflects  management's best estimate of the amounts that will not
be collected.

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

Property and equipment is recorded at cost.  Expenditures for major improvements
and additions are charged to the asset accounts while replacements,  maintenance
and repairs  which do not improve or extend the lives of the  respective  assets
are charged to expense currently.

Depreciation and Amortization
-----------------------------

Depreciation   of  property  and   equipment  and   amortization   of  leasehold
improvements are computed using the straight-line  method at various rates based
on the estimated useful lives of the assets, which range from 5 to 31 years.

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

The Company  accounts  for income  taxes  according  to  Statement  of Financial
Accounting Standards No. 109, which requires a liability approach to calculating
deferred income taxes.  Under this method,  the Company  records  deferred taxes
based on temporary differences between the tax bases of the Company's assets and
liabilities  and their  financial  reporting  bases.  A valuation  allowance  is
established when it is more likely than not that some or all of the deferred tax
assets will not be realized.

Marketable Securities
--------------------

The Company accounts for marketable securities in accordance with the provisions
of SFAS  No.  115,  "Accounting  for  Certain  Investments  in Debt  and  Equity
Securities."

Under SFAS No. 115,  debt  securities  and equity  securities  that have readily
determinable fair values are to be classified in three categories:

       Held to maturity - the  positive  intent and ability to hold to maturity.
       Amounts are reported at amortized  cost,  adjusted  for  amortization  of
       premiums and accretion of discounts.

       Trading  securities - bought  principally for purposes of selling them in
       the near term.  Amounts are reported at fair value, with unrealized gains
       and losses included in earnings.

       Available  for  sale - not  classified  in one of the  above  categories.
       Amounts  are  reported at fair value,  with  unrealized  gains and losses
       excluded  from  earnings  and  reported  separately  as  a  component  of
       shareholders' equity.


                                       34
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

Marketable Securities (Continued)
--------------------

Marketable securities consists of 405,516 unregistered shares of common stock of
Yak with a cost of $793,205,  which  approximates  market value. The Company has
classified these securities as available for sale.

On March 6, 2003,  Talk  Visual sold  400,000  shares of YAK for  $800,000.  The
proceeds from the sale were used to reduce notes  payable plus related  interest
and trade payables.

Investments in Equity Securities
--------------------------------

The  Company  evaluates  the  recoverability  of  its  equity  investments,   in
accordance  with APB No. 18 "The Equity Method of Accounting for  Investments in
Common Stock" and if circumstances  arise where a loss in value is considered to
be other  than  temporary,  the  Company  will  record a  write-down  of  excess
investment cost. During 2001, the Company  determined that a decline in value of
its equity securities was other than temporary and accordingly recognized a loss
of $963,060, which reduced the carrying value to $0 at December 31, 2001.

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

Revenue is recognized upon completion of the service.


Earnings (Loss) Per Share
-------------------------

SFAS No. 128,  Earnings  Per Share  requires  presentation  of basic and diluted
earnings  per share.  Basic  earnings  per share is  calculated  on the weighted
average  number of shares  outstanding  and diluted EPS  includes  the effect of
dilutive outstanding options and warrants. For the years ended December 31, 2002
and 2001,  no effect was given to  outstanding  options and  warrants  since the
effect would have been anti-dilutive.

Advertising Costs
-----------------

Advertising  costs are  expensed as incurred.  For the years ended  December 31,
2002  and  2001,   advertising   expense   amounted  to  $13,309  and   $31,454,
respectively.

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".

                                       35
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

Segment Information
-------------------

SFAS  No.  131,   Disclosure   about  Segments  of  an  Enterprise  and  Related
Information, requires public companies to report selected segment information in
its financial  reports to  shareholders.  The Company has determined that it has
only one reportable  segment which is providing  telecommunication  services for
its retail and sales divisions.

Fair Value of Financial Instruments
-----------------------------------

The fair  value of notes  payable  are  estimated  using  discounted  cash  flow
analysis based on the Company's incremental borrowing rates for similar types of
borrowing  arrangements.  At December 31, 2002, the fair values  approximate the
carrying value.

New Accounting Pronouncements and Interpretations
-------------------------------------------------

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  142,  "Goodwill  and  Other
Intangible  Assets." SFAS No. 142 is effective for fiscal years  beginning after
December 15, 2001, except goodwill and intangible assets acquired after June 30,
2001 are subject immediately to the non-amortization and amortization provisions
of this statement. Under the new rules, goodwill and intangible assets deemed to
have indefinite  lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the statement.  Other intangible assets will
continue to be amortized over their useful lives.  The Company  adopted  certain
provisions  of these  pronouncements  effective  July 1,  2001 as  required  for
goodwill  and  intangible  assets  acquired  in purchase  business  combinations
consummated after June 30, 2001. The Company adopted the remaining provisions of
SFAS 141 and SFAS 142 effective  January 1, 2002. SFAS 141 and SFAS 142 required
the Company to perform the following as of January 1, 2002: (i) review  goodwill
and intangible assets for possible reclassification;  (ii) reassess the lives of
intangible  assets; and (iii) perform a transitional  goodwill  impairment test.
The Company reviewed the balances of goodwill and identifiable  intangible asset
and  determined  that the Company  does not have amounts that are required to be
re-classed from goodwill to identifiable intangibles, or vice versa. The Company
also  reviewed  the  useful  lives of its  identifiable  intangible  assets  and
determined  that the original  estimated lives remain  appropriate.  The Company
completed the  transitional  goodwill  impairment  test and determined  that the
Company had impairment of goodwill and recognized an adjustment of $339,208 as a
cumulative effect of a change in accounting principle as of January 1, 2002. The
Company  believes  that  the  new  value  fairly  represents   goodwill  in  the
consolidated  financial  statements.  The  Company  is  required  to  perform an
impairment test no less than every twelve months. A  reconciliation  of reported
net loss adjusted to reflect the adoption of SFAS No. 142 is provided below:


                                       36
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

New Accounting Pronouncements and Interpretations (Continued)
-------------------------------------------------------------

                                                        2002          2001

Reported net loss                                   $(3,031,074)  $(8,684,762)
Add back goodwill amortization                          --            177,000
                                                     -----------   -----------
Adjusted net loss                                   $(3,031,074)  $(8,507,762)
                                                    ============  ============

Reported basic and diluted net loss per share       $    (0.020)  $    (0.092)
Add back goodwill amortization                          --        $     0.002
                                                    ------------  ------------
Adjusted basic and diluted net loss per share       $    (0.020)  $    (0.090)
                                                    ============  ============

In October 2001, the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived  Assets.  This statement replaces FASB Statement No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed  Of. This  statement  also  replaces  APB Opinion No. 30,  Reporting
Results  of  Operations-Reporting  the  Effects  of  Disposal  of a Segment of a
Business.  This statement requires that those long-lived assets be valued at the
lower of carrying amount or fair value less costs to sell,  whether  reported in
continuing operations or in discontinued operations.  The provisions of SFAS No.
144 are effective for fiscal years beginning after December 15, 2001. Management
has  determined the impact of the transition to SFAS No. 144 was not material to
the consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145,  Rescission of FASB  statements No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections. This
statement,  among other things,  eliminates an  inconsistency  between  required
accounting for certain sale-leaseback  transactions and provides other technical
corrections.  Adoption of this  statement did not have a material  effect on the
consolidated financial statements of the Company.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal  Activities.  This statement addresses accounting and reporting
for costs  associated with exit or disposal  activities and nullifies EITF Issue
No. 94-3. This statement is effective for exit or disposal costs initiated after
December  31,  2002,  with early  adoption  encouraged.  The Company has not yet
adopted this  statement,  and  management  has not determined the impact of this
statement on the consolidated financial statements of the Company.

In  November  2002,  the FASB  issued  FASB  Interpretation  No.  45  ("FIN45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the  guarantor's  balance sheet upon issuance of a guarantee.  In
addition,  FIN 45 requires  disclosures  about the guarantees that an entity has
issued,  including a reconciliation  of changes in the entity's product warranty
liabilities.  The initial recognition and initial measurement  provisions of FIN
45 are applicable on a prospective  basis to guarantees issued or modified after
December  31,  2002,  irrespective  of  the  guarantor's  fiscal  year-end.  The
disclosure  requirements  of FIN 45 are effective  for  financial  statements of
interim or annual  periods  ending after December 15, 2002. The adoption of this
Statement  did  not  have  a  material  impact  on  the  consolidated  financial
statements.

                                       37
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

New Accounting Pronouncements and Interpretations (Continued)
-------------------------------------------------------------

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation,  Transition  and  Disclosure."  SFAS No. 148 provides  alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for  stock-based  employee  compensation.  SFAS No. 148 also requires
that  disclosures  of the pro forma  effect of using  the fair  value  method of
accounting for stock-based  employee  compensation be displayed more prominently
and in a tabular format.  Additionally,  SFAS No. 148 requires disclosure of the
pro forma effect in interim  financial  statements.  The  transition  and annual
disclosure  requirements  of SFAS No. 148 are  effective  for fiscal years ended
after December 15, 2002. The interim  disclosure  requirements are effective for
interim  periods  beginning  after  December 15,  2002.  The Company has not yet
adopted this  statement,  and  management  has not determined the impact of this
statement on the consolidated financial statements of the Company.

In  January  2003,  the FASB  issued  FASB  Interpretation  No.  46 ("FIN  46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual period  beginning after June 15, 2003. The Company has not yet
adopted this  statement and  management  has not  determined  the impact of this
statement on the consolidated financial statements of the Company.

Reclassifications
-----------------

Certain  amounts  in  the  2001  consolidated  financial  statements  have  been
reclassified to conform with the 2002 presentation.

NOTE 2 - LIQUIDITY

As reflected in the accompanying financial statements,  the Company has incurred
significant  net losses since  inception and expects to continue to incur losses
and generate  negative  working capital from operations  through 2003. Until the
Company generates  positive cash flow, the Company is dependent on proceeds from
the  sale  of  certain  assets,   successful   negotiations  related  to  vendor
settlements  refinancing  certain  equipment,  collection of receivables  from a
former officer and in their absence, an infusion of debt or equity capital.

                                       38
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 2 - LIQUIDITY (Continued)

As discussed in Notes 3, 12 and 16, subsequent to December 31, 2002, the Company
has completed the sale of the Sacramento, California real estate, resulting in a
reduction of  approximately  $5,100,000  of debt,  related  interest and accrued
liabilities  and  has  sold  principally  all of its  investment  in  marketable
securities  reducing debt and accounts  payable by  approximately  $800,000.  In
addition,  the Company  has  negotiated  a  settlement  agreement  with a former
vendors reducing accounts payable by approximately $1,125,000,  and negotiated a
letter of intent to sell the net assets of Mundo.

Based upon the above events and  management's  projected  operations and related
cash flows,  it believes  that there will be  sufficient  cash flows to meet the
needs of the Company for 2003.

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  segment.  On February 26, 2003,
the Company sold its property in  Sacramento,  California for  $5,500,000.  As a
result of the sale,  the existing  mortgage was  assigned to the  purchaser  and
approximately $735,000 of notes payable and related interest were satisfied.

Included in the 2001 results of  operations  is a loss of $493,955 from the July
2001 sale of the  Company's  property in Toronto,  Canada.  Also included in the
2001 results of operations is an estimated loss of $2,638,853  which includes an
asset impairment of $2,581,986  based on the Company's  estimate of net proceeds
from  the  sale  of  its  property  in  Sacramento,  California.  An  additional
impairment  loss of $759,998 was  recognized  during the fourth quarter of 2002,
based on the actual results from the February 26, 2003 closing.

Revenues and expenses from  discontinued  operations for the year ended December
31, 2002 were  $1,264,882 and  $1,467,290,  respectively.  Revenues and expenses
from  discontinued  operations  for  the  year  ended  December  31,  2001  were
$1,244,844 and $1,302,900, respectively.

Following is summarized  financial  information  as of December 31, 2002 for the
discontinued operations:

                                               2002
                                             ---------
Current assets                              $  130,086
Total assets                                 5,527,243
Current liabilities                          4,417,143
Equity                                       1,110,100

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

                                       39
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 4 - PROPERTY AND EQUIPMENT (Continued)
                                               2002
                                            ----------
Telecommunications and office equipment     $1,066,836
Furniture and Fixtures                          40,034
Leasehold Improvements                         263,966
                                             ---------
                                             1,370,836
Less accumulated depreciation                 (574,888)
                                             ---------
                                             $ 795,948
                                             =========

Depreciation expense on property and equipment was $242,069 and $269,812 for the
years ended December 31, 2002 and 2001, respectively.

NOTE 5 - GOODWILL

The changes in the carrying  amount of goodwill for the years ended December 31,
2002 and 2001, are as follows:

                                               2002             2001
                                             ---------        ---------
Balance as of January 1                      $ 663,750        $ 865,345
Transitional impairment loss                  (339,208)            --
Goodwill written off related to
  sale of business units                       (97,967)            --
Amortization expense                              --           (201,595)
                                             ---------        ---------
Balance as of December 31, 2002              $ 226,575        $ 663,750
                                             ==========       ==========

Based on the change in accounting principle discussed in Note 1, the Company has
recognized goodwill transitional impairment of $339,208 related to the call shop
reporting unit. The fair value of the reporting unit was determined using recent
sales of two units within the call shop reporting unit.

NOTE 6 - NOTES PAYABLE

Notes payable are as follows:

15% Unsecured note payable to a vendor, repaid on March 5, 2003     $ 150,000

Convertible note payable, terms currently under negotiation           289,700

15% Mortgage note, secured by a lien on property, equipment
and receivables, repaid on March 5, 2003                              291,667

9% Mortgage note, secured by a lien on the Sacramento land and
building, maximum funding of $1,000,000, repaid on February 26, 2003  500,000

                                                                    ---------
Total Notes Payable                                                $1,231,367
Less current maturities                                               941,667
                                                                    ---------
Long-term debt                                                        289,700
                                                                    =========

There is no definite maturity date for the remaining long-term debt.

                                       40
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   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  September  2007.  Future  minimum
rental payments  required under operating  leases that have initial or remaining
terms in excess of one year at December 31, 2002, are as follows:

 2003                                                            $  382,022

 2004                                                               314,872

 2005                                                               263,655

2006                                                                203,637

2007                                                                116,309
                                                                  ---------
 Total future minimum rentals                                    $1,280,495
                                                                  =========

Rent expense for the years ended  December  31, 2002 and 2001,  was $487,526 and
$576,315, 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 are
a party to or which any of their property is subject.

Carrier Services
----------------

The Company has minimum volume  commitments  with three of its carrier  services
providers  totaling  $4,100,000.  The Company is in negotiations with two of the
carrier providers to waive the commitment of $3,900,000.

NOTE 8 - STOCKHOLDERS' EQUITY

The Company's  authorized  capital stock is 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, 2002 and 2001,  the Company had  148,725,141  and
136,895,987 issued and outstanding common shares, respectively.

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

Under the terms of a 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.


                                       41
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 8 - STOCKHOLDERS' EQUITY (continued)

On  September  10,  2002,  in  connection  with the loan  agreement  for the 15%
mortgage  (Note 6),  the  Company  issued  warrants  to the  lender to  purchase
2,000,000 shares of its common stock at $0.001 per share, expiring September 10,
2012.

As of December 31, 2002,  warrants to purchase  4,542,372 shares of common stock
were outstanding.

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

Between  January 11, 2002 and  February 12,  2002,  the Company  sold  2,320,754
shares of common stock to Evertrend Holdings Limited ("Evertrend") at an average
purchase  price  of  $0.0269  per  share  pursuant  to a common  stock  purchase
agreement  between the Company and  Evertrend.  Ladenburg  Thalmann & Co.,  Inc.
received  $5,000.00  in  placement  fees and  Evertrend  received  a warrant  to
purchase  1,160,377 shares of common stock at an exercise price of $0.0269 until
March 15, 2002 in connection with this  transaction.  The Company paid $1,000 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.

In December 2002, the Company  issued  3,183,400  shares of its common stock for
services comprised of the following:  2,000,000 shares issued in connection with
the  extension of the 9% mortgage  note that should have been issued at the time
of  the  original  loan   consummation   in  1999,   500,000  shares  issued  as
compensation,  350,000  shares  issued to  individuals  serving  on the Board of
Directors as director's fees and 333,400 shares issued for consulting services.

In December  2002,  the Company  returned  to treasury  3,675,000  shares of its
common  stock.  The Company had  requested  the return of 3,175,000  shares from
entities,  involving its former Chairman,  Michael  Zwebner,  as the agreed upon
consideration was never received. The Board voted in December 2002 to cancel the
500,000 shares that had been awarded to Mr. Pedro Sanchez,  the Company's former
chief technical officer.

On various dates during 2001, the Company issued a total of 28,747,167 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 former Chairman of the Company is a 33%  shareholder.  The share price
for the shares sold under this private placement was $0.03 per share.

                                       42
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 8 - STOCKHOLDERS' EQUITY (continued)

On  June  22,  2001,   the  Company   satisfied   its   obligation  to  Overseas
Communications,  Ltd., a foreign corporation in which the former 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 former 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 former  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 9 - STOCK OPTION AND PURCHASE PLAN

The Talk Visual  Corporation and Subsidiaries 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
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.  As of December 31, 2002 there
were fifty-two participants in the plan.

In 2002, options were issued to Harley L. Rollins for 5,250,000 shares of common
stock,  Andrew T.  Silber  for  4,500,000  shares of common  stock,  independent
consultants for 1,200,000 shares of common stock, and all other employees for an
aggregate of 1,585,000  shares of common stock. The options vest over a three to
four year period and expire ten years from date of grant.

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.  These
options  were  cancelled  in 2001  upon the  resignation  of these  non-employee
directors.


                                       43
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 9 - STOCK OPTION AND PURCHASE PLAN (continued)

Option activity within each plan was as follows:

                                         Incentive     Directors      Average
                                       Stock Option  Stock Option      Price
                                           Plan          Plan        Per Share
                                        ------------ ------------    ---------

Balance outstanding, December 31, 2000  1,400,000          -0-         $  0.55

 Options Granted                            -0-            -0-            -0-

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


 Options Granted                       12,665,000          -0-         $ 0.011

 Options Cancelled                       (130,000)         -0-         $ 0.011
                                        ------------ ------------    ---------
Balance outstanding, December 31, 2002 12,535,000          -0-         $ 0.011
                                        ------------ ------------    ---------

The following table summarizes  information  about stock options  outstanding at
December 31, 2002:
<TABLE>
<CAPTION>

                                         Options Outstanding                             Options Exercisable
                                         -------------------                             -------------------
                                                      Weighted Average                                 Weighted Average
                                                    Remaining Contractual                            Remaining Contractual
Exercise Price               Number of Options          Life (Years)          Number of Options          Life (Years)
---------------              -----------------        ---------------         -----------------       ---------------

<S>                          <C>                     <C>                        <C>                    <C>
   $ 0.011                   12,535,000              9.5 years                  875,000                9.5 years
</TABLE>


The  weighted  average  fair  value per  option as of grant date was $ 0.006 for
stock options granted during the year ended December 1, 2002. The  determination
of the fair value of all stock options  granted  during the year ended  December
31, 2002 was based on (i) risk-free interest rate of 2.97%, (ii) expected option
life of 5 years, (iii) expected  volatility in the market price of the Company's
common stock of 100%, and (iv) no expected dividends on the underlying stock.

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 year ended December 31, 2002 would
have  been  $(3,056,144)  and  $(0.021),  respectively.  Accordingly,  pro forma
amounts are not presented.

The approval of an amendment to the Company's Stock  Option/Stock  Issuance Plan
to increase the number of common shares  available for issuance by an additional
15,000,000  shares did not receive enough votes for passage by the shareholders.
Therefore,  if shareholder approval is not obtained by June 28, 2003 the options
in excess of the remaining balance of 3,807,267 shares will be cancelled.

                                       44
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 10 - STOCK COMPENSATION PLAN

The Talk Visual  Corporation and Subsidiaries 1995 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 the Company.

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

NOTE 11 - INCOME TAXES

The components of income taxes were as follows:

Provision (benefit) for income taxes

                                                    December 31
                                               2002             2001
                                             ---------        ---------
Current
   Federal                                   $    -0-         $    -0-
   State                                          -0-              -0-

Deferred
   Federal                                    (998,000)      (2,779,000)
   State                                      (167,000)        (478,000)

Change in Valuation Allowance               (1,165,000)      (3,257,000)
                                             ---------        ---------
Income tax expense                                -0-              -0-
                                             ---------        ---------

The effective tax rate for the years ended December 31, 2002 and 2001,  deferred
from the federal  statutory rate due principally to increase in the deferred tax
asset valuation allowances.

As of December 31, 2002,  the Company has net operating  loss  carryforwards  of
approximately $26,232,000,  expiring in various years through 2022. The Internal
Revenue Service Code contains  provisions  which limit the federal net operating
loss  carryforward  available that can be used in any given year in the event of
certain occurrences, which include significant ownership changes.

                                       45
<PAGE>


                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 11 - INCOME TAXES (Continued)

At December 31, 2002, approximate deferred tax assets were as follows:

Allowance for doubtful accounts                                 $   43,000
Inventory reserve                                                   10,000
Goodwill                                                           203,000
Equity investment write-down                                       680,000
Long-lived asset impairment                                      1,258,000
Net operating loss carryforward                                  9,871,000
                                                                -----------
Deferred tax asset                                              12,065,000
less valuation allowance                                       (12,065,000)
                                                                -----------
                                                                $    -0-
                                                                ===========

NOTE 12 - RELATED PARTY TRANSACTIONS

As of December 31, 2002,  amounts due from a former officer consists of $245,209
due from Michael Zwebner (Mr. Zwebner),  former officer,  former Chairman of the
Board and current  stockholder.  The Company had reached a verbal agreement with
Mr.  Zwebner  to repay  this  amount  plus  accrued  interest  during  2003.  As
negotiations  have  reached an impasse  the  balance  has been  reclassified  to
noncurrent  assets.  However,  management  has initiated and it believes it will
prevail in any action required to collect this outstanding balance.

During 2001, the Company engaged the services of Mr. Zwebner, under a consulting
agreement with Overseas  Communications,  Ltd., an Israeli  corporation.  Annual
payments to Overseas  Communications under this agreement were $120,000.  At the
effective time of the consulting agreement, Mr. Zwebner owned 33% of the capital
stock and was 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 this 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 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,  all entities  related by virtue of common  ownership or
management  control by Mr.  Zwebner or members of his family.  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 its  results  from
operations for the year ended December 31, 2001.

                                       46
<PAGE>



                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 12 - RELATED PARTY TRANSACTIONS (Continued)

During 2000,  Eugene Rosov, a former director and its former President and Chief
Executive Officer of the Company, exercised options to purchase 1,000,000 shares
of common  stock by  tendering  notes  issued by the  Company  in the  amount of
$436,406. During 2000, Clinton Snyder, a director and its former Chief Financial
Officer of the Company,  exercised  options to purchase 750,000 shares of common
stock by tendering notes in the amount of $329,219. These notes accrued interest
at an annual rate of 6% and 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. Snyder.

In December 2001, the Company completed the purchase of 405,516 shares of common
stock of Yak, for a purchase price of $793,204 consisting of 8,241,600 shares of
the Company's  common stock and  conversion  of $462,840 of debt.  Following the
consummation  of the  transaction,  the  Company  owned  10% of the  outstanding
capital stock of YAK. Mr. Zwebner and Charles Zwebner,  Mr.  Zwebner's  brother,
are significant stockholders of YAK. On March 5, 2003, the Company completed the
sale of 400,000 shares of YAK for $800,000.

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 a separation  agreement with Mr. Rosov, 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, $40,467 to Mr. Rosov, and $93,094 to Mr. Zwebner. 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.

NOTE 13 - EARNINGS PER SHARE

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

                                                 2002            2001
                                             -----------      ----------
Basic weighted average shares outstanding    148,825,179      94,669,011
Dilutive effect of options and warrants         --               --
                                             ----------       ----------
Diluted weighted average shares outstanding  148,825,179      94,669,011
                                             ===========      ==========

Options and warrants to purchase  16,966,563 shares were outstanding at December
31, 2002. These amounts were not included in the computation of diluted loss per
common share because the effect would be anti-dilutive.

                                       47
<PAGE>

                    TALK VISUAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

NOTE 14 - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

                                                 2002             2001
                                              ---------       ----------

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

 Write down of Assets Held for Sale (b)      $( 759,998)     $(2,581,986)

 Disposal of property (c)                    $     --        $  (576,997)

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

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

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


NOTE 15 - VENDOR SETTLEMENTS

During the year  ended  December  31,  2002,  the  Company  settled  outstanding
payables with several vendors.  In connection with the settlements,  the Company
recognized a reduction in expenses of approximately $370,000.


NOTE 16 - SUBSEQUENT EVENTS

On February 25, 2003, the Company  negotiated a letter of intent to sell the net
assets  of Mundo  Express  of NY,  Ltd.  The  letter of  intent  is  subject  to
satisfactory completion of due diligence procedures by the intended buyer and is
expected to be completed in April 2003.

On February 26, 2003,  the Company sold its property in  Sacramento,  California
for $5,500,000.  As a result of the sale, the existing  mortgage was assigned to
the purchaser and  approximately  $735,000 of notes payable and related interest
were satisfied.

On March 6, 2003, the Company sold its 400,000  shares of Yak for $800,000.  The
proceeds from the sale were used to reduce notes  payable plus related  interest
and trade payables.

In March 2003, the Company negotiated  settlement agreements with former vendors
reducing  accounts  payable by approximately  $1,125,000 for  consideration of a
$250,000 payment in March 2003, and a promise to pay $123,000 upon completion of
certain asset sale/debt restructuring events.

                                       48
<PAGE>


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

On October 10, 2002,  Mayer Rispler & Company was dismissed from its role as the
independent accountants of the Company. Mayer Rispler's reports on the Company's
financial  statements  for  prior  years did not  contain  an  adverse  opinion,
disclaimer  of opinion,  and were not  qualified or modified as to  uncertainty,
audit scope or accounting principles.  Additionally,  there are no disagreements
between the Company and Mayer Rispler on any matters of  accounting,  disclosure
or auditing.

Kaufman  Rossin  &  Company  was  retained  as  the  Company's  new  independent
accountants.

                                 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.

Mike  Rollins - Age 31,  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.

Joseph A.  Guzman - Age 46, has served as a director  of the  Company  since May
2002.  From 1981 to 1998 he worked  with AT&T in a  variety  of  positions  from
account executive to Vice President of Field Operations for AT&T's Latin America
& Caribbean  Communications  Services Group.  From 1998 to November of 2001, Mr.
Guzman  worked  with Global  Crossings,  most  recently  as the Chief  Operating
Officer for Global Crossing's Latin America  Division.  Mr. Guzman has served in
the California  Air National  Guard and holds a B.S. in Finance from  California
State University at Hayward.

Rodney W. Sturm - Age 61, has served as a  director  of the  Company  since July
2002.  From 1966 to 1996 he worked  with AT&T in a  variety  of  positions  from
Director of International Marketing of AT&T's International Communications Group
to Chairman  and CEO of AT&T Puerto Rico and AT&T Virgin  Islands.  From 1996 to
2002,  Mr. Sturm has served as President of the Sigma Group,  a consulting  firm
focused on strategic  development  and deployment  within the  telecommunication
industry.  Mr. Sturm has served as a director for several  public  companies and
holds a BS in Industrial  Engineering  from the University of Illinois and an MS
in Management from the Stanford Graduate School of Business.

Phil Sitton,  - Age 55, has served as Chief Operating  Officer since March 2003.
From 1973 to 1978 he worked for Eastman Kodak as a Cost Engineer. He joined AT&T
in 1978.  From 1978 to 1998, Mr. Sitton was in a variety of  assignments  and in
various  locations  as a Product  Manager,  National  Sales  Manager,  Marketing
Manager,  Network Operations,  Manager,  Chief Financial Officer,  President and
Chief Operating Officer of a wholly-owned offshore subsidiary, and as a Regional
Managing  Director for AT&T's  Caribbean and Latin America  Group.  From 1998 to
2003 Mr. Sitton served as a consultant  to the  telecommunications  industry and
not-for  -profit   organizations.   During  this  period  he  joined  Centennial
Communications on an interim basis serving as Unit President.

                                       49
<PAGE>


Clinton H.  Snyder,  - Age 48, 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
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  the  Secretary  and CFO of Global
Entertainment Holdings/Equities, Inc.

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 subsequently  filed on
November 6, 2001.  One report on Form 5 was not timely filed in connection  with
an acquisition by Michael  Zwebner of a total of 4,777,286  shares of our common
stock in December 2001. A Form 5 reporting  this  transaction  was  subsequently
filed on February 11, 2002.


ITEM 10. EXECUTIVE COMPENSATION

Compensation of Directors

During  2002,  the  Company  elected to  compensate  its  Directors  through the
issuance of restricted  common stock.  For the Director term beginning on August
12, 2002,  each  non-employee  Director  was given a grant of 150,000  shares of
common stock or $1,500.

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 2002 or 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, 2002 and 2001:

                                       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>
Harley L. Rollins               2002     $102,916            -0-                 6,916,600 (1)
   Chairman of the Board
   of Directors, President and
   Chief Executive Officer

Andrew T. Silber (2)           2002      $103,653            -0-                 5,000,000 (3)
   Former Director of Sales
   and Former  Director        2001      $ 14,835            -0-                     -0-

Michael J. Zwebner (4)         2002          -0-             -0-                     -0-
   Former Chairman of the      2001          -0-          $120,000( 5)           4,000,000 (6)
   Board of Directors

Eugene A. Rosov (7)            2002      $ 41,538            -0-                     -0-
   Former Chief Executive,     2001      $200,000         $ 40,467 (8)           3,000,000 (9)
   Officer, President and Director

Clinton H. Snyder, (10)        2002      $ 15,231            -0-                     -0-
   Director and Secretary,     2001      $132,000         $ 26,000 (11)          3,000,000 (12)
   And Former Chief Financial Officer

Pedro Sanchez (13)             2002      $ 11,700            -0-                     -0-
   Former Chief Technical      2001      $104,250            -0-                  500,000
   Officer
-----------------------------------------------------------------------------------------------
</TABLE>


(1)      As part of Mr. Rollins employment  agreement,  the Board authorized the
         purchase of 1,666,600  restricted shares of our common stock at a price
         of  $0.000001  per share.  In June 2002 the Board  granted Mr.  Rollins
         options to purchase 5,250,000 shares of our common stock.

(2)      Mr. Silber  resigned as Director of Sales and a Director of the Company
         on February 28, 2003.

(3)      In June 2002 the Board  authorized  the issuance of 500,000  restricted
         shares  of our  common  stock to Mr.  Silber.  Additionally,  the Board
         granted Mr. Silber options to purchase  4,500,000  shares of our common
         stock.  These  options  expired  on March  1,  2003  upon Mr.  Silber's
         resignation, as none of the options had vested

(4)      Mr.  Zwebner  resigned  as  Chairman  of the Board of  Directors  and a
         Director on June 20, 2002.

(5)      Mr.  Zwebner's  compensation  was 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 our common stock
         at $0.036 per share on December 21, 2001.

(6)      In December  2001,  the Board  authorized  the  issuance  of  4,000,000
         restricted  shares  of our  common  stock  to  Mr.  Zwebner  under  the
         Company's  stock  compensation  plan.  In exchange  for waiving  future
         consideration  as Chairman of the  Company,  the  restriction  on these
         shares was lifted. These shares were issued in January 2002.

(7)      Mr. Rosov resigned as Chief Executive  Officer,  President and Director
         on February 13, 2002.

(8)      As of December  31, 2001,  the Company had advanced Mr. Rosov  $40,467.
         Pursuant to his separation agreement, this amount has been forgiven.

                                       51
<PAGE>

(9)      In December  2001,  the Board  authorized  the  issuance  of  3,000,000
         restricted  shares of our 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.

(10)     Mr. Snyder resigned as Chief Financial Officer on January 18, 2002.

(11)     As of December 31, 2001,  the Company had advanced Mr. Snyder  $26,000.
         Pursuant to his separation agreement, this amount has been forgiven.

(12)     In December  2001,  the Board  authorized  the  issuance  of  3,000,000
         restricted shares of our 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.

(13)     Mr. Sanchez  resigned as Chief  Technical  Officer on January 22, 2002.
         The Board voted to cancel Mr.  Sanchez's  shares on December  18, 2002,
         which were then effectively cancelled by the Company.

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.

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.

The  Compensation  Committee is composed of the following  Directors:  Joseph A.
Guzman,  Rodney W. Sturm and Clinton H.  Snyder.  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.


                                       52
<PAGE>

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.

The Audit  Committee is composed of the following  Directors:  Joseph A. Guzman,
Rodney W. Sturm and Clinton H. Snyder.

Stock Options

The Company granted  certain  options to the Company's named executive  officers
during  fiscal  year 2002.  Harley L.  Rollins  was  granted a stock  option for
5,250,000  shares of common stock and Andrew T. Silber was granted an option for
4,500,000 shares of common stock. Additionally,  the 1,666,600 restricted shares
of common stock  available for purchase as part of Mr. Rollins  employment  have
not been purchased or issued.

There were no option exercises by the Company's named executive  officers during
2002. The Company did not grant any stock appreciation rights during fiscal year
2002 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 28, 2003, 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>
Harley L. Rollins (4)
   President and Chairman of the Board of Directors          6,916,600      4.65%

Clinton H. Snyder
   Secretary and Director                                    3,500,000      2.35%

Andrew T. Silber (5)
  Former Director of Sales
   and Former Director                                         500,000      0.34%

Joseph A. Guzman
   Director                                                    200,000      0.13%

Rodney W. Sturm
   Director                                                    350,000      0.24%

All directors and executive officers as a
   Group (5 persons) (6)                                    11,466,600      7.71%

----------------------------------------------------------------------------------
</TABLE>

                                       53
<PAGE>


(1) Unless  otherwise  indicated,  the  stockholder's  address is the  Company's
    principal executive offices.

(2) Percentage  ownership  is  based  on  148,725,141  shares  of  common  stock
    outstanding  as of March 28,  2003,  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, 2003. 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) Includes options to purchase 5,250,000 shares of common stock.

(5) Mr.  Silber  resigned as  Director  of Sales and  Director of the Company on
    February 28, 2003.

(6) Includes options to purchase 5,250,000 shares of common stock.

Agreements with potential for change in control - None.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We engaged the services of Michael J. Zwebner,  its former 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 were $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 this  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,  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,  all entities  related by virtue of common  ownership or
management  control by Mr.  Zwebner or members of his family.  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
ended December 31, 2001.

During 2000,  Eugene Rosov, a former director and its former 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 its former 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. Snyder.

                                       54
<PAGE>


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. Mr. Zwebner and Charles Zwebner,  Mr.  Zwebner's  brother,
are significant stockholders of Yak.

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 a separation  agreement with Mr. Rosov, 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, $40,467 to Mr. Rosov, and $93,094 to Mr. Zwebner. 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 2003 as described in the following paragraph.

As of December 31, 2002,  amounts due from a former officer consists of $245,209
due from Michael Zwebner (Mr. Zwebner),  former officer,  former Chairman of the
Board and current  stockholder.  The Company had reached a verbal agreement with
Mr.  Zwebner  to repay  this  amount  plus  accrued  interest  during  2003.  As
negotiations  have  reached an impasse  the  balance  has been  reclassified  to
noncurrent  assets.  However,  management  has  initiated  and  believes it will
prevail in any action required to collect this outstanding balance.


                                       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
24       Power of Attorney
99.1     Certification  Pursuant to 18 U.S.C.  Section 1350, as adopted Pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002
------------------

(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>


(b) Reports on Form 8-K

Date of Report: October 10, 2002 - Item 4. Changes in Registrant's Certifying
                                   Accountant

ITEM 14. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures. The Company maintains controls
and procedures  designed to ensure that information  required to be disclosed in
the reports that the Company files or submits under the Securities  Exchange Act
of 1934 is recorded, processed,  summarized and reported within the time periods
specified  in the rules and forms of the  Securities  and  Exchange  Commission.
Based upon his evaluation of those controls and procedures  performed  within 90
days of the  filing  date of this  report,  the chief  executive  and  principal
financial  officers  of the  Company  concluded  that the  Company's  disclosure
controls and procedures were effective.

Changes in Internal  Controls.  The Company made no  significant  changes in its
internal  controls or in other  factors  that could  significantly  affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive and principal financial officers.

                                       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 and
                                             Chief Financial Officer

Dated:  March 28, 2003


                                       58
<PAGE>




                                 CERTIFICATIONS

I, Harley L. Rollins, certify that:

1. I have reviewed this annual report on Form 10-KSB of Talk Visual Corporation;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. I am responsible for  establishing  and maintaining  disclosure  controls and
procedures  (as  defined  in  Exchange  Act Rules  13a-14  and  15d-14)  for the
registrant and have:

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

         b)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented  in this  annual  report  my  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on my evaluation as of the Evaluation Date;

5. I have disclosed,  based on my most recent  evaluation,  to the  registrant's
auditors and the audit committee of registrant's  board of directors (or persons
performing the equivalent functions):

         a)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls; and

6. I have indicated in this annual report whether or not there were  significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any  corrective  actions with regard to  significant  deficiencies  and material
weaknesses.


Date: March 28, 2003                /s/ HARLEY L. ROLLINS
                                    -------------------------------
                                        Harley L. Rollins
                                        Chief Executive Officer and
                                        Chief Financial Officer


                                       59