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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


X               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR 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: 000-33471

                         YAK COMMUNICATIONS (USA), INC.
           (Name of Small Business Issuer as specified in its Charter)

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<S>                                                     <C>
Florida                                                 98-0203422
(State or Other Jurisdiction of Incorporation)          (I.R.S. Employer Identification No.)

55 Town Centre Court, Suite 610
Toronto, Ontario, Canada                                M1P 4X4
(Address of Principal Executive Offices)                (Zip Code)
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         Issuer's telephone number, including area code: (416) 296-7111

        Securities registered pursuant to Section 12(b) of the Act: None

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

                           Common Stock, no par value
                           --------------------------

                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes    X   No  ____
           ----

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not 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
or any amendment to this Form 10-KSB.

The Registrant's revenues for its most recent fiscal year are $24,491,956.

The number of shares of Common Stock of the registrant outstanding as of June
30, 2002 is 4,792,158.

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                         YAK COMMUNICATIONS (USA), INC.


                                TABLE OF CONTENTS

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                                                 PART I


Item 1.          Description of Business                                                           1
Item 2.          Description of Properties                                                         9
Item 3.          Legal Proceedings                                                                10
Item 4.          Submission of Matters to a Vote of Security Holders                              10

                                                 PART II

Item 5.          Market for Common Equity and Related Stockholder Matters                         10
Item 6.          Management's Discussion and Analysis of Financial Condition and
                 Results of Operations                                                            10
Item 7.          Financial Statements                                                             13
Item 8.          Changes in and Disagreements with Accountants on Accounting
                    and Financial Disclosures                                                     13

                                                 PART III

Item 9.          Directors, Executive Officers and Control Persons of the Registrant              13
Item 10.         Executive Compensation                                                           15
Item 11.         Security Ownership of Certain Beneficial Owners and Management                   16
Item 12.         Certain Relationships and Related Transactions                                   18
Item 13.         Exhibits and Reports on Form 8-K                                                 18
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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

        Yak Communications (USA), Inc. ("Yak" or the "Company"), was
incorporated in Florida in 1998. We provide discount long distance
telecommunication services in Canada to residential and small to medium business
enterprises. We started operations in Toronto during July 1999, in Montreal
during October 1999, and in Vancouver during June 2001 and we primarily target
ethnic markets in these major Canadian cities. During the last quarter of 2001
we also started providing services in Ottawa, Quebec City, Kitchener, London,
Edmonton, Calgary and Victoria. In addition, during December 2001, we completed
our initial development and commenced services on a test market basis in Las
Vegas, Nevada and also completed development of similar services in the
Washington, D.C. area. In the first six months of 2002, we commenced limited
operations in Las Vegas, Nevada and during July 2002, we commenced the initial
test marketing phase in the Miami, Florida market.

        We currently offer a "dial-around" service (also known as "casual
calling"). This allows our customers to dial-around their existing long distance
carrier on any call by entering a few digits prior to making the call, without
permanently switching long distance carriers. We also offer our customers the
ability to permanently switch all of their calls from their existing long
distance carrier to our long distance service, known as "1+ billing" or "picked
lines." As of June 30, 2002, we have approximately 300,000 recurring
"dial-around" customers and approximately 2,000 "1+ billing" customers.

        Long distance services to international destinations, commonly referred
to as "international calls" are provided through switching and transmission
facilities that automatically route calls to circuits based upon a predetermined
set of routing criteria. The call typically originates on a Local Exchange
Carrier's ("LEC") network and is routed on that network to the caller's long
distance carrier. The long distance provider picks up the call at its
international gateway switch and sends it directly through one or more other
long distance providers to a corresponding gateway switch operated in the
country of destination. Once the traffic reaches the country of destination, it
is then routed to the party being called through that country's domestic
telephone network. International long distance providers can generally be
categorized by their ownership and use of switches and transmission facilities.
The largest U.S. carriers, such as AT&T Corporation, MCI-Worldcom, Inc. and
Sprint Corp., primarily utilize their own switches and transmission facilities.
Historically, only the very large carriers have transmission facilities that
have worldwide coverage. Typically, mid-size carriers both own and operate their
own switches and facilities, and also rely on resale agreements with other long
distance carriers to terminate their traffic.

        We purchase our long distance calling capacity from both the large and
mid-sized carriers and provide long distance telephone services through our own
gateway switches that have direct access to the carrier networks. By aggregating
volume and gaining access to the carrier networks, we are able to buy time on
those networks at deep discounts. We market and resell that access to our
customers in the form of discounted long distance phone calls using a
"dial-around" service.

        We use our own "state of the art" Harris IXP and Harris LX digital
telephony switches that have access to several carrier networks. Our switches
receive the calls made by our customers and route them to the appropriate
carrier from whom we purchase calling time. Our use of carriers is based on the
location to which a call is made depending upon the price and toll quality of
the route being offered by the carrier. Our acquisition of the carrier time is
at a substantial discount from regular retail rates and we resell the time to
our customers at a discount from the cost the customer would have to pay the
carrier directly. Our billing and collection for these calls is performed by the
LEC, and is included as a part of the customer's regular phone bill. We have
entered into agreements with LECs in our principal markets. See "Billing and
Collection Agreements," below.

        We capitalize on the increasing demand for high quality international
telecommunication services resulting from the increase in immigrant populations,
the globalization of the world economies, the

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worldwide trend towards telecommunication deregulation, and the growth of
international voice and data traffic.

THE INDUSTRY

        Meaningful competition in long distance telephone services in Canada has
been in effect since 1987. After hundreds of new companies entered the
marketplace, there was a "shakeout" leaving five very large providers of long
distance services, Bell Canada, Telus Corporation, Sprint Canada Inc., AT&T
Canada Corp., and Primus Telecommunications Group. Collectively, these five
carriers dominate the Canadian long distance calling market. We believe that of
the long distance market in Canada being approximately $3.6 billion (USD), Bell
Canada and Telus alone have approximately 55%; AT&T, Sprint and Primus combined
have approximately 25%; the other provincial phone companies - Aliant
Communications, Inc., MTS Communications Inc., Saskatchewan Telecommunications
Holding Corporation (SaskTel), Telebec, S.C., and NorthwesTel Inc., collectively
14%; and others approximately 6% ($214.5 million USD).

        Among the advantages these large international long-distance service
providers have is the quality of their calls. Bell Canada, Telus, AT&T, Sprint
and Primus generally provide international calls that consumers find to be
relatively free from static and echoes, and which have few latency problems (the
delay between speaking and hearing). Smaller providers of international
long-distance services often offer calling services without comparable quality
in their efforts to secure low-cost transmission services. We purchase
transmission services of a quality that consumers find to be comparable to that
of Bell Canada, Telus, AT&T, Sprint and Primus, but at a cost to consumers that
is at a steep discount to the costs offered by those providers. We currently
offer telephone calling time to approximately 160 countries at prices to the
consumers that are on average approximately 30% to 40% lower than the market
leaders.

        The resale of long distance calling capacity, which was first permitted
in the North American (Canada and U.S.) market in the 1980s, enabled the
emergence of new international long distance providers. The highly competitive
and rapidly changing international telecommunications market has created a
significant opportunity for carriers that can offer high quality, low cost
international long distance service. This is especially true in the
international long distance calling market where deregulation, privatization,
the expansion of the resale market and other trends influencing international
communications are driving decreased termination costs, a proliferation of
routing options, and increased competition.

        Historically telephone companies have relied on bilateral "settlement"
agreements to compensate each other for calls that originate in one country and
terminate in another. The "settlement" payments were paid to the telephone
company in the country in which the call terminated, and was built into the cost
structure of making international calls. However, as deregulation,
privatization, the expansion of the resale market, technological innovations and
other trends influencing international communications are producing decreased
termination costs, countries around the world are now allowing a scheme known as
international simple resale. International simple resale allows owners of
private leased phone lines between countries, including large facilities-based
carriers and major international corporate users, to resell excess space on
their lines to local phone companies. This boosts the amount of international
capacity and lowers prices. In addition, calls carried on these lines are not
subject to "settlement" fees. Resale of excess capacity has put and continues to
put significant pressure on telephone companies around the world that used to
monopolize incoming telecommunications traffic.

        Over the last six months, several major telecommunication service
providers have had to reconsolidate or reorganize under bankruptcy protection.
As a result, consolidation of capacity providers is expected which may cause
prices for telecommunications services to decrease further.

        One result of these rapid changes is that for telecommunications
companies, telephone call minutes are becoming a low-margin commodity. This
causes the large, facilities-based carriers to focus on new features and
services that can provide them larger margins. This trend will be beneficial to
quality long

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distance resellers, like Yak, which can offer long distance services which may
no longer be as attractive to the large telecommunications companies.

STRATEGY

        Our operations began through our wholly-owned subsidiary, Yak
Communications (Canada) Inc., which was established to provide international
long distance discount services primarily using dial-around access. Our focus
has been principally the penetration into the international calling markets of
the major Canadian cities, initially Toronto (July 1999) and Montreal (October
1999). In the summer and fall of 2001, we launched operations in several western
Canadian cities: Vancouver, Victoria, Edmonton, Calgary, and Winnipeg, and we
also expanded our operations in eastern Canada: Ottawa, Kitchener, London and
Quebec City. In the short term, we expect the international calling markets in
Canada (which currently make up two-thirds of our revenues) will continue to
comprise our core user market. In addition, we expect to follow a similar
strategy (on a limited basis) in various metropolitan areas in the United
States.

COMPETITION

        With full deregulation of the monopoly of Teleglobe Canada (the official
provider of all inbound and outbound international calls to and from Canada) by
the Canadian Radio-Television and Telecommunications Commission in October 1998,
it became possible to effectively compete in the international discount
telephone services market in Canada. We take advantage of the opportunities
offered by a deregulated telecommunications market to route our calls using the
least cost route over different and multiple carrier networks that make use of
digital transmission technologies over existing carrier networks.

        Both in Canada and the U.S. there are several other "dial-around"
companies competing in the marketplace.

Canada

        In Canada, our key competitors include: Alterna-Call, a division of
Sprint Canada which offers a dial-around service, with annual revenues of
approximately $12 million (USD) (FY 2001). The principal product offering of
Alterna-Call is a domestic (North American) fixed flat rate calling service, for
example, 15 minutes of calling for $1 (CDN) with an increased rate per minute
thereafter. Our product offering is a "pay-as-you-go" program, for example, $.07
(CDN) per minute, with no minimums or maximums. Given that the average North
American call today for our core user market is approximately 6 to 7 minutes we
believe our product offering is more attractive to the average consumer. Our
other principal competitor is Telehop Communications Inc. which in 1998 began
offering a dial-around service, in addition to its traditional, regional
flat-rate long distance calling service. Their annual revenues are approximately
$8 million (USD) (FY 2001) and their product offering is similar to
Alterna-Call. They offer 20 minutes of calling for $1 (CDN). Both of these
competitors have arrangements with Bell Canada for their billing and collection
of call records.

United States

        In the U.S., there are many established companies offering "dial-around"
services including: large companies such as AT&T Corporation, Sprint USA, and
MCI-Worldcom; medium sized companies such as VarTec Telecommunications, Inc.,
Excel Communications Inc. and Americatel Corporation, and numerous small
companies typically offering their dial-around service in a particular local
geographic area. The product offerings of these companies vary with different
calling plans and rates, which also often depend on the time of day when the
call is made. Most of these companies have placed a large emphasis on their
North American calling rates, (principally for calling inter-state and
intra-state within the U.S.) with rates varying at different times of day, and
mostly advertising flat rate calling (packaged minutes for a set amount of
cost). We believe that even though the U.S. market already has numerous
significant

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telecommunication industry players in the dial-around segment, there is room for
a company specializing in a "pay-as-you-go" program for international discount
calling.

DESCRIPTION OF COMPANY'S PRODUCTS AND SERVICES

        In general, both residential and business consumers have become
increasingly unwilling to switch long distance carriers. Many consumers have had
a significant amount of sales call pitches from sales persons promising lower
rates, and some have become victims of well-publicized "slamming:" the
unauthorized changing of a consumer's long distance carrier. We believe that
this has resulted in consumer resistance to change to new carriers or
long-distance services that are unrecognized and not trusted by the consumer. We
believe that it is for these reasons that Bell Canada and Telus Corporation,
which historically have been the most expensive providers of long distance
telephone services in Canada, are still the dominant players in the Canadian
international long distance telephone industry.

        However, with a casual calling alternative, our customers can dial the
10-15-945 access number to access our switch for routing of calls at a
discounted price. Our customers do not need to change carriers. Furthermore,
because of our billing and collection arrangements with Bell Canada and Telus
Corporation, our customer will continue to receive only one invoice from Bell
Canada or Telus Corporation which would include the customer's local line
monthly rental and service costs and the long distance calls routed over our
switch. The calls routed over our switch are billed to the customer at our
advertised rates, which on average are approximately 30% to 40% lower than the
rates they would be billed if they used the discounted rates of Bell Canada or
Telus Corporation.

        If the customer wishes to be on a 1+ program, which would mean that he
does not need to dial the 10-15-945 number each time he makes a call, the
customer can sign up with our 1+ program. This essentially gives us the
authorization to move the customer from his current long distance provider to
our switch. The customer would then receive our lower rates each time he makes a
call. With this program we bill our customers directly and do not utilize Bell
Canada or Telus for billing and collection purposes.

        We rely in part, on resale arrangements to secure low cost transmission
of switched calls. Resale arrangements typically involve the wholesale purchase
and sale of transmission and termination services between two long distance
providers on a variable (per minute) basis. The resale of capacity, which was
first permitted in the North American market in the 1980s, enabled the emergence
of new international long distance providers that rely at least in part on
capacity acquired on a wholesale basis from other long distance providers.
International long distance calls may be routed through a facilities based
carrier with excess capacity, or through multiple long distance resellers.
Resale arrangements set per minute prices for different routes, which may be
guaranteed for a set time period or subject to fluctuation following notice.

        During fiscal year 2002, in order to assist in the provision of our
services, we entered into a Marketing Agreement with Telus Communications, Inc.
("Telus"). Under this agreement, Telus provides us with competitive fixed cost
line access, switching and aggregation services, clearinghouse services, long
distance services and billing and collection services. Pursuant to the terms of
this agreement, 25% of amounts due to Telus, up to a maximum of $3.25 million,
are deferred and we are required to segregate such amounts for specific use in
advertising and promotional activities relating to our planned expansion. Such
amounts are to be repaid to Telus commencing July 1, 2003 and ending June 30,
2006, at a rate of $0.005 per minute with a minimum monthly payment of $90,000.

SALES & MARKETING ACTIVITIES

        In North America, as in many countries throughout the world, ethnic
minorities comprise a substantial portion of the population and may also include
recent immigrants and displaced or otherwise separated families. These persons
usually have family in their home countries and need to frequently communicate
with them.

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        We market our services primarily to residential and small to medium
business enterprises in the major Canadian cities which make significant amounts
of international calls. We currently use attractive, informative direct mail
marketing materials aimed at these markets. We also use print media, television,
radio and continuous direct mail marketing materials to develop brand
recognition and generate new customers. We believe that informative, attractive
and distinctive direct mail, coupled with print media advertising in community
newspapers and on selected television and radio programs will allow us to reach
customers that make international calls. We have created novelty items such as
tee shirts, coffee mugs, pens, keychains, caps, stickers and magnets that are
distributed on an ongoing basis to create brand awareness. In addition, we use
our website, www.yak.ca to support our marketing efforts.

VOICE OVER IP AND WEB-BASED COMMUNICATIONS SERVICES

        Whereas traditional telephone service is provided over the public
switched telephone network, internet telephony uses internet protocol (commonly
referred to as "IP") to transmit voice data using the world-wide-web
infrastructure. From its origins, in the mid 1990s, as an inexpensive,
low-voice-quality means to talk without long distance phone call charges from
one personal computer to another, internet telephony has grown into an
inexpensive alternative to traditional long distance calling over the public
switched telephone network, currently accounting for an insignificant percentage
of all international voice telecommunications traffic. By using gateway switches
that can connect conventional phone systems to the Internet, carriers and
resellers can send calls from phone to phone using the internet as the long
distance carrier. Although several software applications and hardware solutions
are currently on the market, the quality of the call, as compared to the quality
of calls over the public switched telephone network, prevents Internet telephony
services from replacing the traditional networks; however, it is beginning to
gain some acceptance in the marketplace. New compression technology is emerging
that is increasing the quality of the calls. When the quality of such lower cost
routing through the internet is acceptable to the consumer, and increased
bandwidth is made available to allow such calls to be made on mass, we intend to
resell this technology to our customers.

HARRIS LX/IXP SWITCHES

        We own and operate both Harris LX and Harris IXP switches. The IXP
switch is based on the most recent commercial communication switching technology
developed by Harris, and represents a significant progression over older
communication switching systems in which components were assigned a single
dedicated function. The older switches are based on technology that we consider
to be inflexible because it required customers to plan for change well in
advance, and even simple changes could require significant effort and result in
down time and loss of revenue. The IXP was inspired by the
easily-interchangeable component technology that underlies the Internet, often
referred to as "plug-and-play" technology. Various component parts used in the
switch to perform various functions are easily replaceable, thus the reference
as "plug-and-play," making expansion and replacement simple and convenient. The
Harris IXP switch supports call control, networking, and internet access. The
IXP switch allows for different vendors' component parts to be used, and gives
us the flexibility to add and update processes by using a range of add-on
components. This switch also allows us to "scale up" as we grow. With both the
LX and IXP switches, all domestic and international signaling protocols are
fully integrated, meaning it can support many standard-based protocols on
digital and analog lines and trunks, and can mix and match protocols. We believe
that this is important in an environment that is subject to rapid change, with
varying technologies and differing signaling protocols.

EMPLOYEES

        As of June 30, 2002, we have 30 full-time employees and two part-time
employees, with the following breakdown: President and Chief Executive Officer
(1), Executive Assistant (1), Accounting (7), Marketing (2), Customer Services
(13), Technical (5), Receptionist (1). All of the part-time employees are

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being paid for their services on an hourly basis. We consider our relations with
our employees to be excellent, and none of our employees are covered by a
collective bargaining agreement.

TECHNICAL TEAM

        We have created a technical team which provides technical solutions
regarding our switching, network engineering, billing, toll fraud control and
data warehousing and management reporting. The technical team currently has
eight members, three of whom are independent contractors. We believe that our
technical support team is equipped to design, install and maintain our switching
systems and meet all of our foreseeable technology requirements. During the last
quarter of fiscal year 2002, we hired a Chief Technology Officer to oversee our
technical team.

BILLING & COLLECTION AGREEMENTS

        We have written agreements with Bell Canada and Telus Corporation for
the billing and collection of long distance calling charges made by our
customers on the Bell Canada local line network in Ontario and Quebec, and by
our customers on the Telus local line network in British Columbia and Alberta.
We also have a billing and collection agreement with MTS for our services in
Manitoba. Under Canadian regulations, Bell Canada and Telus are required to
offer us these billing and collection services. The billing and collection
agreement covers all long distance calls made through our dial-around switching
long distance service and routing system. We track all such calls made, record
information about the source, destination, and duration of the call, rate the
call, and provide Bell Canada and Telus with this data electronically. The Bell
Canada and Telus billing cycles are several times a month and include these
charges to customers on their respective invoices termed as "other carrier"
charges. Bell Canada or Telus then collects these amounts. Under the terms of
the "Billing & Collection Agreement," Bell Canada and Telus are obligated to pay
us within 45 days following the month in which the invoices are generated and
sent to the customer (subject to offsets for non-collectible accounts). Canadian
telecommunications authorities require that all incumbent local exchange
carriers provide these agreements in perpetuity subject only to our continued
compliance with their terms and any changes in applicable regulations.

        In addition, we have an agreement with Telus Corporation Clearinghouse
Operations. This agreement allows for the handling, transporting and delivery of
our billing records generated by our switching and billing system to Bell Canada
and Telus for invoicing and collection. In conjunction with this agreement, we
have developed software and implemented hardware that allows for electronic
encrypted signaling and online transmission of the billable records between our
system and that of Telus which will allow them to process the billable records.
This online transmission process significantly minimizes delays and errors in
the billing.

        In the United States we have entered into an agreement with Billing
Concepts, Inc. which specializes in inter-carrier clearinghouse operations, for
handling, transporting and delivery of our billing records to the LEC for
invoicing and collection purposes. Under this U.S. arrangement all amounts
invoiced by the LECs on our behalf are paid, less the LEC's collection fees, to
Billing Concepts, and in turn Billing Concepts pays our company the amounts
received, less their processing fees. This billing and collection arrangement in
the U.S., both technically and financially, are, and we believe will continue to
be, similar to those arrangements we have established in Canada. This agreement,
however, does not apply to most of the competitive LECs ("CLECs"), and as a
result we cannot currently process calls which originate from an alternative
local line carrier. Unlike Canada, CLECs represent a larger portion of
international calls originating in the U.S. This may affect our ability to fully
realize revenues from this area in the short term.

GOVERNMENTAL REGULATION

        As an international communications company, we are subject to varying
degrees of regulation in each of the jurisdictions in which we provide services.
Local laws and regulations, and the interpretation of such laws and regulations,
differ significantly among the jurisdictions in which we operate. The

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summary below describes the primary regulatory developments at the federal and
state level that may have a material effect on our business.

        In general, regulation of the telecommunications industry is changing
rapidly both domestically and globally. In both the U.S. and Canada, federal and
local regulations are from time to time subject to judicial proceedings as well
as legislative and administrative hearings as well as proposals that could
change, in varying degrees, the manner in which our industry operates. We cannot
predict the outcome of these proceedings or their impact on us. There can be no
assurance that future regulatory, judicial and legislative changes will not have
a material adverse effect on us, or that domestic or international regulations
or third parties will not raise material issues with adverse effect on us.

Canada

Registration and Licensing Requirements. We are registered with the Canadian
Radio-television and Telecommunication Commission ("CRTC") as a reseller of
telecommunications services in Canada. This is a requirement under Canadian law
in order to provide resale services in Canada. In the past, this was the only
requirement under Canadian law in order to be allowed to resell
telecommunications services.

        As of January 1, 1999, new requirements oblige resellers to apply for an
international telecommunications service provider license. A licensing regime
was established in part because of concerns relating to the potential for
anti-competitive behavior involving foreign monopolists acting in conjunction
with a resale affiliate based in Canada. The CRTC also wished to be able to
exercise some supervision over Canadian service providers, especially resale
affiliates in Canada.

        We currently hold a Class B license from the CRTC. The CRTC issues
international telecommunications service provider licenses for a period of five
years and has indicated that, once it gains more experience with the licensing
regime it will consider extending the terms to the maximum permitted length of
10 years. Licensees who maintain their licenses in good standing may expect to
have them renewed by the CRTC. Currently, there is no fee payable in order to
obtain an international telecommunications service provider license.

        The licensing regime for Class B licensee is very light handed. Once a
license is obtained, the licensee must keep it current, by advising the CRTC of
any changes to the filed information. It must also file an annual affidavit
stating that no changes to the information on file have taken place or
alternatively describing any such changes. We are currently in full compliance
with all filing requirements of our Class B license.

        Because we do not provide any services on a monopoly basis and are not a
resale affiliate, it is highly unlikely that the CRTC will have any concerns
regarding anti-competitive behavior on our part. In addition, because we do not
own or operate the underlying transmission facilities used to provide
telecommunications services to the public, we are not classified as a Canadian
carrier, but rather as a reseller. As such, we are not subject to the Canadian
ownership and control requirements that apply to the facilities-based Canadian
carriers.

        Contribution Requirements. The CRTC established the "contribution"
regime in 1992 when it first opened the long distance market to facilities-based
competition. The CRTC decided that the widest possible range of services and
service providers should pay contribution rates. Thus, ILECs, long distance
operators, CLECs, cellular operators, resellers such as our company and others
must all make contribution payments based on their Canadian telecommunications
service revenues.

        Contribution-eligible revenues are defined as total revenues from
Canadian telecommunications services. However, several deductions apply, the
most important one for us being inter-carrier payments. To prevent "double
taxation", inter-carrier payments to other telecommunications service providers
are deducted (except where the services are used internally by the acquiring
service provider).

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        For fiscal year 2002, the contribution charge was approximately 1.4% of
"contribution-eligible" revenues. It is expected to decline quite substantially
in future years. Although we cannot predict whether the CRTC will change its
method of contribution assessment and collection in the future, if the current
approach remains unchanged and the overall contribution requirement declines as
expected, we do not anticipate that our total contribution payments will become
material in future years.

United States

        In the U.S. we operate as an interexchange carrier ("IXC"). As such, our
services are subject to the provisions of the Federal Communications Act of
1934, as amended (the "Act") and FCC regulations, as well as to the applicable
laws and regulations of various states and the regulations of state public
utility commissions ("PUCs"). The recent trend in the U.S. has been to reduce
both federal and state regulatory burdens for telecommunications service
providers.

FCC Domestic Interstate Services Regulation. As an IXC, we must comply with the
requirements of common carriage under Title II of the Act, including the
offering of service on a non-discriminatory basis at just and reasonable rates.
U.S. domestic common carrier services are substantially deregulated and we are
considered a non-dominant domestic interstate IXC, and as such, our provision of
international and domestic long distance telecommunications services in the U.S.
are generally subject to less regulation than are dominant carriers.
Nonetheless, we are required to comply with a variety of license, rate making,
reporting and other regulatory requirements.

        Our costs of providing long distance services will be affected by
changes in the access charge rates imposed by incumbent local exchange carriers
("ILECs") as well as competitive local exchange carriers ("CLECs") for
origination and termination of calls over local facilities. Access charges are
expected to comprise a significant portion of the cost of providing
interexchange services in the U.S. The FCC has significantly revised its access
charge rules in recent years to reduce access charges imposed on IXCs.

        Other carrier compensation issues similarly may affect our operating
expenses as well as our ability to compete with other IXCs and providers of
other competitive services, such as voice over Internet protocol. The FCC has
initiated a broad-ranging rulemaking proceeding in which it has proposed the
replacement of various forms of intercarrier compensation; we cannot predict the
outcome of this proceeding or its possible effect on our company.

         As a provider of domestic interstate telecommunications services, we
must contribute to the universal service fund ("USF"), established by the FCC
pursuant to the federal universal services subsidy regime. Under current
universal service rules, subject carriers must pay USF contributions assessed as
a percentage of their end-user revenues from interstate and international
telecommunications services. These amounts may be billed to our customers.

         In addition to cost of service issues affecting IXCs in general,
regulatory developments affecting the Regional Bell Operating Companies may have
an impact on our ability to compete.

International Services Regulation. International common carriers are required to
obtain individual authority from the FCC and are subject to various reporting
and filing requirements. We have obtained global authorization from the FCC to
provide international switched and private line services on a facilities and
resale basis. In 2001, the FCC determined that international as well as domestic
services provided by non-dominant carriers should be detariffed. As with our
domestic services, detariffing is expected to give us greater pricing
flexibility in our service offerings, but will eliminate protection under the
"filed rate doctrine."

                                       8

<PAGE>

        Other international service rules also may affect our international
business, including rules limiting routes over which U.S. international carriers
may be permitted to provide international switched services over private lines
interconnected with the public switched network (referred to as International
Simple Resale, or "ISR"), and prohibitions against providing call-back services
to countries that have specifically declared such services to be illegal. Under
certain circumstances, international revenues may also be included in the
calculation of our required USF contribution.

State Regulation. Our intrastate long distance operations are subject to various
state laws and regulations, including, in most jurisdictions, certification and
tariff filing requirements. Some state PUCs also require the filing of periodic
reports, the payment of various fees and surcharges and compliance with service
standards and consumer protection rules. State PUCs often require pricing
approval or notification for certain stock or asset transfers or, in several
states, for the issuance of securities, debt or for name changes. We have
received formal commission approvals of applications to provide IXC resale
services in eight states, Nevada, California, Texas, New Jersey, Illinois,
Pennsylvania, Maryland and Florida. We are also authorized to provide IXC resale
services on a registration, or unregulated basis, in two other jurisdictions,
specifically Virginia and the District of Columbia.

        Certificates of authority can generally be conditioned, modified,
canceled, terminated, or revoked by state regulatory authorities for failure to
comply with state laws and/or the rules, regulations, and policies of the state
regulatory authorities. Fines and other penalties also may be imposed for such
violations. PUCs also regulate access charges and other pricing for
telecommunications services within each state. The regional Bell operating
companies and other local exchange carriers have been seeking reduced state
regulatory requirements, including greater pricing flexibility which, if
granted, could subject our long distance services to increased price
competition. We may also be required to contribute to intrastate universal
service funds in some states.

REPORTS TO SECURITY HOLDERS

        We may furnish our stockholders with a copy of this Form 10-KSB and with
quarterly or semi-annual reports containing unaudited financial information.

        For further information about our company, you may read the materials we
have filed with the SEC without charge at the Public Reference Section of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. You can also obtain copies of these materials at prescribed rates from
the Public Reference Section of the SEC in Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms.

        Our SEC filings and the registration statement can also be reviewed by
accessing the SEC's internet site at http://www.sec.gov, which contains reports,
proxy and information statements and other information regarding registrants
that are filed electronically with the SEC.

ITEM 2.  DESCRIPTION OF PROPERTIES

CORPORATE OFFICES

        We lease approximately 6,500 square feet of office space at 55 Town
Centre Court, #610, Toronto, Ontario, for our corporate and customer service
operations. The term of the lease expires in May 2003 and the monthly payment is
approximately $3,500. We have negotiated a favorable extension of this lease
through May 2006 with an option to extend the term of the lease for an
additional 3 years thereafter.

SWITCH LOCATIONS

        We currently lease space at 151 Front Street, Toronto, Ontario and 60
Hudson Street, New York, to house our Harris LX and Harris IXP communication
switches. Both locations are in buildings which

                                       9

<PAGE>

house many other carriers. This provides us with the advantage of ease of access
to other carriers. These switches are installed in rooms that are
environmentally modified, cooled and designed for switching equipment. These
facilities have full battery backup for a full 24 hours in case of a power
failure. Our current lease for the facility at 151 Front Street is for five
years (which commenced in March 2002) at an annual rent of approximately
$38,350. Our current lease for the facility at 60 Hudson Street commenced in
April 2000, renewable on a yearly basis, and provides for monthly rent charges
of approximately $1,000.

ITEM 3.    LEGAL PROCEEDINGS

         We are currently not a party to any material litigation which is not
incidental to the ordinary course of our business and operations.

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

         No matters were submitted to a vote of our security holders, through
the solicitation of proxies or otherwise, during the quarter ended June 30,
2002.

                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

            At the end of fiscal year 2002, our Common Stock was not quoted on
any national exchange or other public trading market. As of September 2002, our
Common Stock is quoted on the OTC Bulletin Board under the symbol "YAKC." There
were approximately 94 shareholders of record of our Common Stock on June 30,
2002.

            We have not paid any dividends on our common stock and we intend to
retain all earnings for use in our operations and to finance the development and
the expansion of our business. We do not anticipate paying any dividends on the
common stock in the foreseeable future. The payment of dividends is within the
discretion of our Board of Directors. Any future decision with respect to
dividends will depend on future earnings, future capital needs and our operating
and financial condition, among other factors. A 4% cumulative dividend in the
aggregate amount of $52,850 was paid to holders of our Preferred A Shareholders
which converted 497,000 preferred shares into an equal amount of common stock
effective June 30, 2002.

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

         The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included herein should be read in conjunction with the
Consolidated Financial Statements of Yak Communications (USA), Inc. and
Subsidiaries, and the related notes to the Financial Statements. Our Financial
Statements have been prepared in accordance with generally accepted accounting
principles in the U.S. and have been audited by our independent auditors.

         The financial information in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" refers to our continuing
operations.

Results of Operations for the year ended June 30, 2002 as compared to the year
ended June 30, 2001.

         Net revenue increased approximately $9,559,000, or 64%, to
approximately $24,492,000 for the year ended June 30, 2002, from $14,933,000 for
the year ended June 30, 2001. We experienced continuous monthly increases in
sales from $940,000 in July 2001 to $2,404,000 in June 2002. This increase in
revenues was the result of our increased sales in our existing markets, which
totaled $5,735,000, and sales in new markets, which totaled $3,824,000.

                                       10

<PAGE>

         During fiscal year 2001, we had $83,000 of gross revenue from our
wholesale carrier resale services, which decreased to $15,000 in gross revenue
for the year ended June 30, 2002. This decrease was a result of our decision to
terminate our wholesale arrangement in early fiscal year 2001, which was
replaced with our more profitable dial-around service.

         Cost of revenue increased $5,551,000, or 45%, to $17,710,000 for the
year ended June 30, 2002, from $12,159,000 for the year ended June 30, 2001.
This increase is in proportion to the increased traffic volumes associated with
the growth in our dial-around revenues. Cost of revenue is comprised primarily
of the cost of long distance services, fees for the processing and transporting
of our calls, and fixed and variable line access. The overall cost of revenue
decreased to 72% of sales for the year ended June 30, 2002, from 81% of sales
for the year ended June 30, 2001. This decrease was due to greater purchasing
power for long distance costs and increased customer utilization of our
fixed-cost access lines. The majority of the cost of revenue is variable, based
upon the cost of the long distance services, processing fees, and access costs.
As our telephony traffic volume increased, it gave us greater "purchasing
power," which has allowed us to lower our long distance costs. The cost of long
distances services has decreased to 42% for the year ended June 30, 2002 from
54% for the year ended June 30, 2001.

         Selling, general and administrative expenses ("SG&A") increased
$1,379,000, or 56%, to $3,847,000 for the year ended June 30, 2002, from
$2,468,000 for the year ended June 30, 2001. This increase was at a lower rate
than the growth of revenue during the same period. The increased amount is
primarily due to additional spending for marketing and advertising in order to
attract new customers and increase our revenue base. Of this increase,
advertising and promotion was the largest component, amounting to $1,484,000 for
the year ended June 30, 2002, as compared to $1,097,000 for the year ended June
30, 2001. The next largest component of SG&A was salaries, which increased to
$1,175,000 for the year ended June 30, 2002, from $703,000 for the year ended
June 30, 2001. This salary increase was a result of hiring additional
administration, technical, and customer service employees which were required to
support our growth in sales during fiscal 2002.

         Organizational and start-up costs for the development of operations of
our subsidiary Yak Communications (America), Inc., which was incorporated in
March 2001, were $170,000. These costs were composed primarily of legal and
consulting fees incurred to obtain the regulatory licenses and contracts
required to commence U.S. operations. We are still in the development stage and
have recently commenced limited test marketing at one location in the U.S.

         Accounts receivable financing costs related to the factoring of our
trade accounts receivable, which are collected for us by the LECs, have
increased $263,000, or 78%, to $603,000 for the year ended June 30, 2002 from
$340,000 for the year ended June 30, 2001. This increase is a direct result of
the increased amount of accounts receivable being factored which increased by
approximately 90% over the year ended June 30, 2001. In addition, we paid
approximately $107,000 in costs and fees to terminate our prior factoring
arrangement and a guaranty / consulting fee of approximately $145,000 in
connection with our new accounts receivable financing agreement. See "Executive
Compensation" below.

         Depreciation and amortization increased $12,000, or 2%, to $463,000 for
the year ended June 30, 2002, from $452,000 for the year ended June 30, 2001.
Depreciation and amortization have remained relatively constant over the last
fiscal years as capital spending decreased to $764,000 for the year ended June
30, 2002 as compared to $1,005,000 for the previous fiscal year.

Liquidity and Capital Resources

         Our liquidity requirements arise from cash used in operating
activities, purchases of capital assets and interest and principal payments on
outstanding indebtedness. To date, we have financed our growth through the
private placement of equity securities, borrowings, accounts receivable
financing, vendor financing and capital lease financing.

                                       11

<PAGE>

         Net cash provided from operating activities was approximately
$1,718,000 for the year ended June 30, 2002, as compared to net cash provided
from operating activities of $938,000 for the year ended June 30, 2001. This was
due to our net income from operating activities of $1,210,581 for the year ended
June 30, 2002, as compared to a net loss of $663,260 for the year ended June 30,
2001. The remaining increase in net cash provided from operating activities
represented an increase in borrowed funds from our accounts receivable
arrangement of approximately $1,425,570 for the year ended June 30, 2002 as
compared to $717,580 for the previous fiscal year.

         Net cash used in investing activities was $764,000 for the year ended
June 30, 2002 as compared to $1,005,000 for the year ended June 30, 2001. These
investing activities were the cash component of the additions to our property
and equipment.

         Net cash used by financing activities was $431,000 for the year ended
June 30, 2002 as compared to $126,000 provided by financing activities for the
year ended June 30, 2001. This was cash used for the repayment of amounts to
various related parties, repayment of amounts due under notes payable and
payments of dividends.

         We do not have any plans for any further significant acquisitions of
property and equipment during the current fiscal year. We believe we have
sufficient fixed capacity to accommodate our anticipated volume of telephony
traffic in both Canada and the U.S. during fiscal 2003. We expect that the only
capital additions to be made during fiscal year 2003 will be those required to
maintain our existing telephony capacity, which are not expected to be greater
than the capital additions made during fiscal year 2002.

         We believe that our current operations will be able to generate
sufficient cash to meet our current obligations and maintain our current level
of operations. We anticipate that additional working capital will be required to
fund the planned growth in sales expected from our recent expansion into the
remaining major cities in Canada which began in the summer of 2001. In order to
satisfy this additional working capital requirement, we may be required to raise
additional funds by increasing our available amount to be borrowed on our
accounts receivable factoring arrangements. We have $6 million available under
our current accounts receivable factoring agreement of which approximately $3
million is currently outstanding. In addition, we may seek to obtain additional
funds from public or private equity or debt offerings. We do not intend to
commence significant marketing efforts in the U.S. until sufficient working
capital is available. However, we intend to investigate and test market in
certain discrete locations in the U.S. in order to determine the potential for
success of our business in the U.S. If no further external funding is available,
we may be required not to immediately pursue expansion plans in the U.S.

         In addition to the financing sources described above, our agreement
with Telus (described above) will provide up to $3.25 million of funds for
specific use in marketing and advertising our planned expansion. These amounts
are reflected as deferrals of amounts otherwise due to Telus.

FORWARD LOOKING STATEMENTS

         From time to time, we make statements about our future results in this
Form 10-KSB that may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
based on our current expectations and the current economic environment. Such
statements are subject to known and unknown risks and uncertainties that could
cause actual future results and developments to differ materially from those
currently projected. We caution you that these statements are not guarantees of
future performance. They involve a number of risks and uncertainties that are
difficult to predict. Our actual results could differ materially from those
expressed or implied in the forward-looking statements. Important assumptions
and other important factors that could cause our actual results to differ
materially from those in the forward-looking statements, include, but are not
limited to: (i) access to sufficient working capital to meet our operating and
financial needs; (ii) our ability to respond to growing competition in our
markets for discount long distance services as well as the extent, timing and

                                       12

<PAGE>

success of such competition; (iii) our ability to expand into new markets and to
effectively manage our growth; (iv) the profitability of our entry and expansion
into the U.S. market; (v) customer acceptance and effectiveness of us as a
discount long distance provider and our ability to assimilate new technology and
to adapt to technological change in the telecommunications industry; (vi) our
ability to develop and provide voice over internet and web-based communications
services; (vii) changes in, or failure to comply with, applicable governmental
regulation; (viii) our reliance on our key personnel and the availability of
qualified personnel; (ix) the duration and extent of the current economic
downturn; (x) general economic conditions or material adverse changes in markets
we serve; (xi) the risk that our analyses of these risks could be incorrect and
that the strategies developed to address them could be unsuccessful; (xii)
changes in our accounting assumptions that regulatory agencies, including the
Securities and Exchange Commission, may require or that result from changes in
the accounting rules or their application, which could result in an impact on
our earnings; and (x) various other factors discussed in this filing.

ITEM 7.  FINANCIAL STATEMENTS

           The Company's audited consolidated financial statements for the
fiscal years ended June 30, 2002 and June 30, 2001, immediately follow the
signature page to this Form 10-KSB.

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

None

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS OF THE COMPANY

           The executive officers and directors of the registrant are as
follows:

NAME                      AGE        POSITION

Charles Zwebner           43         President, Chief Executive Officer and
                                     Director

Vincent Genova            38         Director

Mitchell Shore            43         Vice President of Design, Product Marketing
                                     and Advertising

Anthony Greenwood         43         Director and Secretary

Anthony Heller            51         Director

Margaret Noble            41         Controller

MANAGEMENT

A brief description of management of the Company is as follows:

CHARLES ZWEBNER.

           Mr. Zwebner is the founder of our company, and has served as our
President, Chief Executive Officer, and Chairman of our Board of Directors since
our inception in December 1998. Prior to organizing our company, he served as
the President of CardCaller Canada Inc. (1992-1998) and was a member of its
Board of Directors. Mr. Zwebner founded CardCaller Canada in 1992, which
developed the first Canadian

                                       13

<PAGE>

fixed amount prepaid, multilingual telephone calling card. In June 1997, the
shareholders, including Mr. Zwebner, of CardCall International Holdings, Inc.
("CIH"), the parent of CardCaller Canada, sold all of their shares in CIH to a
U.S. public corporation. Mr. Zwebner continued as President and a director of
CardCaller Canada until his resignation in August 1998. Prior to Mr. Zwebner's
resignation, the new owner of CIH disposed of substantially all of the assets of
that company. Mr. Zwebner holds a B.A. in Computer Science and Business
Administration from York University.

VINCENT GENOVA.

            Mr. Genova is a co-founder of Cash Money Chequing Inc., a chain of
check cashing stores in Toronto, Canada. For the past nine years he has been
responsible for the development and implementation of the unique telephone
products and financial services of Cash Money. Mr. Genova has been instrumental
in site selection, lease negotiation, site plan approval, construction of all
stores, and all aspects of new store development. He has also been
co-responsible for product development, implementation of internal controls, and
systems, and general administration of the company since inception. Together
with his brother Mr. Joe Genova, he has developed effective ways to market
telecommunication and financial products that have achieved above average
industry growth, revenue, and profits.

MITCHEL ANDREW SHORE.

            Mr. Shore has served as our Vice President of Design, Product
Marketing and Advertising since January 1999. Since 1984, Mr. Shore has operated
Mitchel Shore Creative Services, Inc., which has provided marketing and
advertising services for an array of small, medium and large companies,
including London Radio, TV Ontario, AES, BIC Shavers, Bata Shoes, Friedberg
Mercantile, and Shell Canada. Mitchel Shore holds an Honours B.A. from York
University (1977) and an M.A. from University of Western Ontario (1981)
specializing in Marketing and Advertising.

ANTHONY GREENWOOD

            Mr. Greenwood is a Canadian attorney with Greenwoods Barristers &
Solicitors. He was educated in Europe and North America, and practices law and
acts as a consultant to both Canadian and U.S. private and public corporations
in the area of business law, cross border financing, and dispute resolutions. He
is a member of the International Law and Business Law sections of the American
Bar Association and sits on several committees including the International
Business Law Committee of the Section of Business Law. He is also a member of
the Canadian Bar Association, the London, England-based International Bar
Association, and the Tokyo-based Inter-Pacific Bar Association. Mr. Greenwood is
an author of many academic articles in the areas of secured financing, corporate
finance, financial service regulation, and international debt recovery & dispute
resolution, and is an associate editor of the Canadian-based international
Banking & Finance Law Review and an editor of the Australian-based international
law publication Journal of Banking and Finance, Law & Practice. Mr. Greenwood is
also a part time lecturer at the Osgoode Hall Law School (Toronto, Canada).

ANTHONY HELLER.

            Mr. Heller has served as a Director of our company since December
1998. He has served as the President of Plazacorp Investments Limited (a real
estate development company based in Toronto, Canada) since 1994. Since 1994,
Plazacorp has completed over $100 million worth of real estate developments
principally in Canada. Mr. Heller has also been involved in venture capital
financings and has consulted to both privately held and publicly traded
companies in which he has invested.

MARGARET NOBLE

         In 1985 Ms. Noble was accredited as a Certified Management Accountant.
Ms. Noble also graduated from Centennial College in 1983 with a diploma in
Business Administration - Accounting and

                                       14

<PAGE>

Financial Management and a diploma in General Business - Data Processing. Since
her CMA accreditation she has held various accounting and computer system
positions in the high technology, entertainment and telecommunication
industries. Her experience includes the implementation of accounting systems and
procedures as well as strategic planning and problem solving at Dome
Productions, Magnetic North and Yak Communications. In addition to her position
as Controller for Yak Communications, Ms. Noble is also on the Board of
Directors as Treasurer for the United Way of Ajax/Pickering, Ontario.

ITEM 10. EXECUTIVE COMPENSATION

Compensation

         The following table sets forth information about the compensation paid
or accrued by the Company to the Company's named executive officers whose
aggregate compensation exceeded $100,000, for the last three completed fiscal
years:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                         Long-Term
                                                                         Compensation

                                   Annual Compensation                   Awards

Name and                                                                 Securities      Other
--------
Principal Position                 Year       Salary          Bonus      Underlying      Compensation
------------------
                                                                         Options
<S>                                <C>        <C>             <C>        <C>             <C>
Charles Zwebner - President, and   2000       $100,000        $ 85,000   ---             ---
Chief Executive Officer            2001       $120,000        $100,000   1,284,000       ---
                                   2002       $120,000        $100,000   ---             $144,871*
</TABLE>


___________
* Represents a guaranty/consulting fee paid to a corporation controlled by Mr.
Zwebner in connection with his guaranty of our accounts receivable factoring
arrangement and other services provided by Mr. Zwebner in obtaining such
financing.

Compensation of Directors

         Our Directors do not receive any compensation in their capacity as
members of our Board of Directors.

Compensation of Officers - Employment Agreements

            On September 20, 2000, the Company and our Canadian subsidiary
entered into an Employment Agreement with Charles Zwebner, our President and
Chief Executive Officer, which provides him an annual base salary of $120,000.
The Employment Agreement expires on December 31, 2003, unless terminated earlier
in accordance with the provisions of the agreement. The Employment Agreement
also provides for annual salary increases and bonuses as determined by our Board
of Directors.

         On December 21, 2000, in connection with Charles Zwebner's employment
agreement, we entered into a Stock Option Agreement with Charles Zwebner. Under
this Stock Option Agreement, our

                                       15

<PAGE>

Company granted Mr. Zwebner the option (the "Option") to purchase up to
1,284,000 shares of our common stock (the "Option Shares") at an exercise price
of $1.558 per share. The Option expires on December 31, 2003. The Option is
exercisable solely upon the occurrence of any of the following events: (i) the
sale of all or substantially all of the assets of the Company; or (ii) an
initial public offering of an equity security by the Company under the
Securities Act of 1933, as amended. In the event that neither of these
conditions to exercise is satisfied prior to the expiration of the Option or in
the event of Charles Zwebner's death or termination of his employment with the
Company prior to December 31, 2003 for any reason excluding for cause, then
Charles Zwebner may require that the Company purchase the Option Shares. The
purchase consideration of the Option Shares shall be in stock of the Company.
The number of shares to be considered shall be based upon a market value sale
price of the Company as if the Company were to be sold and the value of the
Option Shares would be included in the sale price.

STOCK OPTION PLAN

            In June 1999, we established a Stock Option Plan for key employees
which covers up to 640,000 shares of our common stock. There are currently no
options outstanding under the Stock Option Plan.

STOCK AWARD PLAN

            The Company has authorized a one-time Stock Award Plan whereby the
Company may issue up to an aggregate of 40,000 shares of its common stock to
certain of its employees as the Board of Directors may determine in its
discretion, as of December 28, 2001, all 40,000 shares were issued under this
Plan.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                         Number of              Percent of Total
                         Securities             Options Granted to
                         Underlying             Employees in
Name                     Options Granted        Fiscal Year            Exercise Price         Expiration
----                     ---------------        -----------            --------------         ----------
<S>                      <C>                    <C>                    <C>                    <C>
Charles Zwebner          1,284,000              100%                   $1.558                 12/31/03
</TABLE>


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The following table sets forth the beneficial ownership of shares of
our common stock by (i) each person who is known to us to be the beneficial
owner of more than 5% of our common stock; (ii) each director and named
executive officer (defined above) individually; and (iii) all directors and
executive officers as a group. Beneficial ownership of common stock has been
determined for this purpose in accordance with Rules 13d-3 and 13d-5 of the
Securities and Exchange Commission, under the Securities Exchange Act of 1934,
as amended, which provide, among other things, that a person is deemed to be the
beneficial owner of common stock if such person, directly or indirectly, has or
shares voting power or investment power with respect to the common stock or has
the right to acquire such ownership within sixty days after the date of this
registration statement.

                                       16

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name and Address of Beneficial
------------------------------
Owners                                              Number of Shares                 Percent of Class (1)
------                                              ----------------                 --------------------
-------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                              <C>
Directors and Executive Officers

-------------------------------------------------------------------------------------------------------------------
Charles Zwebner                                       2,077,400(2)                           34.2
121 Westgate Boulevard
Toronto, Ontario M3H 1P5
-------------------------------------------------------------------------------------------------------------------
Vincent Genova (3)                                      318,200                               6.6
1 Deerchase Circle
Woodbridge, Ontario L4H 1B4
-------------------------------------------------------------------------------------------------------------------
Mitchell Shore                                          201,600                               4.2
45 Palm Drive
Toronto, Ontario M3H 2B5
-------------------------------------------------------------------------------------------------------------------
Anthony Greenwood                                         7,500                                *
112 Glen Park Avenue
Toronto, Ontario, M6B 2C5
-------------------------------------------------------------------------------------------------------------------
Anthony Heller                                          492,400                              10.3
77 Caribou Road
Toronto, Ontario M5N 2A7
-------------------------------------------------------------------------------------------------------------------
Margaret Noble                                            7,500                                *
9 Epps Crescent
Ajax, Ontario, L1Z 1J2
-------------------------------------------------------------------------------------------------------------------
Owners of More Than 5% of Stock

-------------------------------------------------------------------------------------------------------------------
Michael Zwebner (4)                                     253,200                               5.3
Melvin Hall
Golders Green Road
London, England NW11
-------------------------------------------------------------------------------------------------------------------
Joseph Genova (3)                                       318,200                               6.6
35 Orkney Crescent
Etobicoke, Ontario M9A 2T4
-------------------------------------------------------------------------------------------------------------------
Talk Visual Corporation (5)                             405,516                               8.5
3550 Biscayne Boulevard, Suite 704
Miami, Florida 33137
-------------------------------------------------------------------------------------------------------------------
Ralquina Group Holdings Limited                         425,000                               8.9
Suite 3C
Sunset Plaza
Main Street
Horse Barrack Lane
Gibraltar
-------------------------------------------------------------------------------------------------------------------
All Directors and Executive Officers as a             3,104,600                              51.2
Group (6 persons)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

__________
* Less than 1%.
(1) Based on 4,792,158 shares of common stock outstanding as of the date of this
filing.
(2) Includes a currently exercisable option to purchase 1,284,000 shares of
common stock and 197,000 shares of common stock currently held in the name of
1231912 Ontario, Inc., a corporation controlled by Charles Zwebner.
(3) Messrs. Joseph Genova and Vincent Genova are brothers.
(4) Mr. Michael Zwebner is the brother of Charles Zwebner. Does not include
67,242 shares owned by Overseas Development Holdings Corporation, a foreign
corporation, of which Michael Zwebner is a principal shareholder and a director.
(5) Talk Visual Corporation is a Delaware corporation of which Michael Zwebner
is a shareholder and former director and officer.

                                       17

<PAGE>

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            Our Canadian subsidiary has entered into an agreement with 1054311
Ontario Limited, a company controlled by Anthony Heller, a shareholder and
director of our Company, to provide cash advances or arrange for third-party
financing of up to $435,000 to our Canadian subsidiary, based upon available
accounts receivable from Bell Canada. As of December 31, 2001, all amounts
outstanding under this arrangement (amounting to $398,071) have been converted
into 200,000 shares of our common stock.

            In April 2000 we entered into a three-year lease with
E-Cashexpress.com Corporation, a corporation of which Charles Zwebner is a
shareholder and director, for our corporate offices and customer service
operations at 55 Town Centre Court, #610, Toronto, Ontario. As of May 2002, this
lease arrangement was terminated.

            In December 2000, the Company entered into a transaction with Talk
Visual Corporation ("TVCP"), a corporation controlled by Michael Zwebner, the
brother of Charles Zwebner. Pursuant to this transaction, TVCP agreed to
purchase between 51% and 60% of the outstanding shares of our common stock in
exchange for $.50 in cash and four shares of TVCP common stock for each share of
our common stock. In addition, TVCP agreed to loan to us $1 million. As part of
this loan amount and in anticipation of closing this transaction, TVCP advanced
us $450,000. Subsequently, this transaction failed to close and an agreement was
entered into on June 30, 2001 which provided for the conversion of the
outstanding balance of the initial $450,000 advance ($366,000) into 202,758
shares of our common stock along with our further obligation to issue to TVCP,
or otherwise arrange for TVCP to receive, an additional 202,758 YAK shares in
exchange for 8,241,600 TVCP shares. As of December 28, 2001 this transaction was
completed. As part of this stock exchange, Overseas Development Holdings
Limited, an affiliate of Michael Zwebner, exchanged 82,758 YAK shares for
3,364,221 TVCP shares. The balance of 120,000 YAK shares was exchanged by a
third party shareholder of our company for 4,877,379 TVCP shares. As of December
28, 2001 there are no remaining outstanding agreements, liabilities or
obligations between TVCP and our company.

            Michael Zwebner, the brother of Charles Zwebner, had arranged loans
to the Company of which, as of the beginning of fiscal year 2002, $216,000 was
outstanding. As of June 30, 2002, all amounts due to Michael Zwebner were paid
in full.

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

(a) Exhibits. The following exhibits are filed with or incorporated by reference
into this report. The exhibits which are marked by a single asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from the
Company's Registration Statement on Form 10SB, as filed with the Securities and
Exchange Commission on January 3, 2002. The exhibits which are marked by a
double asterisk (**) were previously filed as part of, and are hereby
incorporated by reference from the Company's Form 10SB/A as filed with the
Securities and Exchange Commission on February 20, 2002. The exhibit numbers
correspond to the exhibit numbers in the referenced documents.

EXHIBIT NO.       DESCRIPTION OF DOCUMENT

3.1*              Articles of Incorporation of the Company, as filed on December
                  24, 1998, with the Secretary of State of the State of Florida.

3.2*              Articles of Amendment to the Articles of Incorporation of the
                  Company, increasing the number of authorized common stock from
                  50 million shares to 100 million shares, as filed on June 4,
                  1999, with the Secretary of State of the State of Florida.

                                       18

<PAGE>

3.3*              Articles of Amendment to the Articles of Incorporation of the
                  Company, designating Series A Convertible Preferred Stock, as
                  filed on July 27, 1999, with the Secretary of State of the
                  State of Florida.

3.4*              Bylaws of the Company.

10.1*             1999 Stock Option Plan.

10.2*             Billing and Collection Services Agreement, dated August 8,
                  2000, between the Company and Telus Corporation.

10.3*             EMI Translation Service Agreement, dated July 1, 2000, between
                  Telus Communications, Inc. and the Company.

10.4*             Option Agreement, dated December 21, 2000, between the Company
                  and Charles Zwebner.

10.5*             Employment Agreement between the Company, Yak Communications
                  (Canada), Inc. and Charles Zwebner, dated September 20, 2000.

10.6*             Invoice Ready Billing and Information Management Services
                  Agreement, dated April 27, 2001, between Yak Communications
                  (America) Inc. and Billing Concepts, Inc.

10.7              Billing and Collection Services Agreement, dated November 1,
                  2001, between the Company and Bell Canada.

10.8              Receivables Sale Agreement, dated as of February 8, 2002, by
                  and between Yak Communications (Canada) Inc., Yak
                  Communications (America), Inc., Yak Communications (USA), Inc.
                  and Textron Financial Canada Limited.

21                Subsidiaries

23.1              Consent of Horwath Orenstein LLP.

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


(b)      REPORTS ON FORM 8-K
         None

                                       19

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                            Yak Communications (USA), Inc.



Date:  September 18, 2002                   By:    /s/ Charles Zwebner
                                                   Charles Zwebner, Chairman

                                            By:    /s/ Vincent Genova
                                                   Vincent Genova, Director

                                            By:    /s/ Anthony Greenwood
                                                   Anthony Greenwood, Director

                                            By:    /s/ Anthony Heller
                                                   Anthony Heller, Director

                                       20

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
  Yak Communications (USA), Inc.
  Miami, Florida

We have audited the accompanying consolidated balance sheets of Yak
Communications (USA), Inc. and Subsidiaries (the "Company") as of June 30, 2002
and 2001 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Yak Communications
(USA), Inc. and Subsidiaries as of June 30, 2002 and 2001 and the results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

                                                /s/ Horwath Orenstein L.L.P

                                                Chartered Accountants

Toronto, Canada
August 2, 2002

                                      F-1

<PAGE>

                YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                              JUNE 30, 2002 AND 2001
<TABLE>
<CAPTION>
                                            Note      2002             2001
-------------------------------------------------------------------------------
                                                       $                $
<S>                                      <C>        <C>              <C>
                                 ASSETS
CURRENT
   Cash and cash equivalents                          582,513           59,404
   Accounts receivable, net                   4     4,886,802        3,258,314
   Prepaid expenses and sundry               14       425,783          158,749
   Income taxes recoverable                             6,244            6,244
   Deferred costs                                           -           77,002
                                                    --------------------------

                                                    5,901,342        3,559,713

PROPERTY AND EQUIPMENT, NET                   3     2,844,112        2,531,570

DEPOSITS                                               63,646           55,152

LICENCE FEES                                                -           79,260
                                                    --------------------------
                                                    8,809,100        6,225,695
                                                    ==========================
</TABLE>

       The accompanying notes are an integral part of these consolidated
                              financial statements

                                       F-2

<PAGE>
                YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                              JUNE 30,2002 AND 2001
<TABLE>
<CAPTION>
                                                             Note        2002           2001
--------------------------------------------------------------------------------------------------
                                                                           $              $
<S>                                                          <C>       <C>            <C>
                              LIABILITIES

CURRENT LIABILITIES
  Accounts payable and accrued liabilities                             1,146,253        962,324
  Amounts due for network access and usage                               523,543        668,309
  Amounts due to long distance carriers                                1,943,754      1,736,275
  Amounts due for equipment                                              188,976        360,034
  Due to Factor                                                4       3,006,017      1,580,444
  Note payable                                                 5               -         51,519
  Due to related parties                                       6               -        216,000
  Current portion of obligations under
     capital leases                                            7         129,110        253,641
                                                                      -------------------------
                                                                       6,937,653      5,828,546
                                                                      -------------------------
LONG-TERM DEBT
  Obligations under capital leases                             7           9,970        139,866
  Loan payable - related party                                 8               -        415,030
  Advances from Telus Communications Inc.                      9         143,775              -
                                                                      -------------------------
                                                                         153,745        554,896
                                                                      -------------------------
DEFERRED INCOME TAXES                                         10         204,000              -
                                                                      -------------------------
                                                                       7,295,398      6,383,442
                                                                      -------------------------

                     STOCKHOLDERS' EQUITY (DEFICIT)

COMMON STOCK                                                  11         201,521        194,151
SERIES A CONVERTIBLE PREFERRED STOCK                          11               -        497,000
ADDITIONAL PAID-IN CAPITAL                                             1,732,060        764,359
ACCUMULATED OTHER COMPREHENSIVE INCOME -
  TRANSLATION ADJUSTMENT                                                  67,232         31,585
DEFICIT                                                                 (487,111)    (1,644,842)
                                                                      -------------------------
                                                                       1,513,702       (157,747)
                                                                      -------------------------
                                                                       8,809,l00      6,225,695
                                                                      =========================
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements

                                       F-3

<PAGE>

                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                                    Accumulated
                                                                            Additional          Series A               other
                                                     Common stock            paid-in         Preferred stock       comprehensive
                                                   Shares      Amount        capital        Shares     Amount         income*
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>          <C>            <C>        <C>           <C>
Balance, June 30, 2000                           3,852,400    $192,124    $  400,386       497,000  $ 497,000      $  30,499
Common stock issued for conversion
 of debt to equity                                 202,758       2,027       363,973            -          -              -
Foreign currency translation adjustment                 -           -             -             -          -           1,086
Net loss                                                -           -             -             -          -              -
                                                ----------    --------    ----------      --------  ---------      ---------
Balance, June 30, 2001                           4,055,158     194,151       764,359       497,000    497,000         31,585
Foreign currency translation adjustment                 -           -             -             -          -          35,647
Common stock issued under employee stock
 award                                              40,000         400        79,600            -          -              -
Common stock issued for conversion of
 debt to equity                                    200,000       2,000       396,071            -          -              -
Common stock issued for conversion of
 preferred stock into common stock                 497,000       4,970       492,030      (497,000)  (497,000)            -
Dividends on preferred stock                            -           -             -             -          -              -
Net income                                              -           -             -             -          -              -
                                                ----------    --------    ----------      --------  ---------      ---------
Balance, June 30, 2002                           4,792,158    $201,521    $1,732,060            -   $      -       $  67,232
                                                ==========    ========    ==========      ========  =========      =========

<CAPTION>
                                                                         Stockholders'
                                                          Deficit       Equity (Deficit)
-----------------------------------------------------------------------------------------
<S>                                                     <C>             <C>
Balance, June 30, 2000                                $  (981,582)        $  138,427
Common stock issued for conversion
 of debt to equity                                             -             366,000
Foreign currency translation adjustment                        -               1,086
Net loss                                                 (663,260)          (663,260)
                                                      -----------         ----------
Balance, June 30, 2001                                 (1,644,842)          (157,747)
Foreign currency translation adjustment                        -              35,647
Common stock issued under employee stock
 award                                                         -              80,000
Common stock issued for conversion of
 debt to equity                                                -             398,071
Common stock issued for conversion of
 preferred stock into common stock                             -                  -
Dividends on preferred stock                              (52,850)           (52,850)
Net income                                              1,210,581          1,210,581
                                                      -----------         ----------
Balance, June 30, 2002                                $  (487,111)        $1,513,702
                                                      ===========         ==========
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements

                                       F-4


<PAGE>
                YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                        YEARS ENDED JUNE 30, 2002 AND 2001

<TABLE>
<CAPTION>
                                                            Note         2002              2001
---------------------------------------------------------------------------------------------------
<S>                                                         <C>       <C>              <C>
                                                                      $                $

NET REVENUE                                                            24,491,956        14,932,936

COST OF REVENUE                                                        17,710,565        12,159,325
                                                                      -----------------------------
GROSS MARGIN                                                            6,781,391         2,773,611
                                                                      -----------------------------
EXPENSES
  Selling, general and administration                                   3,847,433         2,468,016
  Accounts receivable financing                                           603,490           339,648
  Organizational and start-up costs                                       170,361            87,371
  Refinancing costs                                                       107,103               -
  Employee stock award                                                     80,000               -
  Writedown of property and equipment and licence fee                      67,595               -
  Interest on capital lease obligations                                    27,529            45,449
  Interest on long-term debt                                                  -              44,846
  Depreciation and amortization                                           463,299           451,541
                                                                      -----------------------------
                                                                        5,366,810         3,436,871
                                                                      -----------------------------
INCOME (LOSS) BEFORE INCOME TAX                                         1,414,581          (663,260)

PROVISION FOR INCOME TAXES                                   10           204,000               -
                                                                      -----------------------------
NET INCOME (LOSS)                                                       1,210,581          (663,260)
                                                                      =============================
BASIC EARNINGS (LOSS) PER SHARE                                              0.29             (0.17)
                                                                      =============================
DILUTED EARNINGS (LOSS) PER SHARE                                            0.20             (0.17)
                                                                      =============================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                    4,175,158         3,852,400
                                                                      =============================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES - ASSUMING
  DILUTION                                                              5,956,158         4,991,400
                                                                      =============================
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements

                                       F-5

<PAGE>
                YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        YEARS ENDED JUNE 30, 2002 AND 2001

<TABLE>
<CAPTION>

                                                               2002            2001
---------------------------------------------------------------------------------------
<S>                                                         <C>             <C>
                                                                $               $

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                           1,210,581        (663,260)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities
      Depreciation and amortization                             463,299         451,541
      Employee stock award cost                                  80,000             -
      Writedown of property and equipment and licence fee        67,595             -
      Deferred income taxes                                     204,000             -
  Changes in assets and liabilities:
   Decrease (increase) in:
    Accounts receivable                                      (1,628,488)     (1,269,907)
    Prepaid expenses and sundry                                (267,034)         (1,127)
    Deferred costs                                               77,002         (77,002)
    Deposits                                                     (8,494)         41,768
   Increase (decrease) in:
    Accounts payable and accrued liabilities                    202,617         178,732
    Amounts due for network access and usage                   (144,766)        511,580
    Amounts due to long distance carriers                       207,479         814,544
    Amount due for equipment                                   (171,058)        234,114
    Due to Factor                                             1,425,573         717,579
                                                            ---------------------------
  Net cash provided by operating activities                   1,718,306         938,562
                                                            ---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                           (764,176)     (1,004,901)
                                                            ---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Repayments on obligations under capital leases               (254,427)       (330,373)
  Repayments under loan payable                                     -          (109,363)
  (Repayments) advances from/to related parties                (216,000)        582,000
  Dividends paid                                                (52,850)            -
  Repayments on note payable                                    (51,519)        (16,021)
  Advances from Telus Communications Inc.                       143,775             -
                                                            ---------------------------
  Net cash (used in) provided by financing activities         (431,021)        126,243
                                                            ---------------------------
INCREASE IN CASH AND CASH EQUIVALENTS                           523,109          59,904
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                     59,404            (500)
                                                            ---------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                          582,513          59,404
                                                            ===========================
Supplemental disclosure of cash flow information:
  Interest paid                                                  56,217          90,295
  Non-cash investing and financing activities:
  Common stock issued for services                               80,000             -
  Conversion of loan payable to common stock                    398,071         366,000
  Conversion of preferred stock to common stock                 497,000             -
  Obligations under capital leases incurred in connection
   with acquisition of equipment                                    -           386,335
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements

                                       F-6

<PAGE>

                YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001

1.   ORGANIZATION AND BUSINESS

     Yak Communications (USA) Inc. is a switch based reseller specializing in
     offering dial-around long-distance services to consumers. The Company was
     incorporated in the State of Florida on December 24, 1998 and operates as a
     holding company of its wholly-owned subsidiaries in the United States and
     Canada.

     The Company's began offering its services to consumers in Canada in July
     1999 and in the United States commencing December 2001.

     The Company is dependent upon its ability to obtain ongoing sources of
     financing to fund its working capital requirements for continuing
     development and operations. While the Company has in the past, been able to
     maintain access to adequate external financing sources on acceptable terms,
     no assurance can be given that such access will continue.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     These consolidated financial statements have been prepared in accordance
     with accounting principles generally accepted in the United States and
     reflect the following policies:

     Principles of consolidation

     These consolidated financial statements include the accounts of Yak
     Communications (USA), Inc. and its wholly-owned subsidiaries - Yak
     Communications (America), Inc. and Yak Communications (Canada) Inc.
     (collectively hereinafter referred to as the "Company"). All intercompany
     balances and transactions are eliminated upon consolidation.

     Revenue recognition

     The Company records revenue from the sale of dial-around services and the
     resale of long-distance services at the time of customer usage based upon
     minutes of use.

                                       F-7

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)


     Cost of revenue

     Cost of revenue includes network costs that consist of the cost of
     long-distance services, processing costs, line access and usage costs.
     These costs are recognized when incurred.

     Use of estimates

     The preparation of consolidated 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 consolidated financial statements and the reported amounts of
     revenues and expenses during the reported period. Actual results could
     differ from those estimates. These estimates are reviewed periodically and,
     as adjustments become necessary, they are reported in earnings in the
     period in which they become known.

     Computation of earnings (loss) per common share

     Basic earnings (loss) per share is computed by dividing the earnings (loss)
     attributable to common stockholders by the weighted average number of
     common shares outstanding for the period. Diluted earnings per share is
     computed giving effect to all dilutive potential common shares that were
     outstanding during the period. Dilutive potential common shares consist of
     incremental common shares issuable upon exercise of convertible preferred
     stock and stock options. The effect of potential common stock has been
     excluded from the computation of diluted loss per share during 2001 as the
     effect would be antidilutive.

     Foreign currency translation and foreign assets

     In accordance with the provisions of Statement of Financial Accounting
     Standards ("SFAS"), No. 52, "Foreign Currency Translation," assets and
     liabilities of the Company's foreign subsidiary were translated into United
     States dollars at the exchange rates in effect on the reporting date.
     Income and expenses are translated at an average exchange rate for the
     respective period. For the foreign subsidiary which utilizes its local
     currency as its functional currency, the resulting translation gains and
     losses are included in other comprehensive income. Gains or losses
     resulting from foreign exchange transactions are reflected in earnings.

                                      F-8

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     Cash and cash equivalents

     Cash and cash equivalents are comprised of cash and term deposits with
     original maturity dates of less than 90 days.

     Deferred costs

     Certain costs relating to providing services in new locations, incurred
     prior to the commencement of operations, are deferred and amortized over a
     period of one year, commencing 30 days after operations commence.

     Property and equipment

     Property and equipment is stated at cost less accumulated depreciation
     which is provided on the straight-line and declining balance methods over
     the estimated useful lives of the assets as follows:

       Telecom switching systems                      20% declining balance
       Billing, administration and customer
          service systems                             20% declining balance
       Carrier identification codes loading           20% declining balance
       Office furniture and equipment                 20% declining balance
       Leasehold improvements                         over term of the lease
       Computer hardware                              20% declining balance
       Automobile                                     20% declining balance
       Installed lines                                20% declining balance

     Cost includes major expenditures for improvements and replacements which
     extend useful lives or increase capacity of assets as well as expenditures
     necessary to place assets into readiness for use. Costs incurred during the
     application development stage are capitalized and amortized over the
     estimated useful life of the systems. Expenditures for maintenance and
     repairs are expensed as incurred.

                                      F-9

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCLAL STATEMENTS

                              JUNE 30, 2002 AND 2001


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     Property and equipment (cont'd)

     The Company periodically evaluates the realizability of its property and
     equipment. In making such evaluations, the Company compares certain
     financial indicators such as expected undiscounted future revenues and cash
     flows to the carrying amount of the assets. During the year ended June 30,
     2002 the Company wrote down property and equipment and licence fee with a
     net book value of $67,595 and believes that no further impairment exists.

     Assets under capital lease are amortized using rates consistent with
     similar assets.

     Licence fees

     The cost of license fees are deferred and amortized on a straight-line
     basis over 3 years.

     Income taxes

     The Company accounts for income taxes in accordance with Statement of
     Financial Accounting Standards No. 109 "Accounting for Income Taxes" which
     requires an asset and liability approach to financial accounting and
     reporting for income taxes. Deferred income tax assets and liabilities are
     computed annually for differences between the financial statement and tax
     basis of assets and liabilities that will result in taxable or deductible
     amounts in the future based on enacted tax laws and rates applicable to the
     periods in which the differences are expected to affect taxable income.
     Valuation allowances are established when necessary to reduce deferred tax
     assets to the amount expected to be realized. The income tax provision is
     the tax payable or refundable for the period plus or minus the change
     during the period in deferred tax assets and liabilities.

     Cost of Start-up Activities

     The Company expenses the cost of start-up activities and organizational
     costs as incurred in accordance with statement of position 98-5 "Reporting
     on the Costs of Start-up Activities".

                                      F-10

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLlDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001

________________________________________________________________________________

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     Advertising and promotion expense

     Advertising costs are expensed as incurred. The costs of promotional
     marketing materials are deferred and expensed as used.

     Stock option plan

     The Company accounts for stock options issued to employees in accordance
     with SFAS No. 123, Accounting for Stock-Based Compensation, which permits
     entities to continue to apply the provisions of Accounting Principles Board
     ("APB") Opinion No.25, "Accounting for Stock Issued to Employees", and
     provide pro forma disclosures of the effect on net income (loss) and net
     income (loss) per share for employee stock option grants as if the fair
     value based method, as defined in SFAS No. 123, has been applied. The
     Company has elected to apply the provisions of APB Opinion No. 25 and
     provide the pro forma disclosures required by SFAS No. 123. Under APB
     Opinion No. 25, the Company recognizes no compensation expense related to
     employee stock options, as no options are granted at a price below the fair
     market value on the day of grant.

     Comprehensive income

     The Company reports and presents comprehensive income and its components in
     accordance with SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130
     requires only additional disclosures in the consolidated financial
     statements; it does not affect the Company's financial position or results
     of operations.

     Other comprehensive income is comprised of the foreign translation
     adjustment arising from the conversion from Canadian dollars to U.S.
     dollars and is presented as a separate component of stockholders' equity.

                                      F-l1

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001


                                                    2002              2001
________________________________________________________________________________

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     Comprehensive income (cont'd)

     Comprehensive income for the years ended June 30, 2002 and 2001 are as
     follows:

                                                    $                 $

     Net income (loss)                           1,210,581          (663,260)
     Foreign currency translation
        adjustment                                  35,647             1,086
                                                ----------          --------
                                                 1,246,228          (662,174)
                                                ==========          ========

     Fair value of financial instruments

     SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
     requires disclosure of the fair value of certain financial instruments for
     which it is practicable to estimate fair value. For purpose of the
     disclosure requirements, the fair value of a financial instrument is the
     amount at which the instrument could be exchanged in a current transaction
     between willing parties, other than in a forced sale or liquidation. The
     carrying values of cash, receivables, accounts payable, and other current
     liabilities are reasonable estimates of their fair value due to the
     short-term maturity of the underlying financial instruments. The carrying
     value of the capital leases is a reasonable estimate of its fair value
     based on current rates for equipment obligations.

     The estimated difference between the carrying value and the fair value of
     the loan payable to a related party in which no interest has been charged
     is not significant. As of December 31, 2001, this loan was repaid by the
     issuance of 200,000 common shares of the Company.

                                      F-12

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001

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

 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

      Credit risk

      Financial instruments that potentially subject the Company to
      concentrations of credit risk consist principally of trade accounts
      receivable. The Company has in place systems to prevent and detect fraud.
      The Company's system limits credit to any one customer in the amount of
      $225 without formal approval. On occasion, defaults occur on receivables.
      The Company makes a provision when deemed necessary. As of June 30, 2002
      and June 30, 2001, the allowance for doubtful accounts was approximately
      $19,600 and $198,200, respectively.

      Reclassifications

      Certain classifications were made to prior year balances to conform to the
current year presentation.

 3.   PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                             Accumulated
                                                  Cost       depreciation   ----Net book value-------
      <S>                                       <C>          <C>           <C>
                                                   $             $                 $         $

      Telecom switching systems                 2,596,401        741,299    1,855,102    1,857,787
      Billing, administration and
       customer service systems                   749,267        197,961      551,306      413,189
      Carrier identification codes loading        133,573         11,237      122,336       40,108
      Office furniture and equipment               45,928          9,388       36,540        9,314
      Leasehold improvements                       38,351         11,201       27,150       11,949
      Computer hardware                            38,535          4,908       33,627       46,949
      Automobile                                   13,581          3,776        9,805       12,014
      Installed lines                             257,830         49,584      208,246      140,260
                                                --------------------------------------------------
                                                3,873,466      1,029,354    2,844,112    2,531,570
                                                ==================================================
</TABLE>

                                      F-13

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001

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

3.   PROPERTY AND EQUIPMENT (cont'd)

     Telecom switching systems include assets under capital leases having a net
     book value of $858,000 as of June 30, 2002 and $1,072,000 as of June 30,
     2001.

     Depreciation expense for property and equipment including equipment under
     capital leases for the years ended June 30, 2002 and 2001 was $423,000 and
     $413,000, respectively.

4.   DUE TO FACTOR

     The amounts due to factor are secured by a pledge of the Company's accounts
     receivable (see note 8). The Company has an agreement to sell an undivided
     interest in certain accounts receivable with recourse to a Factor. Payments
     are collected by the Factor from the sold accounts receivable; the
     collections are reinvested by the Factor in new accounts receivable of the
     Company, and a yield, as defined in the agreement is transferred to the
     Factor. As at June 30, 2002, the amount sold under the agreement, expiring
     February 2004, that had not been collected was $3,808,000 (June 30, 2001 -
     $2,393,000) which will be forwarded to the Company once collected after
     repayment of the Factor's advances.

5.   NOTE PAYABLE

     The note is payable to a director and shareholder which bears interest at
     8% and is due July 31, 2002. The note was repaid in full during the
     current year.

6.   DUE TO RELATED PARTIES

     The amounts due to a corporation controlled by a shareholder are
     non-interest bearing and due on demand. The amounts were repaid in full
     during the current year.

                                      F-14

<PAGE>
                 YAK COMMUNICATlONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001


7.   OBLIGATIONS UNDER CAPITAL LEASES

     The Company's capital leases are for terms of 24 months at annual interest
     rates ranging from 9.25% to 10.50%.

     The future minimum lease payments required under the capital lease
     agreements are as follows:
                                                          $
            2003                                         135,451
            2004                                          10,055
                                                        --------

            Total minimum lease payments                 145,506
            Amounts representing interest                  6,426
                                                        --------

            Principal                                    139,080
            Current portion                              129,110
                                                        --------
                                                           9,970
                                                        ========

8.   LOAN PAYABLE - RELATED PARTY

     The Company has entered into an agreement with a corporation (lender),
     which is controlled by a shareholder and director of the Company to provide
     cash advances or third party loans up to $435,000 based upon available
     accounts receivable. The cash advances bear interest at 12% and the
     interest rate on any third party advances shall not exceed the bank's prime
     rate plus l-l/2%. The lender has agreed to waive any interest calculated on
     its cash advances provided the credit is not in default. As security for
     these advances, the Company has agreed to pledge its accounts receivable
     (subordinate to the prior pledge disclosed in note 4) and has provided a
     general security agreement over all its assets. This agreement expires
     March 15, 2006 at which time the loan is due on demand. As of June 30,
     2001, $415,030 was advanced under this agreement. On December 31, 2001,
     this loan which had a balance of $398,071 was repaid by the issuance of
     200,000 shares of the Company's common stock.

                                      F-15

<PAGE>
                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                              JUNE 30, 2002 AND 2001


9.   DUE TO TELUS COMMUNICATIONS INC. (Telus)

     Telus provides the Company with marketing credits to a total maximum value
     of $3,250,000. The marketing credits are calculated as 25% of the value of
     monthly billed revenue to the Company by Telus in the preceding month to a
     maximum of $270,000 per month.

     The Company is restricted to spend this amount on advertising and
     promotional activities within sixty days of the credits being advanced to
     the Company.

     Marketing credits will be repaid commencing July 1, 2003 and ending June
     30, 2006. Repayments are by way of paying an additional $0.005/minute, at a
     minimum of $90,000 per month. The repayments are non-interest bearing as
     long as no payments are in default.

10.  DEFERRED INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts used for income tax purposes. The
     deferred tax liabilities of June 30, 2002 relate to the difference between
     the depreciation used for Canadian tax purposes and financial reporting
     purposes.

     As of June 30, 2002, the Company has net operating loss carryforwards for
     U.S. Federal income tax purposes of $300,000 which may provide future
     income tax benefits expiring between 2019 and 2020.

     Realizastion of the net operating loss carryforward is dependant on
     generating sufficient taxable income before expiration of the loss
     carryforwards. As such Management has provided a valuation allowance for
     the full amount of the deferred tax asset of $100,000 as of June 30, 2002
     related to the U.S. operations.

                                      F-16

<PAGE>

                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001

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

11.  CAPITAL STOCK

     Common stock

     100,000,000 shares authorized, no par value, stated value $0.01 per share.

     On June 29, 2001, 202,758 common shares were issued for the conversion of a
     debt to a related party of $366,000.

     On December 28, 2001, 40,000 common shares were issued to employees under
     an employee stock award.

     On December 31, 2001, 200,000 common shares were issued for the conversion
     of a debt to a related party of $398,071.

     Series A convertible preferred stock

     500,000 shares authorized, par value $1 .00 per share.

     These shares are convertible at the holders' option into common stock at a
     conversion rate of one share of common stock for each share of Series A
     preferred stock. The holders of Series A preferred stock are entitled to
     receive an annual cash dividend of 4% per share. The dividend arrears on
     the Series A convertible preferred stock is $32,700 at June 30, 2001. The
     Company may redeem the Series A preferred stock at a redemption price of
     $1.00 per share. On June 30, 2001, 497,000 shares of Series A preferred
     stock were converted into common stock.

                                      F-17

<PAGE>

                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001

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

 12. COMMITMENTS

     The Company has lease commitments for its premises which expire at various
     dates through March 2007. The future minimum lease payments are as follows:

                                        $

                                 2003    117,000
                                 2004     80,000
                                 2005     80,000
                                 2006     77,000
                                 2007     25,000

13.  STOCK OPTION PLAN

     Effective June 30, 1999, the Company adopted a Stock Option Plan (the
     "Plan") which permits the issuance of stock options to selected employees
     and directors. The Company reserved 640,000 shares of common stock for
     grant under the Plan. Options granted may be either nonqualified or
     incentive stock options and will expire no later than 20 years from the
     date of grant (10 years for incentive options). No options have been issued
     under this plan.

     On December 21, 2000, nonqualified options for 1,284,OOO common shares were
     granted to an individual who is a director and chief executive officer and
     are exercisable at $1.56 per share on or before December 31, 2003, or upon
     the sale of the Company. In the event of the chief executive officer's
     death or termination of employment prior to the exercise of the options and
     before December 31, 2003, the Company is obligated to purchase the optioned
     shares at a price equal to the fair market value of the shares less the
     option price. The purchase consideration of the option shares shall be in
     stock of the Company.

     If compensation cost for the Company's grants for stock-based compensation
     had been recorded consistent with the fair value-based method of accounting
     per SFAS No. 123, the Company's pro forma net income (loss), and pro forma
     basic and diluted net income (loss) per share for the years ending June 30,
     would be as follows:

                                      F-18

<PAGE>

                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001

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

13.  STOCK OPTION PLAN (cont'd)

                                                  $                  $

     Net income (loss) as reported            1,210,581           (663,260)
     Pro forma net income (loss)                645,621         (1,228,220)
     Basic net income (loss) per share
       As reported                                 0.29              (0.17)
       Pro forma                                   0.15              (0.25)

     Diluted net income (loss) per share
       As reported                                 0.20              (0.17)
       Pro forma                                   0.11              (0.25)

14.  RELATED PARTY TRANSACTIONS

     (a)  Office rent of $72,000 was paid and property and equipment of $25,624
          was purchased from a corporation of which the Company's chairman is a
          shareholder and director.

     (b)  The Company paid marketing and design fees for the years ending June
          30, 2002 and 2001 of $70,125 and $70,763 respectively to a corporation
          controlled by an officer and shareholder.

     (d)  The Company paid professional fees for the years ending June 30, 2002
          and 2001 of $72,038 and $14,344 respectively to a director and
          minority shareholder.

     (e)  The Company paid consulting fees for the years ending June 30, 2002
          and 2001 of $96,900 and $94,669 to a corporation controlled by a
          minority shareholder.

     (f)  The Company paid a financing fee and guarantee fee to a Corporation
          controlled by the Company's chairman of $144,871.

     (g)  Prepaid expenses and sundry assets include advances made during the
          year of $69,291 to a corporation of which the Company's chairman is a
          shareholder and director.

     These transactions have all been accounted for at their exchange amounts.

                                      F-19

<PAGE>

                 YAK COMMUNICATIONS (USA), INC. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2002 AND 2001

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

15.  ECONOMIC DEPENDENCE

     The Company is dependent in Ontario and Quebec upon Bell Canada and in
     British Columbia and Alberta upon Telus Corp. to provide billing and
     collection services to its customers under a renewable agreement. The
     Company is also dependent upon TELUS Communications Inc. to provide
     billing, transport and handling services under a renewable agreement which
     expires in June 2003.

16.  ADVERTISING AND PROMOTION

     The Company expenses advertising costs as incurred which includes
     direct-mail advertising, newspaper and television advertising. Advertising
     expense for the years ended June 30, 2002 and 2001 were approximately
     $1,484,000 and $1,097,000, respectively.

17.  SEGMENTED AND RELATED INFORMATION

     The Company operates in one reportable segment in two geographic regions -
     Canada and the United States. Summary information with respect to the
     Company's operations by geographic regions are as follows:

                                                         $                $

     Net revenue
       Canada                                        24,367,256      14,932,936
       United States                                    124,700               -
                                                     --------------------------
                                                     24,491,956      14,932,936
                                                     ==========================

     Operating profit (loss)
       Canada                                         1,956,378        (389,094)
       United States                                   (541,797)       (274,166)
                                                     --------------------------
                                                      1,414,581        (663,260)
                                                     ==========================

     Assets
       Canada                                         8,549,443       6,198,130
       United States                                    259,657          27,565
                                                     --------------------------
                                                      8,809,100       6,225,695
                                                     ==========================

                                      F-20

<PAGE>

EXHIBIT INDEX

EXHIBIT NO.       DESCRIPTION OF DOCUMENT

10.7              Billing and Collection Services Agreement, dated November 1,
                  2001, between the Company and Bell Canada.

10.8              Receivables Sale Agreement, dated as of February 8, 2002, by
                  and between Yak Communications (Canada) Inc., Yak
                  Communications (America), Inc., Yak Communications (USA), Inc.
                  and Textron Financial Canada Limited.

21                Subsidiaries.

23.1              Consent of Horwath Orenstein LLP.

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