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, 1999
                                   ---------------------------------

( )  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. [ ]


                                       1
<PAGE>

  State issuer's revenues for its most recent fiscal year.  $1,165,988
                                                           ------------

  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 27, 2000 was: $77,745,360
                                                        ------------

                (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;
                                                   -----------------------------
38,413,261 shares as of March 21, 2000.
---------------------------------------

                      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.         Business                                                 4
   Item 2.         Facilities                                              11
   Item 3.         Legal proceedings                                       13
   Item 4.         Submission of matters to vote of security holders       13


Part II.
   Item 5.         Market for registrants' common equity and related       13
                   stockholder matters
   Item 6.         Management's discussion and analysis of financial       16
                   condition and results of operations
   Item 7.         Financial statements                                    23
                   (see table of contents, page 22)
   Item 8.         Changes in and disagreements with accountants           45


Part III.
   Item 9.         Directors and executive officers of the registrant      47
   Item 10.        Executive compensation                                  50
   Item 11.        Security ownership of certain beneficial owners and     52
                   management

   Item 12.        Certain relationships and related transactions          53
   Item 13.        Exhibits and reports on Form 8-K                        53



                                       3
<PAGE>


                                      PART I

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


    Except for historical  information  contained herein,  the statements in the
report (including without limitation,  statements indicating that the registrant
"expects",  "estimates",  "anticipates"  or "believes" and all other  statements
concerning future financial results, product offerings or other events that have
not yet occurred) are  forward-looking  statements that are made pursuant to the
safe harbor provisions of the Private Securities  Litigation Reform Act of 1995,
Section 21E of the  Securities  Exchange Act of 1934, as amended (the  "Exchange
Act"),   and  Section  27A  of  the   Securities   Act  of  1933,   as  amended.
Forward-looking   statements  involve  known  and  unknown  factors,  risks  and
uncertainties, and actual results may differ materially from forecasted results.
Those  factors,  risks and  uncertainties  include,  but are not limited to: The
registrant's  ability to effectively  manage its various businesses in a rapidly
changing environment; the timing of new product introductions; retail acceptance
of the registrant's  products;  the registrant's ability to adapt and expand its
product  offerings;  the cost of, and demand for, customer service and technical
support;  price pressures in the competitive  environment;  the  consummation of
possible  acquisitions;  and the  registrant's  ability  to  integrate  acquired
operations into its existing business and manage growth.  Additional information
on these and other risk factors are included  under "Risk Factors" and elsewhere
in this Form 10-KSB.

ITEM 1.  BUSINESS

                                   BACKGROUND

General
-------

Talk Visual  Corporation  ("TVCP",  the "Company" or "Talk Visual") is a leading
provider of  retail-based  videocalling  services  for  business and the general
public  in North  and South  America.  Through  its  Retail  Operations  & Sales
Division, the Company is rapidly developing its videocalling services in Europe,
Eastern  Europe,  the  Caribbean  and  North  Africa.  Taken  together  with the
Company's  innovative   videocalling  equipment  -  the  TV225,  produced  under
exclusive  contract with Motion Media of Bristol,  UK - the Company's  extensive
suite of  telecommunications  products  has  positioned  TVCP to  become a major
provider of videocalling services to businesses and consumers worldwide, linking
people in the developed  countries to one another and to businesses and families
in less developed  nations.  The Company's  retail  locations and its associated
company branch locations in Canada,  the UK, Israel and the Philippines  provide
an audio-visual link for businesses and families.  The service enables unusually
low-cost visual communications especially designed for expatriates and the small
home office marketplace,  allowing these groups to communicate with high-quality
audio-visual images over inter-continental distances, in real-time.

The Company  believes that there is a deep-seated  relationship  between certain
key telecommunications  products/services and other tangential products/services
it carries in its retail operations.  Conceptually, the products/services permit
businesses and consumers to "communicate"  domestically and internationally.  To
support the "communication" needs of key business and consumer populations,  the
Company's  retail  locations  sell a wide range of telecom  and  telecom-related


                                       4
<PAGE>


products  and  services.  The  products  sold  include  pagers,  cellphones  and
videophones;   services  include   long-distance   telephone   calling  in-store
("call-shop  services"),   money  transfer,  and  air  travel  ticket  issuance.
Recently,  the Company has begun the process of retail store build-out to create
a network of retail locations during the year 2000. These stores are in addition
to the planned  deployment of over 1,000  videophone  locations  associated with
Postal  Business  Center  partners  in  the  United  States.   Generally,   most
Company-owned and partnership  locations will sell the majority of the Company's
products and services.

The Videophone  Sales  Division  markets a highly  price-competitive  ISDN-based
video-telephone,   the  TV225.   The  TV225  is  a   sophisticated   interactive
video-appliance, with an enhanced features set designed to provide consumers and
businesses  with the ability to download  news,  movies,  information  and other
real-time data from the desktop, without the need for a computer. The Videophone
Sales  Division also arranges for the Company to provide TV225  purchasers  with
Local  Exchange  Carrier  hookup  for a  128-Kilobit  ISDN line.  Long  distance
service, for which the underlying provider is Sprint, is provided by the Company
and billed to the  consumer on the local  carrier  monthly  bill or  separately,
depending upon carrier billing arrangements.

The Company's Carrier Sales Division works with the Videophone Sales Division to
resell ISDN service to support  128-Kilobit and greater ISDN  videophone  calls.
The Carrier Sales Division  sells both  international  and domestic  service for
ISDN ordinary analog telephone service.  Both the Carrier Sales Division and the
Videophone  Sales Division have been created recently (as of March 2000) for the
purposes  of tying  together  all aspects of the  Company's  product and service
sales  plan.  The Company is also a reseller  for US Wats,  Inc.  long  distance
service  on  a  special  website  uniquely  designed  for  verifiable   customer
authorization  for carrier  designation.  US Wats  provides  highly  competitive
domestic and international tariffs on a direct-to-consumer  basis, with reseller
commissions forwarded automatically to the Company.

The Company believes that  videocalling  services will become one of the fastest
growing areas of the  telecommunications  industry.  Despite its early  promise,
videocalling  has  lagged  major  telecom  products  such  as fax  and  cellular
telephone service,  largely because of a) the cost of equipment;  b) the absence
of a unified ISDN (or IP) setup  mechanism;  and c) the availability of adequate
origination and termination points. Talk Visual believes that it has remedied a)
with the newly available TV225  videophone;  that in conjunction  with the local
exchange   carriers  and  outside   ISDN  service   agencies  the  ordering  and
facilitation  of ISDN lines is now a routine and simple  matter;  and because of
the low  price  of the  TV225  videophone,  the  Company  will be able to  offer
businesses and consumers a broad range of originating and terminating points for
convenient videocalls.

According to the Gartner Group, a respected telecommunications research company,
"the videoconferencing market is growing at 48 percent a year from a base of 1.1
billion dollars in 1995." Another industry research  company,  Forward Concepts,
projects a 40%  annualized  growth  rate from over $1 billion in 1996 to over $5
billion by 2001.  IDC sees the  business  market for  videoconferencing  systems
climbing  to  600,000  systems in 2001.  In  contrast,  they see the  heretofore
non-existent  consumer market also reaching a quarter-million units in 2001, but
blossoming to 5.4 million systems in 2005. Finally, another research firm, Frost
and  Sullivan,  predicts  staggering  growth of  videoconferencing  sales to $35
billion by 2002.

This  prediction  for 2002 is exactly  equivalent to the industry  forecasts for
wireless subscriber growth.


                                       5
<PAGE>

Talk Visual Corporation believes that it has positioned itself to participate in
this projected  growth by providing  equipment,  services and especially  retail
locations  for  the   processing  of  videocalls   and  other  closely   related
"communications" products and services.

The Company was 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,  the Company
became a Nevada corporation.  The Company introduced its videocalling  services,
cellular telephone and pager sales products in early 1999 with the launch of its
first corporate retail locations.  The Company's  principal office is located at
3550  Biscayne  Boulevard,  Suite 704,  Miami,  Florida  33137 and its telephone
number is (305) 572-0575.

                             DESCRIPTION OF BUSINESS

Retail Operations and Sales Division
------------------------------------

The Company  introduced  its first retail stores in early 1999, and was offering
connectivity in its fourteen  Company-owned  locations by July 1999. Through its
current  partnerships with approximately thirty additional  locations,  and with
four hundred  Sprint-enabled  locations,  the Company can offer  service in most
major  cities  on  the  planet.  As the  Company  recently  transitioned  from a
development  stage  company,  the  revenue  from retail  sales of  products  and
services is negligible at this time.

The Company sells the following items out of its retail stores:

 o  Telephone   calls   ("call-shop   services")
 o  Videocalls   (domestic   and international)
 o  Prepaid phone cards and prepaid residential services
 o  Cellular phones,   pagers,  and  related  accessories
 o  High-speed  Internet  services, including free email
 o  Sale and distribution of videotelephones and equipment

By the end of the year 2000, the Company plans to have presence in over 150 U.S.
Metropolitan  Service  Areas  (MSA's),  which  cover  more  than 70% of the U.S.
population and all major markets in Canada.  The Company  anticipates  being the
leading  videocalling  provider for small  business  and  consumer  videocalling
services,  and believes it is currently the  lowest-cost  provider in the United
States and abroad.  The Company purchases low-cost minutes from Sprint and other
carriers, and resells them to its customers and partner retailers.

The Company has arranged with a variety of domestic and  international  carriers
to  carry  its  voice  traffic  from key  populous  cities  to  South  American,
Caribbean, Asian, African and European destinations.  Calls are routed and rated
using outside-vendor software, deployed in each retail store location. A typical
average margin of 40% is retained by the Company for international calls.

The Company  purchases  its prepaid  phone cards from a variety of vendors,  and
offers its  retail  clients a range of pricing  with  "best  per-minute  values"
varying  from  week  to  week  and  month  to  month,   depending   upon  vendor
arrangements. Prepaid phone cards produce a 30% average margin for the Company.

The Company has not launched its prepaid residential services,  but has acquired
switching  equipment to deliver this service in New York, Los Angeles and Miami.
The service is anticipated to be launched during the third quarter of 2000.

                                       6
<PAGE>

Cellular  telephones  and  cellular  services  are  provided  to the  Company by
Voicestream/Omnipoint, AT&T Wireless Services, and Sprint PCS. The Company makes
net margins on service  implementation  of between $100 and $150 per  instrument
sold. At this time, the Company does not enjoy any residual  payments from these
carriers.  Accessories for cellular telephones are a high-margin item (typically
over 300%),  and the Company  promotes its accessories  sales whenever  cellular
phones are sold.

Pagers are provided to the Company by Nixxo, Motorola and Philips.  Price points
enjoyed by the Company allow retail  margins of 10% to 50%,  depending  upon the
service plan and product.  The Company  believes  that its pager sales  programs
will provide a meaningful  contribution  to carrying  expenses.  Accessories are
purchased  from a range of  vendors,  largely  based on price,  quality  and the
cellular telephones most popular within the retail area.

Integrated  Digital Services  Network,  or "ISDN", is made up of two channels of
digital  signals sent over  standard  copper  telephone  lines.  Because it is a
digital signal,  it can achieve  information  transfer rates of up to five times
faster than  standard  analog lines which carry  regular  telephone  calls.  The
Company's ISDN-based network permits a partner retailer to launch calls from the
partner's location to the Company's switching platform,  via the domestic Sprint
network. Calls are launched using either credit-card validation systems over the
ISDN network, or via the partnering retailer's  locally-provided ISDN lines. All
partner retailers' ISDN local lines have  long-distance  service provided by the
Company,  which  resells/rebills  Sprint ISDN  service.  A  subscribing  partner
retailer  establishes  an account with the Company by assigning to the Company a
Letter of  Authorization,  allowing the Company to order local and long distance
ISDN service in the partner's  name.  Fees are paid by the partner  retailers to
the local  exchange  carrier for one-time  installation  and network  connection
fees, and for ongoing  monthly  service rates. A wide range of national  service
plans,  provided by the local  exchange  carriers,  offers monthly costs ranging
from $30 to $90,  with the more costly plans  including  local  exchange  "free"
minutes. The Company "PICs" (Preassigned  Interexchange  Carrier assignment) the
ISDN  phone  numbers  to its  own  account,  and  receives  from  Sprint  a bill
representing the monthly long-distance  traffic by individual account.  Accounts
are  viewed  on-line  on a  daily  basis  by the  Company's  carrier  accounting
department,  and any calls made from the individual ISDN-based phones are billed
directly to the partner  retailer.  The billing  method is simple and effective:
the retailer must have on-file with the Company a valid and current credit card,
which  is  charged  for all  calls  on a  daily  basis.  Charges  are  based  on
pre-determined  routings  and  ratings,  which are made known to the  retailer's
customers by literature at the ISDN  videophone  site. The retailer  charges the
customer  for all call  minutes at the time of call  termination,  and  collects
cash,  credit  card  or  other  payment  methodology;  these  methodologies  are
transparent to the Company,  which bills the partner  retailer's credit card for
the appropriate call charges less the retained retailer's portion. This retained
portion typically represents about 25% of the final videocall fee. Typical calls
are an average of twenty-two  (22) minutes long,  and typical fees are $1.00 per
minute for domestic  videocalls.  The  retailer,  therefore,  will normally keep
$5.50 for each call. While experience is limited, the Company's current research
indicates  that five calls per day are the likely  complement,  subject to local
advertising,  demographics and location. This would represent approximately $650
per month in revenue to the  retailer,  of which a median amount of $60 would be
direct and indirect costs. It is estimated that most retailers will retain a net
income of about $600 monthly.

                                       7
<PAGE>

The service is currently being rolled out in the United States. The Company will
provide a minimum of 1,000  retailers  who are  members  of the Postal  Business
Express Center association (USXP - Universal Express) with low-cost or zero-cost
videophones in order to create the network  end-points for the  origination  and
termination of videocalls.

The  Company is in the process of building  retail  locations  of its own in key
major cities.  Retail stores are being opened in several business  locations and
expatriate  communities  in New York  City (in the  boroughs  of  Manhattan  and
Queens),  in towns on the New York/New  Jersey  border  (greater New York area),
Miami,  Chicago,  Denver,  Los  Angeles  and San  Francisco.  Correlated  retail
locations  are under  investigation  in the most  populous  cities of  Colombia,
Guatemala,  Honduras,  the Dominican Republic,  and Mexico. Some of these retail
locations will be partnership  locations.  In addition to these  locations,  the
Company has entered into an agreement with Skynet Corporation,  an international
package delivery service with over 300 locations in major cities  worldwide,  to
set up 200 of its locations with  videophone  services  under a revenue  sharing
agreement.

Videophone Sales Division
-------------------------

The Company has begun providing  videophone  sales in response to the industry's
need  for  low-cost  videophone  instruments.  The  Company's  videophone  sales
division has committed to Motion Media, of Bristol, UK to sell a total of 10,000
of its TV225 videophone units, custom designed for Talk Visual  Corporation.  In
order to  implement  sales  programs,  the  Company is hiring two teams of eight
sales and sales support personnel to implement the investigatory program focused
on videophone sales in Miami, FL.  Subscribers to the videophone program will a)
purchase a videophone  for $1396,  based on a downpayment of $100 and 36 monthly
payments of $36; b) purchase  installation  of  facilities  for and monthly ISDN
service from the local  exchange  carrier,  arranged for by the Company;  and c)
purchase for $200 the required  Network  Interface  device (NT-1) to connect the
videophone to the local  network.  Purchasers may opt to purchase the videophone
outright for $1599, with an additional NT-1 purchase, if needed.

Videophone  purchasers are connected to the local exchange  carrier  through the
efforts of the Carrier  Sales  Division.  The Carrier  Sales  Division  receives
orders from the Videophone Sales Division,  implements the service,  and follows
up with customers to offer them other long distance and local telecommunications
service  products.  The Company  believes  that the consumers and both small and
larger  businesses  will  appreciate the convenient  size and performance of the
TV225.  In addition,  local exchange  subscribers are able to have any "regular"
telephone  service line  upgraded to ISDN service for a modest  charge.  The new
ISDN line allows both "regular"  telephone  services - phone calls,  fax calls -
and permits as well high-speed Internet connection to the subscriber's  Internet
Service  Provider  (ISP),  along  with  providing  for  connectivity  to service
videocalls.  Long  distance  ISDN  services will be provided by Sprint and other
carriers.

The Company  believes  that its sales  efforts in Miami can be expanded  city by
city into every major American business and population  center.  The combination
of a) a quality,  low-cost videophone; b) "wrapped" service for the arranging of
ISDN line installation;  c) videophone  availability in local retail partnership
operations;  d) the existing "legacy" ISDN-based  equipment in tens of thousands
of businesses;  and e) the presence of videophones in high-visibility areas such
as airport  lounges,  will create a vibrant market for videophone  carrier sales
and videophone instrument sales.

ENGINEERING, RESEARCH AND DEVELOPMENT
-------------------------------------

Talk Visual  Corporation  believes that its future  success will depend in large
part on its ability to enhance  existing  services  and develop new  services in

                                       8
<PAGE>

response  to changing  market,  consumer or  technological  developments  in the
video-telecommunications areas. An important factor in the future success of the
Company's  videophone sales and service  offerings will be the Company's ability
to provide,  at competitive  prices,  more functionality and features than those
which might become typically available in other competitive offerings. While the
Company  does  not  know  of  any  other  entities  currently   providing  truly
competitive  services,  it does believe that such  competition will arise in the
future.

The Company is developing  proprietary  methodologies to route, rate and service
videocalls.  Calls being  launched  from Company  partnership  locations in, for
example,  Trans World Airlines  "Ambassadors Club" lounges,  will go through the
local exchange carrier to a platform at the Company's headquarters.  Specialized
ISDN-based T-1 circuits will route and rate the outbound call to other videocall
equipment  anywhere  in the world.  The calling  customer  will pay for the call
using a standard  credit card, the  information for which is entered at the time
of the call.

The  Company   believes  that  providing  a  platform  for   centralization   of
videocalling is a key element in its future growth.  The platform allows callers
to access a vast menu of  available  sites to call - both  private and  business
sites - in addition to the  Company's  locations.  Callers may access a complete
menu of  choices in order to make  reservations  with a live  operator  on-line,
place a videocall, or receive information from news or entertainment sources.

These  technologies  are currently under  development at the research level. The
Company anticipates making them available to the general public by the middle of
year 2000.

The  Company  believes  that two key  wireless  technologies  will assist in its
effective delivery of services:  a) the linking of physical  locations,  whether
retail operations or switching locations,  by wireless services generally in the
unregulated  2.4  gigahertz  range,  to key  points-of-presence  for  carriers -
specifically   to  avoid  the  costs   associated   with   "IP-T-1"   facilities
traditionally   deployed  by  the  local  exchange   carriers,   and  the  major
long-distance  carriers,  for prices in excess of $1,000 monthly  carrying fees;
and b) the  development  of "local area"  wireless  video-telephony  to enable a
wireless  mobile  "cart" or "unit" to move around in hospital,  nursing home and
hotel environments.  The Company is developing both these technologies,  in both
the ISDN and IP transmission realms, and anticipates trial deployment before the
end of year 2000.

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

The  Company's   sales   strategy  is  to  establish   and  maintain   long-term
relationships  with  its  consumer  and  business  customers,  and  to  leverage
relationships  with major  corporations  in order to rapidly expand its presence
and reach. The Company  utilizes a consultative  sales process to understand and
define  customer  needs,  and  determine how those needs can be addressed by the
Company's  services.  Talk  Visual  seeks to build  upon its  existing  customer
relationships by integrating and cross-selling its different service  offerings.
The Company's  sales cycle varies for different  services and products,  and the
development of key large corporate  relationships can be up to 12 months for the
Company's Carrier and Videophone Sales Divisions.

The Company's sales force consists of sales  representatives  who generally have
significant experience in either retail and/or  telecommunications sales, either
as former employees of wireline or wireless  carriers or in selling products and
services to businesses and/or within a quality retail environment.   The Company

                                       9
<PAGE>

typically assigns each business sales  representative to a well-defined group of
business  prospects  in order to support  the  development  and  maintenance  of
long-term  strategic  customer  relationships.   The  sales  representative  are
supported  by product  specific  account and service  managers  within the sales
teams and who assist in the  management  of the  accounts on a daily basis after
the  completion  of  the  initial  sale.  At  this  time,  the  Company's  sales
representatives  are  located at the  Company  headquarters  in Miami,  Florida;
however,  the Company  intends to roll out its  Miami-based  sales programs into
strategic cities in major geographic regions.

The Company's direct sales strategy is complemented by a marketing  program that
includes  participation  in industry shows,  advertising  and public  relations.
Because the  Company's  business and retail  consumer  groups are  diverse,  the
Company seeks to gain wide exposure through selected  promotions and advertising
on a highly targeted basis.

CUSTOMERS
---------

The  Company  provides  its  services  to  small  and  large  business  users of
video-telephony through its Videophone Sales Division; to expatriate populations
seeking to contact their business associates,  friends and family abroad through
the various  Company and  partnership  retail  outlets as mediated by the Retail
Operations and Sales Division;  and to partners  themselves through  specialized
team members who are integrated into the other sales and support divisions.  The
Company  believes  that a close  integration  and  inter-penetration  of  sales,
marketing  and  support  personnel  helps  to  create  the   cross-communication
necessary for a vibrant, multi-purpose sales effort.

For the year ended  December 31, 1999, the Company's  sales totaled  $1,165,988,
which was composed of $1,075,482  from real estate  operations  and $90,506 from
telecommunication products and services.

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

The market for  videocalling  services is competitive on the equipment side, and
just   beginning   to   develop   on   the   carrier,    support   and   product
development/features  side. A number of companies currently offer one or more of
the  services  provided  by the  Company,  but  generally  only  in the  area of
hardware. In some instances, for example, in the case of Polycom and PictureTel,
the Company  acts as a reseller of  equipment  purchased  through a major dealer
such as Sprint.  At this time, the Company does not know of any other  providers
who bring together the various disparate  elements of the  video-services  sales
process - from retail  operations,  to hardware,  to support of installation and
long-distance services.

The  Company   believes   that  the   principal   competitive   factors  in  the
video-telephony industry include the ability to identify and respond to customer
needs, quality and breadth of service offerings,  price and technical expertise.
The Company's ability to compete also depends in part on a number of competitive
factors out of its control,  including the ability to hire and retain employees,
the development by others of products and services that are competitive with the
Company's  products and  services,  the price at which  others offer  comparable
products  and  services  and the extent of its  competitors'  responsiveness  to
customer  needs.  There can be no  assurance  that the  Company  will be able to
continue  to compete  successfully  with its  existing  competitors  or with new
competitors.

                                       10
<PAGE>

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

The  Federal   Communications   Commission   (FCC),   under  the  terms  of  the
Communications Act of 1934, as amended,  including the Telecommunications Act of
1996, regulates interstate  communications and use of radio spectrum,  including
entry,  exit,  rates and  terms of  operation.  The  Company  presently  neither
operates  any   facilities   utilizing   regulated   frequencies   nor  has  any
facilities-based  services involving  interstate  communications.  However,  the
Company has applied for and has been  granted a "Section  214"  license from the
FCC, which allows the Company to resell  international  long-distance  services.
This  license will  continue to be  maintained  by the  Company,  along with the
reporting requirements pursuant thereto.

The Company  recognizes that the  long-distance and local exchange carriers that
underlie  the  Company's  services  are  regulated at both the federal and state
levels.  Such regulation may decrease the growth of the  videocalling  industry,
affect  the  development  of key  markets,  and  limit the  number of  potential
customers  for the Company's  services or impede the Company's  ability to offer
competitive  services,  or  otherwise  have a  material  adverse  effect  on the
Company's business and results of operation.

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

As more fully described below under  "Facilities," the Company owns and operates
two real estate  properties.  One is located in  Sacramento,  California and the
other is in Toronto,  Ontario,  Canada. Both properties are leased to commercial
tenants and are held by the subsidiaries of the Company.

EMPLOYEES
---------

As of December 31, 1999, the Company had a total of 22 full-time employees and 2
part-time  employees.  The  Company's  employees are not covered by a collective
bargaining  agreement and the Company has  experienced  no work  stoppages.  The
Company believes that its relationships with its employees is good.

ITEM 2 - FACILITIES

The  Company  leases  space  at  2  retail  locations,   and  at  its  principal
headquarters  in Miami,  Florida.  The Miami location  serves as the core sales,
support  and  marketing  facility  headquarters  for  the  Company's  executive,
engineering,  sales, human resources and finance  personnel.  The following is a
listing of the Company's significant leased facilities:

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

Miami, Florida - Headquarters      3,143                       June 30, 2002

Miami, Florida - Retail store      1,890                   December 31, 2001

Boston, Massachusetts - store      1,030                   December 31, 2001


The Company,  through its  subsidiaries,  also owns two  commercial  real estate
properties.  The Company 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.    A retail videocalling center has been opened in a

                                       11
<PAGE>

515 square  foot space.  On February  24,  1999,  the Company  acquired a 22,662
square foot  property in  Toronto,  Canada,  which  contains  commercial  rental
tenants.

The Sacramento property has an occupancy rate of 82.2% and is composed of 50.46%
office rental and 49.54%  retail  stores.  Two of the twenty six tenants  occupy
more than ten  percent of the  rentable  square  footage;  one is the U. S. Post
Office and the other operates a bingo hall. The average  effective annual rental
per square foot for the entire property is $9.88. All existing leases, excluding
renewal  provisions  and the U. S. Post office,  will expire within the next ten
years. Management believes that the property is stable and the current occupancy
rate will be maintained or improved.

For federal tax  purposes,  the basis in the property is the  acquisition  price
paid by Sacramento Results,  Inc., the subsidiary in which the property is held.
The property is being  depreciated over 39 years under the straight line method.
Real estate taxes for 1999 totaled $55,696.

This property is encumbered by five loans as follows:

Mortgage  note,  secured by a first lien on the land and  building,  including a
deed of trust on rents and fixtures;  bearing  interest at 12%,  payable monthly
with the  entire  principal  due  January,  2004.  The  current  balance on this
mortgage is $3,840,000.

12.5%  Mortgage  note,  secured  by a  second  lien on the  land  and  building,
including a deed of trust on rents and a lien on specified equipment;  disbursed
to a maximum  funding of $500,000  based upon  completion  of certain  leasehold
improvements   and   delivery  of  specified   equipment;   payable  in  monthly
installments  of  principal  and interest  for 60 months;  undisbursed  funds at
December 31, 1999 totaled $350,000.  The balance on the mortgage is $124,912, at
December 31, 1999.

Convertible  discounted  loan  note,  secured  by  an  unrecorded  lien  on  the
Sacramento  land  and  building,  with  imputed  interest  at the  rate of 9.4%,
interest  payable  monthly,   principal   balance  due  November  2001,  net  of
unamortized discount of $108,900.  The balance on this loan at December 31, 1999
is $386,100.

A non-interest  bearing  obligation of $1,000,000 to the seller of the property.
This note was  renegotiated  and partially paid down on February 19, 1999. Under
the  renegotiated  note, the Company paid  $457,000.  The  renegotiated  note is
secured  by a  subordinated  position  on the  land  and  building  to  existing
mortgages and  collateralized  by 200,000 shares of the Company's  common stock.
During the first  quarter of 2000,  the holder of the note  signed a  settlement
agreement in which it accepted a cash payment of $450,000 and 100,000  shares of
common stock in full payment of this obligation.  Balance due as of December 31,
1999 is $893,000.

A 9% Mortgage note,  secured by a lien on the land and building,  with a maximum
funding of $1,000,000 due September 1, 2000.  Interest is payable  monthly.  The
balance at December 31, 1999 is $500,000.

The Toronto,  Ontario,  Canada  property  has an occupancy  rate of 79.07% which
represents three tenants out of the four units available. All tenants are retail
stores on street level.  The average  effective  annual rental for 1999 is $8.51
per square  foot.  All  existing  leases will expire  within the next ten years,
however  management is confident that the property will maintain or improve upon
its current occupancy level.

The property is located in Canada and subject to Canadian  tax law.  Real estate
taxes for the year ended December 31, 1999 totaled $47,406.

                                       12
<PAGE>

This property is encumbered by a 7.05%  Mortgage  note,  secured by the land and
building  and  matures  February  1, 2002.  The  mortgage  is payable in monthly
installments  of $8,000,  including  principal  and  interest.  The  mortgage is
payable in Canadian  dollars.  The balance on December 31, 1999 in US dollars is
$964,089.

The property was pledged by the seller as collateral  on an unrelated  bank debt
of the seller in the  amount of  $621,000.  The  seller has  provided a personal
guarantee and  indemnity  until the pledge is  discharged.  The seller is in the
process of having the pledge discharged.

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

ITEM 3 - LEGAL PROCEEDINGS

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

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

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

                                    PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's  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 the
Common Stock.  After the Company began public trading on May 14, 1996, and until
April 7, 1999,  the 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 the National Quotation Bureau, LLC:

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

CALENDAR YEAR 1999                   High                Low
                                    ------             ------
   First Quarter                    $4.125             $3.625
   Second Quarter                    3.500              0.460
   Third Quarter                     0.570              0.120
   Fourth Quarter                    0.910              0.057

                                       13
<PAGE>



CALENDAR YEAR 1998                   High                Low
                                    ------             ------
   First Quarter                    $3.75              $1.125
   Second Quarter                    3.375              0.3125
   Third Quarter                     1.78125            0.9375
   Fourth Quarter                    4.00               0.8125



Market  prices have been  adjusted  for the 1:3 reverse  split of the  Company's
Common Stock on September 6, 1998. 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 27,  2000,  there were  38,413,261  shares of Common  Stock
outstanding, representing approximately 9200 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 the Common
Stock.

DIVIDENDS
---------

         The Company  has not paid any cash  dividends  on its capital  stock to
date. The Company currently anticipates that it will retain all future earnings,
if any,  for use in its  business  and  does  not  anticipate  paying  any  cash
dividends on its capital  stock in the  foreseeable  future.  In  addition,  the
payment of cash dividends may be limited by financing agreements entered into by
the Company in the future.

         In connection with the acquisition of real estate on February 24, 1999,
the Company issued 975,000 shares of 1999 Class A Convertible  Preferred  stock,
$.001 par value,  paying a dividend  of $0.095 per share per annum.  The Company
paid a total of $69,469 in dividends on the Class A Convertible  Preferred stock
during 1999.

Sales of Unregistered Securities.
--------------------------------

     The Company has issued and sold unregistered  securities that have not been
previously  reported 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 the
distribution.  All the issued  securities were restricted  securities under Rule
144, or Reg S regulations,  and appropriate  restrictive legends were affixed to
the securities in each transaction.


                                       14
<PAGE>


On October 26,  1999,  the Company  issued  200,000  shares of common stock to a
consultant for services in representing the Company to the investing  community.
The shares were issued at a value of $0.0625 for a total value of $12,500. These
securities  were  issued in a  transaction  exempt from  registration  under the
Securities  Act of 1933 in reliance on Sections 4(2) and 4(6) of the  Securities
Act of 1933.

On November 4, 1999,  the Company  satisfied  its  obligation to a foreign based
corporation in which the Chairman of the Company is a 33% shareholder,  for open
invoices  in the amount of  $130,000,  representing  consulting  and  management
services provided by the Chairman,  with the issuance of 1,698,014  shares.  The
value on the date of issue was $.0766 per share. These securities were issued in
a  transaction  exempt from  registration  under the  Securities  Act of 1933 in
reliance on Sections 4(2) and 4(6) of the Securities Act of 1933.

On November 17, 1999,  the Company  issued  100,000  shares of common stock to a
consultant for services in representing  the Company to the investing public via
the  internet.  The shares  were issued at $0.7031 for a total value of $70,310.
These securities were issued in a transaction exempt from registration under the
Securities  Act of 1933 in reliance on Sections 4(2) and 4(6) of the  Securities
Act of 1933.

On December  23,  1999,  the  Company  issued  18,000  shares to  employees  and
associates as additional  compensation.  These shares were valued at $0.4688 per
share,  for a total  expense  of  $8,438.  These  securities  were  issued  in a
transaction  exempt  from  registration  under  the  Securities  Act of  1933 in
reliance on Sections 4(2) and 4(6) of the Securities Act of 1933.

On December 30, 1999,  the Company  issued  150,500  shares in  satisfaction  of
consulting  contract  obligations to three  consultants for marketing,  business
acquisition and computer programming services.  Issue prices ranged from $0.4062
to $0.4688  per share for a total  expense of  $70,523.  These  securities  were
issued in transactions exempt from registration under the Securities Act of 1933
in reliance on Sections 4(2) and 4(6) of the Securities Act of 1933.

Conversion of 1999 Series-A Convertible Preferred Stock
-------------------------------------------------------

On  December  1,  1999,  the holder of the  975,000  1999  Series-A  Convertible
Preferred  stock,  originally  issued in connection  with the acquisition of the
Toronto property, notified the Company of its intention to convert the Preferred
stock to common stock under the terms of the conversion  privilege  contained in
the  Certificate  of  Designation.  The formula  outlined in the  Certificate of
Designation,  called for the  conversion  to be based on the lesser of (x) $3.25
per share or (y) the average of the lowest  three day closing bid prices for the
Common Stock as reported by the NASDAQ  SmallCap  Market or such other  national
securities  exchange or quotation system during the 25 trading days prior to the
conversion  date. The arithmetic  average yields $0.0583 per share,  for a total
issue obligation of 16,714,381  shares. At December 31, 1999, none of the shares
had been converted.  The Company has been advised that the Preferred shareholder
will  convert  the shares  over the next  thirty six  months.  The holder of the
Preferred shares has agreed on all conversions  after the first 3,348,500 shares
to re-invest, within the thirty-six month period, $1.00 per converted share, for
a total investment to the Company of $13,365,000.


                                       15
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

The Company was organized as Legacy Software,  Inc.  ("Legacy") in California in
1989, as a successor to a partnership  formed in 1986 and was  reincorporated in
Delaware in March,  1996,  then  reincorporated  in Nevada in 1999.  The Company
completed an initial  public  offering of 1,150,000  shares of its common stock,
par value $.001 per share  ("Common  Stock"),  in May of 1996.  In  September of
1998,  the Company  effected a one for three (1:3)  reverse  split of the Common
Stock. From its inception until October,  1998,  Legacy primarily  developed and
sold educational  entertainment  software.  On September 14, 1998, a merger (the
"Merger")   was   announced   between   Videocall   International    Corporation
("Videocall") and Legacy. Videocall was a development stage company incorporated
in Florida in  February,  1998,  headquartered  in Cambridge  Massachusetts,  to
provide  videocalling and related  telecommunication  services to businesses and
consumers.  Following the announcement of the proposed Merger,  the key officers
of Videocall  were elected as officers of Legacy and open positions on the Board
of Directors were filled by Directors of Videocall, thus creating common control
of the two  companies.  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"). The stock-for-stock transaction, in accordance with
the terms of the Merger, was approved by the stockholders of both companies June
15, 1999,  after which  Videocall was merged into Talk Visual,  with Talk Visual
(the  "Company")  being the survivor.  In addition,  the  stockholders  approved
increasing  the  authorized  common  shares to  100,000,000  and the  authorized
preferred shares to 25,000,000.

The Merger has been accounted for as a reverse  acquisition.  As a result of the
change in  control  and  change in  business  activity  in 1998,  the  Merger is
considered to have occurred by December 31, 1998 and accordingly, all references
are to the activities of Videocall.

On  August  30,  1999,  the  Company  moved  its  headquarters  from  Cambridge,
Massachusetts to Miami, Florida.

Prior to August 24,  1999,  the  Company  was  considered  a  development  stage
company.  On August 24, 1999,  the Company  launched its  videocalling  services
through its wholly owned retail  stores in the United  States and joint  venture
partners in Europe,  Israel,  Canada,  Asia and South  America.  On September 2,
1999, the Company announced the successful transmission of full-motion, superior
quality videocalls over the internet from the Company's  Sacramento,  California
location to the Miami, Florida location.

In conjunction with Film World, Inc. and producers John Daly (Platoon,  The Last
Emperor,  Terminator)  and Menahem  Golan  (Cobra Delta  Force,  Runaway  Train,
Missing in Action),  the Company  initiated Global Visual Casting on November 2,
1999.  This service permits  aspiring  actors and actresses  around the globe to
conduct  live  videocall  auditions  with  Film  World's  casting  directors  in
Hollywood.

In December,  1999, the Company announced a joint venture with Universal Express
with access to over 7,000 potential sites for installation of  videoconferencing
equipment.  The  Company  designed  and is  currently  offering  an  attractive,
low-cost  turnkey  package for those retail  locations to join the  videocalling
network.  Also in December,  the Company initiated its internet sales operation,
Beeperforabuck.com  to commence selling pagers at a low cost over the world wide
web.


                                       16
<PAGE>

Through a recently  signed  contract  with an original  equipment  manufacturer,
Motion Media,  Ltd.,  the Company now offers a desktop  based  videoconferencing
telephone at a reasonable price. The Company views this unit as the next step in
deploying video telephony to the mass market.

In October of 1998,  Videocall  acquired the stock of Sacramento  Results,  Inc.
("SRI"),  a California  corporation.  SRI's primary asset  consists of a 119,100
square  foot,  two story,  strip  center  retail and office  complex  located in
Sacramento,  California.  In  February,  1999,  the  Company  formed a  Canadian
subsidiary to acquire a 22,662 square foot  property in Toronto,  Canada,  which
contains commercial retail rental tenants.  Both properties  currently represent
the primary source of the Company's gross receipts.

The  Company  plans  expansion  through an  aggressive  program of  acquisition,
opening new retail sites,  forming joint  ventures with other telecom  providers
and expanding the telecom product  offerings in all physical and internet retail
sites.

RESULTS OF OPERATIONS

Fiscal Year Ended December 31, 1999,  compared to Fiscal Year Ended December 31,
1998

The Company's  predecessor,  Videocall,  was in development  stage during all of
1998 and  until  August  24,  1999.  Therefore,  revenue  from  operations  only
commenced in the fourth quarter of 1999.

Sales of $8,147 in services and $79,393 in equipment  represent the commencement
of the  Company's  core  business  activity - that of selling  videocalling  and
telephony  service and  equipment.  The majority of the equipment  sales were to
joint venture  partners,  some of which share common management with the Company
and therefore are considered related parties.

The initial  investment in real estate property occurred in October of 1998. The
increase  in real  estate  revenues  of  $846,355  results  from a full  year of
ownership of the  Sacramento  property and the addition in February  1999 of the
Toronto property.  The Toronto property is 20% of the revenue and the Sacramento
property is 80% of rental receipts.

Software  development costs incurred prior to the Merger totaled  $1,487,018 and
accumulated  amortization prior to the current year aggregated  $1,105,325 for a
net  asset  value  of  $381,693.  Management  has  reviewed  the  value  of  the
development  costs and  determined  that it was necessary to reduce the value by
$206,694 to reflect the net realizable value of the asset. The Company currently
has a contract for sale of the software asset for the amount of the adjusted net
realizable value.

Telecommunication  and retail operation  expenses represent the costs of initial
store openings and operating  expenses for the retail stores. The major elements
of the total expense of $442,710 are comprised of the following:

                                       17
<PAGE>

      Advertising                    $ 64,956
      Rents                            22,704
      Tech Support                    104,539
      Store Salaries                  150,064
      Telecom costs                    46,933
      Supplies, Utilities, Misc.       53,514
                                      -------
              Total                  $442,710
                                      =======

Research and  development  costs  decreased  $197,609,  from $270,376 in 1998 to
$72,767 in 1999.  This decrease  represented  the reduction in expenditures as a
result of completion of the development of the web based reservation  system for
videocalling and the software for retail store operations.

Real estate operations expense for the year ended December 31, 1998,  included a
one time charge to bad debt for $150,959.  This amount was for funds transferred
by the seller of the  Sacramento  property to it's  related  entities  that were
never repaid.  Actual general and administrative costs for the rental operations
totaled  $50,774 for the short period of ownership in 1998 and $292,610 for both
properties for the year ended December 31, 1999.

General, administrative and marketing expenses are comprised of the following


                                                  1999         1998
                                                 ------       ------
          Salaries and benefits               $  719,943     $260,391
          Travel                                 295,286       85,219
          Office, computer and maintenance       372,927       90,140
          Rents, licenses and other expenses     304,344       66,642
          Consultants                          1,652,453       48,827
          Legal and other professional         1,178,418      205,260
          Marketing and public relations         459,782       51,607
                                               ---------      -------
                     Total                    $4,983,153     $808,086
                                               =========      =======


Of the total  $4,983,153  expense in 1999,  $2,441,568 was paid in common stock;
actual cash payments totaled  $2,541,585.  For the year ended December 31, 1998,
of the total  expense of  $808,086,  $223,000  was paid in common  stock and the
balance of $585,086 was paid in cash. Consultants,  legal and other professional
expenses  totaling  $2,830,871  for the year ended  December 31, 1999,  included
$2,296,629  paid  in  common  stock,  leaving  actual  cash  payments  to  those
professionals  in the  amount  of  $534,242.  Management  anticipates  that  the
majority  of these  expenses  are one time,  as they  result  from  identifying,
developing and cultivating business relations for deployment of the videocalling
network and with respect to the legal expense, resolution of issues arising from
the Merger and deployment of videocalling services.

Interest  expense of $663,964 for the year ended  December  31, 1999,  increased
over the year ended December 31, 1998 in the amount of $557,196,  primarily from
the full year ownership of the Sacramento and Ontario properties in 1999.

                                       18
<PAGE>

Dividends  paid on the  Preferred  stock in 1999 result from the issuance of the
Series 1999-A  Convertible  Preferred  stock for the  acquisition of the Toronto
property.  On December 1, 1999,  the holder of the Preferred  stock notified the
Company of its  intention to convert the  Preferred  stock to common stock under
the  terms  of  the  conversion   privilege  contained  in  the  Certificate  of
Designation of the Series 1999-A  Convertible  Preferred Stock issue. No further
dividends will be due as a result of the election to convert.

     As of December  31, 1999,  the Company had federal and state net  operating
loss carry-forwards of approximately  $12,215,000 and $6,552,000,  respectively,
available to offset  taxable  income  through the year 2019.  The  Company's net
deferred tax assets consisted primarily of net operating losses. The Company has
established a valuation  allowance  equal to the net deferred tax asset for each
period, as the Company could not conclude,  based upon prior recurring operating
losses,  that it was  more  likely  than  not that  the  Company  will  generate
sufficient  taxable income before 2013 to utilize all of the Company's  deferred
tax assets.

Year 2000 Compliance

The Company did not  encounter  any  disruptions  in service as a result of Year
2000  computer  programming.  The  Company  did not  separately  identify  costs
incurred in connection  with its Year 2000  compliance  activities as such costs
were not  significant  because they  generally  have been incurred in the normal
course of internally  modifying and updating the  Company's  software  programs.
Future expenditures are not expected to be significant and will be funded out of
operating cash flows.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1999,  the Company had $287,156 of cash and cash  equivalents
on hand. The Company will require  additional cash to finance continuing revenue
growth, new product introduction and acquisitions.

Net cash outflows from operating activities for the year ended December 31, 1999
was  $2,315,093  and $839,511 for the year ended December 31, 1998. The increase
in net outflows  results from the Company  operations  extending the entire year
versus part of the year in 1998.  The total net cash outflow of  $2,315,093  for
1999,  was  comprised  primarily of the net loss from  operations  of $5,954,719
adjusted  for  non-cash  items in the  amount  of  $3,093,871,  an  increase  in
inventory  and other  receivables  totaling  $151,923  offset by a  decrease  in
accounts  receivable of $27,785,  a decrease in other current  assets of $81,740
and an increase  in accounts  payable  and other  current  liabilities  totaling
$588,153.

Cash inflows from  investing  activities of $294,989 for the year ended December
31, 1999,  resulted  primarily  from the  inclusion of net assets  acquired as a
result  of  the  Merger.  Purchases  of  equipment  and  leasehold  improvements
aggregated  $1,275,724  in the year ended  December 31, 1999 and $125,138 in the

                                       19
<PAGE>

year ended  December 31, 1998. In the year ended  December 31, 1999, an increase
in the  advances  to  related  parties  accounted  for  the use of  $589,366  of
investing cash flows.

Net cash provided by financing  activities was $1,928,602 in 1999 and $1,743,041
in  1998.  These  funds  were  achieved  by new debt of  $1,054,568  in 1999 and
$608,493 in 1998; proceeds from private placements of common stock of $1,000,000
in 1999 and  $1,172,709 in 1998 and  collection of prior year  subscriptions  of
$688,931 in 1999,  offset by payments on debt and payment of loan fees  totaling
$745,428 in 1999 and  $38,161 in 1998 and cash  dividend  payments on  preferred
stock of $69,469.

RISK FACTORS

As of December 31, 1999, the Company has never achieved operating  profits.  The
Company is dependent on revenues from the real estate operations, investor stock
subscriptions,  short term and long term borrowings and retail  videocalling and
telecommunication  product sales for working  capital needs,  until the business
operations  generate  sufficient  cash  flow to fund  the  Company.  There is no
assurance of profitability - because the Company,  prior to August 24, 1999, was
a developmental company, there can be no assurance that the Company will achieve
profitability and, even if achieved,  that such profitability will be consistent
on a quarterly or annual basis.

During the first  quarter of 2000 the Company has  collected  $1,908,790  of its
stock subscriptions  receivable. It is anticipated that the remaining $1,061,976
will be collected during the second quarter of 2000.  Additionally,  the Company
has  collected  $1,053,500  in option  exercise  payments  and $446,900 due from
shareholder.  The  Chairman of the  Company has made a guarantee  to fund and/or
obtain funding to meet the obligations and working capital needs of the Company.
In addition,  the Company anticipates  receiving  $13,365,000 from the holder of
the Convertible Preferred stock over the next thirty six months as the preferred
is converted to common stock.

Management anticipates that the available funds are sufficient to meet the needs
for working  capital and capital  expenditures in the near term. The Company may
need to raise additional funds for the pursuit of additional  acquisitions,  for
the  undertaking  of new  product  developments  or if the  Company  experiences
operating  losses that exceed  expectations.  If the Company  raises  additional
funds  through the issuance of equity,  or  equity-related  or debt  securities,
these securities may have rights,  preferences or privileges  senior to those of
the rights of the common stock and the  Company's  stockholders  may  experience
additional  dilution.  The Company cannot be certain that  additional  financing
will be available on favorable terms when required, or at all.

Effective  March 30,  2000,  the Company has entered  into a one year  placement
agreement with a prominent  investment  banking firm for a proposed  offering of
equity  securities  to  provide  capital  to the  Company  in an amount of up to
$75,000,000. Under the terms of the agreement, the Company is required to file a
registration  statement with the Securities and Exchange Commission covering the
common  stock to be issued.  The issue  price of the stock will be based upon an
average price for a period of 22 consecutive  trading days preceding the date of
funding.

Management  of  Growth;   Uncertainties   Relating  to  Acquisitions,   Business
Combinations and New Businesses.  The Company has pursued, is currently pursuing

                                       20
<PAGE>

and, in the future may pursue,  new technologies  and businesses  internally and
through  acquisitions and combinations which involve significant risks. Any such
acquisition  or  combination  may involve,  among other things,  the issuance of
equity securities, the payment of cash, the incurrence of contingent liabilities
and the  amortization  of  expenses  related to  goodwill  and other  intangible
assets, and transaction costs, which have adversely  affected,  or may adversely
affect, the Company's  business' results of operations and financial  condition.
The  Company's  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  the  Company's
operations.  There is no  assurance  that the  Company  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 the Company's 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 the  Company  has 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 the Company's  business and
operating and financial  difficulties  of any new or newly combined  operations,
any of which could have a materially  adverse effect on the Company's  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.

                                       21
<PAGE>

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


                                   Contents

Report of Independent Auditors.........................................      23
Consolidated Balance Sheets............................................   24-25
Consolidated Statements of Operations..................................      26
Consolidated Statements of Shareholders' Equity........................   27-28
Consolidated Statements of Cash Flows..................................   29-30
Notes to Consolidated Financial Statements.............................   31-47

                                       22
<PAGE>

              Report of Independent Auditors

To the Stockholders of
Talk Visual Corporation
Miami, Florida

We have  audited  the  accompanying  consolidated  balance  sheet of Talk Visual
Corporation as of December 31, 1999, and the related consolidated  statements of
operations, shareholders' equity and cash flows for each of the two years in the
period  ended   December  31,  1999.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of Talk Visual
Corporation at December 31,1999,  and the results of its operations and its cash
flows for each of the two years ended in the period ended  December 31, 1999, in
conformity with generally accepted accounting principles.

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

/s/Mayer Rispler & Company,P.C.
-------------------------------
Mayer Rispler & Company, P.C.
Brooklyn, New York
March 30, 2000

                                       23
<PAGE>

                          TALK VISUAL CORPORATION


                         CONSOLIDATED BALANCE SHEET
                             DECEMBER 31, 1999

                                     ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                     $   287,156
   Accounts receivable, net of allowances
    for doubtful accounts of $3,017                                   46,031
   Inventory                                                          25,853
   Other receivables                                                 530,319
   Stock subscriptions receivable                                  1,908,790
   Marketable securities                                             180,043
   Other current assets                                               56,172
                                                                  ----------
   Total current assets                                          $ 3,034,364

PROPERTY AND EQUIPMENT, net                                       11,477,805

ADVANCES TO RELATED ENTITIES                                         675,102

OTHER ASSETS                                                         451,118
                                                                  ----------
   TOTAL                                                         $15,638,389
                                                                  ==========

                  See notes to consolidated financial statements.


                                       24
<PAGE>

                             TALK VISUAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                                  (Continued)
                                DECEMBER 31, 1999

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Notes payable and current portion
     of long-term debt                                           $ 1,571,634
    Accounts payable                                                 918,780
    Accrued expenses                                                 248,824
    Other current liabilities                                         52,828
                                                                  ----------
    Total current liabilities                                      2,792,066


LONG-TERM DEBT, net of current portion                             5,372,001
                                                                   ---------
   TOTAL LIABILITIES                                               8,164,067
                                                                   ---------

COMMITMENTS AND CONTINGENCIES                                           --

STOCKHOLDERS' EQUITY
   Series A Convertible  redeemable preferred stock -
     liquidation value $1 per share, par
     value $.001 per share, 25,000,000 shares
     authorized; 975,000 issued and outstanding                          975

   Common Stock, par value $.001 per share,
     100,000,000 shares authorized; 32,060,978 shares
          issued and outstanding                                      32,061
   Common stock subscribed                                             4,241
   Additional paid in capital                                     16,409,119
   Accumulated deficit                                            (7,221,561)
   Accumulated other comprehensive loss                             (688,537)
   Stock subscriptions receivable                                 (1,061,976)
                                                                  ----------
   Total Stockholders' Equity                                      7,474,322
                                                                  ----------
       TOTAL                                                     $15,638,389
                                                                  ==========

                 See notes to consolidated financial statements.


                                       25
<PAGE>

                             TALK VISUAL CORPORATION
                       CONSOLIDATED STATEMENTS OF OPERATIONS

                                                 YEARS ENDED DECEMBER 31,
                                                 ------------------------
                                                 1999                1998
                                                 ----                ----
REVENUE

Telecommunication Services and

   Product sales                              $    8,147         $     --
 Equipment sales, related parties                 79,393               --
 Real Estate revenues                          1,075,482            229,127
 Other income                                      2,966               --
                                              ----------          ---------
Total revenue                                  1,165,988            229,127
                                              ----------          ---------
COSTS AND EXPENSES
 Cost of equipment sales, telecommunication
     and retail operation expenses               442,710               --
 Depreciation and amortization                   299,264             41,982
 Research and development                         72,767            270,376
 Real estate operations                          292,610            201,733
 General, administrative and marketing         4,983,153            808,086
 Write-down of software development
   costs                                         206,694               --
                                              ----------          ---------
Total costs and expenses                       6,297,198          1,322,177
                                              ----------          ---------
LOSS FROM OPERATIONS                          (5,131,210)        (1,093,050)
                                              ----------          ---------
OTHER INCOME (EXPENSE)
  Interest expense                              (663,964)          (106,768)
  Interest income                                  5,915              2,445
  Foreign currency translation loss                 (962)              --
  Adjustment of non-marketable securities
    to fair value                               (164,498)              --
                                              ----------         ----------
                                                (823,509)          (104,323)
 NET LOSS                                    $(5,954,719)       $(1,197,373)

DIVIDEND ON PREFERRED STOCK                  $    69,469        $      --
                                              ----------         ----------

NET LOSS APPLICABLE TO COMMON SHARES         $(6,024,188)       $(1,197,373)
                                              ==========         ==========
NET LOSS PER COMMON SHARE
  BASIC AND DILUTED                          $     (0.23)       $     (0.06)
                                              ==========         ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD                 26,674,262         21,234,818
                                              ==========         ==========

                 See notes to consolidated financial statements

                                       26
<PAGE>

<TABLE>
<CAPTION>
 Talk Visual Corporation
 Consolidated Statements of Stockholders' Equity
 Years Ended December 31, 1999 and 1998
                                                                                                                   Additional
                                                 Preferred Shares            Common Shares        Stock             Paid In
                                                 Shares    Amount         Shares       Amount   Subscribed          Capital
                                                 ------    ------        ------        ------   ----------          -------

<S>                                              <C>       <C>            <C>       <C>         <C>            <C>
Balance January 1, 1998                             --     $  --          885,000   $    885        --          $  7,062,557

Year Ended December 31, 1998:
     Common shares issued in private placement      --        --          472,667        473        --               308,777
     Exercise of warrants                           --        --           19,084         19        --                74,981
     Common shares subscribed                       --        --             --         --           354           2,453,748
     Common shares issued for services              --        --           16,667         17        --               222,983
     Common shares exchanged for debt               --        --             --         --            28              73,172
     Net Loss                                       --        --             --         --          --                 --
     Other comprehensive income - unrealized gain
       (loss) on marketable securities              --        --             --         --          --                 --
     Comprehensive loss                             --        --             --         --          --                 --
     Issued pursuant to Videocall-Talk Visual
       Merger                                       --        --       19,841,400     19,841      25,693            (481,599)
                                                ----------------------------------------------------------------------------
Balance December 31,1998                            --        --       21,234,818     21,235      26,075           9,714,619

Year Ended December 31, 1999:
     Effect Equity transfer of Talk
       Visual-Videocall Merger                      --        --             --         --          --               678,592
     Collections on subscriptions                   --        --             --         --       (25,693)
     Common Shares issued for services              --        --        4,459,642      4,460        --             2,437,108
     Common Shares issued in exchange
       for debt                                     --        --           27,500         28        --               106,535
     Previously subscribed stock,
       issued                                       --        --        2,321,017      2,292        (354)             (1,938)
     Issuance of preferred shares                975,000       975           --         --          --               974,024
     Issuance of stock for prior
       agreement                                    --        --             --           28         (28)              --
     Common shares issued in private
       placement                                    --        --        4,000,000      4,000        --               996,000
     Common shares subscribed                       --        --             --         --         4,241           1,495,759
     Issued to employees                            --        --           18,000         18        --                 8,420
     Net Loss                                       --        --             --         --          --                 --
     Other comprehensive loss - unrealized
       loss on marketable securities
       and currency exchange                        --        --             --         --          --                 --
     Comprehensive loss                             --        --             --         --          --                 --
     Dividends paid on preferred stock              --        --             --         --          --                 --
                                                ----------------------------------------------------------------------------
Balance December 31,1999                         975,000   $   975     32,060,977   $     32,061   $   4,241    $ 16,409,119
                                                ============================================================================
</TABLE>

                 See notes to consolidated financial statements


                                       27
<PAGE>

<TABLE>
<CAPTION>
 Talk Visual Corporation
 Consolidated Statement of Stockholders' Equity
 Years Ended December 31, 1999 and 1998

               (continued)

                                                                Accumulated
                                                                   Other               Stock            Total
                                                 Accumulated    Comprehensive        Subscription    Stockholders'  Comprehensive
                                                 Deficit           Loss              Receivable         Equity         Loss
                                                 -----------    ------------         ------------      ----------   ------------

<S>                                            <C>            <C>                  <C>                <C>            <C>
Balance January 1, 1998                        $(6,511,054)   $      --            $    --            $   552,388

Year Ended December 31, 1998:
     Common shares issued in private placement        --             --                 --                309,250
     Exercise of warrants                             --             --                 --                 75,000
     Common shares subscribed                         --             --             (157,000)           2,297,102
     Common shares issued for services                --             --                 --                223,000
     Common shares exchanged for debt                 --             --                 --                 73,200
     Net Loss                                   (1,318,706)          --                 --             (1,318,706)   $ (1,318,706)
     Other comprehensive income -
       unrealized gain
       (loss) on marketable securities                --          207,043               --                207,043         207,043
                                                                                                                      -----------
     Comprehensive loss                               --             --                 --                  --       $ (1,111,663)
                                                                                                                      ===========
     Issued pursuant to Videocall-Talk Visual
       Merger                                    6,632,387           --           (1,589,666)           4,606,656
                                                ------------------------------------------------------------------
Balance December 31,1998                        (1,197,373)       207,043         (1,746,666)           7,024,933

Year Ended December 31, 1999:
     Effect Equity transfer of Talk
       Visual-Videocall Merger                        --             --                 --                678,592
     Collections on subscriptions                     --             --            1,746,666            1,720,973
     Common Shares issued for services                --             --                 --              2,441,568
     Common Shares issued in exchange
       for debt                                       --             --                 --                106,563
     Previously subscribed stock,
       issued                                         --             --                 --                  --
     Issuance of preferred shares                     --             --                 --                974,999
     Issuance of stock for prior
       agreement                                      --             --                 --                  --
     Common shares issued in private
       placement                                      --             --                                 1,000,000
     Common shares subscribed                         --             --           (1,061,976)             438,024
     Issued to employees                              --             --                 --                  8,438

     Net Loss                                   (5,954,719)          --                 --             (5,954,719)     (5,954,719)
     Other comprehensive loss - unrealized
       loss on marketable securities
       and currency exchange                          --         (895,580)              --               (895,580)       (895,580)
                                                                                                                      -----------
     Comprehensive loss                               --             --                 --                    --     $ (6,850,299)
                                                                                                                      ===========
     Dividends paid on preferred stock                --          (69,469)              --                (69,469)
                                                ------------------------------------------------------------------

Balance December 31,1999                       $(7,221,561)   $  (688,537)       $(1,061,976)         $ 7,474,322
                                                ==================================================================
</TABLE>

                 See notes to consolidated financial statements


                                       28
<PAGE>

<TABLE>
<CAPTION>
                           TALK VISUAL CORPORATION
                     CONSOLIDATED STATEMENT OF CASH FLOWS

                                                               YEAR ENDED DECEMBER 31,
                                                               -----------------------
                                                                  1999           1998
                                                              -----------    -----------
<S>                                                           <C>            <C>
Cash Flows From Operating Activities:

Net Loss                                                      $(5,954,719)   $(1,197,374)

Adjustments to reconcile net
  loss to net cash used
  in operating activities:
  Depreciation and amortization                                   272,491         41,979
  Amortization of product development costs                       206,605           --
  Write down of other investments                                 145,563           --
  Write off of intangibles                                         27,645           --
  Issuance of common stock in exchange for services             2,441,567        223,000

Increase (decrease) in cash from changes in:

   Accounts receivable, net                                        27,785         28,326
   Inventory                                                      (17,603)          --
   Other receivables                                             (134,320)       (98,674)
   Other current assets                                            81,740        (94,160)
   Accounts payable                                               514,893        184,838
   Accrued expenses                                                73,232         43,024
   Other current liabilities                                           28         29,530
                                                              -----------    -----------
      Net Cash from Operating Activities                       (2,315,093)      (839,511)
                                                              -----------    -----------
Cash Flows From Investing Activities:

   Purchase of property and equipment                          (1,275,724)      (125,138)
   Advances - related parties                                    (589,366)          --
   Purchase of subsidiary                                            --         (468,950)
   Assets acquired in merger                                    2,157,842        153,608
   Acquisition or disposition of other assets                       2,237        (85,606)
                                                              -----------    -----------
      Net Cash from Investing Activities                          294,989       (526,086)
                                                              -----------    -----------
Cash Flows from Financing Activities:

   Borrowings on debt                                           1,054,568        608,493
   Payments on Notes Payable and Long Term Debt                  (727,883)        (1,812)
   Proceeds from Private Placements of Common Stock             1,000,000      1,172,709
   Collections on stock subscriptions receivable                  688,931           --
   Cash dividend payments                                         (69,469)          --
   Other                                                          (17,545)       (36,349)
                                                              -----------    -----------
      Net Cash from Financing Activities                        1,928,602      1,743,041
                                                              -----------    -----------

Increase (decrease) in cash and cash equivalents                  (91,502)       377,444
Cash and cash equivalents at beginning of period                  378,658          1,214
                                                              -----------    -----------
Cash and cash equivalents at end of period                    $   287,156    $   378,658
                                                              ===========    ===========
</TABLE>

                 See notes to consolidated financial statements


                                       29
<PAGE>

                           TALK VISUAL CORPORATION
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (continued)



                                                      YEAR ENDED DECEMBER 31,
                                                     -----------------------
Supplemental disclosure of cash flow information:       1999          1998
                                                     ---------     ----------
a. Cash paid during the period for:

       interest                                     $  641,888     $    5,540
                                                     ---------     ----------
       income taxes                                 $      800     $     -0-
                                                     ---------     ----------

b. Noncash investing and financing transactions:
For the year ended December 31, 1999:

     Purchase  of  Canadian  real  estate  in  exchange  for  975,000  shares of
convertible  preferred  stock and  assumption  of a  mortgage  in the  amount of
$987,755.

     Issuance  of 200,000  shares of common  stock in  satisfaction  of accounts
payable in the amount of $81,240.

     Issuance of 55,650 shares of common stock in  satisfaction of notes payable
in the amount of $129,009.

Videocall International
-----------------------
For the year ended December 31, 1998:

     Issuance of 611,909  shares of common  stock for $75,000 in  equipment  and
$66,000 in third party notes receivable.

     Issuance of 2,974,250 shares of common stock for marketable securities with
a value of $882,100.

     Issuance of 3,000,000  common shares and a note payable for  $1,000,000 for
the acquisition of the subsidiary which holds the California real estate.

     Issuance of 212,500 shares of common stock for 212,500  options to purchase
marketable securities, valued at $341,998 net of the option exercise price.

Talk Visual Corp. (formerly Legacy Software, Inc.)
--------------------------------------------------
For the year ended December 31, 1998:

         On December 18,  1998,  the Company  agreed to issue  52,051  shares of
common stock in exchange for the  contribution of a short term investment with a
market value of $104,102.

         In December,  1998, the Company agreed to issue 28,150 shares of common
stock for the cancellation of a note payable  including  accrued interest in the
amount of $73,200.

      Sale of assets and assumption of debt by a third party $147,935.

      Reduction of debt by a former co-development partner   $300,000.

                 See notes to consolidated financial statements


                                       30
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Merger
----------

Talk  Visual  Corporation,   formerly  Legacy  Software,   Inc.  ("Legacy")  was
incorporated  in Delaware in 1996 and primarily  developed and sold  educational
entertainment software.  Videocall International Corporation ("Videocall") was a
development stage company incorporated in Florida in February,  1998, to provide
videocalling services to businesses and consumers.  Pursuant to an Agreement and
Plan of Merger  ("Merger"),  dated  September  14, 1998, a merger was  announced
between Videocall and Legacy.  Subsequently,  the key officers of Videocall were
elected as directors and officers of Legacy, thus creating common control of the
two companies.  At December 31, 1998, Legacy had ceased developing and marketing
software products and began focusing on the business activities of Videocall. In
February,  1999,  Legacy's  name was changed to Talk Visual  Corporation  ("Talk
Visual").  The  stock-for-stock  transaction was approved by the stockholders of
both companies June 15, 1999, after which Videocall was merged with Talk Visual,
with Talk Visual (the "Company") being the survivor.

The Merger has been accounted for as a reverse acquisition.  Shareholders of the
Company also approved the  re-incorporation of the Company in Nevada. Each share
of Videocall's  common stock was converted into either 3 shares,  1 share and/or
options exercisable at $1.00 per share,  depending on the shareholder's purchase
price of the  holdings.  In effecting  the Merger,  the Company was obligated to
issue 19,841,400 shares of common stock to the Videocall  shareholders,  and has
granted  15,608,475  three  year  options  for one  share of stock  each,  at an
exercise price of $1.00 per share.  As a result of the common control and change
of  business  activities,   these  financial  statements  reflect  the  combined
operations of both companies for the full 1999 fiscal year, as if the merger had
occurred at December 31, 1998.

Business
--------

Prior to August 24,  1999,  the  Company  was  considered  a  development  stage
company.  On August 24, 1999, the Company became  operational with the launch of
its  videocalling  services through its wholly owned retail stores in the United
States and joint  venture  partners in Europe,  Israel,  Canada,  Asia and South
America.  Additionally,   during  1999,  the  Company  commenced  selling  other
telecommunications  services and equipment  through its retail  outlets and over
the  internet.  The Company  also owns and  operates,  through its wholly  owned
subsidiary,   Sacramento  Results,   Inc.,  a  commercial  property  located  in
Sacramento,  California  and through its wholly  owned  subsidiary,  The Ontario
International Property Corporation,  a commercial property in Toronto,  Ontario,
Canada.

On  August  30,  1999,  the  Company  moved  its  headquarters  from  Cambridge,
Massachusetts to Miami, Florida.

On February 8, 1999,  the Company  purchased a commercial  property  through its
wholly owned  subsidiary,  The Ontario  International  Property  Corporation,  a
Canadian corporation, as follows:


                                       31
<PAGE>

                             TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


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

Business(continued)
--------

        Assumption of mortgage                        $  987,755
        Issuance of 975,000 shares of Class A
        Convertible preferred stock valued at
          $1.00 per share, paying dividends
          of $.095 per share                             975,000
         Cash                                             45,383
                                                      ----------
                                                      $2,008,138
                                                      ==========

The property was purchased subject to a lien of $621,000.  The prior owners have
committed to have the lien released on the property and have provided a personal
guarantee and indemnity to that effect from the prior owner's principal.

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

The  consolidated  financial  statements  include  the  accounts  of Talk Visual
Corporation and its wholly owned subsidiaries,  Sacramento Results, Inc. and The
Ontario  International  Property  Corporation.  All  intercompany  balances  and
transactions have been eliminated.

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

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

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

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

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

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


                                       32
<PAGE>

                              TALK VISUAL CORPORATION


                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


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

Inventory
---------

Inventory,  which consists of finished  goods, is valued at the lower of cost or
market. Cost is determined by the first-in, first-out (FIFO) method.

Stock Subscriptions Receivable
------------------------------

On December 14, 1999 a private  placement of $1,500,000 for 4,241,322  shares of
Common Stock was  subscribed to by third party  investors to provide  additional
capital to the Company.  Of the $2,970,766 still due under the  subscriptions at
December 31, 1999, through March 27, 1999,  $1,908,790 has been received in cash
and have been  presented  as a component of current  assets in the  accompanying
financial statements; the balance of $1,061,976 remains to be collected, and has
been  presented  as a  reduction  of  stockholder  equity  in  the  accompanying
financial statements.

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

Property and equipment is stated at cost less accumulated depreciation.

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

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

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

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

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

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

Earnings Per Share
------------------

The Company  adopted SFAS No. 128,  "Earnings Per Share".  SFAS No. 128 requires
presentation of basic and diluted  earnings per share.  Basic earnings per share
is computed by dividing income available to common  stockholders by the weighted
average


                                       33
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


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

Earnings Per Share (continued)
-------------------

number of common shares  outstanding for the reporting period.  Diluted earnings
per share  reflects the  potential  dilution  that could occur if  securities or
other contracts,  such as stock options, to issue common stock were exercised or
converted into common stock. All amounts have been adjusted for the September 8,
1998 one for three  reverse  split.  For the years ended  December  31, 1999 and
1998,  diluted  earnings  per  share  have  not  been  included  as it  would be
antidilutive.

Foreign Currency Conversion
---------------------------

The  financial   statements  of  the  Company's  foreign  subsidiary  have  been
translated  into United States  dollars at the average  exchange rate during the
year for the statement of operations and year-end rate for the balance sheet.

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".

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

Statement of Financial  Accounting Standards No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities,"  ("SFAS  133")  issued  by the  FASB  is
effective for financial  statements  with fiscal years  beginning after June 15,
2000.  This  statement  establishes   accounting  and  reporting  standards  for
derivative  instruments and for hedging activities.  The Company does not expect
the adoption of SFAS 133 to have an impact on its financial  position or results
of operations.

NOTE 2 - LIQUIDITY

As reflected in the  accompanying  financial  statements,  the Company  incurred
significant  net losses for the years 1999 and 1998,  and expects to continue to
incur losses in 2000.  The Company is dependent on revenues from the real estate
operations,  investor stock  subscriptions,  short term and long term borrowings
and retail videocalling and telecommunication product sales for working capital


                                       34
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 2 - LIQUIDITY (continued)

needs, until the operating  activities generate sufficient cash flow to fund the
Company.

During  the  first  quarter  of 2000 the  Company  collected  $1,908,790  of its
subscriptions  receivable.  It is anticipated that the remaining $1,061,976 will
be  collected  during the  second  quarter of 2000.  Additionally,  the  Company
collected  $1,053,500  in option  exercise  payments  and  $446,900 due from the
Chairman, during the first quarter of 2000. The Chairman of the Company has made
a  guarantee  to fund or obtain  funding  to meet the  obligations  and  working
capital needs of the Company.  Based upon the current cash  utilization rate and
Management's  plan for expansion and new  products/joint  ventures/acquisitions,
and the Chairman's funding obligation,  Management believes that there should be
sufficient capital to meet the needs of the Company for the next twelve months.

In addition to the funding noted above, the Company has entered into a placement
agreement  with an  investment  banking  firm for a proposed  offering of equity
securities to provide capital to the Company in an amount of up to $75,000,000.

NOTE 3 - MARKETABLE SECURITIES

Marketable  securities  consist of common stock currently  trading on a national
exchange.  Marketable securities are stated at market value as determined by the
most  recently  traded  price of each  security  at the balance  sheet date.  At
December 31, 1999,  marketable  securities were considered as available-for-sale
as defined by Statement of Financial  Accounting  Standards No. 115, "Accounting
for  Certain  Investments  in Debt and  Equity  Securities."  Available-for-sale
securities are carried at fair value, with the unrealized gains and losses,  net
of tax, reported as a separate  component of stockholders'  equity.  The cost of
investments sold is determined on the specific  identification  or the first-in,
first-out method. At December 31, 1999, available-for-sale equity securities and
their market value was as follows:

         Equity Securities, at cost                    $ 882,100
         Unrealized  Loss                               (702,057)
                                                      -----------
         Market Value at December 31, 1999             $ 180,043
                                                      ===========

These equity securities are held in a Canadian  brokerage account under the name
of the Company's  chairman.  The Company has received  executed stock assignment
certificates.


                                       35
<PAGE>


                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 4 - OTHER RECEIVABLES

Included in other  receivables  at December  31, 1999,  is a  receivable  in the
amount of $446,901  due from the Chairman of the Company.  This  receivable  was
repaid, in full, during the first quarter of 2000.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

Other operations:
          Equipment, Machinery and Automobiles        $  406,106
          Furniture and Fixtures                          42,255
          Leasehold Improvements                         348,568

Real estate operations:
          Equipment, Machinery and Automobiles           137,476
          Furniture and Fixtures                          13,833
          Leasehold Improvements                          92,268
          Buildings                                    6,167,094
          Land                                         4,590,296
                                                       ---------
                                                      11,797,896

          Less accumulated depreciation                 (320,091)
                                                      ----------
          Net assets                                 $11,477,805
                                                      ==========


Depreciation and amortization expense on property and equipment was $223,733 for
the year ended  December  31, 1999 and $29,793 for the year ended  December  31,
1998.

NOTE 6 - PRODUCT DEVELOPMENT COSTS

As noted  earlier,  the Company has ceased  developing  and  marketing  software
products  and is  focusing on  videoconferencing  and  telecommunications.  With
respect to the year ended December 31, 1999, the Company reduced the capitalized
software development costs by $206,694 to reflect management's  determination of
the current estimated net realizable value.

NOTE 7 - DEBT

The Company's debt is as follows:

In connection  with the  acquisition  of the  Sacramento  property,  the Company
incurred a short term non-interest  bearing obligation of $1,000,000.  The short


                                       36
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)

<TABLE>
<CAPTION>

NOTE 7 - DEBT (continued)

term obligation to the seller of $1,000,000 was  renegotiated and partially paid
down on February  19, 1999.  Under the  renegotiated  note,  the Company paid an
advance against leasehold improvements in the amount of $350,000 and a principal
payment of $107,000, leaving a balance due of $893,000 on the renegotiated note.
The  renegotiated  note is secured by a third  position  on the real  estate and
collateralized by 200,000 shares of Talk Visual common stock.  Subsequent to the
balance  sheet date,  the holder of the note signed a  settlement  agreement  in
which it has accepted a cash  payment of $450,000  and 100,000  shares of common
stock in full payment of this  obligation.  The adjustment  will be reflected in
subsequent financial statements.

<S>                                                                               <C>
Balance due as of December 31, 1999                                               $   893,000


Unsecured note payable to IBM (past due, currently in
negotiation)                                                                          150,000


Due to prior officer (in arbitration)                                                  72,066

Convertible discounted loan note ("CDLN"),  secured by an unrecorded lien on the
Sacramento  land  and  building,  with  imputed  interest  at the  rate of 9.4%,
interest  payable  monthly,   principal   balance  due  November  2001,  net  of
unamortized discount of $108,900 (see discussion below)                               386,100

Mortgage  note,  secured by a first lien on the  Sacramento  land and  building,
including a deed of trust on rents and fixtures; bearing interest at 10% for the
initial  12  months  and 12%  thereafter;  payable  monthly,  interest  only for
seventy-two months, with the entire principal due January, 2004                     3,840,000

12.5%  Mortgage  note,  secured  by a  second  lien on the  Sacramento  land and
building,  including a deed of trust on rents and a lien on specified equipment;
disbursed  to a maximum  funding of $500,000  based upon  completion  of certain
leasehold  improvements and delivery of specified equipment;  payable in monthly
installments  of  principal  and interest  for 60 months;  undisbursed  funds at
December 31, 1999 totaled $350,000                                                    124,912

9% Mortgage note, secured by a lien on the Sacramento land and
building, maximum funding of $1,000,000 due September 1, 2000.
Interest payable monthly                                                              500,000

</TABLE>


                                       37
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 7 - DEBT (continued)

7.05% Mortgage  note,  secured by the land and building
in Toronto  Ontario,  and matures February 1, 2002. The
mortgage is payable in monthly  installments of $8,000,
including   principal  and  interest  The  mortgage  is
payable in Canadian dollars                                         964,089

10.27% Unsecured installment obligation payable monthly,
principal and interest, in the amount of $1,561.21 for
9 months                                                             13,468
                                                                 ----------
Total Debt                                                       $6,943,635
Less current maturity                                             1,571,634
                                                                 ----------
Long term obligations                                            $5,372,001
                                                                 ==========

The aggregate  maturities of long-term debt maturing in succeeding  years are as
follows:

                                          Amount
                                        ---------
              2001                     $  499,423
              2002                         62,058
              2003                        934,924
              2004                      3,875,596


Concurrent with the placement of the Convertible  Discounted Loan Note ("CDLN"),
the lenders  have  subscribed  to 990,000  shares of common  stock at a price of
$990,000, paying $108,900 toward the total subscription. The CDLN is convertible
with an  additional  payment  of  $108,900,  at the option of the  holder,  into
495,000 shares of the Company's common stock,  during the term of the note or at
maturity.  If at maturity,  the holder  declines  the  conversion  feature,  the
Company is obligated to pay the principal on the note,  rescind the subscription
for the 990,000  shares of common  stock and refund the deposit paid toward that
subscription.  At the time of the placement of the CDLN, there was no beneficial
conversion  feature as the  conversion  price and market price of the underlying
common stock were both at $1.00 per share.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company  leases  certain  equipment and real estate under various  operating
leases which expire at various  dates  through  June 30,  2002.  Future  minimum
rental payments  required under operating  leases that have initial or remaining
terms in excess of one year at December 31, 1999 are as follows:


                                       38
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued)

       Operating
     December 31,                Leases
     ------------                ------

        2000                    $114,358

        2001                      92,586

        2002                      23,573
                                 -------
  Total future minimum rentals  $230,517
                                 =======

Rent  expense for the years ended  December  31, 1999 and 1998 was  $144,432 and
$42,601, respectively.

Legal Proceedings
-----------------

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

NOTE 9 - STOCKHOLDERS' EQUITY

The Company's  authorized capital stock consists of 100,000,000 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, 1999, the Company has  32,060,978  issued and
outstanding  Common  shares and 975,000  issued and  outstanding  Series  1999-A
Preferred shares. The preferred issue has a stated liquidation  preference value
of  $975,000  or $1.00 per share,  with no voting  rights and pays a  cumulative
dividend of $0.095 per share.  Holders of the Series 1999-A  preferred  have the
right to convert the stated  value of their  shares,  in whole or in part,  into
common stock at a conversion price of $1.00 per share. The Company has the right
to redeem,  in whole or in part, the Series 1999-A Preferred issue for $1.15 per
share at any time.

In May 1996,  the  Company  consummated  an initial  public  offering of 383,333
shares of its common  stock,  adjusted  for the 1:3 reverse  split in  September
1998.  On June 18,  1999,  the  Company  completed  the  merger  with  Videocall
International  Corporation.  This  transaction  was recorded as a reverse merger
effective December 31, 1998.

Options and Warrants Outstanding
--------------------------------

As a result of the  Merger,  on June 18,  1999,  the Company  issued  options to
purchase  15,608,475 shares of common stock at $1.00 per share with a three year
expiration period to the Videocall  shareholders and 1,800,000 warrants at $0.25
per share with a three year  expiration  period as a  commission  fee to brokers
involved in the introduction of the merged companies. No value has been recorded
for these options since they have not been registered and are not tradeable.

                                       39
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)

NOTE 9 - STOCKHOLDERS' EQUITY (continued)

On May 30, 1999, the Company issued 45,000 options at $2.97 per share with a two
year  expiration  period to a former  employee.  The stock  price on the date of
issue was $2.875. Accordingly, no compensation expense was recorded.

In connection with the Company's  initial public  offering of common stock,  the
Company issued  warrants to a trust company to purchase  66,667 shares of common
stock at $3.93 per  share,  expiring  five  years  from the date of  issue.  The
warrants were  exercisable  immediately.  Through  December 31, 1999,  the trust
company has exercised 60,432 of the warrants.

As of December 31, 1999,  warrants and options to purchase  17,593,043 shares of
common stock were outstanding.

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

During 1999 the Company  issued an aggregate  1,132,128  shares of common stock,
for various  services and  obligations.  At issuance,  the stock ranged in price
from $0.0625 per share to $4.00 per share.  These  issuances  were recorded at a
total  expense  of  $2,056,773,  which  includes a  non-marketability  discount.
Included in this amount is 50,000  shares of common stock to the  President as a
bonus  and  18,000  shares  of  common  stock to  employees  and  associates  as
additional compensation.

On January 25, 1999,  the Company issued 600,000 shares of common stock pursuant
to the agreement with the parties  responsible for the introduction of Videocall
to the Company.  This transaction was priced at $3.75 per share for a total cost
of $2,250,000,  which was charged to equity. The Company is also obligated under
the  agreement,  to issue options,  exercisable at $0.25 per share,  to the same
parties.  See the discussion  under the June 18, 1999 equity  transaction  noted
below.

On February 24, 1999, the Company  acquired a 22,622 square foot office facility
in  Ontario,  Canada with the  issuance  of 975,000  shares of Class A Preferred
Stock, Series 1999-A, $.001 par value, and the assumption of a first mortgage in
the amount of $935,450 along with various minor  obligations  totaling  $31,293.
The total acquisition price of the property was $2,008,138. On December 1, 1999,
the holder of the Preferred shares issued under this  acquisition,  notified the
Company  of  its  election  to  exercise  the  convertibility   feature  of  the
certificate  provisions.  Under  the  formula  outlined  in the  certificate  of
designation  of the  preferred  stock and based upon the price of the  Company's
common stock for the time period on which the conversion is based, each share of
preferred  stock  will be  converted  to  17.14  shares  of  common  stock.  The
conversion  of the  preferred  stock will result in the  issuance of  16,714,381
shares  of  common  stock.  The  Company  has been  advised  that the  Preferred
shareholder will convert the shares over the next thirty six months.  The holder
of the Preferred shares has agreed on all conversions  after the first 3,348,500
shares to reinvest,  within the  thirty-six  month  period,  $1.00 per converted
share, for a total investment to the Company of $13,365,000.

On March 5, 1999,  the Company  issued 27,500 shares of common stock in exchange
for  $105,000 of notes  payable and  accrued  interest at $3.875 per share.  The


                                       40
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 9 - STOCKHOLDERS' EQUITY (continued)

market  value  of the  shares  issued  on the  date  of  exchange  exceeded  the
obligations recorded on the books of the Company by $1,562.

On June 18, 1999, as a result of the Videocall  Merger,  each share of Videocall
common was converted into the right to receive  either one share,  three shares,
and/or options of Talk Visual Common Stock or,  19,841,400 shares and 15,608,477
options in the  aggregate.  The options are  exercisable  at $1.00 per share and
expire three years from their issue date.  In  connection  with the Merger,  the
Company  also  issued  1,800,000  options,  in  addition  to the  options to the
shareholders  previously  noted,  at an exercise  price of $0.25 per share for a
three year period, to third parties who were responsible for the introduction of
the Company and Videocall.

On July 16, 1999,  the Company issued  4,000,000  shares of common stock under a
private placement  subscription  dated July 7, 1999. The shares were issued at a
subscribed price of $0.25 per share, based on the trading price for the day at a
twenty percent discount.

On  November  4,  1999,  the  Company   satisfied  its  obligation  to  Overseas
Communications, Ltd., a foreign corporation in which the Chairman of the Company
is a 33% shareholder, for open invoices in the amount of $130,000,  representing
consulting and management  services provided by the Chairman,  with the issuance
of 1,698,014  shares of common stock.  The value on the date of issue was $.0766
per share.

Pursuant to an S-8 filing  December 17, 1999,  the Company issued 980,000 shares
of common stock to various  individuals as compensation  for services  rendered.
Issue prices ranged from $0.10 per share to $0.4688 per share, for a total value
of $347,750.

NOTE 10 - STOCK OPTION AND PURCHASE PLAN

Talk Visual  Corporation,  formerly Legacy  Software,  Inc.,  predecessor to the
merged entities, had a tax qualified stock option plan for employees and certain
non-employees,  that provided for the granting of stock  options and  authorized
the  issuance  of  common  stock.  On June  19,  1997,  in  connection  with the
termination  of certain  employment  agreements,  all stock  options  were fully
vested for terminating  employees.  At December 31, 1999, all outstanding  stock
options were fully vested.

Under the former option plan, options granted fell into two catagories:  (i) the
Incentive  Stock  Option  Plan under which  qualified  employees  could,  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


                                       41
<PAGE>


                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 10 - STOCK OPTION AND PURCHASE PLAN (continued)

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.

Videocall International  Corporation granted a stock option with respect to Talk
Visual common stock, to a former employee.  Dated May 30, 1999, the employee was
granted the right to purchase up to 45,000  shares at a price of $2.97 per share
expiring February 28, 2002.

Option activity within each plan was as follows:

                                                                   Weighted
                                         Incentive     Directors    Average
                                       Stock Option   Stock Option   Price
                                           Plan          Plan      Per Share
                                       ------------   ------------ ---------
Balance outstanding, December 31, 1997    119,000        8,333       $9.60

  Options granted range from
        $2.07 to $12.00  per share        140,000        1,667       $3.20

  Options cancelled range from
        $3.00 to $12.00 per share          (6,667)     (10,000)      $9.60
                                          -------      --------
Balance outstanding, December 31, 1998    252,333        -0-         $5.74
                                                       ========
  Options expired range from
        $8.25 to $9.75 per share         (119,000)                   $9.00
                                          -------
Balance outstanding, December 31, 1999    133,333                    $2.85
                                          =======

Talk Visual stock option granted by Videocall International Corporation:  45,000
shares at a weighted average price per share of $2.97

The total balance  outstanding at December 31, 1999 is 178,333,  with a weighted
average exercise price of $2.88 per share.

Information  relating to stock options  outstanding  and exercisable at December
31, 1999, summarized by exercise price are as follows:


                                       42
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 10 - STOCK OPTION AND PURCHASE PLAN (continued)


                                                       Life     Exercise
                                           Shares    (months)    Price
                                          --------    ------    --------
Incentive Stock Option Plan

                                             8,333      9.0      $4.14
                                            25,000     14.0      $4.14
                                             8,333      9.0      $3.11
                                            25,000     14.0      $3.11
                                            16,667      9.0      $2.07
                                            50,000     14.0      $2.07
Granted May 30, 1999
                                            45,000     26.0      $2.97
                                           -------
        Total                              178,333               $2.88
                                           =======


All stock options  issued to employees  have an exercise  price of not less than
85% of the fair market  value of the  Company's  common stock on the date of the
grant,  and in  accordance  with  accounting  for  such  options  utilizing  the
intrinsic value method there is a related  compensation  expense recorded in the
Company's  financial  statements  representing 15% of the fair market value. Had
the compensation cost for stock-based  compensation been determined based on the
fair  value of the grant  dates  consistent  with the  method  of SFAS 123,  the
Company's net loss and loss per share for the years ended  December 31, 1999 and
1998 would  have been  increased  to the pro forma  amounts  presented  below as
follows:

                                           1999                 1998
                                        ---------            ---------
Net loss as reported                  $(6,024,188)         $(1,197,373)
Net loss pro forma                    $(6,092,320)         $(1,244,787)

Basic and diluted net loss per
  common share as reported                 $(0.23)              $(0.06)

Basic and diluted net loss per
  common share pro forma                   $(0.23)              $(0.06)

The fair value of option grants is estimated on the date of grant  utilizing the
Black-Sholes   option-pricing   model  with  the  following   weighted   average
assumptions  for grants in 1999 and 1998:  expected  life of option of 2.5 years
and  10  years,   respectively,   expected   volatility   of  80.0%  and  26.2%,
respectively,  risk-free  interest rate of 6.0% and a 0% dividend yield for both
years.  The weighted  average  fair value at date of grants for options  granted
during 1999 and 1998 was $1.51 and $0.34 per option, respectively.


                                       43
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)

NOTE 11 - GENERAL, ADMINISTRATIVE AND MARKETING EXPENSE

General,  administrative  and  marketing  expense is comprised of the  following
items:

                                                  1999         1998
                                                 ------       ------
          Salaries and benefits               $  719,943     $260,391
          Consultants                          1,652,453       48,827
          Legal and other professional         1,178,418      205,260
          Marketing and public relations         459,782       51,607
          Other general and administrative       972,557      242,001
                                               ---------      -------
                     Total                    $4,983,153     $808,086
                                               =========      =======

Of the total  $4,983,153  expense in 1999,  $2,441,567 was paid in common stock;
actual cash payments totaled  $2,541,585.  For the year ended December 31, 1998,
of the total  expense of  $808,086,  $223,000  was paid in common  stock and the
balance of $585,086 was paid in cash.

NOTE 12 - INCOME TAXES

At December 31, 1999 and 1998,  the Company had federal and state net  operating
loss  carryforwards  of approximately  $12,215,000 and $6,552,000,  available to
offset taxable  income  expiring at various times through the year 2019. The Tax
Reform Act of 1986  contains  provisions  which limit the federal net  operating
loss carryforwards  available that can be used in any given year in the event of
certain occurrences, which include significant ownership changes.

At December 31, 1999 and 1998,  the Company's  net deferred tax asset  consisted
primarily of net operating  losses.  The Company  established  a 100%  valuation
allowance equal to the net deferred tax asset, as the Company could not conclude
that it was more likely than not that the deferred tax asset would be realized.

NOTE 13 - RELATED PARTY TRANSACTIONS

The Company provided certain administrative,  technical and operational support,
loan advances,  loan of equipment and sales of equipment  along with  facilities
utilization to the foreign  entities TV  Telecommunications,  Ltd,  Videocall of
Canada, Inc., Videocall Israel, Ltd. and the Belgium operations.  These entities
are owned and/or managed by individuals are  stockholders of in the Company.  At
December 31, 1999, balances due from these entities totaled $675,102.

During  1999,  the Company  incurred  and paid  $35,788 of interest and recorded
$6,413 of prepaid  interest  to a foreign  entity  managed by a Director  of the
Company.  The same Director was issued 175,000 shares of common stock at a price


                                       44
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 13 - RELATED PARTY TRANSACTIONS(continued)

of $2.719 for a total  charge to expense of $475,781,  for services  rendered in
securing financing for the Company.

The  Company  accrued  $150,000  to  Overseas  Communications  Ltd.,  a  foreign
corporation  owned 33% by the Chairman of the Company,  for consulting  services
provided by the Chairman. The Company issued common stock in payment of $130,000
of this obligation.

NOTE 14 - EARNINGS PER SHARE

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

                                                     1999            1998
                                                     ----            ----
Basic weighted average shares outstanding         26,674,262      20,895,575
Dilutive effect of options                            --              --
                                                  ----------      ----------
Diluted weighted average shares outstanding       26,674,262      20,895,575
                                                  ==========      ==========

Options and warrants to purchase  17,593,043 and 252,333 shares were outstanding
during the years ended  December  31, 1999 and 1998,  respectively,  and Class A
Preferred  Stock,  Series 1999-A  convertible  into  16,715,241  shares was also
outstanding,  but these amounts were not included in the  computation of diluted
loss per common share because the effect would be antidilutive.

NOTE 15 - SUBSEQUENT EVENTS

Business Acquisitions

On January 30,  2000,  the Company  signed a letter of intent to acquire 100% of
First  Debit  Corporation  for  $2,750,000,  payable by $225,000 in cash and the
balance in common shares. First Debit Corporation specializes in the production,
distribution and sales of prepaid telephone cards in Toronto and Montreal.

On March 6, 2000,  the  Company  signed a letter of intent to acquire 70% of YAK
Communications  (USA) Inc., a company of which 17% is owned by Charles  Zwebner,
brother  to the  Chairman  of the  Company,  7% by  the  Chairman  and 8% by the
principal  holder of the  convertible  preferred  stock.  The  consideration  is
8,400,000  preferred  shares with a face value of  $8,400,000  convertible  into
common  shares at the lower of $3.875  per share or the  average  of the  lowest
closing bid price in the five days prior to conversion.  The Company also agreed
to invest an additional $6,000,000 consisting of $500,000 in cash and $5,500,000
of convertible preferred shares under the same terms. The Company has engaged an
independent outside valuation firm for this acquisition.


                                       45
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)



NOTE 15 - SUBSEQUENT EVENTS (continued)

Business Acquisitions (continued)
---------------------


On March 16, 2000, the Company signed an agreement to purchase a 25% interest in
Entertech Media Group, Inc. of Hollywood,  CA. Under the terms of the agreement,
the Company  will  exchange  3,000,000  common  shares for  3,666,666  shares of
Entertech  Media common stock.  Entertech has agreed to provide content (such as
movies, music, news programs,  documentaries,  etc.) to customers of the Company
who have  purchased the Company's  videotelephone  model TV225.  The Company has
agreed to pay a broker 75,000 shares of its common stock on consummation of this
transaction. The transaction is subject to Board approval.

On March 24, 2000, the Company signed a letter of intent to acquire QuickPage of
NJ, Inc., a retail chain of fourteen stores in the New York/New Jersey area. The
consideration is $5,500,000,  payable in stock and cash. At closing, the Company
will make a cash payment of $250,000, pay cash for the inventory,  not to exceed
$250,000,  and will  commence  payments of $100,000 per month for the ten months
following  closing.  The  balance,  due in common  stock,  will be priced at the
average trading price for the five trading days prior to closing.

Manufacturing Agreement
-----------------------

On February  11, 2000,  the Company  signed an OEM  agreement  with Motion Media
Technology  Limited  for the  purchase  of video  conferencing  telephone  units
aggregating $9,994,000 over a three year period.

Financing Agreement
-------------------

On March 30, 2000, the Company entered into a one year placement  agreement with
an  investment  banking firm for a proposed  underwriting  of common stock in an
amount of up to  $75,000,000.  Under the terms of the agreement,  the Company is
required to file a  registration  statement  with the  Securities  and  Exchange
Commission  covering the common stock to be issued. The issue price of the stock
will be based upon an average price for a period of 22 consecutive  trading days
preceding  the  date of  funding.  If the  underwriter  is  unable  to  locate a
qualified  institutional investor willing to invest in the offering within sixty
days of the  contract  signing,  the  Company  has the  right to  terminate  the
agreement.

Facilities
----------

The Company leased an additional 2,559 square feet at its corporate headquarters
effective February 1, 2000. The lease term is twenty nine months and calls for a
monthly  payment of $4,265 the first year,  increasing $170 in year two and $179
in the final year, for a total obligation of $127,480.


                                       46
<PAGE>

                              TALK VISUAL CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)


NOTE 16 - SEGMENT INFORMATION

Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise  and Related  Information,"  ("SFAS 131") issued by the FASB is
effective for financial  statements  with fiscal years  beginning after December
15, 1997.  SFAS 131 requires that public  companies  report certain  information
about operating  segments,  products,  services and geographical  areas in which
they operate and their major customers.

The  Company's   reportable  operating  segments  consist  of  real  estate  and
telecommunication  services. The summary of the operating segment information is
as follows at December 31,:

                              Rental          Telecom         Total
                            ----------      ----------      ----------
1999

Net revenue                 $1,075,482      $   90,506      $1,165,988
Depreciation/Amortization      213,323          85,940         299,263
Operating Income (loss)       (414,784)     (5,539,935)     (5,954,719)
Assets, net                 11,068,078       4,570,311      15,638,389
Capital expenditures         2,637,963         619,016       3,256,979

1998

Net revenue                    229,127            --           229,127
Depreciation/Amortization       36,701           5,280          41,982
Operating Income (loss)       (190,549)     (1,006,824)     (1,197,373)
Assets, net                  8,564,161         889,113       9,453,274
Capital expenditures         8,363,003         177,913       8,540,916

                                       47
<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS


None

                                 PART III

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

Certain biographical information concerning the Directors and executive officers
of the Company as of March 31, 2000 is set forth  below.  Such  information  was
furnished by them to the Company.

David B. Hurwitz

David B. Hurwitz - Age 36, has been a Director of the Company since  November 6,
1998. Mr. Hurwitz is the President and Chief Executive  Officer of US WATS, Inc.
A senior executive and business development professional, Mr. Hurwitz has proven
ability to build  entrepreneurial-based  businesses through strategic alliances,
teaming  relationships,  creating cohesive  organizational  structures,  and the
professional development of their human resources. Mr. Hurwitz has over 12 years
experience   in   the   telecommunications   industry,   encompassing   business
development,  general management, and strategic sales and marketing initiatives.
Prior to joining  Commonwealth  Long  Distance/RCN  as Vice President of Sales &
Marketing,   where  Mr.   Hurwitz  led  a  sales  force  of  greater   than  140
representatives  and was a key  element in the  development  and  management  of
corporate  sales and marketing  strategies,  Mr. Hurwitz was involved in several
successful entrepreneurial start-up ventures, funded by Petrocelli Industries of
NYC.  As  Executive  Vice  President  &  Chief  Operating  Officer  of  Internet
Communications  Services,  Inc., Mr. Hurwitz was responsible for the development
and  operation  of a prepaid  "debit"  long  distance  calling  card service and
validation  processing service bureau,  and as General Manager of FiberNet,  Mr.
Hurwitz  was  responsible  for  overseeing  the sale and  marketing  of services
associated with FiberNet's Upstate, and New York Metropolitan Area Networks. Mr.
Hurwitz spearheaded the development of business relationships with the country's
largest long  distance  carriers,  and was  responsible  for product and service
development,  rate structures and operating  policies and  procedures.  Prior to
developing the business plan and negotiating  funding for InterNet,  Mr. Hurwitz
participated  in  the  due  diligence  and  sale  of  FiberNet's  Upstate,   and
Metropolitan  New York Area markets to MFS. Mr.  Hurwitz  graduated with a BA in
English and History from Hobart  College in 1985.  He completed  Master's  level
course  work in  Telecommunications  Management  in 1988 and  1989 at the  State
University   New  York  at  Albany.   While   affiliated   with  Rochester  Tel.
Telecommunications  Group, a division of Rochester Telephone (now Frontier) from
1985 until  February of 1992,  Mr.  Hurwitz held numerous  positions  including:
Account  Executive,  Regional Sales Manager and Director of the Mid-Atlantic and
Central Regions.

Michael J. Zwebner

Michael Zwebner - Age 47, is the founder and has served as Chairman of Videocall
International  Corporation  since  February  1998. Mr. Zwebner has recently been
appointed to the Board of a Canadian public firm. From 1974 to 1986, Mr. Zwebner
founded  and ran a travel  and  tourism  company  as well as a charter  airline,
specializing in the areas of air charter travel, wholesale ticketing and general
business and tourist  travel.  From 1986 to 1990, Mr. Zwebner owned and operated
several  real  estate  companies  as well as  managed  a  chain  of five  family
restaurants  and related  catering  services  in England.  From 1991 to 1997 Mr.


                                       48
<PAGE>


Zwebner founded and served as Vice-President of Cardcall  International Holdings
Inc. (USA) and Operating Manager of Cardcall (UK) Ltd. for which he designed and
developed  telecommunications and marketing concepts and organized the extensive
prepaid phone card operations  (Cardcall  having been the largest such operation
in both the UK and Canada).  Mr.  Zwebner  also  coordinated  corporate  finance
activities  for Cardcall.  Mr. Zwebner has served as Chairman of the Board and a
Director of the Company since  September  1998. In February of 1997, Mr. Zwebner
negotiated   and  secured  the   sale/merger   of  the  Cardcall  Group  to  DCI
Telecommunications  Inc., a publicly-held  entity based in Connecticut,  and was
subsequently   instrumental  in  the   multi-million   dollar  sale  of  the  UK
distribution  contract to SmarTalk Teleservices Inc. In addition, in February of
1988,  Mr.  Zwebner  negotiated  the  creation of a  multi-million  dollar joint
venture between  Cardcaller Canada Inc. with Datawave Systems Inc. of Vancouver,
Canada.

Eugene A. Rosov

Eugene Rosov - Age 51, has served as  Director,  President  and Chief  Executive
Officer of Videocall  International  Corporation  since June 1998. In 1967,  Mr.
Rosov started a national  music  educational  and touring  company,  and in 1978
started the international chamber music association,  Chamber Music America. Mr.
Rosov served as acting  Director of Marketing  for the nation's  largest  public
radio station,  WNYC,  from 1979 to 1980. In 1980 he was founder,  president and
CEO of Water Test  Corporation,  a national  drinking  water testing  laboratory
acquired by Household  International  in 1987. From 1988 to 1995 he was founder,
president,  CEO and Chairman of Innovative Telecom Corporation,  the Nashua, New
Hampshire  telecommunications  systems  integrator and provider to five (of six)
Regional Bell operating  companies of prepaid  telephone card  technologies  and
customer service  operations.  From 1995-1998 Mr. Rosov acted as a consultant to
various telecom companies. Mr. Rosov graduated from Harvard College in 1971 with
a BA in General Studies.  Mr. Rosov has served as Chief Executive  Officer and a
Director of the Company since November 1998 and September 1998, respectively.

Michael Cuzner-Charles

Michael  Cuzner-Charles  - Age 53,  currently  serves  as a  Director  with  the
internet based firm Tango-Zebra. He formerly served as a director of Regal Brook
Ltd.  in  Berkshire  (UK),  since  1995.  He was  finance  director  of Kingston
Coatings,  Courtaulds  Plc from 1976 to 1979,  and became a  Director  of the CJ
Phoenix Group (Jewelers in Paris, London and Birmingham) in 1979 until 1982. For
the   international   management   consulting  firm  of  Grant   Thornton,   Mr.
Cuzner-Charles  was senior  manager from 1982 to 1984, and became senior manager
of  Corporate  Finance  for  Touche  Ross from  1984-1992.  From  1992-1995  Mr.
Cuzner-Charles served as a director of MBS Plc, a computer distribution company,
and was Chief Executive Officer of Trade  Intermediary Group Plc. He is a Fellow
of  the  Institute  of  Chartered   Accountants   in  England  and  Wales.   Mr.
Cuzner-Charles has served as a Director of the Company since September 1998.

Alexander H. Walker, Jr.

Mr.  Walker - Age 73, has served as Director  and General  Counsel to  Videocall
International  Corporation  since July 1998. Since 1968 Mr. Walker has served as
Chairman of the Board of the Nevada Agency and Trust Company in Reno,  Nevada, a
licensed and registered Trust Company and Transfer Agent in business since 1903.
From 1944 to 1946 Mr.  Walker  served in the United  States Army,  rising to the
rank of Captain,  Infantry in the United  States Army  Reserve.  He received his
B.A.  from  Waynesburg  College  (1950)  and his  J.D.  from the  University  of
Pittsburgh  School of Law in 1952.  Since 1956, Mr. Walker has been a practicing
attorney,  with  his  practice  including  all  phases  of  trial  work,  with a
particular emphasis on corporate securities matters. From 1954 to 1955 he served
first as Attorney Advisory, and then 1955-1956 as Attorney in Charge of the Salt
Lake (UT) Branch for the United States Securities and Exchange Commission (SEC).


                                       49
<PAGE>

From 1956 to date,  he has  maintained a private  practice as an  Attorney.  Mr.
Walker has served as a Director of the Company since September 1998.

Clinton H. Snyder

Clinton  H.  Snyder,  CPA - Age 45,  has held the  position  of Chief  Financial
Officer  since  November  6, 1998.  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, Md. 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.

Section 16(a) Beneficial Ownership Reporting Compliance

(The following people are directors,  officers, beneficial owners of 10% or more
of the common stock,  or any other person  subject to Section 16 of the Exchange
Act that failed to file on a timely basis Forms 3, 4 and/or 5 as required  under
Section 16(a) of the Exchange Act)

Alexander Walker, Jr., and Michael  Cuzner-Charles had reportable events in 1998
which required the filing of Forms 3 and 5, which have not been filed.

Alexander Walker, Jr., and Michael Cuzner-Charles had a reportable event in 1999
which requires the filing of Form 4, which has not been filed.

Michael Zwebner filed five Form 4s late, and filed the 1999 Form 5 late.

Alexander Walker, Jr., and Michael  Cuzner-Charles have not filed Form 5 for the
calendar year 1999.

ITEM 10.  EXECUTIVE COMPENSATION

Compensation of Directors

The Company  has no standard  arrangements  pursuant to which  directors  of the
Company are compensated  for any services  provided as a director except for the
Automatic Option Grant Program component of the 1995 Stock Option/Stock Issuance
Plan (the "1995 Plan").  Directors who are not current  employees of the Company
("non-employee  directors") are eligible for the Automatic  Option Grant Program
component of the 1995 Plan under which option grants will  automatically be made
at periodic intervals to eligible  non-employee Board members to purchase shares
of Common Stock at an exercise price equal to 100% of their fair market value on
the grant date. Under the Automatic Option Grant Program, each individual who is
first elected or appointed as a  non-employee  Board member will receive a 3,333
share option grant on the date of such  election or  appointment,  provided such
individual has not been in the prior employ of the Company. In addition, at each
Annual Meeting,  beginning with the 1997 Annual Meeting,  each individual who is
to continue  to serve as a  non-employee  Board  member  after the meeting  will
receive an  additional  option  grant to  purchase  833  shares of Common  Stock
whether or not such individual has been in the prior employ of the Company.

Each automatic grant will have a term of ten (10) years,  subject to the earlier
termination  following the optionee's cessation of Board service. Each automatic
option will be  immediately  exercisable;  however,  any shares  purchased  upon


                                       50
<PAGE>

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

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 1998  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, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
                                                              Long-Term Compensation
                                                Other Annual          Awards
                                       Salary   Compensation     ---Securities---
Name and Principal Position     Year    ($)          ($)       Underlying Options(#)
---------------------------     ----   ------   ------------  ----------------------
<S>                             <C>      <C>      <C>                  <C>
Michael J. Zwebner (1)          1999    -0-       $120,000(2)          -0-
   Chairman of the Board        1998    -0-       $ 30,000(2)          -0-
   of Directors
Eugene A. Rosov (3)             1999 $148,961     $112,500(4)          -0-
   Chief Executive Officer,     1998    -0-          -0-               -0-
   President
Clinton H. Snyder, CPA (5)      1999 $120,000        -0-               -0-
   Chief Financial Officer
   and Secretary
</TABLE>

-----------
(1)  Mr. Zwebner became Chairman on November 6, 1998.
(2)  Mr. Zwebner's compensation is paid under a contract with Overseas
     Communication, Ltd., a non U. S. company. This amount was paid by the
     issuance of 1,698,014 shares at .0766 per share on November 4, 1999.
(3)  Mr. Rosov became Chief Executive Officer on November 6, 1998
(4)  Paid by the issuance of 50,000 shares on June 8, 1999, at a value of $2.25.
(5)  Mr. Snyder  became Chief  Financial  Officer  October 6, 1998 and Secretary
     March 1, 1999.

Compensation Committee Interlocks and Insider Participation

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


                                       51
<PAGE>

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

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

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

During the 1999 fiscal year, the Compensation  Committee was composed of Messrs.
Hurwitz, Rosov and Cuzner-Charles.  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.

Stock Options

The  Company  did not  grant any  options  or stock  appreciation  rights to the
Company's Named Executive Officers during fiscal year 1999.

Aggregated Option Exercises in Fiscal 1999 and Value of Options at End of Fiscal
1999

The following table sets forth certain information with respect to the Company's
Named  Executive  Officers  concerning  unexercised  stock  options  held  as of
December 31, 1999. No stock options were  exercised by such  individuals  during
fiscal year 1999. The Company did not grant any stock appreciation rights during
fiscal  year  1999 and no such  rights  were  outstanding  as of the end of such
fiscal year.

<TABLE>
<CAPTION>
                                  Number of Unexercised     Value of Unexercised
                                  Securities Underlying         In-the-Money
                                       Options at                Options at
                                    Fiscal Year End         Fiscal Year End($)
                                  ---------------------     ---------------------
Name                           Exercisable/Unexercisable   Exercisable/Unexercisable
-----------------------         ---------   -----------     ---------   ---------
<S>                                 <C>          <C>           <C>          <C>
Michael J. Zwebner                 -0-          -0-           -0-          -0-
Eugene A. Rosov                    -0-          -0-           -0-          -0-
Clinton H. Snyder, CPA             -0-          -0-           -0-          -0-
</TABLE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following  table sets forth, as of March 28, 2000, 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

                                       52
<PAGE>

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.

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

Overseas Communications, Ltd. (4)
46/11 Diskin St
Jerusalem, Israel                                    4,898,014      12.12%

Helmsbridge Holdings Ltd. (5)
c/o Plazacorp Investments
3845 Bathurst St.
Toronto, Ontario, Canada                            16,714,381      30.32%

All directors and executive
   officers as a
   Group (6 persons) (6)                             7,117,671      17.40%

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

(2) Percentage   ownership  is  based  on  38,413,261  shares  of  Common  Stock
    outstanding  as of March 28,  2000,  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, 2000. Only those shares  beneficially
    owned by the person  holding such  options are  included in the  outstanding
    shares for purposes of computing the percentage  beneficially  owned by that
    person;  such  shares  are not  deemed to be  outstanding  for  purposes  of
    computing any other person's percentage.

(3) Except  as  indicated  in the  footnotes  to  this  table  and  pursuant  to
    applicable community property laws, each stockholder named in this table has
    sole  voting  and  investment  power  with  respect  to the shares set forth
    opposite such stockholder's name.

(4) Michael J. Zwebner  owns 33% of this entity,  all other owners own less than
    10%. The shares listed includes 2,000,000 of options currently exercisable.

(5) The  beneficial  owner of Helmbridge  Holdings Ltd. is Anthony  Heller.  The
    entire amount is composed of the common stock shares upon conversion.

(6) Includes options to purchase 2,488,667 shares of common stock.



ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  Company   engages   the   services  of  the   Chairman   through   Overseas
Communications,  Ltd. The annual payment is $120,000.  Overseas  Communications,
Ltd. is 30% owned by the Chairman of the Company.

On March 6, 2000,  the  Company  signed a letter of intent to acquire 70% of YAK
Communications (USA) Inc. The consideration is 8,400,000 preferred shares with a
assigned  value of  $8,400,000,  convertible  into common shares at the lower of
$3.875 per share or the average of the lowest closing bid price in the five days

                                       53
<PAGE>

prior to conversion.  The Company also agreed to invest an additional $6,000,000
consisting of $500,000 in cash and  $5,500,000 of convertible  preferred  shares
under the same  terms.  YAK  Communications  (USA) Inc.  is owned 17% by Charles
Zwebner, brother to the Chairman of the Company, 7% by Michael Zwebner, Chairman
of the  Company  and 8% by  Anthony  Heller,  who is  the  beneficial  owner  of
Helmsbridge  Holdings,  Ltd.,  owner of the Convertible  Preferred shares of the
Company.

On March 16, 2000, the Company signed an agreement to purchase a 25% interest in
Entertech Media Group, Inc. of Hollywood,  CA. Under the terms of the agreement,
the Company  will  exchange  3,000,000  common  shares for  3,666,666  shares of
Entertech  Media  common  stock.  Entertech's  Chairman  is John Daly,  who is a
principal  shareholder  of Whyteburg  Ltd. At the time of the Merger,  Whyteburg
Ltd. was a more than 5% holder of the Company's  common  stock.  The Company has
agreed to pay a broker 75,000 shares of its common stock on  consumation of this
transaction.

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

(a)   Exhibits

      3(i)  Articles of Incorporation

      3(ii) By-Laws

      21 Subsidiaries of Talk Visual Corporation

      23 Consent of Mayer Rispler & Associates

      27 Financial Data schedule

REPORTS ON FORM 8-K.

No reports were filed during the fourth quarter of 1999.

                                       54
<PAGE>

                                POWER OF ATTORNEY


      The  registrant  and each person  whose  signature  appears  below  hereby
appoint Michael J. Zwebner and Clinton H. Snyder as attorneys-in-fact  with full
power of  substitution,  severally,  to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more  amendments  to the annual  report  which  amendments  may make such
changes  in the  report as the  attorney-in-fact  acting in the  premises  deems
appropriate and to file any such amendment to the report with the Securities and
Exchange Commission.

                              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/Clinton H. Snyder
                                            -------------------------
                                                 Chief Financial Officer

Dated:  April 12, 2000

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
Signature                                               Title                                            Date
---------                                               -----                                            ----
<S>                                                <C>                                                 <C>
/s/ EUGENE ROSOV                                   President and Chief Executive Officer              April 12, 2000
------------------                                 (Principal Executive Officer) and
Eugene Rosov                                       Director

/s/ CLINTON H. SNYDER                              Chief Financial Officer (Principal                 April 12, 2000
---------------------------                        Financial and Accounting Officer)

/s/ MICHAEL ZWEBNER                                Chairman of the Board and Director                 April 12, 2000
---------------------------
/s/ DAVID B. HURWITZ                               Director                                           April 12, 2000
---------------------------
/s/ ALEXANDER WALKER, JR.                          Director                                           April 12, 2000
-------------------------
/s/ MICHAEL CUZNER-CHARLES                         Director                                           April 12, 2000
--------------------------
Michael Cuzner-Charles
</TABLE>


                                       55