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


                                   FORM 10-QSB

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934. For the quarterly period ended June 30, 2002

                                       OR

[ ]Transition report pursuant to Section 13 or 15 (d) of the Securities
   Exchange Act of 1934. For the transition period from ________ to ________.


                         Commission File Number 33-95796

                               LECSTAR CORPORATION
                      -------------------------------------

                 (Name of small business issuer in its charter)


           Texas                                       76-0406417
          --------                                     ----------
(State or other jurisdiction                 (IRS Employer Identification No.)
 of incorporation or organization)

        4501 Circle 75 Parkway,
          Building D-4210                               30339-3025
         Atlanta, Georgia                                ________

(Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (404) 659-9500

 Securities registered pursuant to              Name of exchange on which
           registered:                      Section 12(b) of the Exchange Act:

             None                                         None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                          Common Stock, $.01 par value
                    Series A Preferred Stock, $1.00 par value
                         Common Stock Purchase Warrants
              Redeemable Series A Preferred Stock Purchase Warrants
                 -----------------------------------------------
                                (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 preceding 12 months (or
  for such shorter period that the issuer was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days.
                                 Yes |X| No ___


                        As of August 14, 2002, 132,491,988 shares of LecStar
Corporation's common stock were outstanding.




<PAGE>





                                TABLE OF CONTENTS



                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS.............................................2

     Consolidated Balance Sheets as of June 30, 2002 and
     December 31, 2001.......................................................3

     Consolidated Statements of Operations for the three months
     and six months ended June 30, 2002 and 2001.............................4

     Consolidated Statements of Cash Flows for the six months
     ended June 30, 2002 and 2001............................................5

     Notes to Consolidated Financial Statements..............................6



ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR
            PLAN OF OPERATION................................................10


                           PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS................................................14

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS........................14

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES..................................15

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............15

ITEM 5.     OTHER INFORMATION................................................16

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.................................16



SIGNATURES...................................................................17

<PAGE>

                         PART I - FINANCIAL INFORMATION



ITEM 1.           FINANCIAL STATEMENTS

The following financial statements are furnished:

1.       Consolidated Balance Sheets as of June 30, 2002 and
              December 31, 2001.

2.       Consolidated Statements of Operations for the three months
              and six months ended June 30, 2002 and 2001.

3.       Consolidated Statements of Cash Flows for the six months
              ended June 30, 2002 and 2001.

4.       Notes to Consolidated Financial Statements









                                       2
<PAGE>



                               LECSTAR CORPORATION

                           CONSOLIDATED BALANCE SHEETS



                                                 June 30,    December 31,
                                                   2002          2001
                                                (Unaudited)    (Audited)

ASSETS
Current assets:
 Cash and cash equivalents                       $  167,919    $  55,193
 Accounts receivable, net of allowance for
  doubtful accounts
  of $52,560 and $55,826 respectively               998,150      548,417
 Prepaid expenses and other current assets          308,551      157,538
                                                  ----------   ----------
Total current assets                              1,474,620      761,148

Long term investments                               250,000      250,000

Property and equipment:
 Furniture and fixtures                             326,241      326,241
 Network equipment                                1,863,927    2,188,273
 Software                                           592,133      586,638
 Leasehold improvements                             125,189      125,189
                                                  ----------   ----------
                                                  2,907,490    3,226,341

 Accumulated depreciation                        (1,441,502)  (1,133,397)
                                                 ----------   ----------
Net property and equipment                        1,465,988    2,092,944

Restricted cash                                     115,000       45,000
Other assets                                        717,807      357,953
                                                 ----------   ----------

Total assets                                     $4,023,415   $3,507,045
                                                  ==========   ==========


LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
 Accounts payable                                $3,198,733   $2,267,342
 Accrued expenses                                 4,307,177    2,387,330
 Unearned revenue                                   408,425      155,600
 Current portion of notes payable                 3,968,696       88,649
 Current portion of convertible debentures          160,000      180,000
 Current portion of capital lease obligations        29,299       51,535
 Capital lease obligations in default             1,139,489    1,139,489
                                                 -----------   ----------
Total current liabilities                        13,211,819    6,269,945
                                                 -----------   ----------

Long-term portion of notes payable                     -       2,940,487
                                                  ----------   ----------

Stockholders' deficit:
 Cumulative Preferred Stock
  Issued and outstanding - 1,146,823 and
  1,147,249                                       1,146,823    1,147,249
 Common stock, $.01 par value; 500,000,000
  authorized; Issued and outstanding
   - 130,695,170 and 111,932,768                  1,306,952    1,119,328
 Deferred compensation                              (96,976)    (193,951)
 Additional paid-in capital                      42,912,759   40,362,532
 Net unrealized loss on securities                 (550,000)    (550,000)
 Accumulated deficit                            (53,907,962) (47,588,545)
                                                 ----------   ----------
Total stockholders' deficit                      (9,188,404)  (5,703,387)
                                                 ----------   ----------
Total liabilities and stockholders'
 deficit                                         $4,023,415   $3,507,045
                                                 ==========   ==========




                 See notes to consolidated financial statements.

                                       3
<PAGE>



                               LECSTAR CORPORATION

                      CONSOLDIATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                     Three Months Ended                Six Months Ended
                                                          June 30,                         June 30,

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

<S>                                              <C>            <C>               <C>            <C>
Revenues                                         $  1,967,964   $  1,218,613      $  3,553,308   $  2,072,162
                                                 ------------   ------------      ------------   ------------

Operating expenses:
   Cost of services                                 1,268,899        604,234         2,244,602      1,067,050
   Provisioning costs                                 250,303        146,782           353,415        284,551
   Selling, general and administrative expenses     2,286,319      2,841,111         4,681,532      5,128,725
   Depreciation and amortization                      275,290      2,292,308           551,750      4,583,222
   Write-down of net property and equipment                 -         44,222           205,960         44,222
                                                 ------------   ------------      ------------   ------------
Total operating expenses                            4,080,811      5,928,657         8,037,259     11,107,770

Loss from operations                               (2,112,847)    (4,710,044)       (4,483,951)    (9,035,608)

Other income (expense):
   Interest expense                                  (566,349)      (503,072)         (798,745)      (824,895)
                                                 ------------   ------------      ------------   ------------
Net loss                                           (2,679,196)    (5,213,116)       (5,282,696)    (9,860,503)
Preferred stock dividends                          (1,031,216)      (465,888)       (1,036,720)    (1,245,406)
                                                 ------------   ------------      ------------   ------------

Net loss attributable to common stockholders     $ (3,710,412)  $ (5,679,004)     $ (6,319,416)  $(11,105,909)
                                                 ============   ============      ============   ============
Basic and diluted net loss per common share      $      (0.03)  $      (0.17)     $      (0.06)  $      (0.55)
                                                 ============   ============      ============   ============

Weighted-average shares outstanding used in
   computing basic and diluted net loss per
   common share                                   114,707,341     33,683,740       108,670,580     20,275,131
                                                 ============   ============      ============   ============

</TABLE>


                 See notes to consolidated financial statements.



                                       4
<PAGE>
                              LECSTAR CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                                     June 30,

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

OPERATING ACTIVITIES

<S>                                                                       <C>                <C>
Net loss                                                                  $(5,282,696)       $(9,860,503)
Adjustments to reconcile net loss to net cash
 used in operating activities:
   Depreciation and amortization                                              442,109          4,460,490
   Write-down of net property and equipment                                   205,960             44,222
   Stock compensation                                                         480,975            122,732
   Non-cash interest expense                                                  504,509            215,701
   Other non-cash items                                                             -             10,182
   Changes in operating assets and liabilities:
     Accounts receivable                                                     (449,733)          (358,114)
     Prepaid and other assets                                                (529,356)           (95,881)
     Accounts payable                                                         931,391            732,617
     Accrued expenses                                                       1,965,890            925,630
     Unearned revenue                                                         252,825            101,480
                                                                         ------------        -----------
Net cash used in operating activities                                      (1,478,126)        (3,701,444)

INVESTING ACTIVITIES


Purchases of property and equipment                                           (15,292)          (481,613)
Increase in restricted cash                                                   (70,000)                 -
Cash acquired in Corzon merger                                                      -             81,357
                                                                         ------------        -----------
Net cash used in investing activities                                         (85,292)          (400,256)

FINANCING ACTIVITIES


Proceeds from borrowing                                                       895,000          4,399,722
Payment of current portion of long-term debt                                  (38,649)           (94,027)
Payment of capital lease obligations                                          (22,236)          (268,515)
Proceeds from the sale of stock                                                91,460                  -
Proceeds from the sale of warrants                                            750,569                  -
                                                                         ------------        -----------
Net cash provided by financing activities                                   1,676,144          4,037,180
                                                                         ------------        -----------
Increase (Decrease) in cash and cash equivalents                              112,726            (64,520)
Cash and cash equivalents at beginning of period                               55,193            145,674
                                                                         ------------        -----------
Cash and cash equivalents at end of period                               $    167,919        $    81,154
                                                                         ============        ===========

NON-CASH INVESTING AND FINANCING ACTIIVITIES


Issuance of common stock to convert debentures and interest              $     27,802        $         -
Issuance of common stock to convert preferred stock and dividends        $  1,037,529        $         -


Acquisition of Corzon:
         Liabilities assumed                                             $          -        $  7,149,501
         Assets acquired...                                              $          -        $    241,919
         Goodwill recorded.                                              $          -        $ 12,165,101

</TABLE>



                 See notes to consolidated financial statements.

                                       5

<PAGE>

                               LECSTAR CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2002



1.       Description Of Business And Basis of Financial Statements

         LecStar Corporation (the "Company") is a Competitive Local Exchange
         Carrier (CLEC) which markets on a region-wide basis, a full scope of
         advanced telecommunications services that include local access dial
         tone, national and international long distance, enhanced subscriber
         services, high-speed data and internet services and network management.

         The Company had a working capital deficiency at June 30, 2002 of
         approximately $11,737,000, and recorded net losses for the first six
         months of 2002 of approximately $5,283,000. This raises substantial
         doubt about the Company's ability to continue as a going concern. The
         Company's continued existence is dependent on its ability to obtain
         additional debt or equity financing and to generate profits from
         operations. The Company is continuing to pursue additional equity and
         debt financing. There are no assurances that the Company will receive
         additional equity and debt financing. The accompanying consolidated
         financial statements do not include any adjustments that might result
         from the outcome of these uncertainties.

         The accompanying consolidated financial statements have been prepared
         in accordance with generally accepted accounting principles for interim
         financial information and with the instructions to Form 10-QSB and
         Article 10 of Regulation S-X. Accordingly, they do not include all of
         the information and footnotes required by generally accepted accounting
         principles for complete financial statements. In the opinion of
         management, all adjustments (consisting of normal recurring accruals)
         considered necessary for a fair presentation have been included. The
         unaudited consolidated balance sheet at June 30, 2002, has been derived
         from the unaudited consolidated financial statements at that date.
         Operating results for the three month and six month periods ended June
         30, 2002, are not necessarily indicative of the results that may be
         expected for the year ended December 31, 2002, or any other interim
         period. The interim consolidated financial statements and notes thereto
         should be read in conjunction with the Company's audited consolidated
         financial statements and notes thereto for the fiscal year ended
         December 31, 2001.


2.       Recent Accounting Pronouncements

         In July 2001, the Financial Accounting Standards Board (FASB) issued
         SFAS 141, Business Combinations. SFAS 141 supersedes APB 16,Business
         Combinations, and SFAS 38, Accounting for Preacquisition Contingencies
         of Purchased Enterprises. SFAS 141 requires the purchase method of
         accounting for all business combinations initiated after June 30, 2001
         and eliminates the pooling-of-interests method. The Company does not
         expect the adoption of SFAS 141 to have a material effect on its
         financial condition or results of operations.

         In July 2001, the FASB issued SFAS 142, Goodwill and Other Intangible
         Assets. SFAS 142 supersedes APB 17, Intangible Assets, and requires the
         discontinuance of goodwill amortization. In addition, SFAS 142 includes
         provisions regarding the reclassification of certain existing
         recognized intangibles as goodwill, reassessment of the useful lives of
         existing recognized intangibles, reclassification of certain
         intangibles out of previously reported goodwill and the testing for
         impairment of existing goodwill and other intangibles. SFAS 142 is
         required to be applied for fiscal years beginning after December 15,
         2001, with certain early adoption permitted. The Company adopted SFAS
         142 for its first fiscal quarter of 2002.

                                       6
<PAGE>

         In August 2001, the FASB issued SFAS 143, Accounting for Asset
         Retirement Obligations. SFAS 143 addresses financial accounting and
         reporting for obligations associated with the retirement of tangible
         long-lived assets and the associated retirement costs. The Company does
         not expect the adoption of SFAS 143 to have a material effect on the
         Company's consolidated financial statements.

         In October 2001, the FASB issued SFAS 144, Accounting for the
         Impairment or Disposal of Long-Lived Assets, which supersedes SFAS 121,
         Accounting for the Impairment of Long-Lived Assets to be Disposed Of.
         SFAS 144 addresses financial accounting and reporting for the
         impairment of long-lived assets and for long-lived assets to be
         disposed of. However, SFAS 144 retains the fundamental provisions of
         SFAS 121 for: 1) recognition and measurement of the impairment of
         long-lived assets to be held and used; and 2) measurement of long-lived
         assets to be disposed of by sale. SFAS 144 is effective for fiscal
         years beginning after December 15, 2001. The Company does not expect
         the adoption of SFAS 144 to have a material effect on the Company's
         consolidated financial statements.


3.       Loss per share

         Basic net loss per common share and diluted net loss per common share
         are presented in conformity with SFAS No. 128, "Earnings Per Share,"
         for all periods presented. In accordance with SFAS No. 128, basic net
         loss per common share has been computed using the weighted-average
         number of shares of common stock outstanding during the period.


         The following table presents the calculation of basic and diluted net
loss per common share:

                                 Three Months Ended          Six Months Ended
                                      June 30                     June 30
                                 ---------------------   ----------------------
                                  2002         2001         2002         2001
                                ---------     ---------   ---------    ---------
<TABLE>
<CAPTION>

Net loss attributable to
<S>                            <C>           <C>           <C>          <C>
 common stockholders           $(3,710,412)  $(5,679,004)  $(6,319,416) $(11,105,909)
                                 ---------     ---------     ---------    ----------
Basic and diluted:
 Weighted-average shares
 used in computing basic
 and diluted net loss per
 common share                 114,707,341     33,683,740   108,670,580    20,275,131
                              ==========      ==========   ===========    ==========

Basic and diluted net loss per
common share                  $  (0.03)       $  (0.17)     $  (0.06)     $  (0.55)
                              ==========     ==========      ==========   ==========

</TABLE>

         The Company has excluded all convertible preferred stock, warrants, and
         outstanding stock options from the calculation of diluted loss per
         common share because all such securities are anti-dilutive for all
         periods presented. The total number of shares excluded from the
         calculation of diluted loss per share was 278,301,404 in 2002, and
         40,150,068 in 2001.


4.       Equity line and credit facilities

         The Company has entered into an equity line financing agreement whereby
         an institutional investor has committed to purchase up to $25,000,000
         of the Company's common stock, upon the registration covering the
         resale of such stock, over a thirty-six month period, at the sole
         discretion of the Company. As of June 30, 2002 no shares have been sold

                                       7

<PAGE>

         under the equity line. Additionally, the Company has entered into a
         credit agreement with Sherman LLC that will provide up to $5,000,000 in
         revolving credit. Pursuant to the terms of the credit agreement, upon
         each borrowing the Company will issue to Sherman a warrant to purchase
         common stock equal to 19% of the amount borrowed divided by the average
         of the closing bid price of the common stock for the five trading days
         immediately prior to the date of the loan. Borrowings under the credit
         agreement are secured by accounts receivable and certain fixed and
         other assets of the Company, and those of significant subsidiaries, and
         accrue interest at the rate of 15% per year. During the six months
         ended June 30, 2002, the Company borrowed $295,000 pursuant to this
         credit agreement. As of June 30, 2002, $3,470,000 is outstanding under
         this facility and warrants to purchase 2,359,803 shares of our common
         stock at exercise prices ranging from $0.06 to $0.81 per share have
         been issued. Additionally, as of June 30, 2002, the Company did not
         meet conditions to borrow additional funds under the credit agreement.


5.       Notes Payable

         For the six months ended June 30, 2002, the Company borrowed $600,000
         pursuant to secured notes payable maturing no later than January 31,
         2003 and bearing interest ranging from 4 percent to 5 percent. These
         notes are secured either by certain assets of the Company or LecStar
         common stock held by investors of the Company.


6.       Exchange Agreement

         On September 29, 2001 the Company entered into an Exchange Agreement
         with certain investors, whereby such investors exchanged Series D
         Convertible Preferred Stock owned by them and certain debt issued by
         the Company. This exchange of preferred stock, debt, and accrued
         dividends resulted in the issuance of 77,726,078 shares of the
         Company's common stock. Sherman LLC was issued 48,716,835 shares
         pursuant to the Exchange Agreement, becoming a 43.5% holder of the
         common stock then outstanding. The remaining 29,009,243 shares were
         issued to six other debenture or preferred stock holders. Before the
         execution of the Exchange Agreement, Dominion Capital Fund Limited was
         the Company's single largest shareholder, being the beneficial owner of
         6,767,009 shares of common stock. Such ownership represented
         approximately 20.1% of the then-outstanding common stock of the
         Company.


         As a result of this exchange, the Company recognized $4,191,160 of
         non-cash interest expense, which represents the value of premium shares
         given to Sherman LLC as part of this transaction. The Exchange
         Agreement contains a provision whereby the holders shall return 10% of
         their shares issued under the Exchange Agreement, if within 18 months
         the closing price of the Company's common stock on the NASDAQ Stock
         Market, the OTC Bulletin Board, or any other national securities
         exchange on which the stock is listed remains at or above $3.00 per
         share for 50 consecutive trading days. An additional 5% of the shares
         issued under the Exchange Agreement shall be returned if the closing
         price remains at or above $4.00 per share for 50 consecutive trading
         days. As a result of this contingency, the Company has excluded
         11,594,366 shares of common stock from the denominator in computing
         basic and diluted earnings per share.


7.       Stockholders' Deficit

                  Series A Preferred Stock: The Company has designated 3,000,000
         shares out of a total of 5,000,000 authorized shares of its $1.00 par
         value preferred stock as Series A Redeemable Convertible Preferred
         Stock ("Series A Preferred Stock"). Dividends of the Series A Preferred
         Stock are cumulative and payable quarterly in arrears at a quarterly
         rate of $0.30 per share, representing a yield of 12% per year.
         Dividends may be paid in cash or an equivalent value of common stock.
         The Series A Preferred Stock has no voting rights and has a liquidation
         preference of $10 per share. At June 30, 2002 dividends in arrears on

                                       8

<PAGE>

         this preferred stock totaled $2,215,264. The Series A Preferred Stock
         is convertible at the option of the holder into shares of the Company's
         common stock. The initial conversion rate is 2.7 shares of common stock
         for each share of Series A Preferred Stock, subject to adjustment in
         certain events. The Series A Preferred Stock will automatically convert
         into the Company's common stock if the closing price of the Series A
         Preferred Stock exceeds $20 per share for ten consecutive days. The
         Series A Preferred Stock may also be redeemed by the Company upon 30
         days written notice at 110% of the average bid price for the twenty
         trading days prior to the redemption date. The Company has the option
         to pay the redemption in either cash or common stock. At June 30, 2002,
         446,410 shares of Series A Preferred Stock are outstanding.


                 Series D Preferred Stock: The Company has designated 10,534
         shares out of a total of 5,000,000 authorized shares of its $1.00 par
         value preferred stock as Series D Redeemable Convertible Preferred
         Stock ("Series D Preferred Stock"). The original issue price of the
         Series D Preferred Stock was $1,000 per share. Dividends on the Series
         D Preferred Stock accrue at an annual rate of 7% of the original issue
         price, or $70 per share, and are payable in cash or common stock, as
         determined by the holders, only at the time of conversion of such
         shares. Dividends are cumulative from the date of issue. Unless full
         cumulative dividends have been or are contemporaneously paid on the
         Series D Preferred Stock, the Company may not declare or pay cash
         dividends on the common stock, nor may it redeem, purchase, or
         otherwise acquire common stock, nor may it make any other distribution
         with respect to the common stock or any class of capital stock on a
         parity with or junior to the Series D Preferred Stock.


                  The Series D Preferred Stock is convertible at the option of
         the holder into shares of common stock for up to three years after
         initial issuance. After three years, the Series D Preferred Stock will
         automatically convert into shares of common stock. The conversion rate
         is equal to $1,000 divided by 80% of the five-day average closing bid
         price of the common stock on the NASDAQ Stock Market, the OTC Bulletin
         Board, or any other national securities exchange on which the common
         stock is listed at the time of conversion. Holders of Series D
         Preferred Stock are allowed to convert the aggregate amount of such
         holder's Series D Preferred Stock into common stock. The holders of the
         Series D Preferred Stock have no preemptive rights or other rights to
         subscribe for any other shares or securities of the Company. During the
         six months ended June 30, 2002, 426 shares of Series D Preferred Stock
         were converted to common stock. At June 30, 2002, 1,700 shares of
         Series D Preferred Stock are outstanding, with related dividends in
         arrears of $197,410.


                  Series E Preferred Stock: The Company has designated 745,000
         shares out of a total of 5,000,000 authorized shares of its $1.00 par
         value preferred stock as Series E Redeemable Convertible Preferred
         Stock ("Series E Preferred Stock"). The original issue price of the
         Series E Preferred Stock was $10.00 per share. Dividends on the Series
         E Preferred Stock accrue at an annual rate of 8% of the original price,
         or $0.80 per share, and are payable in cash or common stock, as
         determined by the Company, only at the time of conversion of such
         shares. Dividends are cumulative from the date of issue. Unless full
         cumulative dividends have been or are contemporaneously paid on Series
         E Preferred Stock, the Company may not declare or pay cash dividends on
         the common stock, nor may it redeem, purchase or otherwise acquire
         common stock, nor may it make any other distribution with respect to
         the common stock or any class of capital stock on a parity with or
         junior to the Series E Preferred Stock.


                  The Series E Preferred Stock is redeemable at the option of
         the Company at any time after six months of issuance, in whole or in
         part, for $0.01 per share, if the average closing bid price of the
         Company's common stock, as quoted on any national securities exchange,
         NASDAQ, or the OTC Bulletin Board exceeds $3.50 per share for five
         consecutive trading days. Each share of Series E Preferred Stock is
         convertible at the option of the holder into four shares of common
         stock at any time after six months from the date of issuance, subject
         to adjustment. The Series E Preferred Stock is non-voting, and it is

                                       9

<PAGE>

         ranked junior to the Company's Series A Preferred Stock and Series D
         Preferred Stock. The holders of the Series E Preferred Stock have no
         preemptive rights or other rights to subscribe for any other shares or
         securities of the Company. At June 30, 2002, 698,713 shares of Series E
         Preferred Stock are outstanding, with related dividends in arrears of
         $1,927,297.


                  During the six month period ended June 30, 2002, the Company
         issued 1,800,000 shares of its common stock, with a fair market value
         of $384,000, to its advisors in exchange for professional and advisory
         services.

8.       Customer Migration

         On April 1, 2002, the Company entered into a migration agreement with
         Nuvox Communications, Inc. to solicit their residential customer base
         for the right to receive LecStar's service in nine Southeast states.
         This agreement requires the Company to pay a fee to Nuvox over a
         nine-month period totaling approximately $220,000. The Company has
         included this obligation in accrued expenses and has recorded a
         corresponding asset, which is included in Other Assets. The asset is
         being amortized over the estimated life of the customer base, not to
         exceed 24 months.


9.       Reclassifications

         Certain reclassifications have been made to prior period financial
         statements to conform to the current period presentation. These
         reclassifications had no effect on previously reported results of
         operations or retained earnings.


10.      Commitments and Contingencies

         Legal - The Company is a party to numbers of lawsuits arising out of
         the normal conduct of its business. While there can be no assurance as
         to their ultimate outcome, there exists the possibility that these
         lawsuits could have a material adverse effect on the Company's
         financial condition, operating results, or cash flows.

         Pledged assets - The Company has pledged $350,000 of customer accounts
         receivable to a significant vendor to secure payment for services to be
         rendered.




ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

         The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements and the related notes included in this Form 10-QSB. This quarterly
report of Form 10-QSB contains forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations, and intentions. These forward-looking statements
include all statements that are not statements of historical fact. You can
identify these statements by our use of words such as "may," "expect,"
"believe," "anticipate," "intend," "could," "estimate," "continue," "plans," or
their negatives or cognates. Some of these statements include discussions
regarding future business strategy and our ability to generate revenue, income,
and cash flow. We wish caution to the reader that all forward-looking statements
contained in this Form 10-QSB are only estimates and predictions. Our actual

                                       10

<PAGE>

results could differ materially from those anticipated as a result of risks
facing us or actual events differing from the assumptions underlying such
forward-looking statements. Some factors that could affect our results include
those that we discuss in this section as well as elsewhere in this Form 10-QSB.

         Readers are cautioned not to place reliance on any forward-looking
statements contained in this prospectus. We will not update these
forward-looking statements unless the securities laws require us to do so.

Results of Operations

Three Months Ended June 30, 2002 Compared with June 30, 2001

         Total net revenues increased 61% to $1,967,964 in 2002 from $1,218,613
in 2001. The increase was driven primarily by incremental line count growth and
market penetration in both residential and business local and long distance
service segments through additional utility partnerships and the development of
outside sales agent programs. This growth was furthered through customer
migration subsequent to the agreement we entered with Nuvox Communications, Inc.
in April 2002. The Company expects continued growth of its revenue base by
capitalizing on its strategic marketing and support channels, while continuing
to expand geographically and to develop its data, internet, and integrated
services presence in the competitive marketplace.

         Cost of services as a percentage of revenues was 64% or $1,268,899 in
the second quarter of 2002 compared to 50% or $604,234 for 2001. The decrease in
gross profit margin is primarily the result of a significant product mix shift
from prepaid to a post-paid residential service base. Management believes that
profit margin will improve as provisioning processes and operations support
systems continue to be refined, and as overall product mix shifts with the
growth of improved margin services. We periodically evaluate the costs we incur
in delivering services to our customers. As a result of this process, we seek to
identify more cost-efficient procedures for delivering our services, up-sell
products to existing customers, or may decide to discontinue offering some
products.

         Provisioning costs as a percentage of revenues were 13% or $250,303 for
the three-month period ended June 30, 2002 compared to 12% or $146,782 for 2001.
These costs include amounts paid for provisioning new customers and making
changes to existing customer accounts, and are paid to telecommunication
carriers based on our interconnection agreements. For the three month period
ended June 30, 2002, approximately $85,000 of these costs related to recent
customer migration under the agreement with Nuvox Communications, Inc. The
Company recognizes these costs of customer provisioning as period cost, rather
than capitalizing these costs and expensing them over the expected customer
life.

         Selling, general and administrative expenses were $2,286,319 for the
quarter ended June 30, 2002 compared to $2,841,111 for the corresponding period
in 2001. Expenses include salaries and related personnel costs, legal and
professional services, facilities expenses, and sales and marketing costs. Costs
decreased primarily due to reductions in legal and professional services of
$289,206 and salaries and wages expenses of $261,686 between comparable
quarters. In addition, bad debt expense for the 2002 quarter decreased by
$109,175 compared to 2001.

                                       11
<PAGE>

         Depreciation and amortization expense decreased to $275,290 in 2002
down from $2,292,308 in 2002, primarily due to discontinued amortization of
goodwill, subsequent to recording intangibles impairment of $4,651,334 in the
fourth quarter of 2001.

         Interest expense for the quarter ended June 30, 2002 was $566,349 of
which $470,920 was non-cash interest related to the issuance of warrants and the
conversion of debt to common stock, and $95,429 was related to borrowings under
credit facilities, other notes, and capital leases. Interest expense for the
quarter ended June 30, 2001 was $503,072 of which $180,397 was non-cash interest
related to the issuance of warrants and the conversion of debt to common stock,
and $322,675 was related to borrowings under credit facilities, other notes, and
capital leases.

Six Months Ended June 30, 2002 Compared with June 30, 2001

         Total net revenues increased 71% to $3,553,308 in 2002 from $2,072,162
in 2001. The increase was driven primarily by incremental line count growth and
market penetration in both residential and business local and long distance
service segments through additional utility partnerships and the development of
outside sales agent programs. This growth was furthered through customer
migration subsequent to the agreement we entered with Nuvox Communications, Inc.
in April 2002. The Company expects continued growth of its revenue base by
capitalizing on its strategic marketing and support channels, while continuing
to expand geographically and to develop its data, internet, and integrated
services presence in the competitive marketplace.

         Cost of services as a percentage of revenues was 63% or $2,244,602 in
the first half of 2002 compared to 51% or $1,067,050 for 2001. The decrease in
gross profit margin is primarily the result of a significant product mix shift
from prepaid to a post-paid residential service base. Management believes that
profit margin will improve as provisioning processes and operations support
systems continue to be refined, and as overall product mix shifts with the
growth of improved margin services. We periodically evaluate the costs we incur
in delivering services to our customers. As a result of this process, we seek to
identify more cost-efficient procedures for delivering our services, up-sell
products to existing customers, or may decide to discontinue offering some
products.

         Provisioning costs as a percentage of revenues were 10% or $353,415 for
the six-month period ended June 30, 2002 compared to 14% or $284,551 for 2001.
These costs include amounts paid for provisioning new customers and making
changes to existing customer accounts, and are paid to telecommunication
carriers based on our interconnection agreements. For the six month period ended
June 30, 2002, approximately $85,000 of these costs related to recent customer
migration under the agreement with Nuvox Communications, Inc. The Company
recognizes these costs of customer provisioning as period cost, rather than
capitalizing these costs and expensing them over the expected customer life.

         Selling, general and administrative expenses were $4,681,532 for the
six months ended June 30, 2002 compared to $5,128,725 for the corresponding
period in 2001. Expenses include salaries and related personnel costs, legal and
professional services, facilities expenses, and sales and marketing costs. Costs
decreased between comparable quarters primarily due to reductions in salaries
and wages expenses of $543,028 and legal and professional services of $263,946,
offset by an increase in stock compensation of $358,243.

                                       12

<PAGE>

         Depreciation and amortization expense decreased to $551,750 in 2002
down from $4,583,222 in 2002, primarily due to discontinued amortization of
goodwill, subsequent to recording intangibles impairment of $4,651,334 in the
fourth quarter of 2001. In 2002, the Company recorded a write-down of net
property and equipment of $205,960.

         Interest expense for the six months ended June 30, 2002 was $798,745 of
which $504,509 was non-cash interest related to the issuance of warrants and the
conversion of debt to common stock, and $294,236 was related to borrowings under
credit facilities, other notes, and capital leases. Interest expense for the
comparable period ended June 30, 2001 was $824,895 of which $215,701 was
non-cash interest related to the issuance of warrants and the conversion of debt
to common stock, and $609,194 was related to borrowings under credit facilities,
other notes, and capital leases.

Liquidity and Capital Resources

         We have incurred operating losses since our inception and as of June
30, 2002, we had an accumulated deficit of $(53,907,962) and a working capital
deficit of $(11,737,199).

         LecStar has a credit agreement with Sherman LLC that provides us with
up to $5,000,000 in revolving credit. Pursuant to the terms of the credit
agreement, upon each borrowing we will issue to Sherman a warrant to purchase
our common stock equal to 19% of the amount borrowed divided by the average of
the closing bid price of our common stock for the five trading days immediately
prior to the date of the loan. Borrowings under the credit agreement are secured
by our accounts receivable and certain fixed and other assets, and those of each
of our significant subsidiaries, and accrue interest at the rate of 15% per
year. At June 30, 2002, the Company was in compliance with all covenants of this
credit agreement or had received appropriate waivers; however, the Company did
not meet the conditions for additional borrowings under this facility. The
Company is negotiating with Sherman LLC to restructure this agreement.

         We also have a $25,000,000 Equity Line Financing Agreement with Pima
Capital Management Limited. Upon our request, Pima Capital has committed to
purchase up to $25,000,000 of our common stock over a thirty-six month period.
The purchase price per share will be determined by dividing the dollar amount we
request by 92% of the simple average of the closing bid prices of our common
stock over the ten trading days immediately following a draw request from us.
Under the equity line financing agreement, we are obligated to register the
shares of common stock to be purchased by Pima before we may deliver a draw
request to Pima. To date, we have not drawn funds under this equity line of
credit because of conditions to funding.

         Inability to draw funds under either the financing or credit agreement
could result in a material adverse effect on our business, financial condition,
and results of operation. Furthermore, we may need to raise additional funding
through either debt or equity instruments. If we are not successful in these
efforts, lack of additional funding would result in a material adverse effect on
the Company and its viability as an ongoing concern.

                                       13

<PAGE>

         Our cash and cash equivalents increased $112,726 during the first two
quarters of 2002. The principal sources of funds consisted of $895,000 in
borrowings, and $750,569 received in proceeds from the sale of 7,000,000 common
stock warrants, which are included in the total calculation of outstanding
shares. The primary use of funds was cash used in operations of $1,478,126.

         We have not paid dividends on the Series A preferred stock since June
1998 and we are currently analyzing our alternatives for addressing these
arrearages totaling $2,215,264. At June 30, 2002, we were in default on
$1,139,489 of lease obligations. Default under lease obligations could have a
materially adverse impact on our business.



                           PART II - OTHER INFORMATION



ITEM 1.           LEGAL PROCEEDINGS

         The Company is a defendant in the action McIntosh & Associates, Inc. v.
LecStar Corporation filed in the district county of Dallas County, Texas. The
Plaintiff alleges breach of contract and is seeking $151,143.18 in actual
damages plus legal and equitable interests of reasonable and necessary attorney
fees. On February 8, 2002, the Plaintiff received a final judgment by default
for the amount of its claim.

         The Company is a defendant in the action James D. Grenfell v. LecStar
Corporation filed with the American Arbitration Association on September 27,
2001. The Plaintiff alleges breach of contract and is seeking in excess of
$900,000 in actual damages plus legal and equitable interests of reasonable and
necessary attorney fees. The likelihood of an unfavorable outcome or estimate of
any possible loss cannot be determined at this time.

         We are not currently a party to any other material legal proceeding
other than various claims and lawsuits arising in the normal course of business.
We do not believe that these lawsuits would individually or in the aggregate,
have a material adverse effect on our business, financial condition or results
of operations.



ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS

         During the six months ended June 30, 2002, we sold warrants to purchase
a total of 7,000,000 shares of common stock to certain existing shareholders
(Sovereign Partners, Atlantis Capital Fund, Ltd., Dominion Capital, and Sherman
LLC), and received $750,569 in cash proceeds. In addition, the Company sold
2,292,500 shares of common stock and received $91,460 in cash proceeds. These
warrants and common stock were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act, as a transaction by
an issuer not involving a public offering.

                                       14
<PAGE>

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

         As of June 30, 2002, the Company had not met the conditions for
additional borrowing as required by the credit agreement with Sherman LLC. The
Company is negotiating with Sherman LLC to restructure this agreement. Inability
to draw funds under the credit agreement could result in a material adverse
effect on our business, financial condition, and results of operation.

         We have not paid dividends on the Series A Preferred Stock since June
1998 and we are currently analyzing our alternatives for addressing these
arrearages totaling $2,215,264.



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

         The annual meeting of the shareholders was held in Atlanta, Georgia on
May 13, 2002. Proxies for the meeting were solicited under Regulation 14A. The
matters that were submitted to a vote of shareholders were (a) the election of
three directors, each for a term of one year, (b) the approval of a reverse
common stock split proposal, and (c) the ratification of the appointment of
Sherb & Co., LLP as our independent accountants for our fiscal year ending
December 31, 2002. A total of 59,746,152 votes were received, representing 52.3%
of the entitled vote.



William S. Woulfin was elected as a director of the Company.  The vote was as
 follows:

                  For                       Against                    Abstain
                  ---                       -------                    -------

             59,746,152                        0                         0

W. Dale Smith was elected as a director of the Company.  The vote was as
 follows:

                  For                       Against                    Abstain
                  ---                       -------                    -------

             59,746,152                        0                         0

John C. Canouse was elected as a director of the Company.  The vote was as
 follows:

                  For                       Against                    Abstain

             59,746,152                        0                         0



         The shareholders also approved a reverse common stock split proposal:

                  For                       Against                    Abstain

             59,746,152                        0                         0

         Lastly,  shareholders  ratified the appointment of Feldman,  Sherb &
Co., P.C. as our  independent  accountants for the fiscal year ending December
31, 2002.

                  For                       Against                    Abstain

             59,746,152                        0                         0



ITEM 5.           OTHER INFORMATION

         None.



ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         None.

(b)      Reports on Form 8-K.

         On April 18, 2002, we filed a current report on Form 8-K to report
agreement with Nuvox Communications, Inc. to solicit their residential customer
base for the right to receive LecStar's telephone service.

                                       15
<PAGE>




                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act,
LecStar Corporation has caused this quarterly report on Form 10-QSB to be signed
on its behalf by the undersigned, thereunto duly authorized, on August 14, 2002.

                                                     LECSTAR CORPORATION



                                                  By:/s/    W. DALE SMITH
                                                         ------------------
                                                            W. Dale Smith
                                                            President

                                                  By:/s/    JAMES E. MALCOM
                                                         -------------------
                                                            James E. Malcom
                                                         Chief Financial Officer

                                       16